GMAT Test Prep: RC-54801906 GMAT Reading Comprehension

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, 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 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, 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 I 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.
 
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