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9 of 9 people found the following review helpful
5.0 out of 5 stars Overall an Excellent Book, January 16, 2011
This review is from: Awakening Giants, Feet of Clay: Assessing the Economic Rise of China and India (Hardcover)
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"Although both China and India have done much better in the past quarter century than they did in the past two hundred years in the matter of economic growth, and although both polities have shown a remarkable degree of resilience in their own ways, one should not underestimate their structural weaknesses and the social and political uncertainties that cloud the horizon for these two countries. It will indeed be a sign of "vain perplexity" to pronounce judgment on how and when these clouds will clear." (pg 159)

In order to present a picture of India and China that is more accurate than the idealistic view often peddled in the financial press, Pranhab Bardhan in his book Awakening Giants, Feet of Clay: Assessing the Economic Rise of India and China calls upon the vast amount of academic literature written about the countries to prove that there are a number of structural and institutional problems (mostly economic) that are inhibiting growth in these countries. In comparing India and China, which are sure to drive global economic growth in the years to come, Bardhan presents two countries at very different stages in their development, which must tackle a number of similar problems, as well as a number of problems unique to each country.

Contrary to the "myths popular in the media and parts of academia that have accumulated around the significant economic achievements of the two countries," Bardhan looks at a variety of shortcomings in India and China in relation to the following: economic growth, agriculture, infrastructure, the financial sector, the operation of free markets, poverty and inequality, the public sector, and finally, the environment. Awakening Giants, Feet of Clay assumes that readers have considerable prior knowledge of economics; this is clear when phrases such as "gini coefficient" and "dynamic competitive advantage" are used with no explanation.


Bardhan focuses on the last twenty-five years in comparing the economies and structural issues of India and China. What emerges from his work is a picture of a relatively vibrant and dynamic Chinese economy compared to a sluggish India. What is surprising, however, is the fact that this difference can in many ways be accounted for by the fact that China, a communist country, embodies free-market principles such as competition more so than India does, especially in its governance.

Some early instances of China encouraging competition and using incentives to spur economic growth can be found in the proliferation of Township Village Enterprises (TVEs) in the 1980s and 1990s which helped spur industrialization in rural areas. Controlled by local governments, these enterprises effectively responded to incentives presented in a market economy without privatizing ownership. These institutions, until their privatization in the mid-1990s, were not backed by the state (whereas State Owned Enterprises were), so they encouraged regional competition between TVEs. This notion of regional competition for public sector entities pervades throughout Chinese government. For example, the Communist Party of China (CPC) builds in career incentives (i.e., advancement within the CPC) for local officials based on interregional competition. As well, the CPC encourages institutional experimentation on a regional level, so that innovative ideas can be extended into other regions. In contrast, Indian bureaucrats at a regional level often only serve for short periods of time, and generally shy away from `rocking the boat' because they are unlikely to reap benefits if a project succeeds, and will face blame if it fails. As well, regional experimentation in India is low because local governments would face great pressure from the electorate to bail out unsuccessful projects.

"China's progress in building highways has been simply phenomenal. In 1988, China had barely one hundred kilometers of expressways; within ten years, the total length of China's expressways had become second only to that of the United States, and rose to 60 thousand kilometres by 2009." (pg 57)

A key indicator of future growth and competitiveness is the infrastructure of a country; in this regard, China eclipses India in a number of areas. For one, the generation, transmission, and distribution of power in China have kept pace with economic growth. On the other hand, severe underpricing and power theft in India have led state-owned power firms to suffer enormous financial losses; as a result, the cost of power to manufacturers in India is upwards of 35% more expensive than in China. The same can be seen in urban infrastructure where, because of political pressure to keep user charges on water/sewage/waste low, "India is ill-equipped to cope with the already mounting demands arising from urban growth". However, the author does note that in one critical area of infrastructure, telecommunications, India enjoys a cost advantage over China. This occurs because of the vigorous private sector in this space, and speaks to the potential for privatization to help solve India's infrastructure problems.

Particularly relevant to those interested in finance, Bardhan, in one of his best chapters, compares the state of the financial markets in the two countries; in this regard, India is seen as much farther ahead than China. The author contrasts the successful National Stock Exchange (NSE) of India (the third largest stock exchange in the world by number of transactions) with Chinese equity markets (highly speculative and suffering from rampant insider trading). Bardhan concludes that India's system is more balanced compared to China's, where "allocation of capital remains severely distorted, particularly working against private enterprise".

Awakening Giants, Feet of Clay also raises the alarm on the environmental problems which both countries are facing. In a fascinating chapter, Bardhan points out that environmental performance scores for India and China are "significantly worse than the average scores in their respective income group of countries". Even more alarming is the fact that according to the World Health Organization, air pollution can be attributed to 500,000 premature deaths in India and even more in China. Unsurprisingly, it appears both of these countries are investing in green energy (e.g., China has surpassed the US in terms of installation of wind turbines).


Awakening Giants, Feet of Clay accomplishes exactly what it sets out to do - provide readers with a sense of how these two emerging economies have developed, and what structural/institutional problems they must overcome to continue this development. Bardhan is able to draw upon a vast array of academic literature and use complementary graphs in a way that is accessible to readers who know little about either country prior to reading the book.

Bardhan paints a realistic picture of these two emerging economies, a picture that is often skimmed over by the financial press. By highlighting a number of severe problems in these economies, problems which could impede growth in the years ahead, the book serves as a warning for any investors who believe that "this time is different" in these two emerging markets. After reading this book it is likely one will be able to better understand pieces in the financial press written about India and China, and better yet, understand what overly optimistic authors tend to not mention about these countries.

In terms of writing style, Bardhan is academic and to-the-point, with occasional moments of flair to keep the book interesting. At the end of each chapter the author summarizes what was said, which reinforces the book's key arguments.

What is disappointing in some respects is the way in which Bardhan concludes the book. The chapter entitled "Looking to the Future: Through the Lens of Political Economy" shines in a lot of ways (e.g., the discussion of communism vs. democracy in India and China's developments) but feels somewhat incomplete. Bardhan's focus in the final chapter is largely on the political aspects of these countries, rather than economic ones, which may leave readers thirsting for a more economic evaluation of these two countries' futures. Given the preceding chapters, which equip readers with a solid understanding of the economic issues facing these countries, Bardhan should have used his conclusion to draw upon what readers have learnt to predict the economic future of these countries.

Overall, the book is excellent. For those interested in learning about the two economies that are sure to take centre stage in the 21st century, Awakening Giants, Feet of Clay is a phenomenal starting point. While the author admits that the book "does not represent new frontiers of research," it successfully brings the vast swathe of academic literature about these countries together to paint a clear picture of India and China's economic development.

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3 of 8 people found the following review helpful
4.0 out of 5 stars A few good ideas, June 3, 2010
This review is from: Awakening Giants, Feet of Clay: Assessing the Economic Rise of China and India (Hardcover)
This short book has a few interesting ideas.

The most surprising ones involve favorable claims about China's collectivist period (but without any claim that that period was better overall).

China under Mao apparently had a fairly decentralized economic system, with reasonable performance-based incentives for local officials, which meant that switching to functioning capitalism required less change than in Russia.

Chinese health apparently improved under Mao (in spite of famine), possibly more than it has since, at least by important measures such as life expectancy. This is reportedly due to more organized and widespread measures against ordinary communicable diseases under collectivism.
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1 of 5 people found the following review helpful
4.0 out of 5 stars Great but not without flaws, November 1, 2010
This review is from: Awakening Giants, Feet of Clay: Assessing the Economic Rise of China and India (Hardcover)
This is a fantastic book- and Prof. Bardhan is among the top rsearchers in the field of Development economics. There are too many books published these days which talks about the rise of China and India- but this book is in a league of its own. Prof. Bardhan doesn't do hype, this is a serious scholarly work that would be easier to enjoy if you have an economics background, but even if you don't, you should be able to take away something from this book.

I just have one critical comment. The author talks about the positive aspects of China's socialist legacy- a solid investment in basic health and education, a relatively egaliterian land ownership pattern, rural electrification etc etc. He is quite right to highlight these things as China's socialist legacy is usually presented in wholly negative terms in most mainstream discussions of these issues. However, we should never allow ourselves to forget the horrendous human rights crimes perpetrated during this period. Somewhere between 20 to 30 million people perished during the Great Leap Forward alone. More than a million people were murdered in cold blood during the Cultural revolution. Children were sometimes forced to denounce their parents and witness their public humiliation and death. I think it is necessary to remember these episodes before we get too carried away celebrating the "positive aspects" of China's socialist legacy. Now, I am not accusing Prof. Bardhan of supporting these things- that would be ludicrous. What I am saying is that these factors must always be kept in mind while discussing China's socialist legacy to have a more balanced perspective on China's performance during this period.
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1 of 7 people found the following review helpful
5.0 out of 5 stars Good Background -, August 8, 2010
This review is from: Awakening Giants, Feet of Clay: Assessing the Economic Rise of China and India (Hardcover)
In 1820, India and China contributed nearly half of the world's income; in 1950, it was down to one-tenth, has now risen back to one-fifth, and is projected to reach one-third by 2025. Author Bardhan compares China and India across a number of dimensions. I'm primarily interested in China, due to its fantastic economic rise since 1979, about twice that of India's.

China's average output grew an average 7.1%/year from 1979 to 1984, vs. 2.7% from 1970-1978. TVEs were the most dynamic part of China's economy in the first two decades of its reform. They went from less than 6% GDP in 1978 to 26% in 1996. In the 1980s, regional and local governments had SOE managers sign performance responsibility contracts in return for greater freedom; the government also subsidized workers buying their formerly SOE-supplied apartments, while relieving the SOEs of that responsibility. Some SOE managers were selected by auctioning commitments to profit delivery. By 2005, two-thirds of regional SOEs were privatized - the top managers of three-quarters of them were the new owners. Until the late 1990s, dismissal of Chinese workers was limited to 1% of staff/year, and they had to be found new employment. Large-scale SOEe layoffs then came, cushioned by a safety net. Of the total government spending in China, over half is made at sub-provincial levels. China's manufacturers used to have excessive inventories, typical of state-enterprises, no more.

Reliance on reservoir storage of water in China is almost 5X the amount in India. China's rice yield/hectare is 2X that of India's, and 1.5X in wheat - this has continued for centuries.

At the beginning of the 1990s, India's highway and rail infrastructure was greater than China's in terms of miles. Chinese power companies ROE approximates 12% - enough incentive for investment and repairs. Industry uses about 75% of the power, agriculture and residential users consumer about 14%, and transmission losses are about 7%. Non-payment and theft are not problems. The cost of power in India is about 35% higher, and industrial users experience 17 significant shutdowns/month, vs. only 5 in China. Theft and non-billing losses approximate 37% in India; not surprisingly, the system runs at a loss. China had 100 km. of expressways in 1988, 60,000 by 2009. India has about 8,000. China finances roads more through tolls than fuel taxes; private finance only accounts for less than 10%. Staff costs are about 25% of China's railways, 50% in India - again, not suprisingly, India's railways are poorly utilized and repaired. China took less than two years to acquire land and relocate people in Shanghai, vs. Mumbai taking 13 years and still not finished. Beijing has 24-hour water service, while Mumbai/Delhi has 4-5 hours/day. Ship turnaround in Shanghai is much faster than Mumbai (3.6 days); Hong Kong is the fastest - down to hours, in some cases.

Domestic gross savings in China was 54% of GDP in 2008 - 6% from government, retained earnings (low dividends, capital investment/replenishment -->20%), and personal savings the remainder. India's gross savings average 38%.

A state study found that 2,932 of the 3,320 Chinese citizens with at least 100 million RMB were children of high-ranking Party officials. Most corruption occurs through land transfers - by 2006, 60 million Chinese farmers lost their land without adequate compensation - the money goes to kickbacks and extra government revenues.

China's role in industrial support includes bargaining the terms of FDI, negotiating prices of imported materials, channelling investment to favored sectors, directing M&A, promoting capabilities, and appointing managers.

Recent economic reforms are not a sufficient explanation for India's recent growth - over 94% of its population lies outside the affected corporate sector. India's IT-enabled services sector employs less than 0.5% of the labor force, and business services/telecommunications only cover about 25% of the total service sector. India's rate of decline in poverty has not accelerated recently either. Those reforms included abolishing most restrictions on entry/capacity expansion (from about 80 products, now less than 40), lowering taxes and tariffs, increasing the allowed foreign investment, and a modest opening of the public sector. It still has strong anti-dumping regulations - mostly aimed at China. Small firms use 90% of total manufacturing employment, and produce about one-third total output. It is still difficult to reduce staff in large firms.

Indian agricultural subsidies mostly go to large firms, and soak up funds for investment elsewhere. Indian local governments are hampered by their dependence on higher levels of government for funds and personnel. India's poor lack the rural safety net that land redistribution in China provides, creating greater resistance to market reforms. It greater social heterogeneity also makes reaching consensus more difficult.
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