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)