Remember that very embodiment of the Peter Principle, Defense Secretary Robert McNamara? Once the Ford chief executive who unveiled the Edsel, at the Pentagon he introduced body counts as quantitative measures of success in Vietnam, and a self-defeating doctrine of slow escalation. As its director, he reoriented the World Bank to giving fish to poor nations rather than teaching them to fish. And as a 1980s eminence grise he added to his nonsensical nuclear notion of “purposeful vulnerability” by proposing to foreswear first strikes.
It is this oracle who comes to mind in reading financier George Soros’s latest book on the international financial system and tensions between capitalism and democracy. The guilt which inspired McNamara’s commitment to a “Basic Human Needs” doctrine at the World Bank and apology for Vietnam in In Retrospect can be found in Soros as well, whose penitent critique of capitalism’s inequities is probably not unrelated to his colossal success in currency speculation.
Yet most of all, it is McNamara’s belief in the promise of elite management that can be found in Soros, if one looks just below the surface. “Reflexivity,” a feedback effect between humans and their environment, is a kind of Swiss Army Knife of a concept that Soros says can explain everything from his own financial success to the Russian and Asian financial meltdown to the interplay between the market and social values. Soros stresses the importance of being “aware of the inadequacy of knowledge” and the related fallibility of humans. Still, what Soros reflexively resorts to is elite management—of market disruptions and financial instability, and in philanthropy to bolster open societies.
Soros’s observations about economics and government are not as innovative as he believes. In contending that open societies “could be threatened . . . from the lack of social cohesion and the absence of government,” he fails to acknowledge many others who have come to the same conclusion, such as Samuel Huntington in Political Order in Changing Societies three decades ago. Moreover, in suggesting that the market distorts the open society, he makes no reference to Joseph Schumpeter, who observed in his 1947 book Capitalism, Socialism and Democracy that a hypercritical quality in capitalist orders may corrode democracy’s legitimacy.
Soros’s concern about the unfair distribution of wealth and power recalls the work of another scholar—Michael Walzer at Princeton’s Institute for Advanced Study. In his 1983 book, Spheres of Justice, Walzer offered a formula for distributive justice:
No social good x should be distributed to men and women who possess some other good y merely because they possess y and without regard to the meaning of x.. . . [D]ifferent goods to different companies of men and women for different reasons and in accordance with different procedures. And to get this right, or to get it roughly right, is to map out the entire social world.
If equity requires that distribution of benefits in “the entire social world” be mapped out, then someone has to do the mapping. Of course, an elite given that power undercuts the entire notion of equity—possessing power to influence all spheres of life.
Yet this is a formula Soros unwittingly echoes, by recommending that inequitable market forces be counteracted by elite reformers:
I believe change is possible. It must start at the top, as in most cases of revolutionary change. Only those who are successful in the competition are in a position to institute changes in the terms on which the competition is carried on.
To do the job, will those “at the top” somehow possess any more of that “perfect knowledge” which Soros stresses is missing in the market, or any less of the fallibility he focuses on in his first chapter? And while Soros explores the decline in those moral values necessary to complement market forces, why should we think the Sorosian elect will be particularly well-endowed with sound values?
Regarding philanthropy for fledgling democracies, Soros has earned much of his pride given his own enormous generosity. But to apply the phrase he used to describe capitalism, “the empire analogy is justified” when one looks at his complex network of foundations. In a rich volume on funds supporting Central European liberalization, For Democracy’s Sake, Kevin Quigley notes the problems accruing from Soros’s micromanagement of his philanthropic empire:
The Soros foundations appear to work best when somewhat independent from the man. Perhaps understandably, Soros has difficulty delegating decision-making authority . . . . Another criticism is that the Soros foundations—with the possible exception of [the Warsaw-based] Batory [Foundation]—are among the most opaque of any active in Central Europe, at least in financial terms.
The latter critique about a lack of transparency is particularly telling for a man who criticizes capitalism for arbitrary outcomes and an absence of that perfect knowledge posited in textbook models of the market.
Finally, Soros’s commentary on global financial instability suggests that every book he writes should have the same title as his earlier book, Soros on Soros. His self-absorption is apparent in a six-page quote in the Preface from his own September 15, 1998, testimony on the Russian financial meltdown in congressional hearings on whether to underwrite the immense expansion of the International Monetary Fund’s resources. Here he observes that “the IMF has run out of money” (a falsehood) and praises “the Bretton Woods institutions—the IMF and the World Bank—which have tried valiantly to adapt themselves to rapidly changing circumstances.” It’s worth noting that Soros’s mild critique of the IMF does not identify its remarkable lack of transparency, which only diminishes knowledge in the marketplace.
George Soros does touch on a number of truths. Often capitalism deserves just two cheers, especially when one looks at business community antipathy for sanctions or diplomatic pressure to further political freedom in such places as Burma or China. Also, there is merit in treating open societies and financial instability in one book. Thailand’s closed kleptocracy proved how the two are directly related. And Soros is right to suggest that the world’s most fortunate should assist consolidating democracies—as he has done on a tremendous scale.
Still, a close examination of Soros’s musings about political economy and his practice in philanthropy belie the pluralism he ostensibly champions. Whatever preamble he offers giving lip service to fallibility, it may be unwise to seek guidance about a stable world economy, a fair society, and pluralistic politics from an icon of elitist management.
Mark P. Lagon is Council on Foreign Relations international affairs fellow at the Project for the New American Century, and he teaches a Georgetown University graduate class on economic instruments of foreign policy.