Perhaps no periodical article since Francis Fukuyama‘s career-making piece on the “End of History” has aroused such widespread attention as George Soros‘ “The Capitalist Threat” in the February Atlantic Monthly. Self-made billionaire Soros sees a threat to his old master Karl Popper‘s postwar ideal of the open society in the growth of laissez-faire capitalism, both in the United States and in places like Russia where an anarchistic and gangster-ridden capitalisme sauvage has filled the gap left by the Soviet command economy.
I must express my admiration for Soros’ understanding of what he calls the “reflexivity” of human institutions. Unlike social scientists who try to pretend that their models are independent of the object they are studying, this successful businessman has derived from his experience of the market system the fundamental anthropological truth that all models of the human condition are paradoxical because they both must and cannot include themselves within the system they model. Soros shares GA‘s insistence on the generative nature of the human and its creations.What then of the “threat”? Soros cannot be accused of hostility to the market principle. What he criticizes is an ideology that makes the market the sole arbiter of social policy; such an ideology, as he sees it, defeats the open-society ideal by condemning the economically weak and neglecting the infrastructure. As this argument is often put, our interest in the commons, including the safety net for the needy, follows the Prisoner’s Dilemma model: we are all better off if we all contribute to these causes, but no one has a marginal interest in contributing if the others don’t. Laissez-faire, on both the individual and the state level, makes us “unwilling to make any sacrifices for the common good (53).”
Soros’ point is to set the ideal of an open society in opposition, not merely to the totalitarian models that Popper had traced back to Plato‘s Republic, but to dogmatic belief in the infallibility of the market. No doubt such belief is unfounded; but it should be made clear that the dogmatism of the market is not merely more benign but on a different plane than the dogmatism that rejects the market. Where the latter poses the infallibility of a doctrine, which is really that of its omnipotent interpreters, market-worship emphasizes precisely the fallibility of human self-knowledge that Popper makes the foundation of the open society: since no one can know a priori the best allocation of resources, we must rely on the market to provide it. Dogmatic adherence to this reliance is dogmatic openness; by the same token, what corrects it is not more openness but partial closure. Soros himself hints at this toward the end of his essay by situating the open society midway between totalitarian despotism and anarchy.
Although we are ignorant about many things that we must leave to the market–which is nothing more than a mechanism for calculating the resultant of human value-judgments–those corrections that Soros would have us bring to the process are based not on economic ignorance but on moral belief. When we take a stand about income distribution or welfare, we are not tempering doctrinaire arrogance with humility, but tempering doctrinaire submission to the dictates of the market with an affirmation of moral values.
No doubt the ultimate effect of this assertion is pragmatic. The good society is the only livable society; the moral model of human reciprocity is not derived from some vaporous ideal, but repeats the originary reciprocity of which we are reminded every time we use language. But like religious belief, moral principles are pragmatic only because they go beyond the pragmatic in any narrow sense; it is because we are willing to subordinate material value to moral value that we can create material value in confidence. This solution to the Prisoner’s Dilemma is the foundation of the human itself; and Soros is again close to GA‘s understanding of human paradoxicality in his insistence that the faith that sustains these values is a sign not of our “perfect knowledge” but of the contrary. The ultimate foundation of the open society is the “arbitrary” moral closure that creates the human community. It is only with respect to the survival of this closure in the virtual human community of today that openness has value.
I have sympathy for Soros’ emphasis on the economy rather than the government, the private over the public sector, which stands in contrast to standard liberal political theory. Nonetheless, as Soros never seems to realize, his argument is about politics, not economics. Attuned to the paradoxical reflexivity of human institutions, he fails to note the paradoxical relationship between closure and openness in the laissez-faire ideology he attacks, and therefore gives short shrift to the political institutions within which this relationship is worked out. As a critic pointed out on a recent talk show, reliance on the market follows the pendulum model of most ideological trends–or of the stock market. Market thinking, having retreated under the assault of governmental intervention from the 1930s through the 70s, has only recently begun to recapture some of its old terrain, and the momentum is now in the laissez-faire direction. As a warning lest the pendulum swing too far, Soros’ message makes its point; but it does not help us to rethink the articulation between the political and economic spheres in modern market society.
The political sector acts as a self-conscious check on the “blind” forces of the market. It dictates outcomes that are not the resultant of material desires but of a priori moral judgments. Because these are factors of closure rather than openness, the ideal of the open society is best served by assuring that these judgments too are subject to the open-ended interaction of a market-like process. Representative democracy creates a political market parallel with the economic market, in which outcomes must be negotiated even where “absolute” moral values are at stake. Even where such values seem irreconcilable, as for example in the abortion debate, workable compromises are reached and evolve over time.
An element of self-conscious moral closure is indispensable to maintaining the optimum of social openness. Open-ended economic circulation thrives on the conversion of resentment into economic energy, but sometimes–in Prisoner’s Dilemma cases–this conversion cannot be made directly, but must be mediated by the political process. What must not be forgotten is that expanding and broadening the possibilities of human reciprocity through economic circulation, not instituting an a priori model of “social justice,” is the end of democratic political activity. Democracy’s superiority is that it minimizes political intervention in the market process by the optimizing effect of negotiation. We all have the same fundamental moral intuitions, although our interests and perceptions are different. The democratic process tests the commonality of these intuitions better than any other by reproducing originary chaos and resolution in a representational framework.
The political sector would like to see itself as imposing moral criteria on the amorality of the marketplace, but what it really does is to negotiate our various resentments toward the outcome of market processes. The potential corruption of this sector by economic forces that the Democratic fund-raising scandals are recalling to our attention only gives us one more reason not to exalt the moral stance of the political over the economic. Like all social systems, liberal democracy spawns utopian models of how it should work, but the important thing is that is does work more or less adequately. Not only does corruption generate resentments of its own, as a look at the headlines makes clear, but it cannot prevent the political expression of other, more fundamental resentments within the body politic.
The current vogue for laissez-faire solutions is typical of the pendular fluctuations of the ideological marketplace. But the more fundamental point is that democratic institutions are optimal in the long run for controlling the amplitude of this pendulum. Soros’ exhortation is not a critique of liberal democracy but a political gesture within it.
These remarks apply less directly to the problems of Russian and (briefly) East Asian capitalism raised in the article. But whether or not Soros’ criticism of the West for its failure to mount a Marshall Plan for Russia is valid, the Russian robber capitalists are not comparable to the robber barons of the Gilded Age; they operate in a society whose political institutions are not only too weak to control economic activities but too weak to maintain social order. Kidnapping, murder, and extortion are not features of the classical market system even in its worst excesses. Economic gangsterism may be inevitable after years of centralized planning, but laissez-faire ideology is no more relevant to it than Marxism is to Peruvian guerilla movements.
In such circumstances, a strong central authority may do more than a weak democracy to impose the rule of law prerequisite to the market system; post-Pinochet Chile is now the envy of Latin America. But can free markets remain compatible in the long term with political repression? It is often suggested that, in the more communally confident East Asian environment, the Prisoner’s Dilemma can be solved with less need for the negotiation of resentments. Yet this truism is thrown in doubt by the vulnerability of Asian democracies like South Korea and even Japan to politically influential mass demonstrations, a phenomenon unknown in the United States since the end of the Vietnam War. At the other extreme, China’s political elite can most likely only maintain control over an expanding market sector by drifting toward a variety of National Socialism fed by resentment against the West. Not the excesses of laissez-faire but an unstable combination of third-world resentment and market-driven prosperity is potentially the most dangerous trend in the world today.
The recent superior performance of the market-oriented US to the European welfare-state, as demonstrated by a simple comparison of growth and unemployment rates, suggests that, in the debate over the open society, the burden of proof still lies with those who would impose restrictions on the marketplace. But I agree wholeheartedly with Soros’ final point that, after 200 years of Enlightenment arrogance, “[t]he time is ripe for developing a conceptual framework based on our fallibility (58).” Soros has affirmed the propitiousness of generative anthropology.