Popn Pyramids Price Movts Privatisation Causes of Growth Causes of Infl. In 1960, the American Economic Historian, WW Rostow suggested that countries passed through five stages of economic development. The economy is dominated by subsistence activity where output is consumed by producers rather than traded. Any trade is carried out by barter where goods are exchanged directly for other goods. Agriculture is the most important industry and production is labour intensive using only limited quantities of capital.
Resource allocation is determined very much by traditional methods of production.
Increased specialisation generates surpluses for trading. There is an emergence of a transport infrastructure to support trade. As incomes, savings and investment grow entrepreneurs emerge. External trade also occurs concentrating on primary products. Stage 3 Take Off Industrialisation increases, with workers switching from the agricultural sector to the manufacturing sector.