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WILL THE REAL SOROS PLEASE STAND UP

THE CRISIS OF GLOBAL CAPITALISM
Open Society Endangered
By George Soros
PublicAffairs 245pp $26

When a good kid goes bad--or when a long-lasting marriage falls apart--the parents, the ex-spouses, and their friends often suffer lengthy periods of remorse, even though they know they couldn't have done much to alter the outcome. Call it the ''what-a-waste syndrome.''

George Soros, the billionaire hedge-fund manager, experiences what-a-waste on a global scale. In The Crisis of Global Capitalism, his third book of financial, political, and social philosophy, Soros identifies a half-dozen recent tragedies that he believes might have been prevented--or mitigated--if political leaders had had the spine and intelligence to act early. These outcomes include the Thai, East Asian, and Russian economic collapses and the wars in Bosnia, Rwanda, and elsewhere. The biggest catastrophe yet will be a deep global recession leading to depression, he warns--unless, by some miracle, governments wake up and face reality. Soros rushed this book into print precisely to sound an alarm.

Whether Soros is right is debatable, and what he would do to prevent such a dire outcome is even less clear. He sees the recent rally in global stocks from their August lows as a bad sign--as misleading as the two ''false dawns'' in Asia that preceded it. With economies in Asia, Latin America, and Japan still sinking, ''the disintegration of the global capitalist system will prevent a recovery,'' Soros writes.

Soros believes the financial straitjacket slapped on Asian nations by the International Monetary Fund made things worse. Seeing the IMF as discredited, he favors a new loan-guarantee fund of $150 billion or more, run by the major Western countries and Japan, that would infuse ruined economies with fresh resources. He would also experiment with currency boards, exchange controls, and tougher regulation of national banks to curb currency speculation. In an offhand way, though, he suggests that none of the above is likely to win political support--effectively canceling out his policy prescriptions.

Abstract and exasperating as this book is, it is also worth sticking with, both for a brilliant narrative of what went wrong in Asia, Russia, and other emerging markets and also for some challenging, perhaps kooky, intellectual leaps for which he's willing to risk ridicule.

Deciding which Soros you're reading, however, can be a challenge. There is Soros the billionaire hedge-fund boss, whose realpolitik answer after shorting the British pound in 1992 and the Thai baht in early 1997--and cleaning up on both--is: If I hadn't done it, someone else would have.

There is also Soros the monetary statesman, who dashes off op-ed pieces and dials up Treasury officials around the world, offering advice about how to avert disasters in markets where his funds are major players. There is the stop-me-before-I-kill-again Soros, who pleads hard for tough controls and regulation of the very hedge funds and markets in which he makes his living.

Then there is Soros the philanthropist, a figure who wins acclaim in the West for spending millions to establish foundations that back democratic reforms in Central Europe and Russia. And there's Soros the radical, who riles Americans with his funding of right-to-die initiatives and medical-marijuana legalization.

Inconsistent as it sounds, there's an underlying logic to all this activity. Soros fears that markets have so usurped the role of political leaders that government is on automatic pilot. Consequently, he says, there are no strong leaders willing to risk troops or money abroad to head off wars and economic collapses. Meanwhile at home, the leadership vacuum allows social intolerance to rise. Among other results, drug use is criminalized when it should be treated as a medical problem. (What a waste.)

This isn't only theory, of course. It's well known that U.S. Treasury officials shied away from bailing out Thailand both because they thought it was unimportant and because they didn't want to take a bruising from Congress. In his recently published A World Transformed, a memoir written jointly with U.S. National Security Adviser Brent Scowcroft, George Bush makes it clear that in 1988, U.S. officials were afraid to take a chance on Mikhail Gorbachev and give him the aid he requested. Yet suppose Gorbachev had gotten the funding he needed for Russian pensioners, Soros asks. Suppose a line had been drawn early against a Thai collapse and that NATO allies had told the Bosnian Serbs that no conflict would be tolerated. Might those actions have headed off today's disasters?

These are easy questions for a billionaire to lob from the Park Avenue penthouse where he runs his money. But they are good ones. More than $150 billion in public money has been spent on Asia, to no discernible benefit, and an additional $42 billion is on deck for Brazil. Would a little politically unpopular preventive spending have been worth the risk? Today, the real bailout is occurring through coordinated interest-rate cuts by Western central banks--a development too recent to be mentioned in this book. But if private investors don't return to Asian and South American markets, don't be surprised if the next call is for a Soros-like loan-guarantee fund. That would be costly, late, and wasteful--and preferable only to the alternative, a depression.

BY ROBERT J. DOWLING



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PHOTO: Cover, ``The Crisis of Global Capitalism''

BOOK EXCERPT: Chapter One of ``The Crisis of Global Capitalism''


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