The Hindu - 2 (News Based RC) | Verbal Ability & Reading Comprehension (VARC) - CAT PDF Download

We've prepared a reading exercise based on an editorial from The Hindu, a respected Indian newspaper known for its insightful analysis of current affairs. After reading, questions test your understanding, inference, and critical thinking—ideal for CAT-level RC practice. Editorials enhance quick comprehension of complex arguments, nuanced viewpoints, and socio-political vocabulary, sharpening analytical skills on issues like free speech and governance.

Reading Comprehension

The 2025 Nobel Prize in Economic Sciences has been awarded to Philippe Aghion, Peter Howitt and Joel Mokyr, who have, over decades, attempted to explain humanity’s unprecedented progress over the past two centuries. While Mokyr has provided the long historical and cultural context, Aghion and Howitt have given it a formal mathematical frame or the “creative destruction” model. The idea itself is older. It originates with economist Joseph Schumpeter, who described capitalism as an evolutionary system in which innovation continuously displaces old technologies, firms and industries — a process both creative and destructive. But Schumpeter’s framework rested on certain assumptions: that markets are free, competition is open, and the state acts only as an enabler of private enterprise, not as a driver of innovation. This assumption sits uneasily with the historical record. The long vision of the erstwhile Soviet state, and now the Chinese model of developmental capitalism, reveal how the state itself can shape and direct innovation. The creative destruction model, refined by Aghion and Howitt in the early 1990s, emerged during the twilight years of the Cold War, just as the Washington Consensus and neoliberalism became the dominant global economic paradigm. These models reinterpreted Schumpeter’s idea in mathematical form through the endogenous growth theory — the notion that long-term growth is generated not by external forces but by innovation, education, and research arising within the economy. Crucially, it assumed that competition and private incentives — not central planning — are the engines of technological progress.

But the Nobel recognition comes at a time when the very conditions for this model to succeed have been upended by U.S. President Donald Trump. His administration has weaponised global trade, politicised science and technology, and turned markedly protectionist, departing from the open, rent-seeking capitalism of the post-war American economic order. While the creative destruction and endogenous growth models remain powerful tools to understand progress within a specific system — that of neoliberal capitalism — they fail to explain the exponential technological advances of state-led economies such as China. These models also overlook how geopolitics, institutional fragility and widening inequalities can reshape the very structure of innovation. It is thus telling that the Nobel Committee has chosen to honour a framework whose ideal conditions — liberal markets, global openness, and scientific freedom — are under strain. This perhaps must be viewed as a warning that for liberal democracies to thrive, they must not renege on the ideals of institutional freedoms within state-enabled capitalist societies.

Q1: The phrase "creative destruction" model primarily refers to:
(a) A process where state planning displaces private enterprise for faster growth
(b) An evolutionary capitalist system displacing old technologies through innovation
(c) The historical role of Soviet-style central planning in technological advances
(d) Neoliberal reforms that prioritise external forces over internal research
Ans: (b)
Explanation: The editorial describes Schumpeter's framework, refined by Aghion and Howitt, as capitalism's evolutionary process, where innovation continuously displaces outdated elements, emphasising its creative and destructive aspects in driving progress.

Q2: Which would most weaken the editorial's cautionary view of the Nobel award's timing?
(a) Evidence that China's state-led innovations align closely with endogenous growth theory
(b) Historical data showing neoliberal models thriving despite protectionist policies
(c) Proof that Trump's administration enhanced global openness and scientific freedom
(d) Confirmation that widening inequalities do not impact the structure of innovation
Ans: (c)
Explanation: The core argument highlights strains on the model's assumptions like liberal markets and openness, due to Trump's protectionism; if his policies instead bolstered these, it would undermine the claim that ideal conditions are under threat, reducing the award's "warning" value.

Q3: The editorial's reference to the "Washington Consensus and neoliberalism" implies:
(a) A rejection of Schumpeter's ideas in favour of Soviet-style planning
(b) The dominant paradigm that shaped the refinement of creative destruction models
(c) An outdated framework irrelevant to modern state-led economies like China
(d) A geopolitical force that overlooked institutional fragility in growth theory
Ans: (b)
Explanation: It positions the early 1990s refinement of the model amid the rise of the Washington Consensus and neoliberalism, which promoted free markets and private incentives as engines of progress, aligning with the model's core assumptions.

Q4: The "telling" choice of the Nobel Committee is interpreted as:
(a) An endorsement of state-driven innovation over private competition
(b) A warning to liberal democracies to preserve freedoms amid global strains
(c) A critique of the endogenous growth theory's failure to address inequalities
(d) A nod to historical Soviet visions in contemporary economic paradigms
Ans: (b)
Explanation: The editorial views the honour as poignant, given the erosion of the framework's prerequisites like openness and freedom, urging democracies not to abandon institutional ideals in state-enabled capitalism to sustain thriving innovation.