Global markets need global society, says George Soros

Global markets need global society, says George Soros

By Vincent Lingga

HONG KONG (JP): American financier George Soros said yesterday
that financial markets were inherently unstable and international
financial markets even more so because they did not operate in a
vacuum.

Soros, who was blamed by Malaysian Prime Minister Mahathir
Mohamad partly for the recent financial market turmoil in
Southeast Asia, told a World Bank seminar that international
capital flows were notorious for their boom-boost pattern.

"There is no such thing as equilibrium in financial markets
because market participants are trying to discount a future which
itself is shaped by market expectations," he told the fully
packed seminar on global integration.

Soros was speaking one day after Mahathir held a seminar on
Asia with a 16-page speech at the same venue.

Soros sees a useful role for foreign financial institutions in
emerging markets on the grounds that closed financial systems
tend to be inefficient, corrupt and bound-up in politics.

"But foreign capital is notoriously fickle," he said.

"Therefore, the best way to achieve stability in the financial
market is to mobilize domestic savings for domestic capital
formation in an efficient fashion," he said.

He contended that Mahathir's suggestion for a ban on currency
trading was inappropriate and did not deserve serious
consideration.

"Interfering with the convertibility of capital at a moment
like this is a recipe for disaster. Dr. Mahathir is a menace to
his country," Soros said.

The instability of financial markets can cause serious
economic and social dislocations but he also contended that
markets cannot be left to correct their own mistakes.

Mahathir has viewed the financial turmoil in Malaysia as the
work of speculators and market manipulators such as Soros whom he
called a "moron" with a lot of money.

Soros also raised questions about relationships between the
state and business interests, though this cooperation had often
been credited with the economic success in many Asian countries.

"These relationships between capitalism and democracy raise
questions because an autocratic regime is more favorable to rapid
accumulation of capital than a democratic one while a prosperous
country is more favorable to the development of democratic
institutions than a destitute one."

He argued that the transition from autocracy to democracy was
far from assured.

"Those in power are likely to cling to their power. In this
context, the emphasis on Asian values has served as a convenient
pretext for resisting democratic aspirations," Soros said.

Soros sees the political prospects for the Asian economic
miracle as cloudy at best because economic dislocation and
decline do not create a good environment for the development of
democratic institutions.

Economic globalization or global markets and economy cannot
survive without a global society based on the concept of an open
society, he said.

"A global society should be based on the concept of an open
society with institutions which allow people with different
opinions, different backgrounds and different interests to live
together in peace."

"We need a market economy, but we also need institutions that
ensure political freedom and social justice," he added.

Soros did not consider the diversity of values, religions and
traditions as an obstacle to the development of a global society
conducive for a global economy.

Freedom of information is of critical importance to an open
society, according to the American financier.

Citing an example, he referred to Mahathir's accusations of
him being the culprit behind the financial turmoil in Malaysia.

"He (Mahathir) could not get away with it if he, and his
ideas, were subject to the discipline of independent media inside
Malaysia," Soros said. (vin)