Prof. W.W. Rostow has divided the process of transformation into five stages of economic growth.
These five stages are:
(i) Traditional Society:
Rostow has described traditional society as one whose structure is developed within limited production functions based on pre-Newtonian science and technology. It means primitive and old methods are used for production. Production is meant for consumption. Consumption is very limited. There are no concepts of saving and investment in the economy. The civilization of Middle East is the best example of this type.
(ii) Pre-Takeoff stage:
In this stage, people think for a higher standard of living. To achieve this good, structural and economic changes take place in the economy. Saving and investment in particular activities are encouraged. Education is also spread. This is the period when preconditions for take-off are developed. The emergence of new investors and entrepreneurs causes an upward trend in trade and commerce. Thus, all the efforts are made to fulfill the pre-conditions of economic growth.
(iii) Take-off Stage:
According to Rostow, take-off is the stage of industrial revolution with the use of improved technology. It is also called a great watershed in the life of modern societies. All types of socio-economic infrastructures have been laid. As a result growth process starts. There is a high rate of saving and investment and the rate of capital formation is very fast. There is development of both consumer and capital goods industries.
(iv) Drive to Maturity:
After attaining self-sustained growth, economy is ready for a drive to maturity. At this stage economy moves towards the goal of becoming a mature economy. In fact, this is the period when a society has effectively applied the range of modern technology.
Thus modern technology is adopted in all sectors of production. At this stage, working forces organize themselves in order to have greater economic and social security. Here international trade also occupies a significant place. The rate of investment and capital formation are extraordinarily increased.
(v) High Mass Consumption:
It is the final stage of production. This stage occurs after attaining the stage of drive to maturity. In this stage, leading sectors produce durable consumer goods and services. Per capita output or income of the country becomes very high. In fact, standard of the people can be guaranteed for all members of the society. This led to the foundation of welfare state. Many countries of Western and Northern Europe have attained this stage.