Economist GMAT Reading Comprehension Challenge #22

Economist GMAT Reading Comprehension Challenge #22

Welcome back to the GMAT reading comprehension challenge! Core reading skills are key to GMAT success so we summarize Economist articles to help you improve your GMAT reading. For more info on getting started with these articles go ahead and visit the GMAT reading comprehension challenge home page.

Article: The struggle to reform China’s economy


For the past...

At stake in US/China trade talks is one of the 21st century's most consequential issues: the trajectory of China's $14trn economy.

Although President Donald Trump...

Trump started the trade war with China but there is near universal agreement that China's aggressive state capitalism makes it a bad actor in the global trading system, causing gross distortions in markets at home and abroad, and poses a threat to security.

The backlash...

China's steroidal state capitalism is yielding diminishing returns and leads to long term instability but China's leader, Xi, is reluctant to limit state power or yield to American demands though those things could boost economic performance and win more friends abroad.

Its leaders...

China's leaders are entitled to feel smug as they have presided over one of history's great socio-economic successes.

Yet as our essay...

Since Mr. Xi took power China has in some ways gone backwards as government owned firms have grown in prominence and the private sector has stagnated.

Regulators meddle...

In addition to heavily manipulating the economy and suppressing critical analysis, the government has announced a "made in china 2025" plan to use state direction to dominate high-tech industries, a plan which has so far produced little except for alarm in the rest of the world.

Make no mistake...

The current system could continue for some time but is facing pressure from a shrinking working age population, inefficient spending, and a swelling bubble of debt.

The backlash abroad...

China's image risks becoming another drag on the economy as trade barriers rise and its firms are viewed with suspicion by western markets.

China’s leaders...

China's leaders have underestimated the frustrations behind the trade war and the depth of change in its economy that may be required to end the feud.

To deal with...

To improve the economy and reduce foreign hostility the state's role in allocating capital must be limited and banks and financial markets must operate freely.

Mr Xi also...

Mr. Xi should temper industrial policy by giving state firms autonomy while requiring them to operate as efficiently as the private sector and by shifting spending away from grandiose schemes such as "Made in China 2025" to funding basic research.

Lastly, China...

China must protect the rights of foreign firms.

Given China’s poor...

America needs room to respond to potential Chinese bad behavior with punitive measures but given that Chinese firms can operate with greater transparency and on commercial principles they should treated like businesses from any other country.

Today, these reforms...

Chinese economic policy has been regressing but opening up the economy is a popular idea at home and would make China a richer country with fewer enemies.

Main Idea

Liberalizing the Chinese economy would help solve its current slowdown and create fewer enemies abroad.

Primary Purpose

To provide some context to the current US/China trade war and suggest reforms for improving China's economy and its relationship to the world at large.


Economist GMAT Reading Comprehension Challenge #21

Economist GMAT Reading Comprehension Challenge #21

Welcome to the GMAT RC challenges! To get the most out of these articles go ahead and start at the Economist GMAT Reading Comprehension page

Article: Jair Bolsonaro tackles Brazil’s pensions problem


Jair Bolsonaro won...“change our history”.

The success of Bolsonaro's presidency depends on reviving the Brazilian economy which would require reforming the pension system.

Mr killing old people.”

Although Bolsonaro has signaled that he supports pension reform by appointing an investment banker and determined modernizer as his economy minister as a congressman he voted against pension reform.

The least 30 years.

The pension reform package, which would drastically increase retirement age, is even more aggressive than the one that Bolsonaro voted against as a congressman as it reduces the transition period from 21 to 12 years.

The plan would raise ...private-sector workers.

The plan would also raise contributions paid by bigger earners, limit collecting of multiple pensions, and reel in public sector pensions so that they would be more in line with pensions in the private sector.

If congress enacts...a Brazilian bank.

The plan would generate substantial savings and is said to reduce imbalances significantly.

It must now get through congress...shield him from prosecution.)

The plan requires a constitutional change and with that a 3/5 majority in congress which it is unlikely to muster without changes that would potentially decrease the expected savings substantially.

Mr Bolsonaro has advantages...pensions reform.

Bolsanor's plan has hope as his allies lead both houses of congress and most people in congress as well as the broader public support pension reform.

But, as Mr Jereissati admits...majorities in congress.

Although most people support pension reform they don't necessarily agree with all of the changes proposed in the Bolsonaro's plan.

His two-month-old presidency...his cabinet job.

A scandal in his party has made it harder for pension reform to pass.

Such dramas will...Moody’s says.

The odds are in favor of pension reform and although it will likely be a diluted version of the current plan, according to Moodys, investors would be re-assured.

Mr Guedes’s ambitions.. resist lower import barriers.

The minister for the economy has further plans for modernizing the Brazilian economy including simplifying the tax code, reducing barriers to imports, and privatizing state owned enterprises but faces opposition in his own cabinet.

Right now...believe it.

The government is aggressively promoting the benefits of pension reform of which Brazilians have generally been skeptical.

Main Idea

Although Brazilians have traditionally been skeptical of its benefits, much needed pension reform is likely to pass and even though it will be in a diluted form, according to experts, it will still be enough to re-assure investors and help improve the Brazilian economy.

Primary Purpose

To discuss the Brazilian government's push for pension reform.

Economist GMAT Reading Comprehension Challenge #20

Economist GMAT Reading Comprehension Challenge #20

Here to improve GMAT Reading Comprehension? Great! Welcome to the challenges. For instructions on how to get the most out of the articles go ahead and start at the Economist GMAT Reading Comprehension home page.

Article: What would happen if Facebook were turned off?


There has never..Facebook would be like.

Facebook is massively popular and is said to provide tremendous value to its users but also has a dark side which might make it worth leaving behind.

To begin to imagine...into the digital wilderness.

Researches conducted a study on users who disconnected from facebook for a month.

Those booted off...depression and anxiety.

Users who disconnected experiences a variety of positive effects.

It also to disappear.

Based on the study it appears that users overestimate how much value facebook provides but, considering that some users who had disconnected during the study but rejoined, indicates that the social network still provides value to users.

Yet that is not...did not exist at all.

Users might only be rejoining because there are 2.3 billion other people on facebook even though the world at large might be better without facebook.

How could that be? ...good and bad.

Facebook grew quickly as the online population exploded and became an online megacity which could attract people by its sheer size.

In the life of physical cities... decamp to sunnier climes.

The attraction of being close to others can lead to remarkable durability.

Such things occur...Roman ancestors occupied.

A greater collapse in Roman era Britain caused Britain to become more successful than France which had remained more stable during that period but then failed to adapt to a changing economic landscape.

Such ruts are something better.

The end of Facebook could lead to a better social network.

Main Idea

Although it seems to provide value, Facebook may provide less value than users perceive and its downfall could lead to a better social network.

Primary Purpose

To discuss a study evaluating the value of Facebook and advance reasons for why the end of Facebook could benefit society.

Economist GMAT Reading Comprehension Challenge #19

Economist GMAT Reading Comprehension Challenge #19

Welcome the the Economist GMAT Reading Comprehension Challenge! For more info on using the Economist articles to improve GMAT reading comprehension head over to the GMAT Reading Challenge home page.

Article: It is time to worry about Germany’s economy


The world... across the West

The world is used to a thriving German economy which has been an anchor of fiscal stability.

Yet the German economy...European champions.

Having narrowly avoided recession in 2018 and facing a slow-down, the German economy looks vulnerable.

Germany is getting both... too low by Germany.

Germany is getting the short and long term economic issues wrong by focusing on a potentially overheating economy and rising inflation instead of a low growth trap.

The slowdown...around the world.

The trade war with China and the drive to bring supply chains home could threaten Germany's globalized economic model.

Reform has made...Germany will struggle.

Reform has made the German labour market strong but it may struggle to adapt to technological change.

The government is not blind...It is time to worry.

Increased infrastructure spending, tax incentives for private investment, and lower taxes for households to increase consumption would work better to keep the economy healthy than protectionism and the rolling back of labour market reforms.

Main Idea

The German economy has short and long term issues that could be solved by increasing infrastructure spending, tax incentives for private investment, and competition in coddled service industries while lowering taxes for households to increase consumption.

Primary Purpose

To discuss the issues facing the German economy and suggest ways to solve those issues.

Economist GMAT Reading Comprehension Challenge #18

Economist GMAT Reading Comprehension Challenge #18

For instructions on how to use these articles: Economist articles to improve GMAT verbal 

Article: The truth about big oil and climate change


In America, the world’s largest economy...America’s highways with electric cars.

With climate change hard to ignore, America, the worlds second biggest polluter, is embracing green ideas.

Yet amid the clamor is a single...the climate could be disastrous.

Even though green ideas are being embraced, demand for oil is still rising and the energy industry plans to satisfy it triggering potentially disastrous consequences for the climate.

ExxonMobil shows...bloated role for the state.

Government intervention is needed to solve climate change.

For much of the 20th century...four are majors.

The major oil companies have considerable influence.

In 2000 BP promised to go...not what they say.

On the face of it the majors have endorsed renewables but largely remain dedicated to fossil fuels.

According to ExxonMobil...1.5°C above its pre-industrial level.

Although production needs to fall considerably in order to prevent potential climate catastrophe, with demand rising, all of the majors are expected to expand output.

It would be wrong to conclude...shareholders can enforce.

Energy firms aren't evil just profit driven.

Some hope that the oil companies...combustion engines in 2030.

It is unlikely that oil companies will gradually head in a new direction or that brilliant innovations will save the day.

So, too, the boom in ethical investing....investors remain modest.

There has been a boom in ethical investing, which can put pressure on polluters, but oil companies' recent commitments to green investors remain modest.

And do not expect much...diplomacy, not judges.

Some hope for legal action against oil companies but that looks unlikely.

The next 15...the partisan divide.

The next 15 years will be critical for climate change so it's not a moment to soon that climate change seems to be capable of winning bipartisan support even in the shadow of the Trump administration's withdrawal from the Paris agreement and attempt to resurrect the coal industry.

The key will be...including, even, ExxonMobil.

Unlike the Democrat's Green New Deal, a successful green policy must be practical and not cause too much financial hardship to centrist voters and is best exemplified in a carbon tax.

Primary Purpose

To discuss a potential increase in climate threatening fossil fuel production and the best way to slow climate change.

Main Idea

A political solution that is practical and will not cause excessive hardship on centrist voters is needed to curb climate change and a tax on carbon is the best option that meets these criteria.