I’ve just recently finished George Soros’ new book, Open Society : The Crisis of Global Capitalism Reconsidered. In this 245-page mini-treatise, the renowned currency speculator and billionaire “guru” calls for more government regulation and bureaucratic management as a solution for the global financial meltdown that erupted in Asia in 1997 and still — according to George Soros — threatens the world today.
What makes Mr. Soros’s prescriptions so ironic is that Soros condemns the economic paradigm and financial structure that allowed him to accumulate such enormous wealth in the first place. Indeed, it almost seems that the “man who broke the Bank of England”, as the British press once called him, has begun to wax philosophical on what he describes as the moral shortcomings of capitalism.
Does Mr. Soros have an ulterior motive?
His moralistic criticisms of free markets do appear a bit disingenuous since they arrived only after he lost nearly two billion dollars through bad investments in Russia. I suppose one of the psychological quirks of being a self-made billionaire is beginning to believe in one’s own infallibility. And since the great George Soros cannot be wrong, then the market must be wrong.
Perhaps Mr. Soros believed Russia was too big to fail and multilateral organizations like the IMF and World Bank would be there to bail out his bad decision making.
It appears that Mr. Soros no longer understands that capitalism entails both profit and loss, and the fact is that both of these components are vitally important to convey information to market participants.
Mr. Soros’s bad call on Russian debt conveys the message that his analysis of risk was flawed – nothing more and nothing less. As a result, the value of his hedge fund fell almost as precipitously as the Russian ruble. And, as Soros began to feel the asphyxiating squeeze of margin calls, he cried fowl and his metamorphosis into a disgruntled anti-capitalist began in earnest.
The truth of the matter is that the financial tumult that shook Asia, Russia and to a lesser extent Latin America was not proof that global capitalism doesn’t work, as Mr. Soros purports. Instead, the Asian contagion illustrated to the world that global capitalism works even more efficiently than had previously been thought, largely because of technological innovations in communications and finance.
The financial crisis can ultimately be blamed on a number of mundane factors such as government controlled money, banking, and finance, not the entire system of free-market capitalism or the post-war liberal economic world order.
As long as nitwits continue to riot at WTO meetings or emerging market currencies fall in the face of devaluating pressure, there will be an alarmist-du-jour pointing a finger and offering a solution. For the moment, Mr. Soros is an alarmist whose arguments don’t hold any water. Hopefully, Mr. Soros’s wealth won’t afford his ideas the credence they don’t deserve.
