Gerschenkron Model

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ECONOMIC HISTORY

Answers Reading I

1. In the case of England, the agricultural sector played a key role in industrialization. This is mainly because, the increase in productivity in the sector led to an increase in the workers income, and this increase made possible for them to save more. The increase in savings led to an increase in investment in the industrial sector. When we are talking about a backward country, the process cannot be imitated. Backward countries had a traditional agriculture, and there was not an increase of productivity, so the agricultural sector could not finance the imports of capital needed. Also it was much easier to borrow money from institutions than being dependent of the agriculture.

2. Although Rostow thought that countries followed a stage-like pattern of development, Gerschenkron firmly disagreed with this assumption: Rostow implied that all countries repeat the same process of industrialization; this could be seen as a “inescapable law of economic development. The process of industrialization of the advance countries was not the same as of the backward countries. For example, England did not have any institution to finance its industrialization, in contrast to the late-comers, who had a whole international financing system built. This advantage of backwardness is what the Gerschenkron model is about. Each country had its own process of industrialization and it did not have to follow certain stages.

3. In order to industrialize, backward countries need to import large amounts of capital. The technology imported will come from the advance countries, and will help the relative backward countries to become advanced. The process of industrialization of these countries will take, in fact, much less time compared to the advanced countries, because the technology imported is far more efficient than those used in first place by the advanced countries when they were in the middle of the process. Since they have access to this...
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