Magazine article The Spectator

The Capacity for Response

Magazine article The Spectator

The Capacity for Response

Article excerpt

William Rees-Mogg THE CRISIS OF GLOBAL CAPITALISM by George Soros

Little, Brown, 17.99 pp. 245

George Soros belongs to a very small group, that of highly successful speculators. He has made some $5 billion for himself, and even larger amounts for his funds. Compared to some other business fortunes, these are not exceptional sums; he is only a tenth as wealthy as Bill Gates, who is a much younger man. The relative scarcity of great speculative fortunes is, however, easy to explain: the business is highly competitive; it can only itself be capitalised to a limited degree because the speculator, however gifted, has to start each day looking for a new source of profit. Successful speculators need an unusual combination of intelligence and temperament, and they need to be able to detach themselves from their own past judgments.

The Crisis of Global Capitalism is written in two parts. The first part deals with the author's philosophy, which he believes has contributed greatly to his success. The second part deals with the current financial situation, and forecasts the future. George Soros is an amateur philosopher and a professional speculator, but his philosophy, like that of many self-made philosophics, is full of interesting insights. He puts his emphasis on a recognition of human fallibility - we all get things wrong - on what he calls 'reflexivity' - we change the events in which we participate - and on the open society. As a young man, he was greatly influenced by Karl Popper. These principles helped him to be a successful speculator, and have guided the use he has made of his money as a philanthropist.

The second part of the book deals with the present and immediate future of global finance. It was written during and shortly after the crisis of August-September 1998, which involved Russia, the hedge funds and world stock markets. At that time Soros expected a worse outcome than has so far occurred.

The range of probabilities lies between a cascading decline of the stock markets and a more drawn-out process of deterioration. . . The false dawn will be followed by a prolonged bear market, just as in the 1930s and in Asia currently . . . The economy would eventually recover if the global capitalist system increased. …

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