T h o u g h t f o r t h e d a y
Financial markets are inherently unstable and there are social needs that
cannot be met by giving market forces free rein. Unfortunately these social
needs or market defects are not recognized. Instead there is widespread
belief that markets are self-correcting and a global economy can flourish
without any need for a global society.
It is claimed that the common interest is best served by allowing everyone
to look out for his or her own interests and that attempts to protect
the common interest by collective decision making distort the market mechanism.
This idea was called laissez-faire in the C19th but it may not be such
a good name today because it is a French word and most of the people who
believe in the magic of the marketplace do not speak French. I have found
a better name for it: market fundamentalism.
It is market fundamentalism that has rendered the global capitalist system
unsound and unsustainable.
Who is George Soros?
Born Budapest August 1930
Soros has been* a considerably influential player in the financial markets.
Based in London and the US his Quantum Fund has been the best performing
investment fund in history. The power of speculators like Soros was dramatically
illustrated in 1992 when Soros, following a bet with the UK Prime Minister
John Major, sold $10 billion worth of UK pounds on the international money
markets for a $1 billion profit and, in doing so, single-handedly managed
to force a devaluation of the pound and scuttle a new proposal for an
exchange rate system in the EU at the same time.
He still runs is Quantum Fund, but spends most of his energy supporting
and developing his Open Society Institute - especially work in Eastern
Europe including Kosovo, with an aim of crisis prevention through the
understanding shared values. His Open Society Institute has been pivotal
in helping eastern European countries develop democratic societies and
market economies. He began his philanthropic work in Cape Town 25 years
ago providing funds for black students to attend Capetown university.
Today he continues that support by providing mortgage guarantees for nearly
He wants to use his estimated £5bn fortune and his fame to help tackle
what he sees as the failures of globalisation. The idea of a man who made
billions betting on the financial markets sides with the anti-globalisation
movement might strike some as ironic. Soros credits the anti-globalisation
movement for having made companies more sensitive to their wider responsiblities.
Latterly working with Global Witness group, forcing oil companies to disclose
how much they pay governments in developing world for drilling rights.
Oil companies are not necessarily directly responsible for corruption
but the money paid to foreign governments frequently misappropriated.
By declaring payments, voters have chance to hold goverments to account
for the funds. Its working with Angola.
Soros, Markets Morality and Self-Delusion:
'If I had to deal with people instead of markets, I could not have avoided
moral choices and I could not have been so successful in making money.'
What Soros says paraphrased:
We are all part of a global capitalist system which is characterised not
only by 'free trade' but more specifically by the free movement of capital.
The system is very favourable to financial capital which is free to pick
and chose where to go. The global capitalist system is based on the belief
that financial markets, left to their own devices, tend towards equilibrium,
move like a pendulum, operate a self-correction.
This belief is false, says Soros. Financial markets are inherently unstable
and there are social needs that cannot be met by giving market forces
free rein. One of the great defects of the global capilalist system is
that it has allowed the market mechanism and profit motive to penetrate
into fields of activity where they do not properly belong. Monetary values
have usurped the role of intrinsic values and markets have come to dominate
areas of society where they do not properly belong.
"Common interest does not find expression in market behaviour: Corporations
to not aim at creating employment; they employ people (as few and cheaply
as possible) to make profits. Health care companies are not in business
to save lives; they provide heath care to make profits. Oil companies
to not seek to protect the environment except to meet regulations or to
protect their pubic image"
As for intrinsic values, to produce a global growth in a traditional society,
such as India, presupposes overcoming symbolic and moral obstacles, that
is ridding these societies of various inhibiting areas and practices such
as myths, ceremonies, rituals, mutual aid, networks of solidarity, and
the like. These are the very social collective networks that George Soros
upholds as vital. We must learn, he said, to distinguish between individual
decision making as expressed in market behaviour and collective decision
making as expressed in social behaviour in general and politics in particular.
In both cases, we are guided by self-interest, but in collective decision
making we must put the common interest (perhaps even our environment etc)
ahead of our individual self-interest.
In this way we will save ourselves from being destroyed by the myth of
technology always fixing what we have in the last 2 decades destroyed
namely our capital resources. (eg oil and climate change etc)
Morality and market participants and George Soros
If I had to deal with people instead of markets, I could not have avoided
moral choices and I could not have been so successful in making money.
Market fundamentalists try to disregard social values by arguing that
whatever those values are they find expression in market behaviour. (I
think this is the same argument as saying, the Sun newspaper prints what
its readers want to read, rather than taking responsibility for forming
the views of its readers).
'As an anonymous participant in financial markets, I never had to weigh
the social consequences of my actions. I was aware that in some circumstances
the consequences might be harmful but I felt justified in ignoring them
on the grounds that I was playing by the rules. The game was very competitive
and if I imposed additional constraints on myself I would end up as a
looser. Moreover I realised that my moral scruples would make no difference
to the real world; if I abstained somebody else would take my place. Therefore
in deciding which stocks or currencies to buy or sell I was guided on
by one consideration: to maximise my profits by weighing the risks against
Anonymous market participants are largely exempt from moral choices as
long as they play by the rules. In this sense, financial markets are not
immoral; they are amoral.