With reference to the above passage, the following assumptions have been made: 1. Modern democracies rely on the market forces to enable them to be welfare states. 2. Markets ensure sufficient economic growth necessary for democracies to be effective. 3. Government programmes are needed for those left behind in economic growth. Which of the above assumptions is/are valid?

Passage

Can a democracy avoid being a welfare state for long? Why cannot mass welfare be left entirely to the markets? There is a built-in tension between markets and democracy. Markets do not work on a one-person-one-vote principle as democracies do. What one gets out of the market place depends on one's endowments, skills, purchasing power and the forces of demand and supply. Markets reward individual initiative and skill, and may also lift many from the bottom rungs of society, but some people never get the opportunity to develop skills that markets demand; they are simply too poor and too handicapped; or skill formation takes too long. By creating jobs, markets may be able to help even unskilled people, but capitalism has always witnessed bursts of unemployment.

QUESTION

CSAT

Easy

Comprehension

Prelims 2021

With reference to the above passage, the following assumptions have been made:

Modern democracies rely on the market forces to enable them to be welfare states.
Markets ensure sufficient economic growth necessary for democracies to be effective.
Government programmes are needed for those left behind in economic growth.

Which of the above assumptions is/are valid?

Select an option to attempt

Explanation

Statement 1 is incorrect: The passage mentions that there is a built-in tension between markets and democracy. The passage further goes on to elaborate, how. Here 'built-in' refers to the systemic aspects of each.

Statement 2 is incorrect: The last few lines of the passage invalidate the claim made in statement 2. The passage mentions that 'some people never get the opportunity to develop skills that markets demand' and that 'capitalism has always witnessed bursts of unemployment'. Therefore, we can assume that democracies are not efficient if the market runs strong.

Statement 3 is correct: As the markets cannot ensure equity (as understood from the various lines of the passage), government programs are needed to complement the market outcomes, to help those who have not benefited by the 'efficient distribution of resources' of the markets.

Hence, Option (B) is correct.

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