The 5 Stages of Economic Development
A country in its initial stages of economic development has a limited investment base, and regional trade is dominated by barter. The monetary system is underdeveloped and investment never exceeds 5% of economic production. Togo and Ghana are two examples of such countries. A country at this stage will eventually experience economic growth and become mature.
Stage post-maturity
The next stage of economic development is the drive to maturity. In this stage, the industrial process becomes more differentiated and new leading sectors gradually replace the earlier ones. As the economy matures, domestic demand increases and industry diversifies. This is the pinnacle in economic development.
The primary goal of companies at this stage is to maintain their profit margins. This is achieved by marketing and financial management. Examples of mature companies include McDonald’s and Coca-Cola. Despite their success, many companies are unable to sustain their success in this stage. These businesses may not be managed properly.
Drive to Maturity stage
The Drive to Maturity stage refers to the transition of an economic system from the early stages to industrialization to more advanced technologies. This stage of economic development is when an economy becomes less dependent on a handful of industries and can absorb and apply the latest technology. This stage of economic development allows an economy to produce almost everything.
Traditional societies are characterized by low trade levels, agrarian-based economies, and a lackluster scientific perspective. Later, a country may industrialize and establish a national or global outlook. This phase can last for decades. During this stage, a country’s GDP grows at a much faster rate than its population and economic growth outpaces its rate of population growth.
The traditional economy is characterized by basic industries, an unskilled labor force, and low-productivity production. A nation will eventually reach a point when its output per capita is relatively high. It will also see the rise of service-based professionals as well as the development of a welfare system. This stage is crucial for the government.
After about 60 years, a society will transition from the take-off stage into the maturity stage of its economic development. This is likely due the compounding effect of capital stock, and the ability of a society absorb modern technology. A society may be capable of absorbing modern technology over three generations.
Transitional stage
The transitional phase of economic development is where an economy begins to undergo transformation. This stage sees the economy transition from a primarily agricultural economy to one that is more industrialized. As industries grow, jobs shift away from agriculture to the industrial sector.
During this stage, real income levels decline. According to the Krugman and Venables models, real income levels will decline as countries seek international competitiveness. It is this pursuit that often impedes free trade. Table 4 summarizes inframarginal comparative statistics of general equilibrium.
The industrial stage is next in economic development. This stage is made up of several stages. The first stage is dominated by agriculture, which requires intensive labor and low levels trade. The second stage is when the economy moves towards manufacturing and an international outlook. This is the “take off” phase. This phase is when the economy develops quickly and the population and workers are centered on a new industry. The third stage is called the “drive to maturity”. The fourth stage is a longer period in development during which the standard of living and the national economy grow.
The final stage of the industrial revolution involves re-structuring the national economy to create the most competitive and effective companies. Restoring the country’s domestic raw materials processing industry and integration with extraction industries are the key priorities. The most promising way to accomplish this is through the creation of large financial-industrial groups capable of competing with the transnational corporations of the West.