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Five Important Stages of Economic Development

Updated on June 1, 2014


The history of mankind has been broadly divided into three stages-savagery, barbarism and civilization. Similarly, the economic development of mankind has been broadly divided into five stages. They are the hunting stage, the pastoral stage, the agricultural stage, the commercial stage and the industrial stage.

Hunting Stage

The wants of the primitive man were simple and few. They were easily satisfied. For a long time man lived on the wild fruits and roots. He satisfied his need for food and clothing by picking fruits, by hunting and fishing. He roamed about in small groups from place to place. He led a wild and dangerous life. Life was risky because he had to live among wild animals in forest. Whenever there was not enough food, sometimes he practiced cannibalism. That is, one man ate another man. It is believed that in many cases he practiced cannibalism not only on his enemies, but also on the old and useless members of his own social group. Slowly he made weapons. The earliest weapons of man consisted of wooden sticks, animal bones, teeth and pieces of stone. Later on, he began to make use of fire. After that, he made tools and weapons from metals. Thus in the early stages of mankind, man lived by hunting and fishing.

Pastoral Stage

In course of time, with the growth of population, there arose a great need for large amounts of food supply. Domestication of animals took place during the period. That is, man tamed and bred animals. In the early stages, he got his food by destroying the animals. Now he discovered that by domesticating the animals, he could have more or less a permanent source of food. Not only that, the animals were used for transport and later on for clothing, protection and pleasure. During this period, also man had no settled life. He had to move from place to place in search of new pastures. During this stage, man lived the life of a shepherd. The idea of private property developed only during this stage and the wealth of a man was determined y the number of cattle he had. This in turn gave rise to inequalities of wealth and different social classes. Life on the whole during the stage was less risky than in the hunting stage and cannibalism disappeared.

Agricultural Stage

From the pastoral stage, man reached the agricultural stage. During this stage, he learnt the art of cultivating plants. By accident, man found that the seeds would multiply themselves. And that was the beginning of the cultivation of the soil. Agriculture made settled life necessary. Man no longer could roam about as he did in the hunting stage. Thus, villages came up. Agriculture made it possible to support a large population. During the early phase of the agricultural stage, land was common property. In other words, there was communal ownership. But houses and other things like cattle were private property. The village then was a self-sufficient unit. Whenever economic, social and political conditions were good, villages developed into towns.

Commercial Stage

After the agricultural stage was reached, man started living in villages. At first, the village was a self-sufficient unit. But later on as it grew in size, the wants of the population increased. In the early stages of agriculture, man produced goods only for the consumption of his own family. But with the development of agriculture he learnt to produce more than before. Naturally, he tried to give the surplus to somebody and get something in turn. This gave rise to exchange. Trade and commerce developed that way. Not only that, agriculture created the need for tools and implements. Some men devoted themselves to the provision of tools, implements and such useful things others. There was specialization of labor in different trades. People learnt that they could benefit by division of labor. Handicraft system developed like that. At first money was not used as a medium of exchange. There was only barter economy. That is, goods were exchanged for goods. Later on money became the medium of exchange. The invention of money is one of the fundamental discoveries of mankind. The early money consisted of some stones, cattle or some objects made of metals. With the development of big towns, trade developed. At first, there was commerce between villages. Then there was trade between villages and towns and so on. After commerce had developed to a certain degree, merchants and craftsmen organized themselves into “guilds” to promote their interests. Finally, after the industrial revolution in England, commerce developed between nations. And we have today international trade and commerce.

Industrial Stage

The industrial development can be broadly divided into four systems. They are (1) the family system, (2) the guild system, (3) the domestic system, and (4) the industrial revolution and the factory system.

1. The Family System

The family system was in existence in the Middle Ages. As the name itself indicates, the family or the household was the center of economic life. Wants were very few and members of the family produced everything they needed and consumed all that they produced. The household was a self-sufficient unit. It did not produce for the market. Agriculture was the main occupation and production was carried on a small scale. People lived in villages.

2. The Guild System

The guild system came into existence with the development of towns. It was found in Europe and in many other places from the Middle Ages to about the sixteenth century. The guild was an association of persons belonging to the same trade for the promotion of common interests. Thus, there were merchant guilds and craft guilds. Traders in towns formed themselves into guilds (merchant guilds) for their protection and mutual advantage. They controlled the buying and selling in towns and protected the members of the guilds against competition from outsiders. Later on craftsmen (skilled workmen) formed themselves into associations known as craft guilds and these guilds protected the economic interest of their members. These guilds promoted co-operation among workers and helped in improving workmanship. The guilds had powerful influence over production, quality and sale of goods.

3. The Domestic System

The domestic system was very popular between the sixteenth century and the eighteenth century. Under the system, people still worked in their homes. But it was different from the “family” system. The middleman was known as the “clothier”. He was a merchant as well as an employer. In the early stages, the worker, for example, produced only for the customer with whom he was in direct touch. But later on there was an increase in demand for his goods from other countries. That how the middleman came into the picture. The worker gave the product to the middleman and the middleman sold it in the market. Thus, the middleman became a link between the worker and his market. In the textile industry, for example, the “clothier” supplied yarn to weavers. They made it into cloth and gave it back to the clothiers. The clothiers in turn paid them for their work. That is how the system went on for a long. Time. But as days passed, it was found to be unsatisfactory. The system could not supply enough goods to meet the increasing demand for them. Not only that, workers were often dishonest. They cheated the clothiers. Suppose yarn was supplied for 100 yards, they would give only 90 yards of cloth or so to the clothier and say that was all they made from the yarn and steal the rest. The poor clothier had no means of finding it out. So during the Industrial Revolution the system disappeared giving way to the factory system, an important feature of the Industrial Revolution.

4. The Industrial Revolution and Factory System

The factory system is typical of the nineteenth and twentieth centuries. It is a product of the Industrial revolution. Production is now carried on a large scale for world market. In the beginning, a worker used to work at his home. But now he works at the factory for a fixed number of hours and gets his wages. And he works with modern and costly machinery. But capital (machinery, raw materials etc.) is owned by others known as capitalists. Hence, the present economic system in many countries like England and the U.S.A is known as the capitalistic system. Under the factory system, often, we find disputes between the capitalists and the workers. There are strikes and lockouts. The main reason for that is workers want higher wages and the capitalists want larger profits. So there is a clash between labor and capital.

© 2013 Sundaram Ponnusamy


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