Early in the 16th Century, Sir Thomas More penned a short treatise analyzing the social, economic, and moral ills facing England. What distinguished More’s work, and what makes it memorable today, is that in the second half of his treatise he described a fictional country governed by his humanist principles where there would be no poverty, no crime, and no injustices. More called this place Utopia.
Sir Thomas was of course kidding, but his search for Utopia has been replicated many times over in the nearly 500 years since his work was published. And as we approach a new millennium, the clarion call from armchair analysts with a Utopian vision for the 21st century seems to grow louder every day. Most of these analysts are some combination of economist, demographer, historian, and political scientist. But the individual who’s received the most attention doesn’t fit the prophet profile.
He’s George Soros, the billionaire currency speculator and, more recently, philanthropist. In a series of articles published by The Atlantic Monthly, Soros lays out the contours of his Utopia: It’s a place where the rule of law reigns supreme, where there’s respect for human rights, minorities, and minority opinions, and where there’s as much freedom as is compatible with social justice (Austrian philosopher Karl Popper first described this so-called “open society” in 1945). With the collapse of communism and the corresponding spread of Western values throughout the world, this Utopian ideal has a greater chance of being realized on a global scale than at any time in history.
But Soros is here to alert us that his vision of an open society is under siege, and the threat springs from an unlikely source. “I now fear,” writes Soros, “that the untrammeled intensification of laissez-faire capitalism and the spread of market values into all areas of life is endangering our open and democratic society.” Indeed, Soros believes the threat posed by laissez-faire ideologues is “more potent” than the threat posed by totalitarians, and that if we continue on our current course, “the global open society that prevails at present is likely to prove a temporary phenomenon.”
While Soros’s apocalyptic musings fall under the man-bites-dog category—this is the man, after all, who made billions capitalizing on the system he now castigates—the temptation is to dismiss him as a delusional crank. That would be a mistake, as it is precisely because Soros has made billions speculating in world markets, and thus speaks with some authority about capitalism, that his arguments merit further scrutiny.
Soros’s main critique of laissez-faire capitalism is that it, like Marxism, lays claim to an “ultimate truth,” which he identifies as the belief that “free and competitive markets bring supply and demand into equilibrium and thereby ensure the best allocation of resources.” Soros, however, believes this vision cannot be realized, primarily because consumers can never accumulate what he calls “perfect knowledge”: all of the information consumers would theoretically need to make rational decisions in commercial transactions. Lacking such information, regulations and markets, he says, will be “flawed,” and the market will inefficiently, and unfairly, allocate resources.
Soros is particularly obsessed with the “perfect knowledge” argument, referring to it seven times in one article. He is, in fact, correct that “perfect knowledge” is never attainable, as there are hundreds, perhaps thousands, of factors that can potentially enter into every commercial exchange. But assessing each or even most of these factors individually would obviously make commerce move at a glacial pace. Besides, markets, the larger and more open they are, sort out and ultimately reject “bad” information in a way that individual market actors never could. It’s not surprising Soros has found flaws in capitalism: He’s set the bar so high as to be unattainable. It’s as if one were to say that, because aspirin isn’t always a cure for headaches, it constitutes a grave threat to our collective well-being and should be abandoned for a more reliable remedy.
A second Soros beef with capitalism is that it has had a deleterious effect on people’s values. He notes that when economic philosophers such as Adam Smith and David Ricardo were writing, “people were guided by a set of moral principles that found expression in behavior outside the scope of the market mechanism.” But today, Soros sees a worship of the market that is shaping values as opposed to simply responding to them. He writes that “our sense of right and wrong is endangered by our preoccupation with success, as measured by money. Anything goes, as long you can get away with it.”
The decision to pin responsibility for moral decay on the back of laissez-faire capitalism signals that Soros is either engaging in sheer hyperbole or just being intellectually sloppy. Because while the shift in American values over the past three decades may have something to do with a lust for money, it’s hardly the only cause. Soros completely overlooks a web of other interrelated factors, ranging from the infusion of women into the workplace, liberalized divorce laws, and the increased tax burden confronting American families.
One of Soros’s more specific complaints is that “laissez-faire ideology has effectively banished income or wealth redistribution.” Here, he’s simply wrong. The reality, as Robert Samuelson of Newsweek has pointed out, is that in many industrialized nations government spending has reached unprecedented levels. In the United States, such spending is already roughly one-third of our gross domestic product. In Germany, it’s 50 percent of GDP, and in France 54 percent.
Soros overlooks one other fundamental point: It is precisely in those states where his prized “income or wealth redistribution” is highest that the need for a social safety net is often the greatest. France and Germany, as well as the rest of Western Europe, have had anemic records of job creation over the past 20 years, a period when the United States has seen the creation of more than 30 million new jobs. Coincidence? U.S.-style job creation, as Soros should know, tempers the impulses that could potentially threaten the values of an open society, while it is in places like France where long-term unemployment is rampant that representatives of a “closed society” (such as Jean-Marie Le Pen) have flourished.
Even more disappointing than Soros’s diagnoses is the banal generality of his prescriptions. He speaks in lofty terms about how to soften what he identifies as the excesses of capitalism but, like most reformers, never lays out much in the way of specifics. The one theme that does emerge, however, is a disturbing elitism that contradicts some of the notions central to his understanding of an open society.
Upon surveying the world’s political and economic landscape, and seeing what capitalism hath wrought, Soros identifies a key problem: “Our global open society lacks the institutions and mechanisms necessary for its preservation.” Why? Because “there is no political will to bring them into existence.” And why is this political will lacking? If you thought it’s because of the unpopularity of institutions resembling what Soros has in mind—the United Nations, the International Monetary Fund, etc.—you’d be mistaken. No, the real problem, according to Soros, is “the prevailing attitude, which holds that the unhampered pursuit of self-interest will bring about an eventual international equilibrium.”
It turns out Soros has a specific complaint here: The West’s failure to come up with an aid package for Central and Eastern European nations emerging from the ashes of communism. Soros writes that when he put the idea forward at a Potsdam conference in 1989, he was “literally laughed at” by government officials. With some high-minded institutions staffed by enlightened citizens representing the world’s industrialized nations, this problem presumably could have been avoided.
Soros overlooks that one institution—the European Union—was supposed to serve this purpose, only to fail miserably. Indeed, while Soros pins the blame on capitalism, it is a shortage of capitalism that has hampered the transition from communism. The danger of relying on political institutions is that they, by definition, are political. Thus the European Union, instead of trading with Central and Eastern European nations, has instead hurt them by failing to liberalize protectionist barriers in the agriculture sector.
An unyielding faith in elites also drives Soros’s complaint that capitalism inhibits people, and states, from pursuing “the common good.” He never takes a stab at defining just what constitutes “the common good,” except when he says we’re all agreed on “the preservation of the environment.” Soros is perhaps right that few people favor environmental destruction, but he overlooks that there’s a sharp divide over the most cost-effective way to promote environmental protection. This points to the problem with his conception of a “common good.” The world, not to mention the United States, is an incredibly diverse place, and one man’s “common good” may be another man’s impoverishment.
Soros closes by remarking that to have a blueprint for the open society would be “self-contradictory” but that it’s worth striving for. He cites science as an example: “The ultimate truth is unattainable. Yet look at the progress we have made in pursuing it.” Here, Soros has unwittingly provided a rationale for doing exactly what he’s recommended against: preserving, if not bolstering, the laissez-faire system he derides. For just as the quest for science’s ultimate truth has yielded incredible benefits, the capitalist quest for perfect knowledge has produced immeasurable gains. Yet Soros remains preoccupied with the fact that capitalism doesn’t benefit everyone equally, it’s not always neat and tidy, and it has failed thus far to produce a Utopia. These concerns are legitimate to varying degrees, though the prescriptions remedying them fall woefully short. Capitalism, to paraphrase Churchill, may in fact be the worst economic system—except for all the others.
Matthew Rees is a reporter for the Weekly Standard, and the former editorial features editor for the Wall Street Journal Europe.