Soros Concedes His Forecast on Global Economy Was Off By DAVID D. KIRKPATRICK ---------------------------------------------------------------------------- ---- Don Hogan Charles/ The New York Times George Sorors, who is 70 Saturday, has written a new book on capitalism and the global economy. ---------------------------------------------------------------------------- ---- eorge Soros, one of the world's most successful speculators and richest men, has come as close as anyone to personifying the spread of global capitalism and the power of international financial markets. So, in 1998, when he wrote a book predicting the imminent "disintegration of the global capitalist system," his views caused quite a stir. Two years later, the global economy is still kicking, and, in a new book, Mr. Soros, who turns 70 years old today, is taking back his grave forecasts. "Basically, I got carried away in thinking that the system might actually collapse," he said, in an interview. "I goofed." His reversal is a highly unusual public about-face. Most incorrect prognosticators simply let their mistakes drift quietly through remainder piles and into the dustbin of history. But his turnabout is also a barometer of how fast the world has changed. In an unlikely coda to his career, Mr. Soros was one of the few prominent voices since the cold war to question the longevity of global capitalism. The shift by Mr. Soros also reflects the dangerously fickle nature of contemporary international financial markets, one of his favorite themes. In the fall of 1998, he was far from alone in worrying that the global economy might plunge into a depression. But just a few months after his book went to press that possibility seemed remote. In his new book, "Open Society: From Global Capitalism to Global Democracy" (PublicAffairs Press), Mr. Soros explains that he was wrong to worry that international capitalism might soon destroy itself. But he stands by his admonition that unchecked capitalism threatens freedom and democracy around the world. And he is sticking with the delicate philosophical distinction that enables him in good conscience to continue exploiting the same financial markets he vilifies. Mr. Soros intended his previous book as the summation of his lifetime of experience as a World War II refugee, global investor and philanthropist. But in August 1998, his work on the book was interrupted by a looming financial crisis in Russia, where he was active as both investor and philanthropist. After Russia defaulted on its debts, sending convulsions through financial markets from London to S�o Paulo, the growing crisis convinced Mr. Soros that his conclusions were too timely to hold back. He decided to rush the book to press. His intended publisher, Random House, declined to accelerate the timetable, so he decamped to PublicAffairs Press, whose founder Peter Osnos was happy to oblige. Entitled "The Crisis of Global Capitalism: Open Society Endangered," the book was published in November, just weeks after the manuscript was completed. Mr. Soros might have saved himself some embarrassment if he had waited for Random House, giving the markets time to recover. "I have some egg on my face," Mr. Soros admits in a preface to his new book. He decided to write another volume after he set out this year to revise the first for a paperback, and realized his thinking had changed drastically. Mr. Soros writes that his dire predictions rested on two errors. First, he underestimated the ability of key officials in New York and Washington to intervene at the last second when trouble in far-off markets threatened prosperity and stability at home. When investors' skittishness threatened a global credit crisis, the United States financial regulators quickly lowered interest rates and orchestrated a pivotal bail-out of the mammoth Long-Term Capital Management fund in time to head off a panic. "We almost had a collapse," Mr. Soros said, "but life is lived on the edge of chaos." Mr. Soros writes that his second error was underestimating the impact of new technology. "There was an Internet boom concurrent to the bust in emerging markets," Mr. Soros writes in his new preface. "How could I ignore that?" The advent of new technologies bolstered productivity growth in the United States, helping to withstand a slowdown abroad, he said. The Soros fund management company stumbled in technology, too. Soros Fund Management first bet against the boom in high-tech stocks and then was surprised again by their collapse this spring. The funds suffered losses of about 20 percent. Mr. Soros announced that he was shifting his funds' focus toward safer, less lucrative investments to support his philanthropy. Mr. Soros left the day-to-day management of his fund company in 1989 to focus on his philanthropy. "What has happened there has happened to someone else and not to me," he said. "The fact that I had a bearish bias in 1998 maybe prevented us from participating in the upside, but, really, it is unrelated." Mr. Soros notes that his funds still delivered investors a return of more than 30 percent a year since 1969, including the recent losses. "I make mistakes, but when you add it all up, I come out ahead," he said. Mr. Soros said that an enthusiasm for exposing errors in his own thinking had been the key to his success as a financier, as he explains in both books. It is not as easy to recant in public, he said, but he sees the new book as "my life's work, in a way." Mr. Soros said his motivation was to leave his mind's mark on posterity. This book, he said, "means more to me than the billions that I have made." The heart of both books is the idea of an open society, a term popularized by the philosopher Karl Popper, who was the undergraduate tutor of Mr. Soros. He has been refining his ideas about it ever since. Mr. Soros argues for shunning absolute truths, including what he calls "market fundamentalism" -- an absolute belief in the values of the free marketplace. He recommends strong multilateral regulation of international finance to protect other social values, like equality and economic development. The public criticism of his work has been trying at times, he said, especially the skeptical reception of the distinction he draws between "making the rules" and "playing by the rules." He argues in both books that policy makers should worry about morality and the social good, but not fund managers, because markets are inherently amoral. "That is why you can't leave everything to markets," he said. It is also why his fund management company continues trying to seize opportunities to profit off other market participants whenever it can -- after all, somebody else would. His distinction between making the rules and playing by them "is not flying," he acknowledged. "There are people who regard markets as immoral, who say, 'He made a fortune in the stock market, he has a bad conscience, so he is trying to excuse himself.' But if we could get that idea across, it would actually make a better world." _______________________________________________ Crashlist resources: http://website.lineone.net/~resource_base To change your options or unsubscribe go to: http://lists.wwpublish.com/mailman/listinfo/crashlist
