By CRAIG D'OOGE
Financier George Soros came to the Library of Congress on Jan. 22 to discuss the views expressed in his new book, Open Society: Reforming Global Capitalism.
Mr. Soros is a longtime supporter of various projects at the Library of Congress, ranging from an exhibition of "Secrets from the Soviet Archives" to fellowships for librarians from Central and Eastern Europe and the former Soviet Union. The program was sponsored by the Center for the Book as part of its "Books and Beyond" author series.
The Librarian of Congress introduced Mr. Soros and moderated the question-and-answer session.
Mr. Soros manages one of the most successful investment funds in the world, the Quantum Group of Funds. Largely through currency speculation, he has amassed a personal fortune worth billions.
But after mastering financial markets, he decided to take on something new. Evidently there was not enough uncertainty for him in foreign exchange, so he decided to speculateon governments. Along the way, he has become a sort of "lapsed capitalist," a harsh critic of the very system he exploited. "I am the classic limousine liberal," he once said.
His principal means of speculating on governments is the Open Society Fund, a foundation he started in New York in 1979. It has since grown into a network of foundations that operate in 31 countries throughout Central and Eastern Europe, the former Soviet Union and Central Eurasia, as well as southern Africa, Haiti, Guatemala and the United States. In 1999 his foundation network spent $560 million. His foundations are known for backing innovative projects with measurable results, such as an attempt to eradicate tuberculosis in Soviet prisons. Often their efforts are opposed by local governments.
"It is much easier and simpler to make money than do good," Mr. Soros said.
In discussing his new book, Mr. Soros decided to begin with the conclusion and work backward to his reasoning. What the world needs now, according to George Soros, is an alliance of democratic countries that would both foster the development of "open societies" throughout the world and lay the groundwork for a world governed by "open society" principles. Markets are global and outrun the ability of individual governments to control them. Sovereignty is a "somewhat archaic concept." The only solution seems to be a form of global government.
The "open society," a term he borrowed from his mentor, the philosopher Karl Popper, can be defined loosely as a government of the people, by the people and for the people. Because he believes, along with Cardinal Richelieu, that "states have no principles, only interests," Mr. Soros is fundamentally skeptical of a government's ability to provide for the moral and material needs of people, so his open society alliance would include elements of civil society as well.
The United Nations has failed, in his view, because its structure is intergovernmental and its delegates represent governments rather than the people, as envisioned by its charter. Capitalism has failed, in his view, because there are collective social needs, such as disease control, environmental threats and education, that a free market ignores. Mr. Soros called this "the Capitalist Threat" in a controversial article in the Atlantic Monthly a few years ago. At the Library, he went even further, calling "market fundamentalism" a greater threat to individuals than either communism or socialism because of the widespread belief that free economic competition can cure all the world's ills.
At the core of his philosophy is the belief that truth cannot be known because the state of knowing changes what is known, or, as he says in his book, "the relationship between thinking and reality is reflexive—that is, what we think has a way of affecting what we think about."
Applied to markets, this means that the interaction of individual decisions affects the market in unpredictable ways. Applied to classical economics, it means there is no such thing as "rational expectations" that tend toward a perfect equilibrium of supply and demand, because changes in price shape demand and supply. Applied to political theory, it means that the "open society" cannot be described because it is something that people must be allowed to choose for themselves.
It is a political theory that only someone with a high tolerance for uncertainty and risk would be comfortable with.
"Maybe this sounds far-fetched, utopian and wooly in the abstract," Mr. Soros conceded more than once, "but the open society has to be built piece by piece. It is the totality of arrangements, particularly under the international rule of law. It is an ideal based on the recognition that the ultimate truth is beyond our capacity. But it can be achieved if we acknowledge an imperfect society that holds itself open to improvement. Anything else can only be enforced by compulsion."
Mr. Soros knows this can work, because he has seen it. He is encouraged by a meeting of foreign ministers that took place in Warsaw last summer, along with a similar meeting of leaders from civil society. And he is encouraged by the part played by his foundations in mobilizing civil society to overcome oppressive regimes in Slovakia, Croatia and Yugoslavia. Other indications of a move toward the open society include such things as the Jubilee movement for forgiveness of debt in low-income countries, the effort to ban land mines and the Global Witness program to ban the international trade in diamonds used to finance civil wars. These are all signs of a global "open society."
Still, Mr. Soros would rather work through existing institutions by reforming them than by working against them. He thinks the United States should lead this effort, but only if it adopts a "multilateral" approach that takes differing views into account instead of its traditional "unilateral" stance based on American exceptionalism.
"Let's face it, the U.S. occupies a hegemonic position," Mr. Soros said. "The U.S. is in a better place to reform institutions than any other country. But we have an existential position to take—to what extent do we want to be a superpower and to what extent a leader of democracy?"
Nowhere is the tension between these two identities more apparent than in the "amazing" disparity between our military expenditures and our expenditures for foreign aid, Mr. Soros said. He drew laughter from the overflow audience when he said the difference was on the order of 100 to 1, "like the paté in the Soviet Union that was one part goose liver and one part horse meat."
According to Mr. Soros, U.S. reluctance to dispense direct foreign aid persists in spite of the fact that foreign aid is a very cost-effective form of crisis prevention. Once something becomes a crisis, it often becomes a military matter, which is very expensive. Mr. Soros acknowledged that the current state of foreign aid is considered a "morass," but he believes it could be made better if it were designed to meet the needs of the recipients rather than the donors.
Asked by the Librarian to single out an international institution that should be radically reformed, Mr. Soros chose the World Bank.
"The provision of global public goods is not best served by traditional lending activities," he said.
Nevertheless, through the "financial gimmick" of having governments guarantee loans that are never called in, the World Bank is able to borrow money at AAA rates and reloan it for a profit. This profit is used successfully to fund small projects, but the much larger program of loans does not work because narrow national interests determine which loans are approved. Oppressive governments are rewarded, since all loans have to go through them. In addition, he said, some global problems such as AIDS do not allow a country to create the money to repay loans.
Commenting on the situation in Russia, Mr. Soros said that U.S. intervention was not sufficient because the United States went through the International Monetary Fund instead of using its own funds.
"There is no way a nonfunctioning government can meet the terms of the letter of intent required by the IMF," he said, and $15 billion "disappeared."
In contrast, the sort of trust fund that he envisions could have been used to fund the Russian social security system. Millions of people could have been helped by payments of $5 or $6 a month. Although his idea was rejected at the time, he did proceed to hand out $500 each to some 30,000 to 40,000 Russian scientists, giving them the means to stay in the country.
"I can take risks. I can act in an entrepreneurial way," he said.
He is now involved in efforts to strengthen self-government in Russia's provinces, because "if governments are run from the center, they are bound to be autocratic." He has given books to 5,000 provincial libraries and helped them get wired to the Internet.
Asked if he wanted a new international organization to replace the United Nations, Mr. Soros said he thought the United Nations was useful, but that we need to "lower our expectations" about what it can accomplish. It could be reformed, through his proposed alliance of open societies that could act as a "majority party" in the organization. This is already happening in cases in which countries work together to do things (such as keeping the Sudan from rotating into the chair of the Security Council), but he acknowledged that some countries would not like such an alliance. Sounding like the CEO of the world, he said, "those countries would be allowed to leave."
But perhaps nowhere did he sound more like a CEO than in answer to the Librarian's final question of the evening, which was, "How can you sustain a global open society in a world where resources are not sustainable?"
"Life is lived at the edge of chaos," he said. "There is great adaptability in societies. There are not necessarily limits to growth."
Later, watching him in the lobby signing dollar bills that people presented for autographing (and thus increasing their value on the spot), it was hard not to agree.
Mr. D'Ooge is a public affairs specialist in the Public Affairs Office.