Soros spells it out

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Atol from above http://www.flickr.com/photos/robmcm/

No man is an Island. Birmingham is not alone either. It is one of the 8-strong English Core Cities group, part of the United Kingdom and equally directly in the flood plain of any EU tsunami-in-waiting. Any attempts to create inclusive economic growth here in Birmingham will, to a large extent, have to keep a sharp eye on the wider macro-economic hiccups of the world, especially the current goings on in the EU.

George Soros is a billionaire, and has given away $8 Billion around the world to various charitable causes. Despite that he is not a popular man. Unlike another philanthropist, Andrew Carnegie, he has not always found it easy to win friends and influence people. But let us consider what he has to say with an open mind.

On Saturday (2nd June) he delivered some ‘remarks’ at an economic festival in Trento, Italy. [Stangely this paper has subsequenlty been removed from his website!] Now these remarks are not simple, they involve the use of words like ‘reflexivity’, ‘fallibility’ refer to papers on ‘Imperfect Knowledge Economics’, and are all underpinned by a belief in the philosophy of Karl Popper[1].

In his remarks he makes a clear (and to some, obvious) distinction between natural and social sciences, saying in effect that natural science can always find an objective truth by observing what happens in the world around it. However, economics, being a social science, cannot find that level of ‘truth’ as those involved in it are also determining the outcome.

As he clarifies in remarks made in Berlin in April this year. (This paper is still on his web site as is his suggested solution to the problems in Germany made in the Financial Times.):-

“But economics is a social science and there is a fundamental difference between the natural and social sciences. Social phenomena have thinking participants who base their decisions on imperfect knowledge. That is what economic theory has tried to ignore.”

As we can see he posits the simple idea that we are fallible, we make mistakes, we get things wrong. Now the scary part of this is that we can sometimes base our lives on false assumptions, but this tends to impact only upon ourselves and a few close associates. However, when we get Economists suggesting ways of solving a problem which affect whole countries if not the whole world, and when they have diagnosed the wrong problem, this becomes a real problem! So he suggests we try and take account of these errors of judgement:-

“ …I focused on a problem area, namely the role of misconceptions and misunderstandings in shaping the course of events that mainstream economics tried to ignore. This has made my interpretation of reality more realistic than the prevailing paradigm.”

He makes a strong plea that we do not base our view of reality (i.e. on what is actually happening to us ) on abstract  theories and laws but:-

“Instead of pursuing timeless laws and models we ought to study events in their time bound context.”

However, difficult though they are, the remarks George Soros makes repay careful study, for he is spelling out what amounts to a way out of the current Euro Crisis. He claims that EU leaders have misunderstood the very nature of the problem they are dealing with:-

“The authorities didn’t understand the nature of the euro crisis; they thought it is a fiscal problem while it is more of a banking problem and a problem of competitiveness. And they applied the wrong remedy: you cannot reduce the debt burden by shrinking the economy, only by growing your way out of it.”

He then goes on to re-interpret the events leading up to the current EU crisis and proposes some very clear courses of action – mostly for the German Government.

He concludes:-

We need to do whatever we can to convince Germany to show leadership and preserve the European Union as the fantastic object that it used to be. The future of Europe depends on it.”

Now, sadly, there is little we in Birmingham can do. We can read the article and see if we agree with Soros and if so, we could write to our MP and suggest he lobby the PM and the Foreign Secretary to urge Germany to at least consider the proposals Soros has put forward. Apart from that all we can do is buy and inflatable life-raft, fill it with food and wait and see.


[1] The Open Society and Its Enemies – published in 1945

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