George Soros

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George Soros (pronounced [ʃoroʃ]) (born August 12, 1930, in Budapest, Hungary, as György Schwartz) is an American financial speculator, stock investor, philanthropist and liberal political activist.

Currently, he is the chairman of Soros Fund Management and the Open Society Institute and is also a former member of the Board of Directors of the Council on Foreign Relations. His support for the Solidarity labor movement in Poland, as well as the Czechoslovakian human rights organization Charter 77, contributed to ending the Soviet Union's rule in those nations. His funding and organization of Georgia's Rose Revolution was considered by Russian and Western observers to have been crucial to its success, although Soros said his role has been "greatly exaggerated." In the United States, he is known for having donated large sums of money to efforts to defeat President George W. Bush's bid for reelection.

Soros is famously known for "breaking the Bank of England" on Black Wednesday in 1992. With an estimated current net worth of around $8.5 billion, he is ranked by Forbes as the 27th-richest person in America.

Former Federal Reserve Chairman Paul Volcker wrote in 2003 in the foreword of Soros' book The Alchemy of Finance:

"George Soros has made his mark as an enormously successful speculator, wise enough to largely withdraw when still way ahead of the game. The bulk of his enormous winnings is now devoted to encouraging transitional and emerging nations to become 'open societies,' open not only in the sense of freedom of commerce but - more important - tolerant of new ideas and different modes of thinking and behavior."

Contents

[edit] Biography

[edit] Family

George Soros is the son of the Esperanto writer Teodoro Schwartz. According to Kaufmann's biography Soros (2002), Teodoro (also known as Tivadar) was a Jewish prisoner of war during and after World War I and eventually escaped from Russia to rejoin his family in Budapest.

The family changed its name in 1936 (see Kaufmann, p. 24) from Schwartz to Soros, in response to the Fascist threat to Jews. Tivadar liked the new name because it is a palindrome and because it has a meaning. Though the specific meaning is unstated by Kaufmann, in Hungarian "soros" means "next in line, or designated successor", and in Esperanto it is the future tense of "to soar". Tivadar wrote of his ordeal to survive in Fascist Hungary, and help many people escape it, in his book Maskerado.

George Soros has been married to Annaliese Witschak and to Susan Weber Soros. He is now divorced. He has five children: Robert, Andrea, Jonathan (with his first wife, Annaliese), Alexander and Gregory (with his second wife, Susan). His older brother Paul Soros is an engineer, and is also a well-known philanthropist, investor, and New York socialite.

[edit] Native Hungary, and move to England

Soros was thirteen years old when Nazi Germany took military control over its wavering ally Hungary (March 19, 1944), and started exterminating Hungarian Jews [1] in the Holocaust. Tivadar gave his children false identities and paid Hungarian Christians to present the children as their own. George posed as the adopted godson of a man named Baumbach, who was an official in the fascist government. In this role, he accompanied Baumbach, who delivered deportation notices to Jews and confiscated their property. Soros's critics contend that this event is an indicator of the quality of his morality. [2]

In the following year, Soros survived the battle of Budapest, as Soviet and Nazi forces fought house-to-house through the city. Soros first traded currencies during the Hungarian hyperinflation of 1945-1946.

In 1946, Soros escaped the Soviet occupation by participating in an Esperanto youth congress in the West. Soros was taught to speak the language from birth and thus is one of the rare native Esperanto speakers.

Soros emigrated to England in 1947 and graduated from the London School of Economics in 1952. As a student of the philosopher Karl Popper, Soros funded himself by taking jobs as a railway porter and a waiter at Quaglino's restaurant. He eventually secured an entry-level position with an investment bank in London.

[edit] Move to the United States

In 1956 he moved to the United States, where he worked as an arbitrage trader with F. M. Mayer from 1956 to 1959 and as an analyst with Wertheim and Company from 1959 to 1963. Throughout this time, but mostly in the 1950s, Soros developed a philosophy of "reflexivity" based on the ideas of Popper. Reflexivity, as used by Soros, is the belief that self-awareness is part of the environment: actions tend to cause disruptions in economic equilibriums, which may run counter to the progression of free-market systems. Soros realized, however, that he would not make any money from the concept of reflexivity until he went into investing on his own. He began to investigate how to deal in investments. From 1963 to 1973 he worked at Arnhold and S. Bleichroeder, where he attained the position of vice-president. Soros finally concluded that he was a better investor than he was a philosopher or an executive. In 1967 he persuaded the company to set up an offshore investment fund, First Eagle, for him to run; in 1969 the company founded a second fund for Soros, the Double Eagle hedge fund. When investment regulations restricted his ability to run the funds as he wished, he quit his position in 1973 and established a private investment company that eventually evolved into the Quantum Fund. He has stated that his intent was to earn enough money on Wall Street to support himself as an author and philosopher. After all those years, his net worth reached an estimated $11 billion.

[edit] Business

Soros is the founder of Soros Fund Management. In 1970 he co-founded the Quantum Fund with Jim Rogers. It returned 3,365% during the next ten years, and created the bulk of the Soros fortune.

[edit] Currency speculation

On Black Wednesday (September 16, 1992), Soros became immediately famous when he sold short more than $10 billion worth of pounds, profiting from the Bank of England's reluctance to either raise its interest rates to levels comparable to those of other European Exchange Rate Mechanism countries or to float its currency. Finally, the Bank of England was forced to withdraw the currency out of the European Exchange Rate Mechanism and to devalue the pound sterling, and Soros earned an estimated US$ 1.1 billion in the process. He was dubbed "the man who broke the Bank of England."

The Times October 26, 1992, Monday quoted Soros as saying: "Our total position by Black Wednesday had to be worth almost $10 billion. We planned to sell more than that. In fact, when Norman Lamont said just before the devaluation that he would borrow nearly $15 billion to defend sterling, we were amused because that was about how much we wanted to sell."

According to a recent book by Steven Drobny (Inside the House of Money) it was Stanley Druckenmiller, who traded under Soros, who actually perceived the weakness in the pound. "Soros' contribution was pushing him to take a gigantic position," in accord with Druckenmiller's own research and instincts.

In 1997, during the Asian financial crisis, then Malaysian Prime Minister Mahathir bin Mohamad accused Soros of using the wealth under his control to punish ASEAN for welcoming Myanmar as a member. Later, he called Soros a moron. [3] Thai nationals have called Soros "an economic war criminal" who "sucks the blood from the people". [4]

[edit] Partners

George Soros's most successful partners at Quantum fund have been Jim Rogers, Victor Niederhoffer, and Stanley Druckenmiller, all of whom are famous traders in their own rights.

[edit] Insider trading conviction

In 1988, he was asked to join a takeover attempt of the French bank Société Générale. He declined to participate in the bid, but did later buy a number of shares in the company. French authorities began an investigation in 1989 and in 2002, a French court ruled that it was insider trading as defined under French securities laws and fined him $2 million which was the amount that he made using the insider information. Soros denied any wrongdoing and said news of the takeover was public knowledge. [5]

His insider trading conviction was upheld by the highest court in France on June 14, 2006. [6]

[edit] Philanthropy

Soros has been active as a liberal philanthropist since the 1970s, when he began providing funds to help black students attend the University of Cape Town in apartheid South Africa, and began funding dissident movements behind the iron curtain. Soros' philanthropic funding in Central and Eastern Europe mostly occurs through the Open Society Institute (OSI) and national Soros Foundations, which sometimes go under other names, e.g. the Stefan Batory Foundation in Poland. As of 2003, PBS estimated that he had given away a total of $4 billion. The OSI says it has spent about $400 million annually in recent years. Notable projects have included aid to scientists and universities throughout Central and Eastern Europe, help to civilians during the siege of Sarajevo, worldwide efforts to repeal drug prohibition laws, and Transparency International. Soros also pledged an endowment of €420 million to the Central European University (CEU). The Nobel Peace Prize winner, Muhammad Yunus and his microfinance bank Grameen Bank received support from the OSI.

In September 2006, Soros departed from his characteristic sponsorship of democracy building programs, pledging $50 million to the Jeffrey Sachs-led Millennium Promise to help eradicate extreme poverty in Africa. Noting the connection between bad governance and poverty, he remarked on the humanitarian value of the project.[7]

He received honorary doctoral degrees from the New School for Social Research (New York), the University of Oxford in 1980, the Budapest University of Economics, and Yale University in 1991. Soros also received the Yale International Center for Finance Award from the Yale School of Management in 2000 as well as the Laurea Honoris Causa, the highest honor of the University of Bologna in 1995.

Internal Revenue Service records show [citation needed] the Open Society Institute gave $20,000 in September 2002 to the Lynne Stewart Defense Committee. Stewart was convicted in 2005 on two counts of providing material aid to terrorists and three counts of lying to federal investigators she was sentenced in October of 2006 for 28 months in prison.

[edit] Philosophy

[edit] Education and beliefs

Soros has a keen interest in philosophy, and his philosophical outlook is largely influenced by Karl Popper, whom he studied under at the London School of Economics. His Open Society Institute is named after Popper's two volume work, The Open Society and Its Enemies, and Soros's ongoing philosophical commitment to the principle of 'fallibilism' (that anything he believes may in fact be wrong, and is therefore to be questioned and improved) stems from Popper's philosophy. Some critics argue that Soros's static political beliefs appear to conflict with the critical rationalism espoused by Popper, though Soros argues that these beliefs were arrived at through such rationalism.

[edit] Reflexivity, financial markets, and economic theory

Soros's writings focus heavily on the concept of reflexivity, where the biases of individuals are seen as entering into market transactions, potentially changing the fundamentals of the economy. Soros argued that such transitions in the fundamentals of the economy are typically marked by disequilibrium rather than equilibrium in the economy, and that the conventional economic theory of the market (the 'efficient market hypothesis') does not apply in these situations. Whether Soros is theoretically right or wrong on this issue, Soros certainly has the market credentials and proven track record to effectively maintain that his theory of reflexivity is practically relevant in the marketplace — at least for him. Soros has popularized the concepts of dynamic disequilibrium, static disequilibrium, and near-equilibrium conditions.

Refexivity is based in three main ideas:

(1) Reflexivity is best observed under special conditions where investor bias grows and spreads throughout the investment arena. Examples of factors that may give rise to this bias include (a) equity leveraging or (b) the trend following habits of speculators.

(2) Reflexivity appears intermittently since it is most likely to be revealed under certain conditions; i.e., the equilibrium process's character is best considered in terms of probabilities.

(3) Investors' observation of and participation in the capital markets may at times influence valuations AND fundamental conditions or outcomes.

[edit] View of potential problems in the capitalist free market system

Despite working as an investor and currency speculator (his fortune in 2004 was estimated at US$ 7 billion), he argues that the current system of financial speculation undermines healthy economic development in many underdeveloped countries. Soros blames many of the world's problems on the failures inherent in what he characterizes as market fundamentalism. His opposition to many aspects of globalization has made him a controversial figure.

Victor Niederhoffer said of Soros: "Most of all, George believed even then in a mixed economy, one with a strong central international government to correct for the excesses of self-interest."

Soros draws a distinction between being a participant in the market and working to change the rules that market participants must follow. He appears to have no problem working to further his own self-interest economically, while at the same time lobbying for a drastic overhaul of the global financial system. Responding to accusations of being personally responsible for many financial collapses, including those in England, Eastern Europe, and Thailand, he stated, "As a market participant, I don't need to be concerned with the consequences of my [financial] actions."

[edit] Political activism

[edit] Opposition to the Soviet Union

According to Neil Clark (writing in the New Statesman): "(t)he conventional view, shared by many on the left, is that socialism collapsed in eastern Europe because of its systemic weaknesses and the political elite's failure to build popular support. That may be partly true, but Soros's role was crucial. From 1979, he distributed $3m a year to dissidents including Poland's Solidarity movement, Charter 77 in Czechoslovakia and Andrei Sakharov in the Soviet Union. In 1984, he founded his first Open Society Institute in Hungary and pumped millions of dollars into opposition movements and independent media."

Since the fall of the Soviet Union, Soros' funding of progressive, anti-imperialist causes has continued to play an important role in the former Soviet sphere. His funding and organization of Georgia's Rose Revolution was considered crucial to its success by Russian and Western observers, although Soros has said that his role has been "greatly exaggerated."

[edit] Soros vs. Bush

In an interview with The Washington Post on November 11, 2003 ([8]), Soros said that removing George W. Bush from office was the "central focus of my life" and "a matter of life and death." He joked that he would sacrifice his entire fortune to defeat Bush, and many continue to state this as Soros's position even after Soros clarified the humorous nature of the statement in a Q&A session at the end of his March 3, 2004 address to California's Commonwealth Club.

Soros gave $3 million to the Center for American Progress, committed $5 million to MoveOn, while he and his friend Peter Lewis each gave America Coming Together $10 million. (All were groups that worked to support Democrats in the 2004 election.) On September 28, 2004 he dedicated more money to the campaign and kicked off his own multi-state tour with a speech: Why We Must Not Re-elect President Bush delivered at the National Press Club in Washington, DC. The online transcript to this speech received many hits after Dick Cheney accidentally referred to FactCheck.org as "factcheck.com" in the Vice Presidential debate, causing the owner of that domain to redirect all traffic to Soros's site.[9]

Soros was not a large donor to US political causes until the U.S. presidential election, 2004, but according to the Center for Responsive Politics, during the 2003-2004 election cycle, Soros donated $23,581,000 to various 527 Groups dedicated to defeating President George Bush. Despite Soros' efforts, Bush was reelected to a second term as president in U.S. presidential election, 2004.

Soros has been criticized for his large donations, as he also pushed for the Bipartisan Campaign Reform Act of 2002 which was intended to ban "soft money" contributions to federal election campaigns. Soros has responded that his donations to unaffiliated organizations do not raise the same corruption issues as donations directly to the candidates or political parties.

Incidentally, Harken Energy, a firm partly owned by Soros, did business with George W. Bush in 1986 by buying his oil company, Spectrum 7.

His most recent book, The Age of Fallibility: Consequences of The War on Terror, was published in June 2006.[10]

[edit] Gun Control

Directly and through his organization Open Society Institute (OSI), he has funded various gun control organizations, such as the Tides Foundation, the HELP Network and SAFE Colorado. He and seven friends founded their own political committee — Campaign for a Progressive Future — and spent $2 million on political activities in 2000, including providing the prime financial backing for the Million Mom March. OSI has supported UN efforts to create international gun control regulations and has singled out the United States for failing to go along with the international gun-prohibitionists.

[edit] Critics

[edit] Criticism of financial activities

Critics claim that Soros has an undue influence on currency markets through Quantum Fund, his privately-owned investment fund. Like many large hedge funds, it is registered in an offshore tax haven, specifically Curaçao, Netherlands Antilles.

In an August 2004 appearance on Chris Wallace's FOX News Sunday, Speaker of the U.S. House of Representatives Dennis Hastert (Republican), stated, "We don't know where George Soros's money comes from. We don't know where it comes from, from the left, and you don't know where it comes in the right. You know, Soros's money, some of that is coming from overseas. It could be drug money. We don't know where it comes from." Soros responded to Hastert by saying, "by smearing me with false charges and mischaracterizations you are attempting to stifle critical debate and intimidate those who believe this administration is leading the country in a ruinous direction. Now that I have called you on your false accusation, you are using additional smear tactics." [11] Soros filed an official complaint with the House Committee on Standards of Official Conduct. Soros claimed that Hastert's comments "strongly suggests a deliberate effort to use smear tactics, intimidation and falsehoods to silence criticism."

In 2006, Hastert criticized Soros again, this time in regards to the controversy over whether or not Hastert should have acted on information regarding Rep. Mark Foley: "The people who want to see this thing blow up are ABC News and a lot of Democratic operatives, people funded by George Soros."[12]

[edit] Criticism of political activities

Author Bernard Goldberg harshly criticized the philosophies of Soros in his book, 100 People Who Are Screwing Up America.

George Soros has many critics amongst American social conservatives and supporters of Israel.

[edit] Defense of political views

At a Jewish forum in New York City, Soros partially attributed a recent resurgence of anti-Semitism to the policies of Israel and the United States, and to successful Jews such as himself:

"There is a resurgence of anti-Semitism in Europe. The policies of the Bush administration and the Sharon administration contribute to that. It's not specifically anti-Semitism, but it does manifest itself in anti-Semitism as well. I'm critical of those policies... If we change that direction, then anti-Semitism also will diminish. I can't see how one could confront it directly... I'm also very concerned about my own role because the new anti-Semitism holds that the Jews rule the world... As an unintended consequence of my actions ... I also contribute to that image." [13]

[edit] Quotations

Wikiquote has a collection of quotations related to:
  • On Terror: "How can we escape from the trap that the terrorists have set us?" he asked. "Only by recognizing that the war on terrorism cannot be won by waging war. We must, of course, protect our security; but we must also correct the grievances on which terrorism feeds.... Crime requires police work, not military action."
  • On the Bush Administration: "An open society is a society which allows its members the greatest possible degree of freedom in pursuing their interests compatible with the interests of others," Soros said. "The Bush administration merely has a narrower definition of self-interest. It does not include the interests of others."
  • On the Bush Administration: "The supremacist ideology of the Bush Administration stands in opposition to the principles of an open society, which recognize that people have different views and that nobody is in possession of the ultimate truth. The supremacist ideology postulates that just because we are stronger than others, we know better and have right on our side. The very first sentence of the September 2002 National Security Strategy[14] (the President's annual laying out to Congress of the country's security objectives) reads, 'The great struggles of the twentieth century between liberty and totalitarianism ended with a decisive victory for the forces of freedom and a single sustainable model for national success: freedom, democracy, and free enterprise.'"
  • On drug legalization: "I'll tell you what I'd do if it were up to me. I would establish a strictly controlled distribution network through which I would make most drugs, excluding the most dangerous ones like crack, legally available. Initially I would keep the prices low enough to destroy the drug trade. Once that objective was attained I would keep raising the prices, very much like the excise duty on cigarettes, but I would make an exception for registered addicts in order to discourage crime. I would use a portion of the income for prevention and treatment. And I would foster social opprobrium of drug use."
  • On Philanthropy: "I'm not doing my philanthropic work, out of any kind of guilt, or any need to create good public relations. I'm doing it because I can afford to do it, and I believe in it."
  • On Stock Market Bubbles: "Stock market bubbles don't grow out of thin air. They have a solid basis in reality, but reality as distorted by a misconception."
  • On Currency Speculation: "...obviously the totally free flow of capital is not advisable, so you need to create some mechanism for introducing stability." [15]
  • On America: "I grew up in Hungary, lived through fascism and the Holocaust, and then had a foretaste of communism. I learned at an early age how important it is what kind of government prevails. I chose America as my home because I value freedom and democracy, civil liberties and an open society. When I had made more money than I needed for myself and my family, I set up a foundation to promote the values and principles of a free and open society."
  • On America's role: "We must recognize that as the dominant power in the world we have a special responsibility. In addition to protecting our national interests, we must take the leadership in protecting the common interests of humanity. I go into some detail as to what that entails. Mankind’s power over nature has increased cumulatively while its ability to govern itself has not kept pace. There is no other country that can take the place of the United States in the foreseeable future. If the United States fails to provide the right kind of leadership our civilization may destroy itself. That is the unpleasant reality that confronts us. "

[edit] Books

[edit] Authored or co-authored

[edit] Biographies

  • Soros: The Life and Times of a Messianic Billionaire by Michael T. Kaufman (Alfred A. Knopf, 2002) ISBN 0-375-40585-2
  • Soros: The Unauthorized Biography, the Life, Times and Trading Secrets of the World's Greatest Investor by Robert Slater (McGraw-Hill, 1997) ISBN 0-7863-1247-5

[edit] Contributed

  • MoveOn's 50 Ways to Love Your Country: How to Find Your Political Voice and Become a Catalyst for Change by MoveOn.org (Inner Ocean Publishing, 2004) ISBN 1-930722-29-X

[edit] See also

[edit] External links and references

[edit] Bio

[edit] About

[edit] Speech

[edit] Writings

[edit] Scholarly perspectives on Soros's thought

  • Bryant, C. G. A. (2002). 'George Soros's theory of reflexivity: a comparison with the theories of Giddens and Beck and a consideration of its practical value', Economy and Society, 31 (1), pp. 112-131.
  • Cross, R. and D. Strachan (1997). 'On George Soros and economic analysis', Kyklos, 50, pp. 561-74.

[edit] Scholarly perspectives on Soros's speculations

  • Pettis, Michael (2001). The Volatility Machine: Emerging Economies and the Threat of Financial Collapse, Oxford University Press. His analysis of the east Asia currency crises absolves Soros of responsibility.

[edit] Interviews

[edit] Links

Official website: http://www.georgesoros.com

cs:George Soros da:George Soros de:George Soros es:George Soros eo:George Soros fr:George Soros it:George Soros he:ג'ורג' סורוס lt:George Soros hu:Soros György nl:George Soros ja:ジョージ・ソロス no:George Soros pl:George Soros pt:George Soros ru:Сорос, Джордж fi:George Soros sv:George Soros tr:George Soros zh:乔治·索罗斯

George Soros

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