Reading comprehension home exercise-20 PASSAGE A

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 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 British Ports, labour disruptions common in the 1970s 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. The 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 British Telecom 92 percent. When people have a personal stake in something, they think about it, care about it, and 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.

1.       According to the passage, all of the following were benefits of privatizing state-owned industries in the United Kingdom EXCEPT:

A.      Privatized industries paid taxes to the government.

B.      The government gained revenue from selling state-owned industries.

C.      The government repaid some of its national debt.

D.      Profits from industries that were still state- owned increased.

2.       According to the passage, which of the following resulted in increased productivity in companies that have been privatized?

A.      A large number of employees chose to purchase shares in their companies.

B.      Free shares were widely distributed to individual shareholders.

C.      The government ceased to regulate major industries.

D.      Unions conducted wage negotiations for employees.

3.       It can be inferred from the passage that the author considers labour disruptions to be

A.      An inevitable problem in  a weak national economy

B.      A positive sign of employee  concern about a company

C.      A predictor of employee reactions to a company’s offer to sell shares to them  

D.      A deterrence to high performance levels in an industry

4.       The passage supports which of the following statements about employee’s busing shares in their own companies?

A.      At three different companies, approximately nine out of ten of the workers were eligible to buy shares in their companies.

B.      Approximately 90 percent of the eligible workers at three different companies chose to buy shares in their companies.

C.      The opportunity to buy shares was discouraged by at least some labour unions.

D.      Companies that demonstrated the highest productivity were the first to allow their employees the opportunity to buy shares.

5.         Which of the following statements is most consistent with the principle?

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.

6.       Which of the following can b inferred from the passage about the privatization process in the United Kingdom?

A.      It depends to a potentially dangerous degree on individual ownership of shares.

B.       It conforms in its most general outlines to Thomas Paine’s prescription for business ownership.

C.      It was originally conceived to include some giving away of free shares

D.      It is taking place more slowly than some economists suggest is necessary.

7.       The quotation is most probably used to

a.       Counter a position that the author of the passage believes is incorrect

b.      State a solution to a problem described in the previous sentence

c.       Show how opponents of the viewpoint of the author of the passage have supported their arguments

d.      Point out a paradox contained in a controversial viewpoint.

Answer:

1.       D   this question begins with the phrase according to the passage, indicating that it can be answered using facts stated in the passage. The first paragraph lists the benefits of privatization, Use the process of elimination and heck the five possible answer choices against the benefits. The point that is NOT discussed in the passage is the correct answer: 

2.        A   The second paragraph describes the increased productivity, and the third paragraph begins by stating one reason for it: employees of privatized industries were given the opportunity to buy shares in their own companies. The paragraph also cites the high percentage of employees buying shares in three privatized companies, supporting the idea that many employees bought shares.

3.        D   This question states that an inference is required; this inference is based on material presented in the second paragraph. To demonstrate that privatization has raised the level of performance in every area, the author gives three examples. One example is the disappearance of labour disruptions, once common. If the absence of labour disruptions raises the level of performance, then the author must believe that the presence of labor disruptions impedes a high level of performance.

4.       B   Only one statement is supported. The third paragraph presents the percentages of the eligible employees who purchased shares in their companies: 89 percent at one company, 90 percent at a second, and 92 percent at a third. Thus, it is true that roughly 90 percent of the eligible work force at three different companies bought shares in their companies once they were given the opportunity to do so.

5.       C   First identify the principle involved, and then find the statement that is most compatible with that principle. Argue that having a personal stake in a business makes employees work to make it prosper. When there is no personal stake, or self-interest, involved, employees do not have the same incentive to work hard to make their industry prosper. Thus, the poor performance of state-owned industries can be ascribed in part to the lack of motivation employees suffer when they have no personal stake in the business.

6.       D   support for the inference about the pace of privatization is provided by the suggestion of some economists that giving away free shares would provide a needed acceleration of the privatization process. If privatization needs to be accelerated, then it must be going too slowly at least according to these economists.

7.       A    Paine’s quotation offers a concise and time- honoured counterargument to the view voice in the preceding sentence. The economists suggest giving away free shares, but the author notes that these economists are forgetting that, according to Paine, people do not value what they get too cheaply. The author uses the quotation to show the basic error in the economists’ thinking.