Booknotes

GEORGE SOROS, AUTHOR, "THE BUBBLE OF AMERICAN SUPREMACY:" Well, I draw a comparison between stock market bubbles and the -- let`s say, America getting off the rails under the Bush administration after the terrorist attack on September 11.

SOROS: Yes. I was in Beijing. I was coming from Mongolia. And my son called me and told me, Switch on your television. And I actually saw the second plane crash into the tower. So it`s -- even though you are in Beijing, it`s like being there, so it has the same impact.

SOROS: They were very sympathetic. They all expressed -- polite but sympathetic.

SOROS: I was delivering a speech on China`s future. And it was reconciliation with the Chinese administration because I had a foundation there which I closed in 1989, and this was sort of a gesture on their part that -- sort of rehabilitating what the foundation had been doing.

SOROS: No. No.

SOROS: I closed it in `89.

SOROS: Well, because it basically fell into the hands of the political police in China. We set it up in `89 to promote ideas of open society, and it got caught up in an internal power struggle. And it`s a very intricate and -- and fascinating but long story. And then I found out that the political police was actually in charge. I closed it. But now the idea of open society is acceptable. I mean, it is actually something that motivates people in China, and it`s -- it`s an idea whose time has come.

SOROS: Well, it`s difficult to tell because we have national foundations that -- somewhere over maybe 30, but we also have regional -- so for instance, southern Africa, western Africa. It covers a number of countries. So we have now actually fairly global coverage, but we don`t have the national foundations we have had when the communist regime was collapsing and we wanted to help build open societies. We have about 30.

SOROS: Well, see, when the Soviet system collapsed, I wanted to help preserve the values that are really important. And Soviet science, natural science, is world class, and there`s also danger of the scientists maybe going to work for Saddam. So to preserve science and to demonstrate what can be done in helping a country in distress, I set up this science foundation with $100 million. And we gave first aid of $500, which at that time you could live on for a year, to some 35,000 of the top scientists on a very transparent basis -- how many times they`d been cited in reputable scientific journals. Everybody who was cited three times was entitled to $500. So it was quite a revolutionary way of going about it, and it made a tremendous impact because it actually helped those people to survive during a very difficult year.

SOROS: I think it was 1991 -- 1991.

SOROS: I wouldn`t like to confirm it. That`s their estimate, and I think it`s my private affair. So that`s their estimate.

SOROS: Well, I`ve made a lot of money, and I also gave away a lot of money.

SOROS: We`ve had calculations, but I don`t have the actual figure. But at the height, we spent over $600 million a year. And currently, we`re running around $450 million a year.

SOROS: It`s -- it is, yes.

SOROS: I made it in financial markets.

SOROS: Globally.

SOROS: I live in New York.

SOROS: I came to the States in 1956. I left Hungary in 1947. I went to England, and then, after nine years, I moved to America. And ever since then, I`ve been living here.

SOROS: In 1930.

SOROS: Well, I`m Jewish, and when I was 14 years old, the Germans occupied the country. And that was really the formative year of my life. That sort of made me, and it`s because my father had the foresight to get us false papers that we survived. And it was really my father`s finest hour. And he stood up to a vicious regime, and basically, he was successful because he not only saved his life and his family`s life, but he also helped a lot of people. So that was a critical experience for me.

And then afterwards came the communist regime, and that was very repressive and it was very boring, frankly. And so I wanted excitement. I wanted out. And so when I was 17, I went to England.

SOROS: A lawyer.

SOROS: He died in this country in `68.

SOROS: Yes.

SOROS: In `56. There was a revolution, and he and my mother crossed the border -- walked across and came out. So we were reunited after nine years.

SOROS: Very well.

SOROS: Well, I remember a lot because even though I was quite young, you know, we were listening to the BBC, which is a source of information. My father was sort of very interested in what was going on. And the situation was gradually deteriorating, and there was discrimination against Jews. We had to go to special classes, and so on. So it impacted our life very much. And then in 1944, the country was actually occupied by the Germans, and the Jews were collected and deported.

SOROS: Oh, yes. And that, of course, is something again very, very much a part of my psyche, anti-Semitism and, you know, hatred of Jews. It was quite widespread within Hungary.

SOROS: To England.

SOROS: I went to study at the London School of Economics. And of course, I was interested in how society works and what -- how we can understand what -- how we behave. And I was -- I came under the influence of Karl Popper. His philosophy of open society sort of came home to me because he made the point that there is a similarity between a Nazi regime and communist regime because they both believe that they have the ultimate truth. And since nobody is in possession of the ultimate truth, if you have a dogma like that, you have to impose it by force. And that`s what they have in common.

And he proposed the alternative, which is an open society, which is based on the recognition that nobody has -- is in possession of the truth, and therefore you need a critical process. And you have to respect other people`s opinions and interests and find a way for people with different views to live together, which is, of course, democracy. And that`s the society we live in.

And frankly, you know, later on, when I made more money than would have been healthy for my family to have, I set up a foundation and I made open society the objective of my foundation.

SOROS: Yes, I did.

SOROS: Oh, he was very supportive and -- well, we had -- in later life, we had good contact. But of course there is a very funny thing that he himself personally was very intolerant of criticism. And in fact, at one point, I said to him, when he was quite old, How come that you, the apostle of critical thinking, are so intolerant? And he said, Criticism -- I believe in criticism. It has to be well-founded. But there`s really only one person who understands the weaknesses of my theories, and that`s me.

SOROS: Yes.

SOROS: Karl Popper? Yes. And actually, there was -- I mean, Hayek was a bit of a protector of and sponsor of Popper. He was more successful. But there was an ongoing debate between them, a written debate, which is a very interesting one. And Hayek was an apostle of market and Popper was much more for piecemeal social engineering. So they were somewhat separate in their thinking. And I suppose I`m closer to Popper, but I wouldn`t be that far from Hayek, I think, on some issues, like the -- issues of freedom.

But I believe that markets are not perfect. It would be wonderful if you could rely on market equilibrium to allocate resources. Unfortunately, the world isn`t made that way. And certainly, financial markets don`t tend towards equilibrium. And I think that I`ve developed my own theory of reflexivity, and I think it`s been born out by the facts, the evidence.

SOROS: Oh, I think I was involved in money-making even at the age of 14, when we were in hiding. My father used me to act as the runner, so to speak, exchanging on the black market, because being 14, I wouldn`t be suspected. So I was involved in currency markets from the age of 14.

SOROS: In Budapest.

SOROS: In Budapest.

SOROS: In various parts of the city, different parts from where we normally lived.

SOROS: Not terribly well, actually. He -- his formative experience was the Russian revolution. He lived through it in Siberia, and he was so glad to survive that he didn`t want to spend his life making money. He wanted to live well. And so he actually spent the money that there was in the family. There was -- it`s very unusual to have someone in the middle class that would actually dispose of property and live it up. And he did that. So he disinvested, and I -- you know, I`m different from him because I lived without money. I lived through very difficult circumstances in England, and so on. So I realized how important it is to have money, so I was interested in making money.

SOROS: No. I live very well. And I have a lot of help from my wife in spending money. She`s very good at it. (LAUGHTER)

SOROS: I rely on her for that. But I don`t really, really care for money very much. Otherwise, I wouldn`t be giving it away.

SOROS: Yes.

SOROS: That`s right.

SOROS: I had a difficult time getting a job. And I started working in a fancy goods distributor and manufacturer, and then I became a traveling salesman. And I got sort of further and further away from doing something that was appropriate to my education. And so I changed direction and got a job in the city and slowly made my way up. And I was offered a job in America, and I came over here.

SOROS: I was then already in the financial markets, trading between different markets, called arbitrage. So I was buying, let`s say, gold shares in South Africa and selling them in Belgium.

SOROS: To a small firm doing that. And I developed arbitrage, and from there, I got involved in security analysis and eventually set up my own fund.

SOROS: Arbitrage is buying in one market and selling in another. So it`s geographical -- you buy in South Africa and sell in Belgium -- or it can be between different stocks. Let`s say there is a merger, and then you buy the company that`s being merged and sell the stock that you receive in exchange. So it`s reducing the differences between different markets.

SOROS: I would say that it was around 1979, when my fund reached $100 million and my personal wealth reached maybe $20 million. And it was a tremendous strain doing this. And I asked myself, Why am I doing it? And that`s when I set up -- really reflected on it. It was a bit of a mid-life crisis. And that`s when I set up the Open Society Foundation -- 1979.

SOROS: Forty-nine.

SOROS: Yes.

SOROS: I was married.

SOROS: I had children, yes.

SOROS: I had three. And at the start of the mid-life crisis, I also got divorced from my first wife. That was all part of this period of turmoil -- What`s the meaning of my life? Why am I doing what I`m doing?

SOROS: I would say that the Open Society Foundation itself is a political idea. It`s not a party political idea, but it is a political idea. So I became political at the age of 14, when my life was threatened by the Nazi regime.

SOROS: Yes.

SOROS: That is right. And I have become more party political because I`m opposed to the Bush administration`s policies. So I`ve been fighting for the ideas of open society all over the world and -- including in this country, we`ve been active as a foundation for some years.

But now I came to a conclusion that the most important thing I can do is to stand up and oppose the Bush doctrine. And this I did at a time when it was unpatriotic to be critical because after the terrorist attack and the USA Patriot Act -- you know, when Ashcroft said that those who oppose this act are giving aid and comfort to the terrorists -- it had resonance of what I was supporting other people doing in other countries. And so I felt that having spent all that money and being so engaged over there, that the same principles I have to be engaged in over here.

SOROS: I suppose that I would be a Democrat, yes.

SOROS: I have given political contributions the past several campaigns, but not of the magnitude that I have done recently.

SOROS: Well, basically, grass-roots organizing in 17 states, and another $2.5 million to MoveOn, which is a kind of Internet mobilizing force.

SOROS: Well, first of all, it`s very pleasant because you don`t have concerns, you know. It also gives you a degree of freedom, and it also gives you a degree of power. And I value the freedom that it gives me, the ability to be and stand up for what I stand for. The power, I can`t say that I don`t enjoy it because it -- you know, it sort of becomes part of your personality. But I consider it a responsibility because I do have a platform. I`m heard. You are interviewing me. And so I have to use that platform in a responsible way.

And this is, in a way, what I`m arguing in the book about America, because America has power. We are the dominant power in the world, and that imposes on us a special responsibility. We actually have to be concerned with the welfare of the world. You know, Congress basically decides, but only Americans have the vote in Congress.

SOROS: Well, I`m pretty forceful in expressing my opposition to the Bush administration. And there is a certain danger, which I actually turned into almost reality, that because I consider the policies extremist, that I myself become an extremist. And that actually -- if that happens, then I have failed because I think that I am -- I believe in an open society, I recognize that I may be wrong -- and in fact, I`m admitting that I may actually be actively wrong by being so rabid -- but I feel that I have to state my view in a very straightforward -- and I feel passionately about it.

SOROS: I don`t think that`s what`s happening. Qaddafi came in from the cold, had nothing -- not much to do with Iraq. He has been trying to do that for some time. Negotiations, Lockerbie, started before Bush was elected. So to claim Qaddafi as a victory is, I think, wrong.

In the case of North Korea, we have gone full circle. President Clinton had an agreement to contain the proliferation threat, which was basically renounced by President Bush when he came in. And I knew personally -- I personally know Kim Dae-jung of South Korea. I was at his inauguration. And he had this sunshine policy towards North Korea. His idea was that if the sun shines, people take off their overcoat and open up. May or may not be true. At any rate, that was his policy.

He came to this country, he was one of the first visitors trying to convince Bush to follow it. Colin Powell supported him. Bush was -- this was the first time -- and Bush repudiated Colin Powell and told Kim Dae-jung that, No, we are going to take a hard line. And we have now come full circle. We are depending on the Chinese to act as intermediaries in dealing with North Korea. So -- and I think we can make progress because that is a very, very poor country, a very repressive, awful regime, but they need outside assistance. And so we are coming back, and we are negotiating.

So yes, maybe we`ll make progress, but it isn`t because of our unilateral throwing about our weight that we are succeeding but because we are using negotiations and we`re using allies.

SOROS: Yes.

SOROS: Well, you know, the idea of natural selection is the survival of the fittest. And in fact, it`s a valid -- that`s, in fact, what`s happening. That`s how species survive. But the fittest does not mean that who is the strongest in combat. The fittest is who can cooperate better, who can find allies. So it`s a distortion of this idea of Darwin`s idea of evolution to say that it`s military power that will determine who is going to rule the roost. And it`s a false idea.

SOROS: Yes.

SOROS: Yes.

SOROS: Well, New American Century -- and I quote their whole doctrine -- is this ideology that international relations are relations of power, not law, that international law follows what power has accomplished. And since we are so powerful, we ought use our power, and the previous administrations have been remiss in not doing that and we must correct that. We must build up our military forces and we must project that power.

And I think this idea is a dangerous idea. It`s false and it`s counterproductive. And then because of the terrorist attack, this group gained the upper hand and has dominated our policy since then.

SOROS: And actually, Kagan wrote a book which is -- which states this philosophy probably better than -- than any other. And it`s an interesting thing because, you know, he compares Europe -- he says Europeans are from Venus and Americans are from Mars -- that we have the power, therefore we believe in power. Europeans don`t have the power, therefore they don`t believe in it.

Now, this is actually a neo-Marxist idea, namely that the material conditions determine the ideological superstructure. So, it`s very interesting that the neo-conservatives, who actually came from that background, there`s a direct link to Marxism. It`s actually true.

SOROS: Yeah.

SOROS: It`s very interesting, because I was not aware of Leo Strauss. They were contemporaries, same background, delved in Plato, so they really ought to have some kind of a -- but they didn`t refer to each other. So, I discovered Leo Strauss through Wolfowitz. And Leo Strauss talks about natural rights, natural right. You see, there is the Declaration of Independence. These are - these ideas we hold to be self-evident. Right? And then come the ideas, which are the wonderful expression of the principles of open society. But the introduction, self-evident, you see, leads to a belief in some truths which are self-evident and cannot be denied by anyone. So, Leo Strauss took off from that sentence and built on natural right. And Karl Popper, let`s say, took off from the rest and built the principles of open society.

SOROS: No. I wouldn`t go that far, because, actually, Paul Wolfowitz, whom I used to work with quite closely at the time of the Bosnian conflict, and we were both urging the Clinton administration to take a more -- more active and assertive position, so we were on the same side. And I believe he does believe in democracy. I would like to have a debate with him on this issue, because we have now parted company, because I think he`s guided by this self-evident truth, and namely that, you know, we know what democracy is. When you accept American values, then you are on the right track. And I say that democracy means that people have a right to decide for themselves, and they don`t necessarily believe in American values, and they can still be democratic and they can still be an open society.

SOROS: Oh, yes. There are many. I think Europe is -- would be quite comfortable for me. And I think that you`ve got some emerging democracies. I think, for instance, Brazil has done wonderfully in -- since the - they overturned the military dictatorship. And I think that, for instance, the way the presidential elections were fought recently, where -- there was a much more free time on television and you had, you know, 20 minutes or 30 minutes to present your case and not 30-second advertisements was actually a great exercise in democracy.

SOROS: 1962.

SOROS: I`m not there. No. I`m not. I haven`t considered that. I think that - that, first of all, I think that - that the battle has to be fought here, and moving away would be sort of abandoning it. And I also think we are an open society. And we are a democracy. And I think the -- of course, one has to rely on the - on the electorate, and their insight to have something similar -- the -- allergic to the deception that this administration has exercised.

SOROS: Well, I think it does run into thousands. Several - several -- a few thousand. Maybe 2,000.

SOROS: That may be too many. But it`s over 1,000.

SOROS: I think I`m very good at delegating. First of all, each foundation has its own board, and they decide how they use the money, and I only decide whether to give them money or not.

SOROS: No. I`m on none of the boards on the national foundations. But I do pay attention to them, and I visit them and I talk to the members of the board. And I have an overall view, and I`m engaged in some of the programs and some really exciting ones, but I must say that the best things are the things that are done without my knowledge. I mean, it`s -- when I go to a country like Tajikistan and I see what they are accomplishing, and it is -- that is a real pleasure, because I don`t know about it. Usually, when I know about it, it`s because there is some problem.

SOROS: A fair amount. Although I think that I`m now sort of filling the quota that I didn`t get before.

SOROS: Well, I think that basically whatever influence I have is transparent. We publish our annual reports. When I give away money, which is not through the foundation, in this case, I declare it.

SOROS: Yes, yes, so all that is transparent. And in fact, there is a lot of criticism, and now I get a lot of, you know, abusive mails, and there has been really a campaign to discredit me. I think that the Republican -- the Bush propaganda machine has tried to define me before I could define myself, through the book.

SOROS: Well, for instance, that I have accused Bush of being a Nazi, which I didn`t do and I wouldn`t do.

SOROS: No, no. Before that.

SOROS: It comes from the various letters of chairman - of fundraising letters that the Republican National Committee sent out, saying this man is calling Bush a Nazi. We have to -- he`s spending billions and we must rally to the cause. So, I guess I raise more money for the Republicans than I have done for the organizations that I support. So, I think it`s been a fairly concerted campaign, and it has worked.

SOROS: It used to be Russia, but I`ve just now brought it to a close. I spent a very large amount of money, close to $1 billion in Russia.

SOROS: I think it was worth it. Unfortunately, Russia has gone the wrong way, so I don`t have much to show for it. But I think we did the right thing, and it`s regrettable that now it`s gone wrong.

SOROS: Because we were doing a lot of things that, in fact, the state or local people ought to be doing. We were helping education, science, and so on. And this was appropriate when the country collapsed and the system collapsed. And it was worth saving these institutions. Now it`s more regular. The revolutionary period is over, and so it`s not appropriate for me to spend that money. But I will continue supporting civil society organizations, particularly those that act as monitoring and critical of what the reconstituted state is doing, which, as you probably know, is becoming quite repressive in its behavior.

SOROS: We don`t have any one that is large, because we are very much engaged in Central Asia, where we spend, say, $5 million per country. So, I would say that individual foundations spend -- very few would have more than $5 million a year now. And then when we have, like, Southern Africa that would have $10 million. So, it`s in that range. So, it`s -- there is no one that sticks out.

SOROS: Well, we become very bureaucratic. You know, when I set up the foundation, we went from $3 million a year to $300 million a year in a matter of a few years. I basically gave away money without any controls. I didn`t even have a budget. Now we have a budget, and we have procedures, and we are now extremely bureaucratic.

SOROS: It does, because there`s a process, and, in fact, people used to say, well, Soros promised we`d have money. It doesn`t count unless there is some documentation. So, there is -- there are constraints on me.

SOROS: Well, in giving money away, people tell you what you want to hear, and then they do what they want to do. But I think that is natural. I accept that. And I deal with that in that way. And I must say that I think we`re doing quite a good job.

SOROS: Well, my older children -- two of them are in my firm. And the third one has a foundation. She`s committed to Tibet. We have made a deal, you know, like at the time between the Spaniards and the Portuguese, we divided the world. My daughter got Tibet and I got the rest of the world.

SOROS: I`ve got two younger ones.

SOROS: 18 and 16. And they`re just in the process of being formed, and I think they are coming along. They have suffered from being rich kids and having a famous father. It has made things - it created problems. But I think we are coming through them.

SOROS: Well, problems of entitlement and not enough material constraints. You know, everything done for you, so you don`t have developed a sense of accomplishment from doing things for yourself.

SOROS: Not necessarily, but it`s -- it might be excessive. But what are you going to do about it? You know, if you...

SOROS: Well, I have very much advocated retaining the estate tax. I think it`s an excellent place -- an excellent moment to tax wealth, because the wealth creator is gone. It`s inherited by others who are not necessarily qualified to make the most of it. And so, I am very much in favor of that, and I think it`s quite unconscionable that this administration has tried to abolish it. And it`s amazing how they`ve gone about it by calling it the death tax, and people believe that it applies to them, where it really only applies for anybody with over $7 million or even more now, 15 of capital and so on.

SOROS: Look, I think we have learned to make the most of it, so I don`t think it`s -- you can ever have too much. But when you have a lot, you then have to be concerned about other things, like, for instance, preserving the environment in which you live, the so-called externalities or free goods, like air. We have tremendous power over nature now. And we can destroy nature. And we have tremendous destructive power militarily, and we can - we can, and unfortunately probably will, destroy our civilization, if we don`t pay attention.

SOROS: No. I`m keen on Dean. But I would be very happy with either General Clark or John Kerry. I think there are a number of candidates. I don`t necessarily agree with all their views, and they don`t necessarily agree with mine, but I think it would be much, much preferable, because it would be a change of direction.

SOROS: Yes, yes.

SOROS: It is -- this is true. And I think that the rules need improvement. But I play by the rules that prevail, so if these are the rules that prevail, these Section 527 companies -- I didn`t invent them. I didn`t set them up. They were there. And I`m contributing to them. And actually, the Republicans have more money, both inside the party and these 527s, so I don`t think that my concern about campaign finance should stop me from playing by the rules that prevail. But at the same time, the fact that I use those institutions should not necessarily mean that I wouldn`t like to see them changed.

SOROS: Well, I was very clearly on the side of the West and therefore the United States, which was the leader of the free world. It doesn`t mean that I was supporting all the policies. In fact, being -- living in the free world means that you`ve got to be critical. So I was actually quite critical of Clinton`s policies. I was -- and I was very critical of the missed opportunity in -- when the Soviet system collapsed. I was advocating for a more interventionist approach. I thought, you know, I talked about a new Marshall plan, and I was actually laughed at when I talked about it. So I was critical. I was critical of our policies in Bosnia, in Kosovo. Actually, advocated intervention in those countries. But I was -- and I remain firmly committed to freedom, open societies.

SOROS: I thought he pushed the envelope a bit with Watergate. And it was a test for our democracy, which we actually passed with flying colors, because we impeached him for having overstepped the mark. And we didn`t do so well with the Iran- Contra controversy, because there was an excess there and we didn`t - just we didn`t have the drive really to push it too far.

SOROS: I think that he`s a great ex-president. I have a very high regard for him as a person. I don`t think he was very effective as a president.

SOROS: I was critical of Reagan, because that was already the beginning of what I considered the market fundamentalist approach.

SOROS: It was, of course, appropriate to intervene, but I was also not a fan of the first Bush. So I`m generally speaking critical of whatever a regime prepares, because they`re all imperfect, they can all be improved. And so I tend to be critical.

SOROS: I wouldn`t say that with quite the same conviction today as I did at the time of -- when I actually sent the book to the publisher. Because at that time, because of the Iraqi intervention, this suspension of criticism ended. He could no longer dismiss criticism as being unpatriotic, because he overstepped the mark by using terrorism as a pretext for going after Saddam. So he overstepped the mark. He was no longer immune to criticism, and I felt at the time that the criticism was really making headway. Now I see that actually the propaganda machine is doing a very good job. So I`m -- I say it, I think at the end of the book, that it`s not a foreordained conclusion, and I`ll do whatever I can to make my prediction come true. That`s why I`m engaged.

SOROS: I make time. I have written it all myself. It`s a short book. It doesn`t take long to read and it didn`t take that long to write. And also, I crib from my other books. I keep on saying the same things, and I`ve said it before. And so it`s not that difficult, not that difficult.

SOROS: I write longhand or I dictate. Sometimes I just speak like -- as if I`m making a speech, or I write longhand. I usually do it between 3:00 and -- starting 3:00 in the morning.

SOROS: I wake up, and if I have something to say, I say it. So I very often write in the morning.

SOROS: Not that many. Because I try to cut it short. And actually I spent quite a bit of time at home writing and reading.

SOROS: No.

SOROS: I go commercial when I can. And I charter a plane if it`s more direct. So, if I can go on a commercial route, then I take a commercial flight. And if there`s no direct connection, then I take -- charter a plane.

SOROS: The company is active. And I`ve got a new generation of people. And I`m distanced from the money-making, but still engaged. Still engaged. And actually, it`s quite healthy for me, because it sort of gives me -- keeps me in touch with reality. Because when you get caught up in your ideas, you may sort of lose touch with reality. And so it`s a funny thing that you should consider the financial markets as reality, but it is.

SOROS: No, there was one time when somebody was managing my fund -- dropped 20 percent, and I think we recovered a little bit of it. But I did have a bad year also.

SOROS: No.

SOROS: This is it.

SOROS: Thank you.