Lesson | The Phases of Economic Development and 5 Its Impact to Business Environment EXPECTATIONS As we study and immerse ourselves in “Organization and Management” in the process, it is necessary to discuss and differentiate the phases of economic development. The module is subjected to discuss Module 4 - The Phases of Economic Development and Its Impact to Business Environment. After going through the module, you are expected to: 1. differentiate the phases of economic development and its impact to business environment Let us start your joumey in teaming thru a Pre-test PRETEST Good buck! Fill in the Blank Directions: Choose the CORRECT word from the table below and write your answer in the space provided before the number. Walt Whitman Rostow Five Stages of Economic Development ‘axes: Seidel and Moichelle Profit at any cost ________1 . It is a model that can have extremely negative implications down to road if corners are cut and poor decision are made. 2. According to them, the small and large businesses drive economic stability and growth by providing valuable services, products and tax dollars that directly contribute to the health of the community 3. It is used to maintain the infrastructure of a city, state or country- road, bridges, tunnel, public transportation, libraries and other public buildings and services 4. He is economist in the Lyndon B Johnson administration from 1966- 1969. 5. it is a model on economic development developed by Rostow.LOOKING BACK YOUR LESSON ‘As we go further, let us try to recall our lesson about the forms of business organization, The Five Stages of Economic Development, is a model developed by Walt Withman Rostow. The five stages are 1) Traditional Society, 2) Preconditions for Take-off, 3) Take-Off, 4) Drive to maturity, and 5) Age of Mass Consumption. Partnership consists of two or more persons who bind themselves to contribute money or industry to a common fund, with the intention of dividing the profits among themselves. Sole proprietorship is the simplest form of business and the easiest to register, through the Bureau of Trade Regulation and Consumer Protection (BTRCP) of the Department of Trade and Industry (DTI). It is owned by an individual who has full control/authority of its own and owns all the assets, as well as personally answers all liabilities or losses. Corporation is a juridical entity established under the Corporation Code and registered with the SEC. Cooperative is an organization established for the purpose of purchasing and marketing the products or its members, i.¢., shareholders, and/or procuring supplies for resale to the members, whose profits are distributed to the members {in the form of patronage dividends), nat on the basis of the members’ equity. Matching-type Directions: Match the column A to column B. Write your answer in the space provided before the number. A B Marked by an increase in productivity a. Traditional Society In Europe during the 1700s and 1800s b, Modern Society . The economy is able to reinvest 10-20% c. Precondition for Take-Off of what it creates into more production. d. Take-Off A society or economy is able to export e. Age of Mass Consumption production from other countries f. Drive to Maturity . Number of middle-class jobs are fewer than the total number of people. These societies relied heavily on agricultural labor.Economic development generally refers to the sustained, concerted actions of policymakers and communities that promote the standard of living and economic health of @ specific area. Economic development can also be referred to as the quantitative and qualitative changes in the economy (www.abbreviations.com}. Walt Whitman Rostow, also known as W.W. Rostow, was an economist in the Lyndon B. Johnson administration from 1966-1969. He also published articles and developed models on economic development. One of his most prominent ideas was the five stages of economic development. In this model, he suggests that societies go through five ‘stages of economic development as they develop and grow. Each of Rostow’s five stages builds on the previous stage, becoming more complex and integrated. Depending on the economic forces at play, the time it takes to move ‘through each of Rostow’s stages varies. We'll begin by discussing each stage in detail, then we'll tal about how Rostow’s model has led to other ways of measuring development. Rostow’s Five Stages Model Rostow’s 5 Stages of growth Depsedent on Giobel Economyor. Stage § High Mass Consumption Market Managing Economies pctaicsoerton soztor besser coco ak’ G are Stage 4 Drive to Maturity Depeie diversification, innovation, less Developed Economies feltance om import, investment Stage 3 Take Off Dependent on Sub-urban rgecaipane sae ergo": | Eeanomy Stage 2 Transitional Stage Dependent on Social appreciation of Specialization, surpluses, infrastructure | Education and Skill Development ‘Stage # Traditional Society Dependent on subsistence, barter, agriculture Rural Economy Source: https:// wunw.google.com/ search?q=picture+aftrostowtfive+stagesdisxsrf =ALeKKO288PauflUZRW6A_LG2eed6olspqurThe Five Stages: ‘Stage One: Traditional Society The first stage of Rostow’s model and the one in which societies begin, is the traditional society. The traditional society stage was prevalent prior to the 1700s, when most societies operated in a relatively stable state and productivity didn't rise or fall dramatically. Trade existed, such as the spice route between Asia and Europe, but it was timely, costly, and more of a luxury than a necessity. Technology was very limited. Humans had access to little more than handmade tools, transportation, and the printing press. That meant that producing goods was very human capital intensive, which created large gaps in income inequality. These socicties also relied heavily on agricultural labor because a tremendous amount of labor was required to grow enough food to sustain the societies, Stage Two: Preconditions for Take-Off ‘There is a period of transition between the traditional society and a society that takes off, and for a certain time that society is establishing the presondisons for take-off. These preconditions are mostly marked by an increase in productivity, such as was found in Europe during the 1700s and 1800s. A number of hater 6 ‘came together to make productivity increase; for example, population hit a critical mass that made agriculture take up such a high percentage of labor, which provided opportunities for the establishment of educational institutions, banks, and a market for luxury goods Stage Three: Take-Off When the preconditions for take-off are met, a society can take off. Educated individuals start inventing new processes and tools, and access to capital through financial markets and banks make it possible to produce goods and services on a larger scale. This requires a different type of skill set from human laborers, so the economy shifts from agriculture to production. This increases wages for everyone, taking the economic structure from a structure of kings and servants to a wealthy class, middle class, and lower class. A lower class still exists at this stage, either ‘because of social norms that discriminate against people or simply because the number of middle-class jobs are fewer than the total number of people ‘Stage Four: Drive to Maturity ‘The next of Rostow's five stages has a general length of time associated with it, the drive to maturity. According to Rostow, the drive to maturity is about a 60-year period between the take-off and the final stage, the age of mass consumption. During this short period, an economy (the collective of all consumers and producers) is able to reinvest 10- 20% of what it creates into more production. Processes are improved, quality of life is improved, and technology and new ideas continue to become more central to socicty, while the cost of producing the needs for survival flike food and shelter) becomes a smaller part of the economy. More importantly, the middle class grows at the quickest rate of any economic class, For the modern-day U.S., this stagereally took place from after WWI, from about 1915, until around 1980, when the technology era began. ‘Stage Five: Age of Mass Consumption After the drive to maturity, an economy reaches maturity and begins the final stage, the age of mass consumption. Think of the United States, much of Europe, and some of Asia today, and you can see this stage of development at work. The quantity and quality of products and services increase. A society or economy in this stage is able to export production, bringing in money from other countries that helps the economy grow larger beyond actual consumption. According to Seidel, Moichelle, (2019), Small and large businesses drive economic stability and growth by providing valuable services, products and tax dollars that directly contribute to the health of the community. They also provide jobs, strengthening the economic health of cach community where a business is based. Even if a business is headquartered elsewhere, employing people at cach local business contributes to the success of that region, as with the wages they carn, people buy property, work, shop and otherwise invest in where they live. Taxes are used, among other things, to maintain the infrastructure of a city, state or country - roads, bridges, tunnels, public transportation, libraries and other public buildings and services, including police officers and fire-fighters, all benefit from tax money collected from individuals and businesses. These services are essential to the good health and positive qualities of local and national citizens. In a capitalist society like that of the United States, business growth and increased sales means collecting more taxes, which can directly translate to better maintenance and offerings of local infrastructure and services that benefit the community. * The success of business as a whole directly affects the world’s economy. At its core, businesses are designed to serve a particular need that people have, and to provide trusted goods and services related to that need. When consumer confidence or trust dips in business, it isn’t just sales that are negatively affected. This mistrust has a ripple effect and can result in a decline in a country’s general economy, weakening the strength of its currency and buying power. * As businesses focus more and more on providing value to shareholders instead of directly to consumers, their interests and tactics may not align with the best interests of the consumer. A “profit at any cost” model can have extremely negative implications down the road if corners are cut and poor decisions are made in the name of solely working to increase shareholder profit or are based purely on greed. No matter how efficiently you make a product or how special the service is that you deliver, if you lose consumer confidence as a result of your business decisions, consumers won't support you by purchasing your goods and services, and then nobody benefits. * Business is vital to a country's economy. Success of businesses can drive the success of an entire country, including through contributions to the gross domestic preduct, or GDP, of a nation, which affects their world standing. If a country supports businesses with goods and services that are in demand, everyone in the countrybenefits. From job creation that results in money being put back into the community to taxes that help the government smoothly run and provide maintenance and improvements to the country's infrastructure, or in other ways that are helpful for its citizens, there are dozens of ways business success translates to economic development, * In addition to providing products and services that citizens and residents want, economic health can allow for exporting goods and services to others who want those items, contribute to offering avenues for education and training for citizens, create healthy business competition and provide additional methods of strengthening economic development for the country as a whole. *¢ The role of business in relation to the economy is a pivotal ane. Small businesses boost economic revenue on a smaller scale, but one that's of vital importance, directly and positively affecting the health, quality of life and purchasing power of residents in the local community. But small businesses don't always stay small. Many nationally known, brands today got their start as very small businesses run out of someone's home or garage. Start-ups can become multinational companies that can have a huge and positive impact on the global economy, benefiting all of the company’s employees and the communities in which those businesses thrive. Apple, Whole Foods, Amazon and Starbucks were all ideas started on a small scale that have had incredible, explosive positive impacts not just on the U.S. economy, but on a global scale. ACTIVITIES Activity 1: Independent Activity Directions: Using the Graphic Organizer, give your own idea about the five stage of economic development and write your answer in a yellow paper. Five Smges ofActivity 2: Independent Activity ESSAY Directions: Enumerate the Rostow’s Stages of Growth and give your idea about its influence to the business environment. Give 2 influences in each stage. Write your answer in the space provided. Rostow’s Stages of Growth Influence to Business Environment E& ba PDO) od v Walk Whitman Rostow. also known a5 WW. Rostow was an economist in the Lyndon B. Johnson ‘Admunistration Irom 1966-1969. He also published articles and developed madels on economic development, v The Five Stages of Economic Development model is developed by Walt Withman Rostow. The five Siages are T) Traditional Society, 2) Preconditions for Take-off, 3) Take-Off, 4) Drive to maturity, and 5) Age of Mass Consumption. Taxes are used, among other things, to maintain the infrastructure of a city, state or country-roads, bridges. funnel, public transporiation, libraries and other public buildings and serviccs including police officers and fire-fighters, all benefit tax money collected from individuals and businesses. Profit at any cost model can have ¢ ‘Weersions are Made Tn the hi emely negative implications down the road if comers are cut and poor Scisighs are Made Tn the hame of soli working fo increase shareholders profit or are based purely on gree CHECK YOUR UNDERSTANDIN ‘True or False Directions: Before cach statement, write TRUE if the statement is correct or FALSE if the statement is incorrect. 1, Preconditions for take-off are the second stage of economic development, whereas productivity increased found in Europe during the 1700s and 1800s.2. In the age of mass consumption, a society or economy is able to export production, bringing in money from other countries that helps the economy grow larger beyond actual consumption. 3. Success of businesses can drive the success of an entire country, including through contributions to the gross domestic product, or GDP, ofa nation, which affects their world standing. 4. Traditional socicty stage was prevalent prior to 1900s, when most socictics operated in a relatively stable state and productivity didn’t rise of fall dramatically. 5. Drive to maturity is about 80-year period between the take-off and the final stage. MULTIPLE CHOICE: Choose the letter of the best answer. Write your answer in the space provided. ____1. In which stage of economy reaches maturity and begins the final stage? a, Take-Off b. Traditional Society c. Age of Mass Consumption d, None of the above ___2. Who developed and published articles of the Five Stage of Economic Development? a. Walt Whitman Rostow b. Seidel Rostow ¢. Moichelle Rostow d. Seidel and Moichelle Rostow ___3. Which stage had limited technology, and humans had access to little more than handmade tools, transportation, and the printing press? Take-Off Traditional Society Age of Mass Consumption None of the above Boop ___4, Which stage is about the population hit a critical mass that made agriculture take up, such as a high percentage of labor, which provides opportunities for establishing an educational institution, banks, and a market for luxury goods? a. Dive to Maturity b. Modern Society c. Take-Off d. Preconditions for Take-Off ___5. Which stage is used to educate the individuals to start inventing new processes and tools, and access to capital through financial markets and bank make it possible to produce goods and services on a larger scale? Dive to Maturity Modern Society Take-Off Preconditions for Take-Off Boop___6, Which of the following is used to maintain the infrastructure of a city, state or country-roads, bridges, tunnels, public transportation, libraries and other public building and services, including police officers and fire-fighters? a. Taxes b, Income c. Savings d None of the Above ___7. Which of the following is a CORRECT arrangement of the Five Stages of Economic Development? a. Precondition for Take-off, Take-Off, Traditional Society, Age of Mass Consumption, and Drive to Maturity b, Traditional Society, Preconditions for Take-off, Take-off, Drive to Maturity, and Age of Mass Consumption, Traditional Society, Preconditions for Take-off, Age of Mass Consumption, Drive to Maturity, and Take-Off d. Age of Mass Consumption, Preconditions for Take-off, Traditional Society, and __8. Which stage really took place after WWI from about 1915 until around 1980, when the technology era began? a, Age of Mass Consumption b. Drive to Maturity ©, Take-off 4. Traditional Society ___9, Which of the following is NOT one of Rostow’s five stage of economic development? a. Age of Mass Consumption b. Drive to Maturity c. Take-off 4 Technological Society __10. Which of the five stages of economic development takes place over approximately 60 years? a. Age of Mass Consumption b. Drive to Maturity c. Take-off d. Traditional Society REFLECTIVE LEARNING SHEETS. Reflective Question: Give the different phases of economic development. How can it change your point of view as a student particularly in the field of business? Explain in 1 to 2 sentences only. Write your answer in the space provided Phases of Economic Development 1.