George Soros (Soros Fund Management Founder) – The Future of Europe (Apr 2015)

Chapters

Abstract

The Crucial Role of Governance in Resolving Global and European Crises: Insights from George Soros

Abstract:

This article delves into the profound insights of George Soros, a financial market expert and philanthropist, on the current global disorder and Europe’s transformation. It examines the interconnectedness of crises, the role of civil society, and the resurgence of nationalism in Europe, especially in light of Russia’s geopolitical maneuvers. Soros’s perspectives provide a unique lens to understand the challenges of global governance and the potential paths to resolution.

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Introduction: George Soros’s Mastery of Financial Markets

George Soros, akin to financial experts like David Ricardo and John Maynard Keynes, is a deep connoisseur of financial markets. He sees himself as a “theorist practitioner”, leveraging theory to guide his practical decisions and vice versa. His understanding of how these markets influence the real economy forms a pivotal basis for the ensuing discussion.

Global Disorder: A Tapestry of Crises

The current global landscape is embroiled in a state of disorder, marked by failing global governance. This disorder is typified by an accumulation of interconnected crises, where the losers in one crisis often become the spoilers in another. Soros acknowledges the interconnected and reflexive nature of these crises, noting that failures in resolving one crisis can exacerbate others. This complex web of crises poses a significant challenge in comprehensively monitoring and addressing global issues.

Europe’s Transformation: From Unity to Division

In Soros’s view, as expressed in his book “The Tragedy of the European Union”, Europe has transformed from a symbol of unity to a source of division. The euro crisis has particularly deepened this divide, leaving younger generations in debtor nations disillusioned. Complicating this is the existential crises in Greece and Ukraine.

Ukraine: A Beacon of Civil Society

Ukraine stands as a stark contrast to Greece, showcasing the emergence of a vibrant civil society. Soros highlights the significant role of civil society in Ukraine’s transformation, particularly evident during the Maidan protests. His foundation, established in Ukraine in 1990, has been instrumental in nurturing civil society, with many leaders in the new Ukrainian government having benefited from its scholarships and support.

Putin’s Influence and the European Response

Soros observes Putin’s ideology, which echoes interwar Germany’s nationalism, and its allure to some European leaders. Putin’s ideology, akin to that of Nazi Germany, is rooted in ethnic exceptionalism and the concept of a holy Russia. Despite operating from a position of weakness, Putin’s regime focuses on self-preservation and maximizing rents, evident from Russia’s capital flight due to a lack of trust in the regime. Despite Putin’s tactical advantages, Soros acknowledges Angela Merkel’s leadership in confronting Russia but also notes the challenges she faces, including the rise of populism and nationalism within Europe.

The Economic Angle: Austerity and Investment

Soros criticizes the austerity measures imposed on Ukraine and Greece, advocating for a new economic approach. He has announced his intention to invest $1 billion in Ukraine, motivated by the potential for positive change and acknowledging past investment mistakes.

The Strategy for Ukraine: Beyond Survival

For Ukraine to counter Putin’s tactics effectively, Soros argues for a shift from mere survival support to significant budgetary and private capital support. His investment is driven by profit but with a social purpose, aiming to yield substantial profits for his foundation.

Confronting Existential Crises: Europe’s Path to Recovery

Soros, acknowledging the dissonance between his luxurious interview setting and the grave crises facing Europe, emphasizes the importance of resolving the Ukrainian situation. He envisions a potential positive scenario where Europe, and by extension the world, can navigate these crises and restore global order.

Greece and Ukraine: Conditions for Success

For profitable investment in Ukraine, Soros outlines three conditions: political commitment from allies, substantial financial assistance, and a lasting ceasefire. He argues that sanctions alone are insufficient to deter Putin and believes that a flourishing Ukraine could serve as a role model, potentially fostering democratic changes in Russia.

High Stakes and Hope for Democracy

The stakes are high in the global and European context, but Soros offers hope. A thriving Ukraine could pave the way for democracy in Russia, leading to a more stable and harmonious global order. Effective governance, economic foresight, and the empowerment of civil society are key to this process.

Supplemental Information:

George Soros stresses the need for new economic thinking to address current challenges, especially in light of misconceptions like austerity and the Bundesbank orthodoxy. He warns against treating Ukraine like Greece, as this approach, which merely provides drip-feeding economic support, will lead to a situation reminiscent of the old, stressed Ukraine. Soros’ potential $1 billion private business investment in Ukraine is driven by his belief in the country’s potential as an attractive investment opportunity if the situation improves.

Soros highlights Putin’s aim to destabilize Ukraine without taking direct responsibility, using a pattern of converting military victories into ceasefires to induce financial crisis and political collapse. He emphasizes the importance of Ukraine gaining equal footing with Putin and developing strategies to counter his hybrid war tactics. This shift from survival to substantial budgetary and private capital support is crucial.

Soros clarifies that his proposed investment in Ukraine is profit-driven, with profits going to his foundation rather than for personal gain. He believes that investing in Ukraine can be profitable if the situation improves. He acknowledges the cognitive dissonance between his luxurious surroundings and the grave existential crises facing Europe, drawing a comparison to the Weimar period.

While Soros does not provide a detailed positive scenario, he believes that the Ukrainian situation is at least as important as Greece, suggesting potential for improvement. He maintains that Ukraine has a greater chance of a positive outcome compared to Greece, due to less hostility and negative sentiment, and that Ukraine’s allies must make a political commitment to help it flourish.

Soros outlines three conditions for successful investment in Ukraine: political commitment from allies, a source of financing providing substantial financial assistance, and a lasting ceasefire. He also notes that Greece’s situation is highly toxic, characterized by mutual hostility and a collapsed economy, making it difficult to resolve.

Soros emphasizes that economic sanctions alone are insufficient to deter Putin. A comprehensive strategy extending beyond sanctions is required, focusing on substantial assistance to Ukraine. Supporting Ukraine’s prosperity can make it a model for nations under Putin’s influence, demonstrating the benefits of democracy and economic development. The ultimate goal is to foster democratic change within Russia itself, replacing Putin’s authoritarian rule with a democratic government and thereby improving the stability and security of the region.

Notes by: WisdomWave