The missionary in Mr Money: One word from George Soros and currencies quiver. Now the international speculator is pumping his millions into eastern Europe, reports John Torode

Click to follow
The Independent Online
GEORGE SOROS, probably the most successful currency speculator in history, is at it again. In the course of a whirlwind tour that took him to Britain and then on to eastern Europe, he has systematically talked down the German mark.

Mr Soros is a very large player and his reputation is high, so his intervention has an effect. After an article in the Times two weeks ago, in which he said he expected the mark to fall against all major currencies, it did so. There has been further downward movement this week following an attack he delivered in Budapest on the 'futility' of the Bundesbank's effort to maintain high interest rates. It looks set to become his most spectacular operation since last September, when he successfully gambled dollars 10bn (pounds 6.9bn) that sterling would have to drop out of the exchange rate mechanism.

That coup made almost dollars 2bn for the Manhattan- based Quantum Fund which he manages. Almost a third of that accrued to Mr Soros personally. This month the American magazine Business World revealed that he made at least dollars 650m personal profit on his holdings in Quantum and from management fees last year. It is anybody's guess how much Mr Soros is going to cost the Germans.

Currency speculation is the distilled essence of capitalism, and the rewards to the player can be immediate and enormous. While politicians and central bankers gamble with other people's chips - provided ultimately by the taxpayer - individual speculators such as Mr Soros gamble with their own money. Even so, they - and he - are widely regarded as immoral creatures.

'I'm not here to change any stereotypes or make any apologies' Mr Soros told me when I asked about his recent activities. 'Basically, I run a very successful speculative investment fund and about one-third of our profit comes from taking positions in currency.'

In fact Mr Soros is - as well as being a commercial speculator on the grand scale - the biggest private patron of reforms to create an open society in the post-Communist world. 'My money-making endeavours have been quite minimal (in recent years),' he told me. 'They have taken up no more than 10 per cent of my time.' It is, he says, only because of his unprecedented killing on the currency markets that he now finds himself forced to spend more time on his fund, looking for new areas in which to invest. He has just announced plans to put pounds 284m into property in this country as part of a pounds 500m partnership with John Ritblat's British Land.

Reinforcing his own view of his priorities, Mr Soros is more interested in discussing the disposal of his money rather than the harvesting of it. Much of his wealth and attention goes into a growing network of autonomous, open society foundations - 18 so far, and more to come - that he has established across eastern Europe and the former Soviet Union since 1979. Their task is to help to create 'political and cultural pluralism' and market economies.

Mr Soros positively bounces when he describes the beginnings of his east European foundations when Communism was apparently still firmly in control. 'It was heroic, exciting, rewarding - and it was great fun.' he says. 'We were in the business of undermining the system. We would support anything. We gave out large numbers of very small grants because any autonomous operations would undermine the dogma of totalitarianism. There was no real evaluation - it worked very well.'

And now? Mr Soros takes 'a pretty bleak view of the future of the erstwhile Soviet empire' and there seems to be a growing urgency about his activities. He has never believed that sustainable open societies would emerge automatically from the wreckage of Communism. Instead, they have to be nurtured. He especially fears the rise of 'nationalist dictatorships', often including opportunistic former Communists. These regimes he has taken to calling 'Nadi', in conscious reference to the Nazis. Already, he points out, in Hungary and Poland many of those who rallied to his foundations and then went through a period serving or advising post-Communist regimes, now find themselves in opposition, often vilified by the current rulers.

Mr Soros, a stocky 62-year-old of Hungarian Jewish origins, should know about Nadis - of the left and right. As a child, he survived the Nazi era hiding in Budapest and was a post-war refugee from Communism. He worked as a farm labourer, a house painter and a railway porter in this country. He entered the London School of Economics in 1949. There he fell under the influence of then unfashionable thinkers such as the free market economist Friedrich von Hayek and above all the philosopher Karl Popper, author of The Open Society and Its Enemies. Mr Soros moved to the United States in 1956.

He is then no glitzy Gordon Gekko, anti-hero of that quintessentially Eighties movie, Wall Street. He looks a decade younger than his years, perhaps as a result of his compulsive tennis playing and lack of interest in the flashy lifestyle that New York offers to the seriously rich. He neither drinks nor smokes, and his taste in food is modest.

He comes across like an earnest, rather untidy, Middle European professor. He has even developed his own philosophy - reflexivity - about which he has written at book length. He argues: 'Perceptions influence reality and thinking is part of reality. It is a circular relationship.' When I asked about the importance of his philosophical system to his activities, he replied: 'It is the core of my interests', adding: 'The financial markets are merely a laboratory; a kind of validation for my theories.'

If all this sounds a little unconvincing, two facts should be considered. The first is that - whether or not reflexivity is the magic ingredient - Mr Soros has done remarkably well in the markets, although he has made some spectacular losses. Second, his dedication to building open societies in eastern Europe came admirably early and has been sustained for more than a decade.

Now he is working on his most expensive single project. For the first time he is looking beyond the humanities and social sciences. He has in effect recognised that Russia has inherited from the Soviet Union an intellectual advantage in science and that this could be a considerable commercial asset. But this asset could easily be lost.

Mr Soros is convinced that the situation in Russia is 'deteriorating extremely fast'. Already scientific research - 'a great treasure for humanity and a major asset for Russia' - is on the verge of collapse. Unless something drastic is done, institutes will run down, and scientists move abroad. So Mr Soros plans to spend dollars 100m in emergency aid over two years to 'preserve the nucleus of the natural sciences in Russia'.

And if the worst happens and the Nadis take over? 'Empirical research and the scientific method are important elements in an open society and equally a source of resistance to dogmatic thinking if an open society implodes into closed or nationalistic dictatorship.'

In other words, if things do go disastrously wrong - if (to quote from a speech Soros gave nine months ago) 'what used to be the Soviet Union becomes a black hole which may eventually swallow up the world' - he will at least have provided space for a new generation of Sakharovs, Medvedevs and Orlovs, the sort of dissident scientists who rattled the intellectual foundations of the Soviet empire.

(Photograph omitted)

Comments