George Soros has had more identities in his life than most: the Jewish teenager who escaped from the Nazis in Hungary in 1945 by posing as a non-Jew; the immigrant who arrived in the U.S. in 1956 and created an international investment fund that has made him one of the world’s richest men; the philanthropist whose Open Society Institute has given away billions of dollars to international and domestic causes; the philosopher whose dream was to create his own theory of human existence; and the author, most recently of a new book entitled George Soros on Globalization.
Such a wealth of experiences has earned him credibility for another role – that of critic. On April 8, during an appearance at the University of Pennsylvania , Soros blasted the Bush administration for what he considers its ill-advised and dangerous foreign policy.
The clash should come as no surprise. Whereas Soros’s philanthropic thrust has been outward, helping groups and individuals battle totalitarian regimes around the world, Bush’s horizons have been far less expansive, focused inwardly on American interests, increasing rather than decreasing the distance between the U.S. and other nations.
“The United States is the dominant power in the world today and therefore it ought to take the lead in improving the system in which we live,” said Soros, who was in Philadelphia as part of The Granoff Forum on International Development and the Global Economy. “No international arrangements are possible without U.S. participation and support.” But the Bush administration “is viscerally opposed to international arrangements. It believes that the U.S. has reached its dominant position through its own efforts. It values self-reliance and holds international institutions in low esteem.”
Soros noted how this attitude “strikes a chord with the American public although public opinion has shifted in favor of greater international cooperation since the tragic events of September 11.” For the Bush administration, however, that conversion “was only skin deep and it soon wore off.”
While agreeing that the terrorist threat is real and must be defended against, “we are going about it the wrong way,” Soros said. “What makes the situation so dangerous is that nobody dares to say so. [People think that because] the nation is endangered, it is unpatriotic to criticize our leader … The only critical voices [come from] courageous Republicans.”
Soros’s vision for the U.S. is to “lead the world in creating a global open society” whereas the Bush administration “believes in the pursuit of self-interest – individual self-interest through the markets and national self-interest through the use of military power.”
Soros pointed out that an open society and the pursuit of self-interest are not contradictory: “An open society is a society which allows its members the greatest possible degree of freedom in pursuing their interests compatible with the interests of others,” Soros said. “The Bush administration merely has a narrower definition of self-interest. It does not include the interests of others.”
As for terrorists, they are “perpetrators who consider themselves victims of an injustice which is so great that it justifies killing innocent people. The trap is that by making us victims they can turn us into perpetrators who will create more victims,” said Soros. “You can see the process playing itself out in the Middle East and, unless we are careful, it can become worldwide.”
Several in the Bush administration have the “same mentality as Arafat or Sharon,” Soros added, citing U.S. Attorney General John Ashcroft, Vice President Richard Cheney and Secretary of Defense Donald Rumsfeld as examples. “If they have their way, the world will get caught up in a vicious circle.”
Soros considers September 11 a turning point, and an advantage lost. “At that time we were the victims and we had the sympathy and support of almost the entire world…Even the Iranian government expressed its willingness to cooperate. Today, almost the entire world is critical of our policies, and that includes our friends, not only our enemies. …The watershed event was the State of the Union message where President Bush spoke of the ‘axis of evil.’ But the division began earlier when Bush proclaimed that ‘those who are not with us, are against us’ and Attorney General Ashcroft asserted that ‘those who criticize the USA Patriot Act are giving aid and comfort to the enemy.’”
Meanwhile, the U.S. “is not making such great headway on its own. Although we have failed to finish off Osama Bin Laden, we are taking aim at Saddam Hussein. In my view, Saddam Hussein is a worthy target…But the way we are going about it is moving us further away from our target. The members of the Arab League have just embraced Iraq and declared that an attack on Iraq would be considered an attack on each one of them. This must be recognized as a serious setback.
“How can we escape the trap that the terrorists have set us?” Soros asked. “Only by recognizing that the war on terrorism cannot be won by waging war. We must, of course, protect our security; but we must also correct the grievances on which terrorism feeds … We must go back to the principles of open society: the recognition that we act on a basis of imperfect understanding, our actions have unintended consequences and above all, might is not right.”
Soros hasn’t always been an outspoken critic of American foreign policy. He spent the first decades in the U.S. amassing a fortune – his net worth is currently estimated at $6.9 billion – by speculating in the world financial markets. In 1981 an article on Soros in Institutional Investor magazine was headlined, ”The World’s Greatest Money Manager.” Soros’ Quantum Fund, which has had an average annual return of 31% throughout its 32-year history, is considered by some the most successful investment fund ever.
Soros’s experiences in the global financial markets have inspired a number of media sound bites: He is famous, and often criticized, for shorting the British Pound in 1992, nearly breaking the Bank of England in the process and earning $1 billion in one day; he has been accused of causing the Asian crisis in 1997 by betting against the Thai baht, a charge which he vehemently denies and for which he blames Malaysian president Mohamed Mahatir; he predicted the demise of global capitalism in 1998 (wrongly, as it turned out), and his Quantum Fund, like many others, took a big hit (down 21%) after the Nasdaq tanked in 2000.
But in terms of sheer impact, it is as a philanthropist that Soros has made his mark, beginning in 1979 when he paid tuition fees for 80 black students to attend Capetown University in apartheid South Africa . The initiative, as reported in the recent book, The Life and Times of a Messianic Billionaire, by Michael T. Kaufman, eventually became mired in South African politics and racism, causing Soros to abandon the project but also teaching him important lessons about philanthropy.
Since then, Soros, through his Open Society Institute and a network of philanthropic organizations that is active in 50 countries, has given away hundreds of millions of dollars every year, much of it designed to encourage democracy and economic growth. His initiatives, while concentrated mainly in Central and Eastern Europe – the first foundation was established in Hungary in 1984 – have also included Latin America , the Caribbean and China . In the last eight years alone, Soros has given away more than $4 billion.
A few examples: He helped finance Solidarity in Poland and dissident groups in Czechoslovakia and Moscow; he funded hundreds of scholarships for academics from Eastern Europe to study in the West; he provided $50 million to help support Sarajevo citizens during the Bosnian war; he spent nearly $100 million to connect regional universities in Russia to the Internet; he funded educational radio programs for Mongol nomads; he built schools in Albania; and he guaranteed housing loans for poor South Africans, allowing them to purchase homes in areas where they had once been excluded. In 1991 he established the Central European University – with ‘headquarters’ in Budapest and satellites in Prague and Warsaw – and recently set aside $250 million to endow it.
In the U.S., he has helped to expand the role of after-school centers, engaged in the debate over America’s anti-drug policies and established a multimillion dollar “Death in America” project to promote more open discussions about dying, a response to the death of his mother. He has met with global leaders ranging from Boris Yeltsin and Nelson Mandela to Kofi Annan and South Korea ’s Kim Dae Jung.
He has been described as a “globally engaged billionaire” and “the only private citizen who has his own foreign policy.” Soros himself likes the phrase “a stateless statesman.” Whatever the terminology, Soros has always been clear about what he wanted his money to accomplish. According to the Soros biography, when Bill Gates in 1999 set up his own foundation with an initial endowment of $17 billion, Soros was asked if he had any advice for his fellow billionaire. His reply: “Giving away money is more difficult than making money in one respect. In business, there is a single criterion of success: the bottom line. In philanthropy, the bottom line is a cost item, and the benefits are spread over a wide variety of social effects. You need to have your own set of social values to evaluate the effects.”
Well-defined values are almost a trademark of Soros’s philanthropy, and it is hard to separate them from his judgments on such topics as financial markets and the role of governments in promoting peace (or war). For example, he is often asked about his reputation as a speculator who successfully manipulated currency markets so that he earned big gains while others – including non-investors – suffered losses.
Soros’s response to his audience in Philadelphia : “I pursue my self interest and the self interest of investors, and I maximize profits. Then what I do with my profits is my choice … I didn’t affect the outcome of things by being a participant in financial markets. Markets are amoral, not immoral, because the participants don’t give weight to social concerns. That’s why markets are so efficient. They have one single criterion – profits.”
Or, as Kaufman puts it in his book: Soros “has always insisted that though he had gotten rich playing by the rules, he did not make those rules; indeed he had often favored changing some of them.” At the same time, as Soros acknowledged to his audience at Penn, his ability to single-handedly influence markets “has become a very severe handicap. So now I don’t participate in the markets.”
He is critical of market fundamentalism – the belief that unfettered markets lead to the best possible outcomes. In fact, too much reliance on the markets “creates externalities that are neglected, like the environment, which must get taken care of through political or social processes … You can’t rely too much on markets and not give enough attention to the public interest.”
He is also critical of foreign assistance programs whose effectiveness is blunted, he says, for a number of reasons. First, they are entrusted to bureaucrats who are risk-adverse; second, foreign aid often puts the interests of the donors over the interests of recipients, and third, aid often goes to corrupt governments. He said in a recent Wall Street Journal article that “the main cause of misery and poverty in the world is bad government.”
Asked by a panelist whether he thinks democracy should precede economic development, or vice versa, Soros suggested that, generally speaking, economic development should come first. “Often economic development requires the absence of democracy because you can keep wages down. Take China , the most dynamic economy in the world. There is an infinite supply of labor which is getting more productive as the infrastructure develops. But labor doesn’t get a share of increased productivity because there is no freedom of association. So there is capital accumulation but people are not necessarily living better. China ’s leaders will say you can’t afford to have democracy because three quarters of the population is in the hinterlands.
“With economic development coming first there is afterward a better chance of democracy occurring. But the transition to democracy is not always assured. If you rely on rulers turning over the reins of power, you have a long time to wait.”
Soros offered his audience in Philadelphia no specific solutions to the problems of the Middle East . But in his writings and his actions, even his critics would say he has come up with original approaches to complex issues such as currency reform and how to structure foreign aid, and he has engaged in singularly creative forms of philanthropy in his attempts to change the world.
In Soros, Kaufman at one point describes his subject as someone who “didn’t simply fund his projects; he helped devise them, monitored them, tinkered with them, and when they seemed to be ineffective, shut them down. He worked at it with the same energy, and often the same tactics, that he had employed in finance….When Soros was asked how he wanted to be identified at an award ceremony at Oxford, he suggested the following descriptive phrase: ‘George Soros, a financial, philanthropic and philosophical speculator.’”