| Pit Schultz on Sun, 17 Aug 1997 19:01:58 +0200 (MET DST) |
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| <nettime> Australian Radio Report on George Soros 1/2 |
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.
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