Capitalist doubts on free market reliability

By Gwynne Dyer

LONDON (JP): "Although I have made a fortune in the financial markets, I now fear that...the spread of market values into all areas of life is endangering our open and democratic society. The main enemy of the open society, I believe, is no longer the communist but the capitalist threat." (George Soros, Atlantic Monthly, February 1997).

I don't usually hang out with multi-billionaires, but back in 1989-'91 I used to run across George Soros quite a lot in his native Hungary and in various other corners of Eastern Europe and the former Soviet Union. He made sense then, and he makes sense now.

Back then the Communist empire was dying, and Soros stood out as a beacon of intelligence and integrity among all the Western carpet-baggers and snake-oil salesmen who came to feast off the corpse. They were flogging prefabricated ideologies for instant economic salvation to naive recent converts to capitalism; he was trying to help them lay the foundations for a truly open society.

When the world's attention turned elsewhere, Soros remained immersed in that thankless task (to the tune of around US$300 million in grants each year). But recently he came up for air, and realized that the same blind faith in the wisdom and benevolence of the free market was causing the same havoc elsewhere.

So Soros called up the Atlantic Monthly and wrote a scathing article called The Capitalist Threat. Thousands of other writers have already made the same analysis and issued the same warnings, but it's different when one of the world's richest men does it. Money does not talk; it shouts.

Soros is not questioning the usefulness of the free market as a mechanism for determining the price of things. Prices will fluctuate over time, of course, and that's exactly where he made his money: by guessing correctly which way the short-term fluctuations would go. Nevertheless, the market is a better way of determining prices, and more favorable to general economic growth than all the other systems that have been tried from time to time.

He just doesn't believe that the free market is able to determine the actual value of things -- let alone of people andideas. Which is so patently obvious that it shouldn't even need saying. Value is a moral concept, not an economic one.

All the old value systems, whether traditional religious ones or twentieth-century perversions like communism and fascism, are quite clear about this. Values are absolute, and they are derived from absolute beliefs about the nature of human beings and the universe, not from mere monetary considerations. But modernization has brought all these old value systems into question.

This is the point at which the true believers triumphantly declare that we must all return to the old moral absolutism. Soros is not saying that at all. He's simply saying that we must not be so ridiculous as to turn the free market itself into an absolutist value system instead.

As a young man, having briefly tasted both Nazi and communist oppression, Soros studied under British philosopher Karl Popper, whose main contribution to modern thought was his elaboration of the idea of an "open society". Open, that is, to doubt.

Popper demolished the claims of communism and fascism to scientific rigor, and pointed out that the only truly "scientific" ideology for a modern society to adopt was one of perpetual doubt.

As in science, new evidence may force us to change our theories at any time. "Openness", Popper said, is therefore the only appropriate ideology for a democratic society.

If it is a diverse society whose members are free to believe in various religions or in none at all, then an "open society" is also a pragmatic necessity. And indeed, that was already the reality of most democratic societies even in Popper's time.

Soros, like most of Popper's disciples, embraced this principle mainly as a defense against the aggressive moral absolutism of communism. But now, forty years later, with communism discredited and capitalism triumphant everywhere, he is having to use it as a defense against the aggressive pseudo-moral absolutism of laissez-faire capitalism.

Why is Soros having to mount a strong public attack on this antiquated doctrine now? Because in the apparent ideological vacuum after the collapse of communism, some of the snake-oil merchants began selling the free market as a nostrum for all our ills -- indeed, as a complete moral system in its own right. Much harm has flowed from this, and not just in Eastern Europe.

Fiscal discipline, including more or less balanced budgets, is not a fad. But the notion that a globalized free market demands the end of all domestic policies aimed at income redistribution and social justice is mere ideological cant. And with all due respect to Soros, he is a bit late on this one.

The tide is already turning against such silly, absolutist notions in most countries. We have to pay for choices that we make on moral grounds, but capitalism is only an economic system, not a political or moral system. And the 'open society' is not dead. It is, in fact, the dominant political system all around the world.