A Capitalist on the Capitalist Threat
VTR Date: December 4, 1997
Guest: Soros, George
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THE OPEN MIND
Host: Richard D. Heffner
Guest: George Soros
Title: George Soros: A Capitalist on “The Capitalist Threat”
I’m Richard Heffner, your host on The Open Mind. And several of the good people who knew ahead of time who my guest today would be have quite vigorously urged me at least to try to pry from him some of the alchemist’s secrets: how to turn dross into gold, how to make a killing in the financial markets, and so on. For my guest, George Soros, is one of the richest men in the world, has made his own enormous fortune. Call him master investor, speculator, or whatever. And all eyes and ears turn to him for even just a hint as to how to do it.
Fortunately for the decorum of our program, however, my own eyes still glaze over at the slightest mention of finance and markets, and I’m much too aware of a nephew’s observation that “Heffners all seem to lack the gene for making money” to look for ways to make my fortune now.
But I do want Mr. Soros to help me understand something obviously much more complex. Back in February 1997, he wrote an absolutely brilliant cover story for The Atlantic Monthly titled “The Capitalist Threat.” “Although I have made a fortune in the financial markets,” he wrote, “I now fear that the untrammeled intensification of laissez-faire capitalism and the spread of market values into all areas of life is endangering our open and democratic society. The main enemy of the open society,” he continued, “is no longer the communist, but the capitalist threat.”
Well, my question is: What in the world could be more accurate and to the point? Yet, in the newest Atlantic Monthly for January 1998, George Soros seems constrained to defend himself against all the accusations that have now been made against him of being “a hypocritical capitalist.” And I would simply begin today by asking him why. Why seem to go on the defensive and explain the obvious once again? Didn’t he mean what he wrote to begin with?
SOROS: No, I did mean what I wrote. I raised a lot of issues. All the things that concern me. And as a debate, quite an interesting debate, worldwide debate, from which I learned a lot, including where I didn’t get my point across. So, in the second article, I narrowed the scope. I deal with the global capitalist system. And I think I have sort of, I hope that I’m putting things more clearly than in the first article.
HEFFNER: Well, maybe it’s because my eyes do glaze over that everything seemed perfectly clear to me. But the important question to me is, well, I was thinking of Franklin D. Roosevelt, and the many, many people who called him the “traitor to his class,” and the fact that much of the criticism levied against you in this past year has been, in relation to the Atlantic piece, that you were, in a sense, a traitor to capitalism. How do you respond to that?
SOROS: Well, you know, I’m a human being first, and a capitalist afterwards. That would be my answer. In other words, I don’t consider myself committed to the money that I have made. Money is supposed to serve a purpose; I’m not supposed to be its slave. So I can still think for myself. And I’m more interested, actually, in the truth, in understanding things as they are, than in defending, let’s say, my, call it class interests, or my personal interests.
HEFFNER: But that runs quite counter, doesn’t it, to the very essence, the very being of…
HEFFNER: … laissez -faire capitalism?
SOROS: Well, of course, I’m a critic of laissez -faire capitalism, and I think that we ought to be concerned with something more than our self-interest. The laissez -faire thesis is that the common interest is best served by everybody looking out for his personal interest. And my position it that that’s not enough, it won’t do. Markets can do a lot of good, but they’re not as perfect as they’re cracked up to be. So there is a common interest that is not served by the markets, that goes beyond markets. And we have to be concerned with those interests.
Now, that is the subject of politics. And actually I’m critical of markets, but in some ways I ought to be more critical of the political process, because it’s the failure of the political process that has allowed the market mechanism to penetrate into areas of social life where it really ought not to be the dominant force.
HEFFNER: But why do you say, “the failure?” Mightn’t one say that capitalism, as it is practiced now, as you are concerned about it, is a function of, let’s say, in this country, the triumph of Reaganism, which is a political point? So why is it a failure…
SOROS: Of the political system?
SOROS: Because we now have a global economy, and a global capitalist system. Now, we do have political processes in the individual countries. And when things go too far out of line in the economic life, there is a political process to correct it. For instance, when the trusts came into existence, big business became very big. You then have the antitrust legislation, and you had big government to bring big business under control.
Now we have a global capitalist system. The power of the states is greatly reduced. Which, incidentally, I applaud. But nevertheless, there isn’t an international political process to keep pace with the internationalization of our economy.
HEFFNER: You say you applaud that.
SOROS: I do.
HEFFNER: Why do you say that?
SOROS: Well, because most states, being authoritarian institutions, tend to abuse their power. They are usually instruments of oppression. I’ve been, and continue to fight against the oppressive state. I mean, communism was basically state oppression of the people. So it was a real threat to open society, and it continues to be a real threat in many countries.
Now, we do have a rather good democratic system in this country. But if you look around the world there’s an awful lot of places where governments abuse their power, and here too.
HEFFNER: Are you then a believer in international government?
SOROS: Well, no, because I don’t think that we need… Government goes too far. But I do think that you do need international regulation of an international economic process. We do have a few institutions — we have got the International Monetary Fund, the World Bank — without which the capitalist system would have already collapsed in the last few weeks. So they are very necessary.
HEFFNER: Why do you say, “The last few weeks?”
SOROS: Because we are in the midst of a worldwide financial crisis right now. It started in Thailand, and it has spread, you know, first in Southeast Asia, then in Korea. Japan is in a very dire financial strait. The system is in a very bad way. It spread to Brazil. There’s a considerable problem in Russia. Ukraine is on the ropes. There’s a lot of things going on in the world right now that are very worrisome.
HEFFNER: You say “worrisome.”
HEFFNER: With what result?
SOROS: Well, of course, you could have a financial meltdown. You could have a banking crisis where markets cease to function. I’m convinced, and I really sincerely believe that is not going to occur. In other words, the financial system is going to hold together. There will not be, let’s say, defaults by governments in paying their debts, and that kind of thing.
However, these are imposing great strains, what is happening now, on the economic and political life of individual countries. And what the fallout from that is remains to be seen. And there is a lot to be worried about. I’ll give you just one example: our trade deficit next year will probably double from what it is this year. It will become a very major increase. If it is combined with a slowdown in the economy, which at the moment does not seem to be the case, you could have a lot of protectionist sentiment. You could then have a resistance to accepting the imports.
HEFFNER: Don’t we have that sentiment now?
SOROS: We have the sentiment, but you would have a lot more provocation for it. You would have a lot more to worry about, because that would be a greater imbalance.
Now, you need those imports to allow the countries that have debts that they cannot pay to actually pay the debts. They have to export. So, for instance, a country like Thailand has to, which is now in, heading into or is in the midst of a suddenly occurring depression, doesn’t import anymore. People can’t afford to buy cars or computers. But they’ll sell everything abroad that they can. They are also, their currency has fallen by 40 percent, so they will sell everything cheaper than they, they’ll sell at any price. So will Korea. So that’s what’s in the works next year. It will have some political repercussions. If the economy is prosperous as it is, hopefully will absorb it, and eventually the system we’ll correct itself. But if it results in restrictions on imports, then the debtors can’t pay their debts and then you have a breakdown as well.
HEFFNER: You look into the crystal ball. What do you anticipate about our ability to take that counsel and heed it well?
SOROS: I think probably yes. It’s a worrisome thing, but I don’t think it’s going to… I think it will be contained.
HEFFNER: Well, of course, as you say, it’s a political matter.
SOROS: Right. Right.
HEFFNER: It’s not an economic matter.
SOROS: Right. Right.
HEFFNER: Now, do you think that, given the negative response to your being a traitor to your class, in the Atlantic piece in ’97, do you see, in and among your capitalist colleagues, the wisdom required to accept that kind of modification of capitalism that you suggest?
SOROS: I think we all have to put our heads together, because I don’t exactly know what kind of modification I’m suggesting.
HEFFNER: What do you mean?
SOROS: In the sense that I can see that the system is defective, I can see the problems, but I don’t have solutions. I don’t know exactly what to do about it.
HEFFNER: But your basic solution, isn’t it, is attitudinal?
HEFFNER: It has to do with modifying the dog-eat-dog, Darwinian approach that we’re taking now?
SOROS: That is right. But then, once we’ve changed the attitude, we then have to put our heads together and see, you know, what kind of institutional changes do we need? We’ll probably need to strengthen some of the international institutions. We may have to create new ones. We have to make them work better. You have got United Nations that has a function and is not fulfilling that function very well. So there’s a lot of… First, I would like to advocate a change in attitudes. But once you have changed your attitude, you then have to use it for developing new solutions, new institutions.
HEFFNER: Well, before we even get to that, seriously, what chance do you see that there is going to be an attitudinal change, particularly given the response to your piece in The Atlantic?
SOROS: Well, I think one has to work at it. I, you know… [Laughter]
HEFFNER: You’re hedging. You’re a great hedger.
SOROS: [Laughter] No, that’s true. I really don’t know. All I can say is that we need to change our attitude. Whether we’ll have the wisdom to do it, I don’t know.
HEFFNER: What’s the alternative?
SOROS: Well, we go on as we are. I think this global capitalist system is very powerful. It really is a thing that hangs together very well. It’s very painful to quit, for any country to renege on its obligations. The consequences are quite disastrous. But if the conditions deteriorate, and being in the system becomes too painful, then you will have eventually some countries that will react negatively. So I think we are facing now a period of considerable political turmoil, I would say particularly in Asia, in the countries which have been hit by the financial crisis. Very interesting what’s going to happen in China, which is, at the moment has not yet been affected by it, but indirectly it will be affected and it will have to respond. So I think there could be quite some changes in China also.
So I think that the situation is very complicated, and I think you will have important political developments in the next couple of years.
HEFFNER: And in this country?
SOROS: I think it may… We are in actually, in a way, the beneficiaries of what’s happening in the world.
HEFFNER: How so?
SOROS: Because the global capitalist system has a center. And we are, in effect, the center. You see? It’s the dollar that is the dominant currency in the world. Of course, Europe is in similar position. They are also sort of dollar and deutschmark, the new currency, the European currency, these are the strong currencies. So, being at the center, you actually benefit from goods that are going to be supplied at lower prices. So inflation, which has been a threat, is no longer a threat; it’s the other way. Prices a very stable, and they even may decline in certain areas, particularly import prices are likely to come down. Which means that without inflation we don’t need high interest rates to fight inflation, so we can lower interest rates. The lower interest rates stimulate the economy. So we actually, being at the center, the fact that you have got a storm in the periphery is to our benefit.
HEFFNER: But if it is to our benefit economically, as you suggest, in those terms, do you anticipate that the benefits will include a diminution of the dichotomization in this country between rich and poor? Do you anticipate that lower interest rates will bring about a better sharing, a more equitable sharing…
SOROS: No, I don’t think so. Because, actually, in some ways, they will even increase the tension between the lower-paid, whose, let’s say, whose job are more easily substituted by imports from abroad, and the more skilled, say, the service industries, which are not subject to competition from abroad, will be much better situated than the people working in areas which has import competition. So it will be, I think the tensions, if anything, the social tensions might actually increase because of that.
HEFFNER: Well, that’s the point that puzzles me in terms of the reactions to what you have written, have said. And in Soros on Soros the same messages are there. It puzzles me. I remember, I think it was two years ago in The New York Times Magazine section (I think it was there), Lester Thoreau wrote a piece raising a question: How long can a democracy sustain itself if there is a continuing division, a widening division between the haves and the have-nots? And I guess you’re suggesting that that division is going to get greater.
SOROS: Somewhat greater. You see, there is a tension here, and it’s something to be concerned about. But I’m much more concerned with the international setting. You see? This is where our perspectives are different. Because if there is tension between the haves and have-nots…
SOROS: Here. You look at it as a global system, and there’s tension between the haves and the have-nots, and that tension is going to increase greatly. And I’m really much more concerned about the international implications than the domestic ones. We are, in some ways, in a privileged position. There’s plenty to be concerned about. I’m not minimizing it. But what I’m saying is that the international problem, the international tensions, are much greater, and they are being intensified even while we speak.
HEFFNER: Well, but of course, one could never deny what you’re saying, but the tensions in our own country will lead, must lead inevitably to the kinds of pressures toward protectionism that you feel will push the world over into a free-fall.
SOROS: Right. Right. Right. And if we turn protectionist, then there’s a danger of replaying what happened in the war period. So that is the case. So I am concerned about inequities in this country also.
HEFFNER: You know, the question comes up, it’s, I forget whether I learned it in Cicero or where, the question of: How long will you abuse our patience? How long do you think we can abuse the patience of those who are have-nots, and increasingly are have-nots, in our own country? Do you think there is a point at which those who are deprived see how much the rest of us have, will say “no further?”
SOROS: Look, any kind of revolution, I think, can be pretty well ruled out in this country. I think this country is basically a healthy country. I have an international perspective. I see how rotten situations are in other countries. So I’m a great admirer of this country. So I don’t think that we are ripe for a revolution. Correction has to be a political process. And unfortunately money plays too big a role in politics. That has to be corrected. The people have votes, and there is a democracy. So if people are fed up with the way things are now, they can express it in the political process. So I’m more concerned about the political process functioning properly. I’m concerned about the role of money in politics, which is excessive. And I’m concerned about the attitude of the elite, who are too much taken up by this laissez -faire ideology that you leave it to the markets and everything will take care of itself. So I think there has to be a change of heart among the leadership.
HEFFNER: What in the world would bring about that change of heart?
SOROS: Oh, I think, I think that some of the things that have been enacted in the last few years have had an adverse consequence that people are aware of. Take, for instance, the legislation on immigration, which was very repressive, very unjust, because it disqualified, effectively, taxpayers from receiving the benefits to which they were entitled. This is legal immigrants were denied those rights. I think that, in fact, legislators, Republicans, realized that they have made a big mistake, that it needs to be corrected. And, in fact, they have gone quite a long way towards correcting it. They haven’t entirely reversed it. But a large part of the injustice has been corrected. So that shows that the process, the political process, actually works.
HEFFNER: Yes, but I’m talking about the thing you’re most concerned with, and that is attitudes. Attitudes toward the role of the marketplace. We are a market-driven society. Everyplace you turn you hear, “Well, the market provides.” A mantra.
SOROS: Well, I’ll give you another example. I’m concerned about the role of the professions. The loss of professional values, and the fact that they are being superseded by…
HEFFNER: The dollar mark.
SOROS: …the dollar mark, right. Well, take the medical profession, which has been very much mesmerized by the dollar sign. I see a change of attitudes, partly because of the new system of HMOs, which hurt the doctors as well as the patients. And I think the possibility of, let’s say, new coalitions between patients and doctors to change the system. Because I think the doctors are not too happy with the way the system is developing. And this is a purely market system where, you know, providing healthcare becomes strictly a business. And so there is, I think, in the among the professionals an increasing resistance to it.
HEFFNER: So a non-revolutionary revolution of a sort.
SOROS: Right. You see, while I am sort of almost a specialist in revolutions, in actual fact I prefer nonrevolutionary change. I like the political process to work.
HEFFNER: Well, of course, even as we draw to an end now, and I see we have 30 seconds, I come back to the point of the opposition to what George Soros wrote.
SOROS: Oh, I don’t think it’s so severe, actually. I really don’t. No. There have been some vocal critics, but a lot of positive reaction as well. I think you are overemphasizing a bit.
HEFFNER: Okay. You mean you’re not a traitor to your class.
SOROS: I don’t think I’m considered as such.
HEFFNER: Well, George Soros, traitor to your class or not, thank you very much for joining me today on The Open Mind.
And thanks too, to you in the audience. I hope you join us again next time. If you would like a transcript of today’s program, please send $4 in check or money order to: The Open Mind, P.O. Box 7977, FDR Station, New York, NY 10150.
Meanwhile, as an old friend used to say, “Good night, and good luck.”
N.B. Every effort has been made to ensure the accuracy of this transcript. It may not, however, be a verbatim copy of the program.