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OG RC - Privatization

This topic has 1 expert reply and 0 member replies
fiza gupta Master | Next Rank: 500 Posts
Joined
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Target GMAT Score:
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OG RC - Privatization

Post Thu Oct 13, 2016 2:43 am
Elapsed Time: 00:00
  • Lap #[LAPCOUNT] ([LAPTIME])
    While there is no blueprint for transforming a largely
    government-controlled economy into a free one, the
    experience of the United Kingdom since 1979 clearly
    Line shows one approach that works: privatization, in which
    (5) state-owned industries are sold to private companies. By
    1979, the total borrowings and losses of state-owned
    industries were running at about £3 billion a year. By
    selling many of these industries, the government has
    decreased these borrowings and losses, gained over £34
    (10) billion from the sales, and now receives tax revenues from
    the newly privatized companies. Along with a dramatically
    improved overall economy, the government has been able
    to repay 12.5 percent of the net national debt over a
    two-year period.
    (15) In fact, privatization has not only rescued individual
    industries and a whole economy headed for disaster, but
    has also raised the level of performance in every area. At
    British Airways and British Gas, for example, productivity
    per employee has risen by 20 percent. At Associated
    (20) British Ports, labor disruptions common in the 1970’s and
    early 1980’s have now virtually disappeared. At British
    Telecom, there is no longer a waiting list -as there always
    was before privatization -to have a telephone installed.
    Part of this improved productivity has come about
    (25) because the employees of privatized industries were given
    the opportunity to buy shares in their own companies. They
    responded enthusiastically to the offer of shares: at British
    Aerospace, 89 percent of the eligible work force bought
    shares; at Associated British Ports, 90 percent; and at
    (30) British Telecom, 92 percent. When people have a personal
    stake in something, they think about it, care about it, work
    to make it prosper. At the National Freight Consortium, the
    new employee-owners grew so concerned about their
    company’s profits that during wage negotiations they
    (35) actually pressed their union to lower its wage demands.
    Some economists have suggested that giving away free
    shares would provide a needed acceleration of the private-
    zation process. Yet they miss Thomas Paine’s point that
    “what we obtain too cheap we esteem too lightly.” In
    (40) order for the far-ranging benefits of individual ownership to
    be achieved by owners, companies, and countries,
    employees and other individuals must make their own
    decisions to buy, and they must commit some of their own
    resources to the choice.

    Which of the following statement is most consistent with the principle described in lines 35-38?
    (A) A democratic government that decides it is inappropriate to own a particular industry has in no way abdicated its responsibilities as guardian of the public interest.
    (B) The ideal way for a government to protect employee interests is to force companies to maintain their share of a competitive market without government subsidies.
    (C) The failure to harness the power of self-interest is an important reason that state-owned industries perform poorly.
    (D) Governments that want to implement privatization programs must try to eliminate all resistance to the free-market system.
    (E) The individual shareholder will reap only a minute share of the gains from whatever sacrifi ces he or she makes to achieve these gains.

    OA:C

    _________________
    Fiza Gupta

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    Post Fri Nov 18, 2016 7:53 am
    fiza gupta wrote:
    While there is no blueprint for transforming a largely
    government-controlled economy into a free one, the
    experience of the United Kingdom since 1979 clearly
    Line shows one approach that works: privatization, in which
    (5) state-owned industries are sold to private companies. By
    1979, the total borrowings and losses of state-owned
    industries were running at about £3 billion a year. By
    selling many of these industries, the government has
    decreased these borrowings and losses, gained over £34
    (10) billion from the sales, and now receives tax revenues from
    the newly privatized companies. Along with a dramatically
    improved overall economy, the government has been able
    to repay 12.5 percent of the net national debt over a
    two-year period.
    (15) In fact, privatization has not only rescued individual
    industries and a whole economy headed for disaster, but
    has also raised the level of performance in every area. At
    British Airways and British Gas, for example, productivity
    per employee has risen by 20 percent. At Associated
    (20) British Ports, labor disruptions common in the 1970’s and
    early 1980’s have now virtually disappeared. At British
    Telecom, there is no longer a waiting list -as there always
    was before privatization -to have a telephone installed.
    Part of this improved productivity has come about
    (25) because the employees of privatized industries were given
    the opportunity to buy shares in their own companies. They
    responded enthusiastically to the offer of shares: at British
    Aerospace, 89 percent of the eligible work force bought
    shares; at Associated British Ports, 90 percent; and at
    (30) British Telecom, 92 percent. When people have a personal
    stake in something, they think about it, care about it, work
    to make it prosper. At the National Freight Consortium, the
    new employee-owners grew so concerned about their
    company’s profits that during wage negotiations they
    (35) actually pressed their union to lower its wage demands.
    Some economists have suggested that giving away free
    shares would provide a needed acceleration of the private-
    zation process. Yet they miss Thomas Paine’s point that
    “what we obtain too cheap we esteem too lightly.” In
    (40) order for the far-ranging benefits of individual ownership to
    be achieved by owners, companies, and countries,
    employees and other individuals must make their own
    decisions to buy, and they must commit some of their own
    resources to the choice.

    Which of the following statement is most consistent with the principle described in lines 35-38?
    (A) A democratic government that decides it is inappropriate to own a particular industry has in no way abdicated its responsibilities as guardian of the public interest.
    (B) The ideal way for a government to protect employee interests is to force companies to maintain their share of a competitive market without government subsidies.
    (C) The failure to harness the power of self-interest is an important reason that state-owned industries perform poorly.
    (D) Governments that want to implement privatization programs must try to eliminate all resistance to the free-market system.
    (E) The individual shareholder will reap only a minute share of the gains from whatever sacrifi ces he or she makes to achieve these gains.

    OA:C
    We've got a discussion here about how when employees have a stake in a company's profits, they're willing to make sacrifices they wouldn't have otherwise been willing to make, as they'll benefit from these sacrifices in the long run. When an industry is state-owned, employees could have no ownership stake, and thus, the thinking goes, would not make the same kinds of sacrifices. This idea is captured in C

    _________________
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