The Endangered Open Society Propels an Urgent Plea For World Financial Reform
Listener 16 January, 1999.

Keywords: Globalisation & Trade; History of Ideas, Methodology & Philosophy;

One of the more bizarre events of the late 1980s was the right wing think tank, the Mont Pelerin Society, holding a conference in Christchurch in honour of philosopher Karl Popper. The approach – one would hardly call it a philosophy – of the majority of attenders was an anathema to Popper. Especially Roger Douglas, whose paper reported his infamous blitzkrieg policy implementation principles, in which democracy is over-ridden, in the total certainty that his policies were correct. Popper would have been interested in the extent that the policies worked – they have not – but Douglas’s unwavering certainty in the truth of his vision would be totally unacceptable. For Popper knowledge is fallible. One constantly reviewed one’s hypotheses to judge their truth. Scepticism is at the heart of his approach, not ideological belief. Douglas’s paper was the equivalent of devil worship in the Popperian church.

Fortunately Popper has genuine followers. Alan Musgrave, professor of philosophy at the University of Otago, was Popper’s research assistant for many years. I strongly recommend his post-popperian Common Sense, Science and Scepticism as the best introduction to the theory of knowledge (epistemology) I have read. Popper’s best known supporter is financier George Soros whose has just published The Crisis of Global Capitalism. He was writing the book at leisure, but the financial turbulence of the last eighteen months converted it into an urgent plea for world financial reform. This thriving speculator argues that financial speculation needs to be controlled. He seems to be saying “stop me from being so successful.”

Despite being an important philosophical issue, I skip past the book’s initial focus on the puzzle of the problem of social knowledge. Soros goes on to argue his financial decisions are influenced by Popper’s philosophy. He reports his mistakes, which makes a welcome difference from our politicians and businesspeople. (It is easier to make such admissions, when one’s successes outweigh them. Soros’s Quantum Fund took on the British pound in 1992, and won. Recent successes include against the Hong Kong dollar and the Malaysian ringgit. The book has a rivetting account of the Russian crisis of August 1998, based on Soros’s diary.) He also uses a popperian approach as a part of the investment strategy. The greater the divergence between his hypothesis and the conventional wisdom, the greater the risk but also the greater the potential profit.

Soros especially dislikes “market fundamentalists”. We would call them “rogernomes” or “economic rationalists” – or true believers. Leaving aside his epistemological concerns, he worries that their focus on monetary values and transactional markets do not provide an adequate basis for social cohesion. Ultimately they are hollow men. Moreover the fundamentalists are opposed to interference in their cowboy ways (except when they foul up, and anxiously demand a government bail out). Soros believes that there is a need for regulation of the world financial system, to prevent global financial capitalism destroying itself. While the opposition to such reforms is usually attributed to nation states unwilling to reduce their sovereignty, the reality is that the financiers use states as a front to resist interference. The logic of the Soros position is that we will have to have a thumping world crisis to get the required reforms. The financiers appear to be doing their best to induce one.

Soros, a refugee from Hungary and thence the closed British establishment, celebrates the open society which accepts human fallibility which it seeks to improve. (The Soros Foundation contributes almost as much as the European Union for the transformation of Russia to an open society.) It is a long way from that proposed by the market fundamentalists with their unique insight to the truth, which they impose on the rest of us, in a manner not too different from the authoritarian regimes which Popper opposed when in Christchurch, as he wrote The Open Society and its Enemies.