George Soros (Soros Fund Management Founder) – A Conversation at Davos (Jan 2017)

Chapters

Abstract

Analyzing Global Dynamics: Soros on World Affairs, Open Societies, and Economic Shifts

In a comprehensive analysis of the contemporary global landscape, George Soros, a renowned financier and philanthropist, provides critical insights into the dynamics shaping world affairs. His assessments range from the risks and opportunities present in the current world order, the defense and challenges to open societies, to the intricate economic and political consequences of Brexit and the Trump presidency. Soros’s perspectives offer a unique vantage point on the interplay between political decisions and economic implications, underscoring the necessity of cautious navigation in an increasingly interconnected and fragile global environment.

The Current World: Risks and Opportunities

Initially, Soros highlighted the precarious nature of Europe’s situation, acknowledging both its potential for disintegration and the stabilizing interests of external powers like Russia and China. However, he later revised this view, acknowledging that external powers need Europe’s economic capacities, making disintegration less likely. He warned, however, that coming under the influence of Putin’s Russia would be disastrous for Europe’s values.

Defense of Open Society

Soros champions the defense of open societies, contrasting them with authoritarian regimes. He notes a disturbing trend towards the latter, including in major powers such as Russia, China, and even the United States. This shift presents a fundamental challenge to the principles of open societies.

Trump’s Presidency: Implications for Open Society

Soros views President Trump with skepticism, labeling him an imposter, conman, and potential dictator. However, he expresses confidence in the resilience of the U.S. Constitution and institutions to counterbalance Trump’s tendencies, emphasizing the role of Congress in this dynamic. He anticipates bipartisan resistance in Congress that would limit Trump’s powers, especially in foreign policy.

Market Responses and Trump’s Presidency

Soros observes a market enthusiasm following Trump’s election, spurred by expectations of deregulation and tax cuts. Yet, he cautions against the long-term implications of these policies, highlighting the inherent unpredictability of Trump’s approach and the potential for internal conflict within his administration. He expressed skepticism about the long-term economic impact, arguing that uncertainty caused by Trump’s unpredictable behavior would hinder long-term investment.

Predictions of Trump’s Failure

Soros foresees Trump’s failure as a result of ideological contradictions and internal advisory conflicts. He perceives Trump’s presidency as a global threat to open societies, with America’s international influence at risk of being undermined by internal political strife. He explained that his desire for Trump to fail stemmed from Trump’s ideological alignment with a form of government that is antithetical to open societies, which he described as “dictatorship” or a “mafia state.” He emphasized that Trump’s presidency would result in internal political conflict in the US and weaken its positive influence on open societies globally.

Navigating Trump’s Presidency

Soros advises business leaders to approach dealings with President Trump with caution, acknowledging the complex and uncertain business landscape under his administration. He predicted that Trump would further divide America, as he sees himself as embodying the people’s will and considers anyone who disagrees with him as outsiders. He expressed concern that Trump’s rapprochement with Putin would pose risks to both Europe and America, as Putin had influenced Trump’s campaign and disrupted Hillary Clinton’s.

Russia, Trump, and Europe’s Risks

The budding rapport between Trump and Putin, Soros argues, poses significant risks to both Europe and the U.S. He points to Putin’s successful meddling in the U.S. election as evidence of Russia’s growing influence and its capacity to shape public opinion.

Europe’s Role in a New World Order

Soros underscores Europe’s fragility and the imperative for it to carve its own path and uphold its values in a changing global order. He acknowledged Europe’s fragility and urged European nations to cooperate in addressing the challenges posed by the new world order, including the rise of China and Russia’s influence.

European Union’s Struggles

The EU faces disintegration challenges, exacerbated by Brexit and the rise of anti-European parties. Soros highlights the EU’s difficulties in reforming due to the Maastricht Treaty’s stringent laws, which hinder adaptation in the post-2008 financial crisis era. Europe is facing disintegration, exemplified by Brexit and other recent elections. The EU has become dysfunctional due to outdated laws defined in the Maastricht Treaty. Treaty changes are difficult due to required referenda, which have been defeated in France and the Netherlands. Loopholes are being sought to change EU laws, making governance cumbersome and action slow. The political elite has failed to fulfill electorate expectations, leading to alienation and anti-European sentiments. The financial crisis of 2008 has been forgotten, but it may have contributed to the current wave of populism. Saving Europe requires recognizing its current dysfunction and changing direction. The people need to make their voices heard and demand change.

Brexit: Complexity and Consequences

Brexit, according to Soros, is a complicated and lengthy process, requiring mutual understanding and compromise to avoid detrimental outcomes for both the UK and the EU. He suggests the potential for reconciliation as the negative impacts become apparent. Brexit will be a long process, and both sides should find common ground to avoid a bitter divorce. As people realize the negative consequences of disintegration, there may be a movement towards unity. Barnier, a tough negotiator, has acknowledged that a divorce would harm both the UK and the EU. Prime Minister May is unlikely to remain in power due to her divided cabinet and small majority. She cannot go against the referendum and the will of the UK people.

Prime Minister May’s Challenges

Soros observes Prime Minister May grappling with a divided cabinet and a slim parliamentary majority, rendering her position unstable and complicating UK-EU negotiations. Soros believes that the UK’s current economic stability is misleading and that the depreciation of the currency and rising inflation will eventually lead to declining living standards. The decline in living standards may trigger a realization among the British people that they are earning less than before, as wages will not keep up with the rising cost of living. Soros suggests that this situation could lead to a new referendum or fresh elections, but he emphasizes that the divorce process between the UK and the EU will be prolonged and challenging. He anticipates that a desire for rapprochement, or reconciliation, will develop between the UK and the EU. He suggests that in theory, or perhaps even in practice, Britain could leave the EU in 2019 or 2020 and then rejoin over the weekend, effectively implementing a new arrangement by Monday.

Economic Implications of Brexit

Soros predicts a worsening economic situation for the UK, with currency depreciation and inflation eroding living standards. He envisions a protracted and challenging divorce from the EU, possibly leading to a reconsideration of the decision.

China-US Dynamics and Trade Wars

Soros foresees an inevitable trade war between the U.S. and China under Trump’s policies. He emphasizes the importance of China’s successful economic transformation and its role as a global leader. Soros considers it significant that the Chinese President is visiting Davos four days before the US inauguration. He sees this as a first and believes that President Trump’s actions will contribute to China’s rise as a global power. Soros suggests that Trump’s withdrawal from the Trans-Pacific Partnership (TPP) and his protectionist policies will create opportunities for China to expand its influence. He expresses concern that the US and China are on a collision course, which could lead to serious consequences for both countries and the world.

China’s Economic Growth Model and Role in the International Community

* Soros emphasized the need for China to transition to a sustainable economic growth model and become a responsible member of the international community.

* He believes that a trade war between the U.S. and China would harm global economic prosperity and international stability.

* Soros sees Europe and Asia having common interests and should work together to counter the economic attacks from Trump.

RCEP and China’s Regional Partnership

* Soros highlighted the potential of the Regional Comprehensive Economic Partnership (RCEP), a trade agreement between China and 10 Asian countries, to overshadow the Trans-Pacific Partnership (TPP).

* He suggested that if other former TPP members join the RCEP, it could create regional cooperation that is not dominated by China.

* Soros proposes that the RCEP, rather than China itself, should be the partner of the European Union, as it would balance China’s influence.

Xi Jinping’s Leadership and China’s Future

* Soros expressed uncertainty about Xi Jinping’s political future, considering internal power struggles and the choice between opening China to a more open society or maintaining its current state.

* He believes the next two years will be crucial in determining China’s direction, with Xi Jinping aiming for unsustainable growth to maintain power.

* Soros suggests that China’s economic growth model needs to change and the Silk Road project can help utilize surplus production to prevent its use for armaments.

Asia-Europe Economic Cooperation

Soros advocates for economic cooperation between Europe and Asia, particularly through partnerships like the RCEP, to balance China’s regional dominance. He sees this as a crucial counterweight to potential economic conflicts.

Hungary’s Crackdown on NGOs

Soros criticizes the Hungarian government’s actions against NGOs, highlighting the threat to EU values and the rule of law. He emphasizes the importance of civil society in sustaining democracy.

Ukrainian Reforms and Support

Soros commends Ukraine’s reform efforts under Prime Minister Groysman and calls for increased support from the U.S. and EU. He notes the strategic importance of Ukraine in the broader geopolitical context.

US Institutions and Trump’s Presidency

Soros expresses confidence in the ability of U.S. institutions to limit the President’s power, emphasizing the constitutional balance of power.

Japan’s Economic Strategy

Soros praises Japanese Prime Minister Shinzo Abe’s economic policies, suggesting they could serve as a model for EU reforms.

Investments in Businesses That Help Migrants

* Soros pledged $500 million to businesses that aid migrants, aiming to improve communication and financial transactions for migrants through private sector innovation.

Concerns About Geopolitical and Military Conflict

* Soros expressed concern about heightened geopolitical and military conflicts due to interactions between the U.S., Russia, and China, fearing a trade war escalating into other conflicts.

* He conveyed that the world’s security situation has deteriorated since 2016, considering it a dangerous time.

Notes by: Alkaid