The International Crisis: An Interview

In July of 1997, the currency of Thailand, the baht, fell precipitously in value when the government abolished the link it had long maintained to the US dollar. The fall in the value of currency spread to other nations in Asia, including Singapore, Taiwan, Malaysia, the Philippines, Indonesia, South Korea, and Indonesia. As this happened, there was a dramatic outflow of capital from these nations. Investors generally feared that Asian companies would no longer be able to meet the enormous volume of their debt obligations denominated in US dollars and other foreign currencies. The financial turmoil threatened even such economic powers as Hong Kong and China.

Thus a financial crisis began in Asia whose consequences are still being felt as far away as Russia and Brazil. Many of the affected nations are now suffering from a full-fledged depression, with widespread unemployment, rapidly expanding poverty, and, in some cases, social unrest. Some experts believe the advanced economies of Western nations may also deteriorate largely as a result of the international turmoil.

As one of the world’s most successful hedge fund managers, George Soros has long been involved in global capital movements. He came to widespread public attention when his fund sold an estimated $10 billion worth of British pounds short in 1992 in anticipation that the currency would soon have to be devalued. He netted a profit of $1 billion in a matter of weeks. In 1996 and 1997, Soros’s fund, and similar hedge funds, had also been betting heavily that overvalued currencies such as the Thai baht and the Malaysian ringgit would soon fall. These hedge fund managers were accused of causing the ensuing crisis. Soros in particular was singled out by Prime Minister Mahathir Mohammed of Malaysia as the source of his nation’s problems.

In fact, Soros had given up the daily management of his hedge funds in 1989 to devote himself to philanthropic activities and to writing about the world economy. His charitable efforts include the financing of foundations in thirty-one countries dedicated to what he calls an “open society,” based on the ideas of his former teacher, the philosopher Karl Popper. To Soros, an open society is essentially a constitutional democracy that protects liberties, such as those made explicit in America’s Declaration of Independence. Soros has spent hundreds of millions of dollars through his foundations, which have conducted a variety of economic, educational, and humanitarian activities, including, for example, providing water and electricity in Sarajevo during the Bosnian war and the setting up of a new European university in Budapest. He has recently turned more of his attention to America’s problems, sponsoring projects on drug use and on how Americans view death. Soros has been widely praised for his imaginative generosity but he has also been criticized for participating in the affairs of governments while also trying to make profitable investments.

In December, Soros published a new book, The Crisis of Global Capitalism, in which he writes that what he calls “market fundamentalism” may be “a greater…

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