Magazine

Soros' Moment


GEORGE SOROS ON GLOBALIZATION

By George Soros

Public Affairs -- 191pp -- $20

Long hailed as an investor and a philanthropist, George Soros has struggled to gain respect as an author, too. Reviews of his last three books generally panned his meditations on philosophy. And financial policymakers have scoffed at his proposals to fix the global capitalist system, which in 1998 he said might be headed for a breakdown.

Either Soros has moved toward the mainstream, or the mainstream has moved toward Soros. Little in his latest book, George Soros on Globalization, is startling. One reason may be that Soros vetted this compact book with a veritable who's who of international economists, from Nobel laureates Joseph E. Stiglitz and Amartya Sen to former Federal Reserve chief Paul Volcker. But times have changed as well. The "market fundamentalists" he rails against--those who say laissez-faire capitalism is the best way to solve the world's problems--have lost influence since the mid-1990s because of emerging-market crises and the anti-globalization backlash. And Soros' belief that the International Monetary Fund and World Trade Organization exist to advance rich countries' interests has become popular enough that these bodies have begun to reform.

Consequently, the book is useful as an eloquent summary of the chief criticisms leveled against global institutions--even if you disagree with Soros' proposals for reform. His basic assertion is that Western governments have put far too much emphasis on pushing the rapid liberalization of trade and capital markets. The problem is that, while markets are good at creating wealth, they make no distinction between right and wrong and do poorly at providing for "public goods," such as health care, education, and jobless benefits. While rich nations supply social safety nets for workers victimized by freewheeling competition, poor nations lack such mechanisms. What's more, he argues, the volatile international financial system is inherently biased against emerging markets. Unlike rich countries, which have the financial clout to cope with turbulence using deft monetary policy, poorer nations are whipsawed. The instability makes it harder to maintain growth, and this, in turn, poses political risks. Investors' fears of emerging-market crashes, meanwhile, often means that many poor nations are cut off from capital markets. Soros calls this crunch the "next crisis" for the global system.

What to do? Soros' agenda: Curb the instability of global financial markets. Make the IMF and WTO more responsive to developing nations' interests. Create a new system whereby Western aid for development projects is screened by an independent panel of experts. This, along with many other proposals, is too complicated to explain in a short space.

These ideas are today being discussed at big global forums--a sign that, since September 11 and the financial collapse of Argentina, policymakers are increasingly open to fresh thinking. But Soros knows that situation may not last. "I am determined," he writes "not to let the moment pass." By Pete Engardio


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