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Subject: <nettime> Australian Radio Report on George Soros 1/2 From: Pit Schultz <pit@contrib.de> Date: 17 Aug 1997 18:46:37 +0200 * * * * * Mime-Version: 1.0 Content-Type: text/plain; charset="us-ascii" Sender: owner-nettime-l@Desk.nl Precedence: bulk http://www.abc.net.au/rn/talks/bbing/bb970622.htm The Freedom Broker Radio National Transcripts: Background Briefing Sunday, June 22, 1997 The Freedom Broker MUSIC - BALANESCU QUARTET 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 Soros'. 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. MUSIC 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 Institutes. 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. MUSIC 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 society'. 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 rationalism. 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. POMP AND CIRCUMSTANCE MARCH 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 Brussells. 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. MUSIC 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 herd. STRINGS AND DRUMS MUSIC 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 impossible. 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 like. 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. MUSIC 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 somewhere. 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 motives. 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 all. 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. HUNGARIAN MUSIC - LAJTHA 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. CROWDS CHEERING HITLER SPEECH - MUSIC 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