on July 30, 2001
The book consists of roughly two parts. The first is the philosophical foundation of the "theory of reflexivity", with application to financial markets and historical process in general, resulting in the "Open Society" concept. The second is the assessment of the present moment of history and the author's vision of the future of the global financial and political architecture.
The "reflexivity theory", already developed by George Soros in his earlier books (e.g. "The Alchemy of Finance") can be summed up in his own words: "We are part of the world we seek to understand, and our imperfect understanding plays an important role in shaping the events in which we participate." This entails recognition of the fundamental limitations of the social science and our own understanding of society. "It (reflexivity) creates a cleavage between the natural and social sciences and it undermines the postulate on which economic theory has been based: rational behavior in general and rational expectations in particular."
This is a powerful statement indeed. It immediately follows that the future of humankind is not only unknown, or too difficult to predict, but unknowable, because self-awareness and attempts at prediction influence events and change the course of history. This line of reasoning has more immediate application in the financial markets. The widely accepted "efficient market theory" postulates that market participants absorb all available information in an objective and efficient manner, and new information is random and unpredictable relative to previous expectations. If any statistically significant pattern appears in the market data, it should be exploited by many players and will soon disappear. This seems to be similar to the conclusions of the "reflexivity theory". At the first glance the "reflexivity" process can improve market "efficiency" in line with the arguments of the "market fundamentalists" arguments that market processes automatically self-correct any mispricing. Yet this is not what typically happens according to Soros (and his experience and investment track record suggests that his arguments should be taken very seriously). Instead of self-correcting towards the equilibrium, which characterizes many physical phenomena (such as, for example, most types of wave motion), markets form self-reinforcing tendency which moves further away from the equilibrium. This tendency, eventually turning out wrong ("fertile fallacy", and "radical fallibility" in Soros's terms) is supported by several positive-feedback mechanisms.
G. Soros believes that development of the "reflexivity" and "fallibility" concepts should have as profound effect on the thinking of society and historical process, as the Enlightenment and ideas born with French and American revolutions. "It is high time to subject reason, as construed by Enlightenment, to the same kind of critical examination that the Enlightenment inflicted on the dominant external authorities, both divine and temporal. We have now lived in the age of reason for the past two hundred years - long enough to discover that reason has its limitations. We are ready to enter the age Fallibility. The results may be equally exhilarating and, having learned from past experience, we may be able to avoid some of the excesses characteristic of the dawning of a new age."
The remainder of the book deals mainly with the application of these ideas to the current moment in history and the author's vision for the global financial and political structure. This is not an easy task, and the author soon begins to fail his own recipe and the paradigm underlying this vision. To his credit, he never fails to recognize his own fallibility. He speaks at length, and very frankly, about his own investment mistakes and failed predictions. This provides a refreshing contrast with many others who prefer to ignore their failures, or, when they are too evident, spend many pages trying to justify or attribute them to some extraneous factors.
He begins to miss his beat when speaking about the global financial and political architecture. After presenting sharp, well-argued criticism of the present state of the world, his recipes for improvement look disappointingly weak. Essentially it's all about "kinder, gentler" IMF, WB, NATO and other such institutions. His definition of the "Open Society"(that is, the one based on ideas similar to "reflexivity" and "fallibility") eventually looks like nothing more than touched-up version of any liberal democracy today. It is contrasted with "closed societies", based on authoritarian or nationalistic ideas. Well, throughout the human history the strongest military and economic powers always viewed themselves if not perfect, as the only models truly capable of improvement and progress. Every colonial conquest, no matter how destructive and brutal, was based on the ideological support of "bringing civilization to the barbarians" in one or another form. The "Open Society Alliance" proposed by Soros, doesn't look too different from yet another reincarnation of such ideological foundation.
In the model of financial bubbles, which the author described as an application of the "reflexivity theory", the unsustainable booms happen not because skeptical views during the bubble build-up are suppressed by some official censorship, but because even in the presence of critical dissent, the prevailing erroneous consensus become self-reinforcing and self-perpetuating. Similarly, the is no reason to believe that, just because of the democratic mechanisms and press freedom, the supposed "Open Society Alliance" will be free from the standard "arrogance of power". Such arrogance and delusion, which often leads to very costly political mistakes, wars or major crises, can happen not just because any other views are suppressed by censorship as in many authoritarian societies. Rather, because of artificial self-perpetuating consensus generated by and propagated through the media and political elite, while maintaining illusion of a genuine vigorous debate by endlessly pouring attention to peripheral issues.
The "fallibility" concept truly deserves serious intellectual attention. Too bad that most likely the "center" of the global system - the richest and most powerful nations - will invariable find it harder to apply these criteria to themselves, as opposed to the rest of the world.
on January 29, 2002
Here are two reasons to read this book --
1) Learn why George Soros, one of the world's wealthiest men, a billionaire financial speculator, says that dogmatic belief in the so-called "free market" is every bit as dangerous as a comparably dogmatic belief in Marxism-Leninism (a topic Soros knows something about, given that he grew up under a Marxist-Leninist government in Hungary).
2) Learn about the philosopher Karl Popper, a beacon of rationality in a tribalistic world. Soros is an intellectual follower of Popper, author of the renowned THE OPEN SOCIETY AND ITS ENEMIES (see my review), and Soros attempts to apply Popper's thinking to the current crisis of global capitalism. Whether he draws the correct conclusion in every case is less the point than the serious thinking involved. Popper is widely misunderstood to be an advocate of the free market. What he is actually in favor of is freedom of thought -- skepticism of any received dogma, including the dogma of the Free Market, to which many now say There Is No Alternative.
Rubbish, says Popper, and so says Soros. A legal, regulatory framework is required. Without the appropriate regulation, the result is the "gangster capitalism" of Russia, and of Enron. Along with Nobel Prize-winning economists Amartya Sen and Joseph Stiglitz among others, Soros is absolutely right in his basic point, and is making a contribution to the construction of an appropriate institutional architecture for an increasingly global society.
I think George Soros and Robert Kaplan, as well as others that are starting to realize that the opposite of virtue is not vice but rather virtue carried to an extreme (Jim Fox said it first, at least in this era), are on to something.
Although economists of great traditional standing (Robert Samuelson comes to mind) have been very quick to denigrate, even trash, the ideas of George Soros, my personal reaction, and my own reading of 225 or so books that I have reviewed for Amazon, suggests that he is right on target. Unfettered capitalism and corporate consumerism is killing us, and is part of the problem between Western secularism and Islamic fundamentalism--we don't have a model for sustainable faith-based prosperity they can buy into (I am mindful of Bernard Lewis's What Went Wrong thesis).
Most recently, in The Washington Post of 24 February 2002, George Soros is quoted as saying, "We can't be successful in fighting terrorism unless we fight that other axis of evil--poverty, disease and ignorance." Right on. Both The Future of Life and The Future of Ideas (see my reviews of those titles), and many other books now coming together in a critical mass, support basic propositions about the failure of politics, the erosion of moral contexts, and the dangers of capitalism upon public health, the environment, and the social fabric.
I would normally have rated this book with 4 stars for its lack of reference to others, but in light of the importance of the argument that George Soros makes, and the value of his own unique experiences bridging the worlds of poverty and wealth, American and Eastern European challenges and biases, I have to give this a 5--and wait to see our academic economists do better.
on September 3, 2015
Above you will see people call names of anyone who does not agree with this book. It seems calling names like children on a playground is the way to be if you don't agree with someone. Lets be open minded as long as you agree with me attitude.
This is a very rich man who has trampled people in his effort to become more rich. In his world, we would all be poor except for him and those in power who are "certainly more smart than we are, so we must be babysat" We can see already what happens when certain people are in power and there is no way to put on the brakes. The middle class gets poorer and the upper class gets richer. Soros is a self important man who would like to be more in control.
on January 27, 2002
George Soros has written an interesting and thought-provoking book with a goal that could hardly be any more ambitious. Open Society is a vision for a new economic and political architecture for the world.
The book starts out by presenting a 'Conceptual Framework' that serves to outline the basic principles, such as fallibility and reflexivity, upon which Mr. Soros analyses the present and builds a vision for the future. In many ways, this is the best written, most original and most coherent and convincing part of the book. This is achieved by a fair amount of repetition but also good logic and evidence of the author having thought about the ideas for a long time and researched them thoroughly. Mr. Soros is undoubtedly an intelligent and well-read man.
The second part of the book deals with the present moment in history and can actually itself be divided into two parts. It begins by analyzing the global capitalist system, and then discusses the Asian crisis and the events that have taken place in Russia and eastern Europe after the collapse of the Soviet Union. The first two of these are very interesting and give good introduction to the global financial system. The section on Russia is not as engaging and one might suspect that Mr. Soros' personal feelings perhaps interfere a bit with his analysis.
Part two of the book concludes with the author's suggestions for a new global economic and political architecture. There certainly are nuggets of great wisdom and even brilliance here but the writing is hopelessly unconvincing compared to the first part of the book and at times quite frustrating. Mr. Soros draws up inadequate straw men representing his main opponents 'market fundamentalists' and 'geopolitical realists' and then in due course attempts to cut them down. Unlike the first half of the book, which is much more convincing and logically sound, one constantly wants to interrupt the author with lots of "Oh yeah, but what about X ...".
All in all, the book is interesting and definitely a worthwhile read although it is in need of better editing and some serious, critical proofreading. In fairness to Mr. Soros, one of the central themes of the book is fallibility and he does stress that he is not, nor can be, completely right. The book ends with the confession: "I have gone about as far as I can on my own. I have learned a lot from other people's criticism, and I can continue to do so after the book is published." A brave admission, among many in the book, and one should give Mr. Soros credit for putting forth his best and welcoming the reaction.
on December 28, 2005
One of Soros' most compelling arguments comes out of his experiences during the 90's- mostly during the Clinton years- that the Open Society should take an active role in becoming a strong advocate for creating nascent Open societies in areas of political and economic strife. He berates America (as the leader of the free world) for not taking an active role in promoting stable and fair markets in Russia, and not doing enough to prevent the tragedies in the Balkans. He even goes as far as to say that America should step up and become the "policeman of the world".
Then again... isnt that exactly what he's spent the years after this book was authored trying to stop in his attacks on the campaign of George W Bush? Soros is fascinating in the sense that he feels perfectly comfortable documenting his complete ineptitude at coming up with theories about world politics. He even deconstructs his earlier writings, pointing out his flaws, suggesting that the fact that he can be falsified reinforces his self-title as thoretician.
Soros makes the bold claim that if you can get people to agree with you, you can make money off them on the upside, and then make money off them on the downside as long as you don't continue believing your own guff past the sell-by date. He defends this as moral, because it is playing by the rules. He trumpets his years of philanthropy as the justification for a life spent in raiding the economies of the world.
This is a book well-worth reading, and attempting to understand, because he makes/confirms his own point about the evils of market fundamentalism in autobiography. It is an expose on the evils of self-deception and over-reliance on the rules of the game to create morality. Laws and civility, like economics, do not construct good morals and ethics. He leaves himself lost, essentially falling into recourse to a higher power (of a more perfect UN or WTO or IMF, rather than a deity), but calling upon a higher power nonetheless to check the excesses of which has been his daily bread and butter for fifty years.
on December 14, 2000
George Soros is one of New York City's richest Wall Street zillionaires, and got his money by organizing and profiting quite a bit from Soros Fund Management in Manhatten. His Quantum Fund is one of Wall Streets biggest and most profitable (for investors participating in it). He was born in 1930 in Hungary and completed study at the London School Of Economics in 1952. He left Europe for America, and got rich in the money biz, just like his famous fellow Hungarian Jew, Nicholas Deak (shot by his secretary at age 80, but whose famous name still lives on all over the world under the banner of the Deak-Perrera Foreign Exchange organization, the largest money changing company on the planet).
Mr. Soros promotes himself and his business organization by writing books published by vanity press operations. His 1998 book titled THE CRISIS OF GLOBAL CAPITALISM was cranked out in a month by the famous Peter Osnos, publisher extraordinare, and mover and shaker of the Perseus Books Group, and its Public Affairs label. Soros pays a ton of money (which he can certainly afford) to foot the cost of printing, binding, and shipping, gratis, to libraries, bookstores, etc., etc. all over the planet. George Soros knows about and believes in skillful public relations, and he should. His past P.R. efforts have helped importantly to build his fortune.
All this may sound unsavory, but the irony is that George Soros offers, in THE CRISIS OF GLOBAL CAPITALISM, an excellent read which probably wouldn't have seen the light of day had he been a pennyless writer trying to interest publishers in a book attacking big money in the USA and the world, and the abuses of the big money establishment. His book is terrific and everyone who cares about America and the impact of careless and unscrupulous big money should buy it and read it many times over.
Soros pulls no punches. "What I predict," he states directly and without apology, "is the imminent disintegration of the global capitalist system." This is not Karl Marx asking the workers of the world to unite. It's a rich Wall Street guy who likely eats $300 per plate dinners at Manhatten's snootiest restaurants very, very often. Mr. Soros is worth listening to and heeding.
He's written a lot attacking his fellow capitalists in recent years. In February 1997, he wrote an ATLANTIC MONTHLY article, much discussed at the time, titled "The Capitalist Threat."
George Soros states that the capitalist system is deeply flawed. "As long as capitalism remains triumphant, the pursuit of money overrides ALL OTHER SOCIAL CONSIDERATIONS! Economic and political arrangements are out of kilter. The development of a global economy has NOT BEEN MATCHED BY THE DEVELOPMENT OF A GLOBAL SOCIETY!........If and when the global economy falters," (he implies it is certain to do so soon) "political pressures are liable to tear it apart."
Soros dissects the current crisis and economic theory in general, revealing how theoretical assumptions have combined with human behavior to result in dangerous local and world crisis. He shows how unquestioning faith in market forces (touted by politicians in the USA for the past two decades) blinds people to crucial instabilities and how those instabilities have chain reacted to cause the current crisis, a crisis he concludes has the potential to get much, much worse.
This is the most important and worthwhile part of his message. He sugarcoats the end of his book with suggestions not very enthusiastically or hopefully offered. All in all, his book is pessimistic, and must be regarded as such.
Buy and read this wonderful book, especially Part II, Chapter 6 titled "The Global Capitalistic System." If Karl Marx and other Communists over the past century had made THEIR anti-capitalist case as convincingly, maybe the Soviet Union and other similar political entities wouldn't have fallen apart and disappeared forever. There may be nothing that can be done about the present sad situation, but it is worth thinking about, and comforting, oddly, that a man like George Soros has found the skillful words to describe what's really going on.
on January 2, 2001
George Soros is perhaps the most talented money-manager the world has ever known. And yet, in Open Society, he relishes revealing his own fallibility. Unfortunately his flaws as a writer need no revelation -- they are apparent. His style is laboured by an irritating disingenuousness and riddled with silly terms of his own devising. Pity, too. For people will read George Soros. And George Soros has some very interesting things to say in this book. The rub is that they have been said -- much more clearly -- by others before him. If you want to explore the idea that people's ideas color their perception of the world and that their predictions sometimes affect subsequent outcomes (what Soros calls "reflexivity) or any of his other epistemelogical musings, read Karl Popper. Or Hilary Putnam. If you find the idea of the origins of systematically irrational investor behavior interesting, read Andrei Shlieffer or Amos Tversky. Unfortunately, most people aren't going to do the intellectual heavy lifting. In that case, you can do worse than spend a few hundred pages with Mr. Soros.
on May 10, 2001
The real message here is that the our prosperity and our easy way of life is not guaranteed by our being members of a rich and productive society. There are real reasons, embedded in human nature, why our modern economy has teetered on the brink of collapse several times in the last fifteen years. Read this book together with "Maestro : Alan Greenspan's Fed and the American Economic Boom" to understand that it has been repeatedly left up to a small number of people to respond to genuine crises with risky fixes to keep our financial system from collapse. Soros' application of "reflexivity" to market behaviour helps us understand that this will happen again and again. Someday the right people won't be there or the risky fix will not work. Whether Soros' call for international banking authorities and guarantees is feasible is an important question that won't be answered until a lot more people understand that all it will take is time and normal human behaviour to bring it all crashing down.
on January 29, 2015
In this book, George Soros, explains his theory of reflexivity in length and uses the financial markets as a field of example to demonstrate its workings. The first part of the book is dedicated to the theoretic explanation of his theory which is for the most part, very dry and heavy.
The second part is where the fun begins. He starts by analysing the basic framework of the world markets. He explains how the capitalist system can be compared to a globalized empire unmatched by any predecessors. Unlike in the past, this empire does not trample upon the sovereignty of the member nations but yet exercises power and control in other ways such as influence over people’s lives as opposed to geographical expansion. The empire analogy befits the United States and other major economic powers which have allied interests like Germany and Japan. These countries or the centre of power are the givers of capital and the nations who are receiving capital are the peripheries. The periphery nations are often at the mercy of those who are at the centre. He explains the sequence of events that occurred that caused the market in Eurodollars to develop in the 1970s, and boom/busts in South America, South Asia, Japan and Russia.
The content is of very high value to those who want to deepen their understanding of how the financial world functions at the very top. The book is filled with awe inspiring analysis and predictions of the markets and economies. This material is for serious market and history buffs only who apply their minds using the top-down approach.