Pit Schultz on Sun, 17 Aug 1997 19:01:58 +0200 (MET DST)

[Date Prev] [Date Next] [Thread Prev] [Thread Next] [Date Index] [Thread Index]

<nettime> Australian Radio Report on George Soros 1/2


The Freedom Broker

Radio National Transcripts:
Briefing         Sunday, June 22, 1997

The Freedom Broker


          Tom Morton: He's one of America's richest men, and a scathing
          critic of contemporary capitalism. He calls himself a
          financial and philosophical speculator. He's a master
          manipulator of the international currency markets. He once
          best 10-billion dollars in a single night - and won. He's the
          very model of a modern capitalist, but this year he's taken
          to appearing at economic summits for the rich and powerful
          and declaring that capitalism is coming unstuck. And what
          does he blame? Economic rationalism.

          George Soros: I don't believe markets are perfect; I don't
          consider the survival of the fittest the most desirable
          outcome. I believe we must strive for certain fundamental
          values, such as social justice, which cannot be attained by
          unrestrained competition. It is exactly because I have been
          successful in the marketplace that I can afford to advocate
          these ideas. I am the classic limousine liberal.

          Tom Morton: The limousine liberal is George Soros, our
          subject today on Background Briefing.

          Hello, I'm Tom Morton, welcome to the program.

          George Soros, maverick financier, philanthropist and
          philosopher, has recently become economic rationalism's most
          unconventional critic.

          Soros is Mr Globalisation, a man who's looked into the
          maelstrom of forces driving the global economy and harnessed
          those forces to make billions of dollars. When Soros sneezes,
          whole currencies catch a cold.

          In the 1980s, George Soros ran the most successful investment
          fund in history. And in the '90s he's become a leader in a
          different field.

          Robert Slater: He really is a very influential figure; he's
          the largest philanthropist in America today. There are a lot
          of other people giving away money, but nobody of that
          dimension, not even Bill Gates.

          Tom Morton: Just this year, Soros put $50-million into a fund
          for unemployed immigrants in the United States - $50-million
          for those who've been kicked off welfare by Bill Clinton.

          Since the collapse of Communism, he's given more economic aid
          to countries in Eastern Europe than most Western governments.

          Byron Wien is an investment analyst and long-time friend of

          Byron Wien: The thing that makes George different is that
          wealth is not his objective. He's interested in making as
          much money as he can in order to win the game. It is the
          intellectual excitement of the challenge that appeals to him.
          But once he has the money, he uses the money in constructive
          ways: he gives away about $300-million a year, good years and
          bad years, and I don't think any individual has ever given a
          similar amount away.


          Tom Morton: Soros promotes ideas of free speech and democracy
          all across Eastern Europe and the former Soviet Union,
          through a network of cultural foundations called Open Society

          But his noble aims aren't always applauded. In a number of
          Eastern European countries, Soros has been accused of being
          everything from an agent of international Jewish capitalist
          conspiracy to a Communist collaborator.

          Even in the United States, his adopted home, Soros is
          controversial: he supports causes like drug law
          liberalisation and abortion, and he's set up the 'Project on
          Death', a research program on attitudes to death and dying.


          But perhaps Soros' most controversial venture to date, is an
          article he wrote in February this year for the magazine
          'Atlantic Monthly'. The article's called 'The Capitalist
          Threat', and in it Soros launches a full-frontal assault on
          economic rationalism.

          He says that the worship of market forces by the world's
          policy-makers has become a dangerous dogma, one which
          actually undermines democracy, or what Soros calls, the 'open

          Well, as you can imagine, there were hoots of derision from
          the economic rationalists, but one man who takes Soros
          seriously is John Gray, one of Britain's most prominent
          political philosophers. Gray was once a strong supporter of
          Margaret Thatcher, but he's now become a critic of economic

          John Gray: My initial reaction to the Soros article, 'The
          Capitalist Threat', was one of great interest and delight. It
          was of great interest because the article is written by
          someone with a profound practical knowledge of the workings
          of markets, particularly financial markets. There are few
          investors with the degree of insight and competence in
          financial markets that George Soros has got. But also George
          Soros has a broad philosophical perspective which he applies
          to his own work and to his understanding of markets. So my
          delight about his article arose from the fact that here we
          have someone who on the basis both of his practical
          experience of financial markets and of his philosophical
          reflections upon them, is urging the world to recognise that
          the market is a highly imperfect institution. We can't do
          without it; we can't go back to any kind of central planning
          of the economy, but at the same time, the central message of
          Soros' article is that this almost religious faith in the
          virtues of unregulated markets, is misplaced.

          Tom Morton: Lapsed economic rationalist John Gray, who's also
          Professor of Politics at Oxford University.

          Some people see Soros' warnings about the capitalist threat
          as nothing less than blinding hypocrisy, the lamentations of
          a rich man who's made his pile and can now afford the luxury
          of a social conscience.

          Economists have been only a little more indulgent. 'George
          may have made a lot of money', they say, 'but he doesn't
          really know anything about economics.'

          So how seriously should we take this self-confessed
          'limousine liberal'? Well, you might argue that Soros is
          better placed than most to understand what it is that makes
          capitalism tick. He's the No.1 high roller in the casino of
          the global economy. He buys and sells bank-vaults full of
          currencies in a single day.

          Sometimes Soros gets burned. Only a couple of weeks ago, he
          and other traders lost a packet speculating against the Thai
          currency, the baht.

          But Soros' most audacious currency coup was in 1992, when he
          bet against the Bank of England, and won.


          Alexander McLeod: The World Tonight, good evening, this is
          Alexander McLeod. After a fast-moving day in which the pound
          collapsed and interest rates rose twice, the drama continues
          this evening. The second increase has been cancelled;
          Parliament has been recalled; sterling is being withdrawn
          from the exchange rate mechanism, and the European Community
          Finance Committee is about to begin a special meeting in

          Tom Morton: It was George Soros who forced the Bank of
          England to devalue the pound and take Britain out of the
          European exchange rate mechanism, a deeply humiliating
          experience for the mandarins of the City of London.

          Here's how he did it.


          In 1992, Soros spotted trouble brewing in Europe. The German
          government was having a hard time paying for the costs of
          reunification. Inflation was rising in Germany, and when that
          happens, the German constitution says that the German central
          bank, the Bundesbank, must step in to nip it in the bud.

          So the Bundesbank put up interest rates. Now normally,
          Britain would have had to follow suit, but the British
          economy was only just coming out of a deep recession, and
          higher interest rates would have killed off any hope of
          recovery. The other choice was to devalue the pound, but that
          would have meant embarrassing loss of face for John Major's
          government and the Bank of England.

          The Bank declared that it would defend the pound. Ian Harper,
          Professor of International Finance at Melbourne University
          takes up the story.

          Ian Harper: Well Mr Soros in particular - but he wasn't alone
          in this - basically bet that the Bank of England couldn't do
          this, OK? That it could not withstand the movement of funds
          that would go against the pound, and the difficulty for the
          Bank of England was that once this process gets under way,
          whether it's justified or not, it has its own momentum, and
          you can't hold out.

          Well the Bank of England of course tried, valiantly, and then
          it went to borrow additional foreign currency from the
          Federal Reserve in the United States, and said, 'Would you
          help us defend the pound?' And the Fed. was happy to lend
          them - I think the figure was $US7-billion I seem to recall.
          Because of course the Central Bank's attempt to stave off a
          speculative attack of this sort, it really is a bit like a
          gambling game, you've got to put more money on the table, and
          you've got to say, 'Well I'll see you, and I'll raise you'
          and you've got to try and, as it were, frighten off the
          person who's betting against you.

          So the Bank of England said, 'Well, we've now got another
          $7-billion, right? We will see you off.'

          Tom Morton: The international markets put their money on the
          Bank of England. No-one, they thought, could take on this
          great pillar of empire and win. But they hadn't reckoned on
          George Soros.

          Robert Slater: Soros believed that everybody was wrong, that
          the herd was going off in one direction. They all believed
          that the pound would remain stable, and he said to himself,
          'I know something everybody else doesn't. At some point,
          Britain is going to have to devalue the pound.' So he bet
          $US10-billion, about $6-billion was his own and $4-billion he
          borrowed, and he bet that the pound would be devalued. And
          indeed it was. And so he just cleaned up overnight, making
          close to $1-billion in that bet. Now nobody in financial
          history had ever made so much money overnight, and from then
          on, Soros' fame grew. People began to suspect that he had
          abilities to affect financial markets.

          Tom Morton: George Soros' $10-billion bet earned him the
          title 'The Man Who Broke the Bank of England'. Suddenly the
          pages of the financial magazines were full of him. One
          headline read simply, 'Master of the Universe.'

          Politicians in the United States began to worry that Soros
          might have too much power to influence the financial markets
          - more power than governments in fact.

          Soros was summoned before a Congressional Inquiry to explain
          what he and his fund were up to. But according to Ian Harper,
          Soros didn't have mysterious powers to move the markets. The
          pound was going to go over the edge sooner or later, and all
          Soros had done was give it the final nudge.

          Ian Harper: So the lesson is this: not that the likes of Mr
          Soros and the hedge funds, as you say are larger than life,
          are able to kick governments around, that is not the
          implication. The implication is that governments have to go
          strictly down the line, OK? Governments have been hemmed in
          by the markets to make decisions and take policies which are
          much more in conformity with strict economic orthodoxy than
          was the case in the past.

          If as the British tried to do, you try and have your cake and
          eat it too in the face of changes in fundamental economic
          reality, you try and sort of bridge that gap as these horses
          that are going in different directions, the market says,
          'Forget it, you cannot do that,' and comes in much faster
          than was the case in the past to discipline that, and bring a
          government to heel, bring it back to what is a fiscally
          responsible orthodox position.

          Tom Morton: The curious thing is that Soros would say this is
          nonsense. In his autobiography 'Soros on Soros', he says that
          he always starts from the premise that the markets are wrong.

          He believes that markets are ruled not by the iron laws of
          fiscal responsibility, but by the blind instincts of the


          Soros is a man of many contradictions. At the same time as he
          was telling the US Congress that he and his fund did not need
          regulating, he was telling European governments that they
          should be cracking down on people like him.

          What Europe really needed, he said, was a more tightly
          regulated financial system, in which speculators like himself
          couldn't profit from fluctuating exchange rates.

          Well it's Soros' tendency to have a bet each way like this,
          which sometimes exasperates even his close friends - men like
          the distinguished economist, Ralf Dahrendorf, now Lord
          Dahrendorf. According to Dahrendorf, Soros wants to be both
          poacher and gamekeeper. He likes to style himself as a
          benevolent bandit - taking from Western Europe and giving to
          the East.

          Ralf Dahrendorf: He played a sort of Robin Hood. He said, 'I
          knew the Brits wouldn't give anything to East Central Europe
          so I had to take their money and give it to East Central
          Europe myself. And secondly he said there should be
          international regulations which make this sort of operation

          Tom Morton: He was quite seriously asserting then that the
          sorts of activities out of which he's made money should in
          fact be more tightly regulated.

          Ralf Dahrendorf: Yes. Which is similar to his present
          criticism of capitalistism. So he's always had this curious
          tendency and he will continue to benefit from the capitalism
          which he professes to dislike.

          Tom Morton: George Soros has talked frankly about the
          messianic fantasies he had as a child, when he sometimes
          thought that he was God. Yet people who've worked with him
          describe him as a democrat, someone who's prepared to listen
          and who doesn't trip over his ego.

          In recent years he's left the running of his investment fund
          to a few trusted managers, and concentrated instead on
          becoming a kind of international freelance statesman.

          But Soros hasn't always had the kind of success he would

          Robert Slater: He didn't get off to a good start with
          Gorbachev; he wanted a situation in which Gorbachev would
          take him on as a kind of official consultant on how to reform
          the Soviet economy, basically to turn it into an open
          economy, a market economy. But Gorbachev didn't want any of
          that, and Soros was really disappointed. But he's always
          wanted people in the international community to show him
          respect for his thoughts, and specifically his thoughts on
          the economic sphere of life. And he knows that he hasn't won
          that respect very much. It's interesting, because actually in
          the last year or so, or year or two, he's got more attention
          in the media where he's been writing magazine articles, and I
          sense that people are paying more attention to him now than
          ever for his ideas. Sometimes he's being attacked as in the
          case of his very extreme drug policies, and he's taken the
          view that there ought to be liberalisation in the use of
          drugs in America, and he's been attacked for that. And he's
          also written articles about some of the problems of
          capitalist society, and his critics feel he's being
          hypocritical - after all, he gained so much fame and fortune
          by not exploiting the capitalist society, but certainly
          taking advantage of it. And so Soros wants that respect; he
          didn't get it from Gorbachev, he would have loved to have
          become a kind of economic advisor to an American President,
          or to a Secretary of State, and I think it's always bothered
          him that a lot of the attention that he's gotten has been
          from the fact that he made so much money.


          Tom Morton: Background Briefing invited George Soros to
          appear on this program, but his office politely declined,
          telling us that he wanted to concentrate on making money and
          giving it away.

          Indeed Soros the man is shrouded in a certain amount of
          mystery, but the picture his friends and associates paint is
          of a man with rather simple tastes and modest habits. Soros
          doesn't drink or smoke; his only addiction is tennis, which
          he seems to enjoy even more than making money. Soros carries
          his own suitcase when he travels, and he'll catch the tram in
          a foreign city if he thinks it's the quickest way to get

          Sometimes, Soros drops in at the Economics Department at MIT
          to talk to the graduate students there. Once a student asked
          him what was the key to making money. 'Oh, let's talk about
          something interesting,' said Soros, and launched into a
          discussion on philosophy.

          Here's how his friend Ralf Dahrendorf describes him:

          Ralf Dahrendorf: Well he's in many ways a great and generous
          man who is always eager for new things, curious and
          interested; and then he's also a shy man who doesn't quite
          see his place - he's a loner in the scheme of things. He's a
          man of apparent paradoxes but very simple and good human

          Tom Morton: Not someone who's terribly interested in money
          for its own sake, it seems to me.

          Ralf Dahrendorf: No, he isn't, because his own life - I mean
          he's recently spent a little more because he's now using
          private planes which for a long time he didn't want to, but
          in Eastern Europe there's very little choice. But certainly
          not - that's one of the great things about him, he could have
          lived the life of Goldsmith, or - I don't know who - of some
          of the great wealthy billionaires, and he's not interested at

          Tom Morton: Soros is a man, say his friends, who thrives on
          risk and uncertainty. In other words, he's a man for our
          times. He likes to call himself an uncertainty analyst, and
          according to his biographer, Robert Slater, a former
          correspondent for 'Time' magazine, the key to understanding
          Soros' success, and his driving obsessions, is his childhood
          in Hungary.


          George Soros was born in 1930, the son of middle-class Jewish
          parents who were comfortably off, but not rich. His father, a
          lawyer, was good at making money - and losing it. Soros was a
          bright child, and good at sports. He describes his childhood
          and peaceful and uneventful - until March of 1944.


          Robert Slater: Something terribly terribly significant
          happened in 1944 to George Soros. He was 14 years old, the
          Nazis had invaded Budapest in March of 1944 and he called
          that year that he was in hiding from the Nazis, along with
          his family and they moved from one place to another, the most
          exciting part of his life.

          Tom Morton: He even said it was the happiest time of his
          life, didn't he? in his autobiography.

          Robert Slater: And the happiest, which I always found a very
          strange way to describe a life where you were hiding from
          somebody, who if they found you, would kill you.

          Tom Morton: Four-hundred-thousand Hungarian Jews were
          deported by the Nazis and murdered in the concentration
          camps. But the Soros family survived. According to Robert
          Slater, this time of terrible danger had a lasting influence
          on Soros' life.

#  distributed via nettime-l : no commercial use without permission
#  <nettime> is a closed moderated mailinglist for net criticism,
#  collaborative text filtering and cultural politics of the nets
#  more info: majordomo@icf.de and "info nettime" in the msg body
#  URL: http://www.desk.nl/~nettime/  contact: nettime-owner@icf.de