Academic journal article Geopolitics, History and International Relations

The Stages of Economic Development from an Opportunity Perspective: Rostow Extended

Academic journal article Geopolitics, History and International Relations

The Stages of Economic Development from an Opportunity Perspective: Rostow Extended

Article excerpt

ABSTRACT.

This paper extends Rostow's stages of economic growth model from the perspective of entrepreneurial opportunity. The paper outlines the characteristics of traditional, underdeveloped, developing, development, and post industrial economies. The author postulates that the stage of economic growth is a very important determinant upon the types of entrepreneurial opportunities available. Finally, the author also postulates that economic growth is not a linear process, citing the examples of Malaysia and Thailand.

Keywords: Rostow, economic development, growth, development, entrepreneurial opportunity, society

1. Introduction

All economies evolve and develop over time and there have been many theories developed over the years that have attempted to give both descriptive and predictive explanations. One of the more widely accepted theories was Rostow's linear stages of growth model, modified from Marx's stages theory of development, focusing upon the accumulation of capital through the utilization of both domestic savings and foreign investment as a means of creating economic growth and development.1 The Rostow model postulates that an economy goes through five stages of development - the traditional society, the pre-conditions of take-off, the take-off, the drive to maturity, and the age of mass consumption.2

However other economists pointed out that that capital accumulation is not a sufficient condition one its own for development and other cultural, political, social, institutional and geographical factors are also important in creating the right conditions for development.

Michael E. Porter postulated a linear stage model emphasizing a nation's type of development drivers as a source of competitive advantage.3 Porter postulated that a factor driven economy gains its competitive advantage from natural resources, favorable conditions for growing crops, and low cost labor sources, an investment driven economy from the willingness of firms and individuals to invest in modern plant, equipment, and technologies, an innovation driven economy based on firms creating novel processes, products, and business models, and a wealth driven economy (also one in decline) where investment is based on accumulated capital in low risk ventures and activities like shopping centers.

From the point of view of opportunity, the accumulation of capital, social, cultural, political, regulatory, technological, and attitudes towards risk and investment are all important factors in the creation of the opportunity landscape which is related to the stage of national development - demographically, economically, socially, regulatory, and technologically. The following paragraphs attempt to describe the stages of a nation's evolution in reference to the types of opportunities available within each stage of growth.

2. Traditional Economy

Traditional economies can be found in two forms, a subsistence society where its inhabitants live off the land on a daily basis using handed down generational knowledge with minimal outside interference, and an agrarian society where some crops are cultivated and livestock reared, producing some surpluses that can be sold or bartered to acquire outside items that the people feel they need or want. Within an agrarian society today, two types exist, one that relies on outside inputs and the other where people utilize their own inputs, reflecting their degree of both economic and social isolation. Traditional societies can usually be recognized by the high proportion of people involved in land based activities such as agriculture.

The type of activities a subsistence or agrarian society undertakes is shaped by the general topography and climate of the region they inhabit. For example, within an arid ecosystem some horticultural and pastoral activities can be undertaken, within a coastal ecosystem some livestock, fisheries, and horticulture can be undertaken, within a hilly ecosystem horticulture and livestock activities can be undertaken, and with a rain-fed ecosystem arable farming, forestry and livestock can be undertaken. …

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