Walt Whitman Rostow died 20 years ago.
His was a life of turns and twists, incredible career achievements and falls. Coming from the humble background of a Russian Jewish immigrant family, he did his PhD at Yale at the tender age of 24, served as an intelligence officer during World War II, White House Director of Policy Planning under Kennedy and National Security Advisor under Johnson. He was shunned and ostracized for his support to the War in Vietnam and spent his last 30 years as professor of economics at the Lyndon B. Johnson School of Public Affairs at the University of Texas at Austin after he was told that he was not welcome to resume teaching at MIT (where he had taught before joining the Presidential Administration).
As an academic, Rostow is best known for his magnum opus The Stages of Economic Growth: A Non-Communist Manifesto written during his professorship at Cambridge University and published in 1960 prior to his joining Kennedy’s administration in 1961.
The book was meant to “debunk” Marxism and, in the words of the book itself, “resist the blandishments and temptations of Communism.” Rostow calls Communism a disease (of transition). It is a rather peculiar ideological development for someone whose father (Victor Rostowsky) was involved in the Russian socialist movement as a teenager, publishing a left-wing newspaper in the basement of his parents’ house calling for the overthrow of the Emperor Nicholas II.
No wonders Rostow’s book was banished in the Soviet Union. As a young student in Moscow, I had to rely on rather uninformative critical summaries in political economy books (economics as such didn’t exist in the Soviet Union). This is what those textbooks had to say about Rostow’s theory of the stages of economic growth:
“…a bourgeois concept of historical development, which puts the level of technology and the dominance of large-scale industrial production at the forefront when analyzing the evolution of society; ignores the nature of production relations, represents the economic systems of industrially developed capitalist and socialist countries as the same type of “industrial society”. According to this theory, there are two main types of society – “traditional” (pre-capitalist) and “industrial” (capitalist)… Rostow argues that the development of industry and industrialization in each country should inevitably lead to the same results that took place in the West, and this would happen regardless of the nature of the relations of production. According to Rostow, socialist countries are supposedly only repeating those stages that capitalist developed countries have already passed. The USSR supposedly lags behind the USA by an entire social era and in the coming decades will evolve towards capitalism… In general it acts as a direct apology for capitalism.”
Apart from predicting the end of the Soviet Union (and socialism in general), I believe it was Rostow’s double-barreled critique of Marx and contemporary Soviet society rather than anything else that raised the red flags of Soviet sensors. Marx, in its Soviet dogmatic interpretation, was a holy cow that could be only prayed to, but not doubted in any respect. In addition, somewhat surprisingly, Rostow also criticized the Soviet state as “un-Marxist”: He criticized another Soviet icon, Lenin, for having “turned Hegel back on his feet; and inverted Marx.” Rostow accused Lenin and his collaborators of replacing Marx’s economic determinism with power determinism through a violent takeover and an oppressive regime ”filled with the secret police, and the whole system of constraints and incentives which permit them to rule and to get the performance they want from those whom they control.”
Rostow lived long enough to see the collapse of the Soviet Union and Socialism in general. Did he feel vindicated? After all, his prediction of the fall of Socialism came at a time when the Soviet Union was on the peak of its development. The year when the book was published the Soviet Union sent a man to the space, first time in the human history. Against this background, few people would argue the imminent demise of the system in 1961.
I couldn’t find any published comments by Rostow on this issue, which is curious. As a professor of economic history teaching a full decade after the collapse of Socialism, he couldn’t have possibly eschewed this topic. But looking at Rostow’s concept of the stages of economic growth, there was probably little reason for academic jubilation. According to Rostow’s version of modernization theory, all countries have to go through certain stages of growth (development) leading to (surprise, surprise!) capitalist society of high mass consumption. His five stages include traditional societies, pre-conditions for take-off, take-off, drive to maturity, and the age of high mass consumption. Each stage shows different characteristics of growth (measured as income per capita). Only the last three stages are characterized by sustained, albeit slowing (in line with the principle of diminishing return), growth.
Rostow argued that Communists hijacked power in societies going through the second stage when they are particularly vulnerable to different influences and took them to the stage of take-off. But his theory claims that as nations mature, they will transition in a smooth manner to the age of high mass consumption based on ever rising and sustained growth. He spoke about “withering” of Communism. “Communism is a curious form of modern society appropriate only to the supply side of the growth problem: perhaps for take-off, although this is still to be proved, given Communism’s inherent difficulties in agriculture; but certainly it can drive a society from take-off to industrial maturity-as Stalin demonstrated-once its controls are clamped upon that society. But in its essence Communism is likely to wither in the age of high mass-consumption; and this, almost certainly, is well understood in Moscow.”
In Rostow’s view, the society of mass consumption will grow out of the society in the stage of take-off and maturity in a natural, and largely painless, way: “We can be confident… that to the degree that consumer sovereignty is respected and real incomes increase we will see similar – but not identical – income-elasticities of demand and, therefore, similar patterns of structural evolution in different societies as they go through the high-consumption phase.” It’s interesting that Rostow offers a rather deterministic and economically grounded version of development while at the same time denouncing Marxism for its economic determinism. It’s not really that clear how Rostow’s consumption-maximizing person is that different from Marx’s profit-maximizing person. I find Rostow’s presentation of Marxism a simplistic one-dimensional caricature, which totally ignores the fact that Marxism doesn’t deny the existence of human feelings or human motives other than profit or the importance of institutions (superstructure). Marxism posits that economy rules in the final analysis, and human actions are shaped by their position in the socially-determined relations of production.
Two Soviet writers, Boris and Arkady Strugatsky, wrote a science fiction novel Monday Begins on Saturday four years after the publication of The Stages of Economic Growth. These is no evidence that Strugatskys knew anything about Rostow’s writings but one episode in their book (which is a satire of Soviet scientific research institutes) develops the theme of “ever increasing consumption”. One researcher creates a “model of a completely satisfied man” who can instantly satisfy all of his wants. Immediately upon hatching the model grabs all material valuables nearby and then attempts to consume the whole universe. One of the main characters explains what would have happen next to the model of increasingly growing consumption unless the experiment had been stopped: “He’ll then roll up space, wrap himself up like a pupa and halt time.”
In any case, as we all know, the transition from socialism to capitalism at the end of the 20th century was nothing like a benign withering of the socialist state. In most countries it presented a disruption in development characterized by a sharp drop in living standards, de-industrialization, and reduction in consumption often accompanied by more or less violent social conflicts and even civil wars (that appear not done yet considering the ongoing war in Ukraine).
The former Soviet Union is a textbook case. As Aleksandr Gevorkyan writes in Transition Economies, “Rising prices in April of 1991, unemployment, sharp declines in exports, organized crime, and a clear systemic crisis of all institutions collectively exacerbated low living standards. Towards the end of 1991, the Soviet economy had GDP falling at least 20 percent compared to the year before and fiscal deficit rising to almost 30 percent of GDP.”
Statistical data show that it took even the more developed East European countries which joined the EU first (Czech Republic, Hungary, Poland, Slovak Republic, Slovenia, Estonia, Latvia, and Lithuania) about a decade to reach the pre-1989 level of real GDP. For the Baltic state this period was about 15 years and about two decades for the other former socialist countries in Southeast Europe. Some former socialist countries did it even later or even never. Ukraine, up to the beginning of the war in 2022, hadn’t been able to reach that level.
If the veracity of Rostow’s model in general is in question, he most likely would be greatly satisfied with how influential his economic prescripts have remained 60 years after the publication of the book. This concerns especially the take-off stage. Rostow defined the take-off stage in terms of simple Harrod-Domar growth model. This model postulates that one of the most fundamental strategies of economic growth is simply to increase the proportion of national income saved. According to Rostow, the main obstacle to, or constraint on development, is the relatively low level of new capital formation in most poor countries. Hence, one of the principal strategies of development necessary for any take-off was the mobilization of domestic and foreign saving in order to generate sufficient investment to accelerate economic growth.
But if a country wanted to grow at, say, a rate of 7% per year and if it could not generate savings and investment at a rate of 21% of national income (assuming that the final aggregate capital-output ratio is 3) but could only manage to save 15%, it could seek to feel this “saving gap” of 6% through either foreign aid private foreign investment. Thus, the “capital constraints” stages approach to growth and development became rational and in terms of Cold War politics an opportunistic tool for justifying massive transfers of capital and technical assistance from the developed to the less developed nations.
There are two more “conditions” required for the take-off, according to Rostow:
- the development of one or more substantial manufacturing sectors, with a high rate of growth; and
- the existence or quick emergence of a political, social and institutional framework which exploits the impulses to expansion in the modern sector and the potential external economy effects of the take-off and gives to growth an on-going character.
The former condition is obviously related to the concept of structural transformation and the latter is interpreted by Rostow in a rather peculiar manner as “a considerable capability to mobilize capital from domestic sources”.
We can clearly see how the three conditions transformed into policy recommendations and influenced and continue to influence the policies and actions of development aid institutions (from the World Bank to regional development banks and multilateral and bilateral aid organizations) as well as development policies and plans in less developed countries.
First is the concept of a “big push”, an idea that a massive investment assisted by outsider well-wishers can help less developed countries to “take off”, deliver them from the poverty trap conditioned by chronic underinvestment, and, in Rostow’s version, take them away from Communism into the Western orbit. This idea impressed future President Kennedy, who appointed Rostow as one of his political advisers, and sought his advice. Rostow was the main inspiration for the Alliance for Progress, a $20 billion aid program for Latin America launched by Kennedy in 1961. In a speech (written by Rostow) Kennedy spoke of how the Alliance for Progress would allow Latin America to reach the “economic take-off” stage of growth by having an annual growth rate of 2.5% (a target chosen by Rostow), which would end the appeal of Communism in Latin America forever. Rostow was also instrumental in persuading Kennedy that the best way to fight Communism in the Third World in general, not just Latin America, was to increase aid, and in 1961 American aid to the rest of the Third World went up to $4.5 billion from $2.5 billion in 1960. In a speech written by Rostow, Kennedy announced that the 1960s would be the “Decade of Development”, saying that the United States was willing and able to furnish sufficient foreign aid to allow the Third World nations to reach the “economic take-off” stage.
This “Decade of Development” became the precursor of other medium- and long-term international development blueprints. The latest such initiatives, such as the Millenium Development Goals and Sustainable Development Goals have been less focused on investment as such, and recognize the importance of social and environmental progress in addition to economic growth. Yet, economic growth remains a key aspect of these and other development initiatives, such as Africa 2063, for example. The Istanbul Program of Action for the Least Developed Countries (2011-2020) set a target of 7% annually for achieving sustained, inclusive and equitable economic growth.
The early development initiatives spearheaded by the US helped establish a system of Official Development Assistance, including 26 DAC (Development Assistance Committee) most developed countries (donors). Over the years ODA has grown, become better coordinated and, arguably, more effective (although opinions on this matter differ greatly). ODA increased from $43 billion in 1961 to $211 billion in 2022. Rostow’s assertion that economic growth inevitably translates into a modern Western-type society remains a strong incentive for many ODA providers, especially as the world splits and fragments into opposing blocks and the likelihood of a new Cold War is on the rise.
Structural transformation (Rostow’s second condition for take-off) remains the key policy agenda for the developing countries, internationally and domestically. The new Doha Program of Action, which has replaced the Istanbul Program of Action for 2022-2031 recognizes structural transformation as a driver of prosperity: ”Without a structural transformation that prioritizes economic diversification and addresses institutional and capacity constraints, the least developed countries will remain vulnerable to various socioeconomic, health and environmental shocks.” Five Sustainable Development Goals (out of 17) expressly support structural transformation in developing countries.
Domestic capital mobilization for development (Rostow’s third condition) has been on the international agenda as well ever since. This is a central element of the Addis Ababa Action Agenda, a global framework for financing the SDG Agenda: ”For all countries, public policies and the mobilization and effective use of domestic resources, underscored by the principle of national ownership, are central to our common pursuit of sustainable development, including achieving the sustainable development goals. Building on the considerable achievements in many countries…, we remain committed to further strengthening the mobilization and effective use of domestic resources.” Likewise, the Doha Program calls for “significant additional domestic public resources… critical to achieving the Sustainable Development Goals.”
Rostow’s ideas (incidentally, many of them not very new at the time of the publication) still serve as an inspiration for development policy planners and practitioners in many countries. A number of Western policy makers share Rostow’s belief about a linear growth and social development path, in which economic growth creates Western-type societies, and that economic aid is the best way to expedite this in less developed countries. The recent history shows that this is not the case. Consumption is a fact of life, but how consumption is organized and regulated matters more than its scope. As global geoeconomic fragmentation intensifies, specific socio-economic forms of public life may diversify even further and farther from the ideal Western model.