by Chidem Kurdas
George Soros originally intended to wind down his Open Society Foundations at the end of his life but changed his mind. This worldwide network of activist groups – to whom he has given more than $8 billion and named after Karl Popper’s classic The Open Society and Its Enemies – is to continue operating after he’s gone.
In Eastern Europe, the network helped undermine communist regimes and bring about freer societies. The main mission ascribed by Mr. Soros is to hold governments accountable in countries that lack civil institutions. It has to be a bitter irony that he sees the United States, the long-time home of many such institutions, in serious danger of ceasing to be an open society, given the increasingly manipulative and deceptive public discourse.
He was an early and aggressive backer of Barack Obama apparently in the belief that the then presidential candidate would stop the dangerous trend. Now he is disappointed. In a New York Review of Books article he writes that Obama’s “election and inauguration were the high points of his presidency.”
Nevertheless, Soros remains in the Democratic camp, complaining that “The Republican propaganda machine was able to convince people that the financial crisis was due to government failure, not market failure.”
He does not dispute that there were government failures but points out: “both markets and government regulations are bound to fall short of perfection.” Indeed, this is obvious when one considers our mental limits. Given that human beings with cognitive biases constitute both markets and government, neither realm can be perfect. Thus markets are subject to cyclical fluctuations.
It’s the policy response that is the issue. There is a tendency to expand the government regardless of its failures while shrinking the private realm. Government failure results in more government while market failure is used to justify less market.
Mr. Soros laments that political discourse today is not about understanding and coming to grips with reality but rather about staying in power. That’s nothing new, though idealists have long thought otherwise. Two millennia ago, Cicero criticized his colleague Cato: “He speaks in the Senate as if he were living in Plato’s Republic instead of Romulus’s cesspool.” (from a biography, Cicero by Anthony Everitt.)
In fact Plato’s Republic, ruled by philosophical guardians who were to oversee every aspect of life, would have been a repressive horror, as Popper argued. It most closely resembles centralized communist states, including Cambodia under Pol Pot.
But Cicero’s republic-as-cesspool analogy resonates through time. The American founders, knowing their Cicero and Roman history, were mindful of this. They kept the cesspool small and limited, leaving the rest of society to function freely. But over time it flooded and engulfed much of civil life and the economy. Government grows at the expense of civil institutions while the economy is on its way to crony capitalism, if not already there.
I do not doubt that Mr. Soros is well meaning and that his foundations are a great gift to Eastern Europe. But he is fundamentally mistaken about the danger facing the US. The real danger is uncontrolled and unlimited government. That is the reason everything appears to be ruled by propaganda and lobbyists, the reason it looks like there is a malaise in American society, as he remarks. The cesspool has spilled over.
As a young man Soros studied with Popper, who in his 1945 The Open Society correctly identified the defects of socially engineered systems. Hayek was a friend and supporter of Popper. Perhaps Mr. Soros needs to revisit both Hayek and Popper.
ThinkMarkets 
It is odd that the main lesson Soros has gotten from Hayek is that because of complexity it is not possible to predict the consequences of general, fixed rules. So therefore in the area of financial regulation we need to give a lot of discretion to regulators to fine tune their regulations to the specific circumstances. This is what I understand from Soros’s recent talk at the Cato Institute.
Crony capitalism indeed, it especially hurts when one is unemployed, expected to get a job or create one, and the avenues for job creation are severely restricted by the local zoning that leaves the only businesses in operation to the few with the most money and ability to provide a large tax benefit for the local town or city. It is too easy to blame the federal government for business problems when business often pulls up the economic ladder at local levels.
To Soros’ concern: is the US in danger of no longer being an open society? I thought his appearance at a Cato event was very suggestive.
It is unfortunate that Soros is billed as a friend and follower of Popper, apart from the motherhood idea of the open society it is hard to see what Soros gained from Popper. He never picked up on the deep criticism of the roots of totalitarian and collectivist thinking or he would have seen the poison at work in US politics and and condemned the Big Government and dirigist tendencies of both parties.
Mario Rizzo–
It is a key weakness in his arguments that Soros does not seem to have a realistic view of regulators and other government agents. He pays lip service to regulators being imperfect, like private players, but still expects regulators to perform feats that he does not expect from private players.
This dual vision, however, is common. Indeed, much mainstream policy discussion suffers from it.
Becky Hargrove–
I would not deny that local regulations often protect vested interests and act as entry barriers to new business.
Jerry O’Driscoll–
Well, he writes that there is such a danger. Perhaps he’s looking for better answers that he’s found.
Rafe Champion–
He studied with Popper but I agree that he appears to have taken a superficial lesson. None the less, his foundations did work to bring greater freedom to Eastern Europe.
To be sure, his pro-government stance for the US poses a question. It is not clear to me why someone who saw the malign power of the state in Europe would discount that danger.
rafe,
Soros, for all his rantings in the USA, has done excellent work in Eastern Europe.
His personally paying of the salaries of soviet nuclear scientists to keep them from selling their secrets is worthy of a noble peace prize.
I appreciate that he spent hundreds of millions on Open Society institutes and I was not aware of the nuclear scientists initiative (thanks Jim!). I have asked on various discussion groups whether there is evidence of the impact of the Institutes, without a reply. I like to think that any public-spirited person with his resources would have done much the same thing.
Yesterday he had a piece in the Financial Times urging the EU to hang strong and protect the euro and all the other achievements of the EU. He describes the growth of the EU as Popperian piecemeal social engineering –one step at a time, to achieve increimental improvements. That could just as well be the Fabian plan to steadily grow Big Governments. The point of Popperian problem-solving is to critically consider a range of alternative Tentative Solutions to a problem and to constantly check whether the desired outcomes are being achieved when Tentative Solutions are converted into policy.
The first aim of the EU was the common market which could have been achieved by deregulation to eliminate blockaged on the movement of goods across natilonal frontiers. Putting in place a new central government with a whole array of additional regulation was hardly a piecemeal improvement.
He wrote that the implementation of the common currency was flawed due to a lack of regulation to “tame the private sector”. He sees that the system is in deep crisis but his response is to call for more of the original spirit of collectivism to resiste the “Free Finns and other anti-Europeans”, as though seing the failure of collectivism and over-regulation is to be anti-European.
Jerry,
Would you elaborate on your comment, please? What did Soros say and do you think he was about right in his fears for the US?
Roger,
I just responded to Chidem’s post, and asked whether folks thought Soros’ diagnosis is correct (even if his remedies are not). For instance, some of what he says about financial markets and the crisis may be on point. His solutions are not.
The Soros Foundation is also influential promoting left-leaning ideas to top high school students in the U.S. and Eastern Europe through funding of the Urban Debate League and International Debate Association. They support a network of outreach programs for top students, teaching research and debate skills with a blind spot for free market thinking. High school students in Central and Eastern Europe don’t hear much about market ideas and economic freedom. At 4 minutes in this video interview (recorded at FEE) I ask directly if debate students learned about market ideas. http://vimeo.com/13211995 (password is freedom)
–Greg Rehmke
Greg Rehmke-
You make a good point and there certainly are blind spots in Soros’ own writings as well, not to mention the work of many of the people he finances.
Nevertheless, the fact remains that Eastern Europe today is a better place than it was 20 years ago and Soros’ foundations appear to have played a role in bringing this about. One can question the importance of that role; perhaps it did not matter much in the greater sweep of the historic change.
Still, the private foundations, which managed to operate for a time in places under collectivist governments, are a remarkable feat initiated by one man.
I am not trying to defend Soros, merely to understand and assess his arguments without ignoring the organizations he’s helped create.
If the Open Society institutes in E Europe are vehicles for the idea that the world needs more regulation and state intervention, this will undo any good that has been done up to date.
We know he is a massive backer of the Democrats. Does he have a view on the Tea Party movement? And the debt?
Chidem,
I appreciate you comments (on my comment), and I agree the Soros Foundation has done much good (and still does) in providing support to students around the world. A number of students from Eastern Europe, attending FEE seminars had received support from the Soros Fd. Probably it is more an issue of the orientation of the Soros Fd. staff who have their own ideas of what an Open Society should look like. I remember meeting some Soros Fd. staff who had also interned at the Cato Institute. I just wish more former Cato interns, or debaters who have attended FEE and IHS seminars would be working with Soros Fd. programs, especially those that influence high school and college students.
Rafe–
Re “this will undo any good that has been done up to date”
In theory, yes, you could balance the past good against the present actions that favor the growth of interventionism. In practice, it is hard to measure the magnitudes of such effects, say Open Society actions in the 1980s vs. now. Of course many other factors affect the outcomes.
Becky, who put the local zoning regulations in place, along with all the other regulations of Big Government?
Chidemkurdas, I don’t know how you would do the sums. However you may have noticed that many nations are in deep trouble due to the reckless spending and over-regulation of big governments, so I hope that Soros and his Institutes are nowadays paying more attention to these things. Do you think they are? If you find out, please let me know:)
[…] Soros and Open Society in America (thinkmarkets.wordpress.com) […]