GMAT Essays (AWA)

Any feedback is much appreciated, thanks!!

Group #1: Analysis of Issue
The desire of corporations to maximize profits creates conflict with the general welfare of the nation at large.

Discuss the extent to which you agree or disagree with the opinion stated above. Support your views with reasons and/or examples from your own experience, observations or reading.

Response:

The issue of whether corporations' objective of maximizing profits benefits
society as a whole is very divisive. This issue plays a major role in every
political debate around the world today, as governments wrestle with how to
treat corporations. On one hand, when corporations maximize profits, there is
usually a trickle down effect, with these corporations re-investing their profits
thereby creating jobs and providing benefits to society at large. On the other
hand, those opposed to this theory argue that profits are hoarded by
shareholders and owners of corporations and there is very little benefit
received by society from these profits. The desire of corporations to maximize
profits creates conflict with the general welfare of the nation at large in
numerous ways.

The prevailing argument put forward by economists in favor of helping
corporations maximize their profits is the tricke-down theory. President Reagan
is credited with implementing a plan to provide corporations with tax breaks
and other incentives to carry on with their businesses, and subsequently
bolster the economy through increased job creation and investment in new
businesses. There have been numerous studies that discredit this hypothesis,
and the validity of the claim that corporations are apt to re-invest their profits is
questionable. Moreover, there is not strong enough evidence to convincingly
prove that the propensity of investors to spend profits remains constant with
increasing profits; if this propensity is decreasing as profits rise, then the
benefit received by society as a whole as profits are maximized is marginally
lower. In today's economy, with the shift towards a more technology-based and
service-based economy, profits can be maximized more efficiently than in the
past. Corporations need fewer employees and lower investment to generate
higher returns, and as such, even if corporations re-invest their profits, the
corresponding benefit to society in today's economy is lower than it would have
been under President Reagan. All of these factors combined indicate that there
is not much credit to trickle-down economics or "Reaganomics" as they are
often referred to, and that corporations maximizing profits does not necessarily
equal increased benefit to society as a whole.

For decades, economists and philosophers have argued that when
corporations are successful, there is less scarcity of resources and thus the
success of corporations is directly correlated to increased benefits for society.
There is a popular theory, called the "Boiler Room Theory", which refutes this
argument. The theory analogizes corporations maximizing profits to a boiler
room operator. The goal of the boiler room operator is to maintain the
temperature of a given building within a specific range. This temperature is
measured by the gauge on the boiler. If the boiler room operator is judged
solely on the gauge, then he can accomplish great results by simply breaking
the gauge so it is always within the specified range, and not have to deal with
the consequences. Similarly, if corporations are judged solely on their profits,
which are merely a gauge of performance and not indicative of the entire story,
then they can work outside the system to inflate profits while not necessarily
creating benefits for all their stakeholders. This phenomenon has occurred
numerous times in history, through accounting and financial frauds, and other
types of white collar crime. Therefore, judging corporations solely on their
profits can lead to conflict with the general welfare of the nation at large.

Another example of how corporations maximizing profits can lead to conflict
with the welfare of society is seen with the rise of corporate lobbying. Often,
these lobbyists are able to corral the support needed to quell the passage of
bills that would be detrimental to profits of the companies paying them. This
phenomenon is seen with tobacco and oil lobbyists in particular, who have a
history of being able to beat bills which would pass stricter environmental
regulations that would eat into the profits received by their respective
industries. Clearly, in such instances, the power of these lobbyists is an
advantage for the corporations, and their success comes at the expense of
laws that would benefit society as a whole.

The existing economy and legal structure creates an environment where the
desire of corporations to maximize profits creates conflict with the general
welfare of the nation at large. There are ways in which profits can be re-
invested in today's economy which would negate the impact of trickle-down
economics. Profits are merely a gauge on which corporations can be judged
and do not reflect the big picture; as such, judging corporations on profits
alone can lead to perceptions of success while creating little benefit for society.
Lastly, the rise of corporate lobbying in government has lead to an environment
where regulations that might benefit society at the expense of corporate profits
are regularly defeated. All of these factors demonstrate that the desire of
corporations to maximize profits creates conflict with the general welfare of the
nation at large in today's American economy.

Thanks Brent! I am going to try to be a bit more brief so that I can spend some time proof-reading and reviewing. I ran out of time with this essay and had to rush the conclusion.