Glenn Beck's The Blaze has released a video, headlined “OPEN SOCIETY: SOROS EXPLAINS THE ANTI-CAPITALIST, PRO-MARXIST TACTICS HE USES TO FUNDAMENTALLY TRANSFORM COUNTRIES.” The site is using the video, which consists of a series of short clips of philanthropist George Soros speaking, as the latest salvo in Beck's crusade against Soros. Beck has promoted the video on his radio and television shows, and it has since been picked up by Breitbart.tv and Fox Nation. In reality, none of the clips featured in the video comes close to proving the conclusion in the post's headline.
The burden of proof for calling someone like George Soros an “anti-capitalist, pro-Marxist” is stringently high. Soros is a billionaire who amassed his fortune in hedge fund management, i.e. through capitalist means, and has backed nonviolent groups opposed to communist regimes such as Czechoslovakia. The Blaze doesn't even come close to meeting that standard.
In the first clip, taken from a lecture Soros gave in October 2009, Soros says, “I want to explore the conflict between capitalism and open society.” The Blaze tries to hammer this point home with the third clip in the video, taken from the same speech, in which Soros says, “There is a deep seated conflict between capitalism and open society.” But Soros is not calling for the overthrow of capitalism in favor of communism, he's explaining that the influence of money in American political system is too great and that capitalist financial systems are “bubble-prone.” Soros also states that capitalism is “not directly opposed to open society the way Soviet communism was.” From the speech:
Capitalism is not directly opposed to open society the way Soviet communism was. Nevertheless, it poses some serious threats. I have already discussed one of them; financial markets are not equilibrium-bound but bubble-prone. The dismantling of the regulatory mechanism has given rise to a super- bubble whose bursting will negatively influence the American economy for several years to come. This discussion has revealed another threat to open society: the agency problem and the influence of money in politics, which contaminate the political process.
In an open society, the political process is supposed to serve the common interest; in contemporary America, the political process has been captured by special interests. Our elected representatives are beholden to those who finance their election, not to the electorate at large. What is happening to President Obama's healthcare and energy bills provides a vivid illustration. The electorate has been brainwashed to such an extent that a responsible discussion of the public good has become well-nigh impossible. A national health service and a carbon tax are nonstarters. Our choices are confined to solutions that can be gamed by special interests.
Lobbying is at the core of the agency problem. How can it be brought under control?
This is an ethical issue and not a matter of modifying economic incentives. Lobbying is lucrative and it is liable to remain so even if the rules are tightened. In the absence of moral values, regulations can always be circumvented; what is worse, the regulations themselves will be designed to serve special interests, not the common interest. That is the danger facing the United States today when a wounded financial sector is seeking to regain its former pre-eminence.
In The Blaze's second clip, from a 2004 interview, Soros says, “I came to the realization that open society is endangered by our current leadership in this country. And that is when I refocused my attention on the United States.” While The Blaze would like us to think this statement insidious, Soros' “attention” to the United States has largely consisted of philanthropic and political giving of the sort common among wealthy benefactors across the political spectrum.
In the fourth clip in the video, also from his October 2009 speech, Soros says, “Karl Marx proposition from everybody according to their ability, and to everybody according to their needs, was a very attractive idea. But the communist rulers put their own interests ahead of the interests of the people.” This has nothing to do with “anti-capitalist, pro-Marxist tactics” Soros supposedly uses to “fundamentally transform countries” ; Soros is giving an example of what he calls “the agency problem,” in which “Agents are supposed to represent the interests of their principals, but in fact, they tend to put their own interests ahead of the interests of those whom they are supposed to represent.” From the speech:
Once I became aware of the agency problem, I discovered it everywhere.
Communism failed because of the agency problem. Karl Marx's proposition -- from everybody according to their ability and to everybody according to their needs -- was a very attractive idea, but the communist rulers put their own interests ahead of the interests of the people.
The agency problem is also the bane of representative democracy: the elected representatives use their powers for their own interests to the detriment of the common interest.
In the fifth clip, from a question and answer session following the 2009 speech, an interviewer asks Soros, “If what your vision you set out was enacted, would we have as one final result a more equal distribution of wealth?” The Blaze video then abruptly cuts to Soros saying the following:
The success of market fundamentalism in America, which has really kind of skewed a public opinion against their own interests, as I quoted the estate tax, a very good example. Certainly if you eliminated that, then I think the public interest would be better served. And presumably, it would lead to a more equal distribution of wealth.
The Blaze is referencing Soros' comments during the speech about a “well financed propaganda machine which distorts the public's understanding of its own self-interests,” to which he attributes the Bush administration's cutting of the estate tax:
By far the most powerful force working in favor of market fundamentalism is that it serves the self-interests of the owners and managers of capital. The distribution of wealth is taken as given and the pursuit of self-interest is found to serve the common interest. What more could those who are in control of capital ask for? They constitute a wealthy and powerful group, well-positioned to promote market fundamentalism not only by cognitive arguments but also by the active manipulation of public opinion. Market fundamentalism endows the market mechanism, which is amoral by nature, with a moral character and turns the pursuit of self-interest into a civic virtue similar to the pursuit of truth. It has prevailed by the force of manipulation, not by the force of reason. It is supported by a powerful and well financed propaganda machine which distorts the public's understanding of its own self-interests. For example, how else could the campaign to repeal the estate tax, which applies only to an elite 1 percent of the population, have been so successful?
There are, of course, competing forces in that arena using similar methods of manipulation but they tend to be less well financed because they cannot draw on the self interest of the wealthiest and most powerful segment of the population. That is how market fundamentalism has emerged triumphant in the last 25 years and even the financial crisis was not sufficient to impair its influence. This was demonstrated by President Obama's decision to avoid recapitalizing the banks in a way that would have given the government majority control.
Again, nothing here about “anti-capitalist, pro-Marxist tactics” that Soros “uses to fundamentally transform countries.”
The Blaze's next clip makes much of Soros' discussion about his anticipating Britain's withdrawal from the European Exchange Rate Mechanism:
Take the British crisis, when Britain left the exchange rate mechanism. I guessed correctly that it would. And by doing it, I actually precipitated that move. It probably happened a little faster because when Britain, the British Treasury Chancellor of the Exchequer raised the interest rate by two percent, I said this is a counsel of despair, they are on their last legs, therefore one can sell the currency, it cannot be protected. And in fact, at that time, by selling additional - or trying to sell additional amounts, I precipitated the event which occurred I think the next day or within two days. So, in a way, it works as the Marxist way. Marxist theory is that you can accelerate the course of history by anticipating it correctly. And in that particular instance, he is right, it really works that way.
Soros is explaining to a student at Hong Kong University at a January 2010 event that an investor cannot force a market outcome, they can only accelerate an outcome if they predict it correctly, and pointing out that “in that particular instance,” events unfolded as Marxist theory would predict. As we noted yesterday, Soros is hardly the first person to ever cite a communist to make a point -- for instance, Beck ally Ralph Reed has cited Mao Tse-Tung.
In the Blaze's last clip, also from the October 2009 speech, Soros says, “The general equilibrium theory takes the initial allocation of resources as given. This rules out any consideration of social justice. Most importantly, the theory assumes that people know what their self interest is and how best to pursue it. In reality, there is a significant gap in what people think and what the facts are.” If Beck's larger narrative is any indication, this is meant to vilify Soros for using the phrase “social justice.” In full context, Soros was criticizing “market fundamentalism,” which he defines as “the undue extension of market values to other spheres of social life, notably politics” :
I define market fundamentalism as the undue extension of market values to other spheres of social life, notably politics. Economic theory claims that in conditions of general equilibrium, the invisible hand assures the optimum allocation of resources. This means that people pursuing their self-interest are indirectly also serving the public interest. It gives self-interest and the profit motive a moral imprimatur which allows them to replace virtues like honesty, integrity, and concern for others.
The argument is invalid on several counts. First, financial markets do not tend toward equilibrium. General equilibrium theory reached its conclusions by taking the conditions of supply and demand as independently given. The invisible hand of the market then brings supply and demand into equilibrium. This approach ignores the reflexive feedback loops between market prices and the underlying conditions of supply and demand. It also ignores the visible hand of the political process which lies hidden behind the market mechanism.
Second, general equilibrium theory takes the initial allocation of resources as given. This rules out any consideration of social justice. Most importantly, the theory assumes that people know what their self-interest is and how best to pursue it. In reality, there is a significant gap between what people think and what the facts are. Nevertheless, market fundamentalism has emerged triumphant. How could that happen?
Again, this has nothing to do with “anti-capitalist, pro-Marxist tactics” that “fundamentally transform countries.” Soros is explaining that, because people do not always actually know what is in their self-interest, he disagrees with the economic theory that “the invisible hand assures the optimum allocation of resources,” and thus that “people pursuing their self-interest are indirectly also serving the public interest.” Beck inadvertently confirms this every time he shills for gold -- he's explaining to his audience, who presumably were previously unaware, that their self-interest would be best served by buying precious metals.
The Blaze also omits a following statement in which Soros advocates for minimal government intervention in markets. From the lecture, emphasis added: “I want to make myself quite clear: I condemn market fundamentalism as a false and dangerous doctrine but I am in favor of keeping government intervention and regulations to a minimum for other better reasons.”