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 shows one approach that works: privatization, in which 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 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.
In fact, privatization has not only rescued individual industries and a whole economy headed for disaster, but 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 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 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 workforce bought shares; at Associated British Ports, 90 percent; and at 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 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 privatization process. Yet they miss Thomas Paine’s point that “what we obtain too cheap we esteem too lightly.” In 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 can be inferred from the passage about the privatization process in the United Kingdom?
- It depends to a potentially dangerous degree on individual ownership of shares.
- It conforms in its most general outlines to Thomas Paine’s prescription for business ownership.
- It was originally conceived to include some giving away of free shares.
- It has been successful, even though privatization has failed in other countries.
- It is taking place more slowly than some economists suggest is necessary.
Answer & Explanation
Answer is (E).
While the previous GMAT reading comprehension passage is my favorite for teaching students how to attack harder RC problems, this one is a close second. As you saw in the last example, it is so important to find the “hidden” piece of information in the passage. Generally, people are quite lazy in this regard, and they pay for it whenever this mechanism of difficulty is used.
Unlike the previous question, this one lacks any specificity in the question stem, as the whole passage is about the privatization process in the UK (the previous one asked about the very specific issue of “labor disruptions”). In this case, you must go through each answer choice and find where that topic was discussed in the passage to see if there is hard evidence to support the given inference. This type of question is more time consuming, since you must look for each topic presented in the answers instead of just one topic in the question stem.
Let’s now break down each of the answer choices to see which inference is properly supported by evidence in the passage:
(A) In the final paragraph, the author talks about the danger of giving away free shares to employees, rather than making them purchase the shares. However, this answer choice references the danger of “ownership,” and everyone in the passage agrees that private ownership is a good thing. This is a classic example of wordplay, in which something you DID read in the passage is subtly changed in the answer to make it incorrect.
(B) This is the #1 incorrect answer, but it is an extremely lazy choice that could never be proved from the passage. The test writers know that you will be able to find the quote of Thomas Paine very quickly AND the inference in this answer choice seems reasonable. However, there is absolutely nothing in the passage that tells you what Thomas Paine prescribed for business ownership. All you know is that he said, “What we obtain too cheap, we esteem too lightly”. For all we know that quote could have been from a book about how to avoid raising spoiled children! There is absolutely no basis for this statement in the passage, yet so many people pick this “lazy” answer because the topic matter is easy to find. Always beware of the easy-to-find and seemingly reasonable statement in RC answer choices – you saw a very similar “con” in the last problem.
(C) and (D) For each of these answers, there is simply no information to support either in the passage. You will not find anything in the passage about whether the original plan was conceived to give away shares or how the UK process compares to other countries. These are relatively easy to eliminate.
(E) For this correct inference, you just need to find the right information and then the answer seems quite clear. Since this answer choice references “some economists,” you should go find those keywords at the beginning of the third paragraph, where it says: “Some economists have suggested that giving away the shares would provide a needed acceleration” Boom! Since they are saying there is a need for acceleration, you can be sure the process is taking longer than they believe is necessary.
As in so many hard RC questions, you need to dig back into the passage and find a crucial detail. This question could never be answered from even the most careful initial reading, so you must take the time to carefully mine the passage after reading the question and answers. In both of these previous RC questions, the test writers use the same trap: 1. They punish the “lazy” test-taker who is satisfied with a reasonable answer that is improperly based on an easy-to-find piece of information (or is simply true in the “real world”). 2. They reward the analytical test-taker who digs deeply to unlock a hidden connection between concrete evidence and the right answer. If you haven’t proven your answer with hard evidence in this type of RC question, keep looking!
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