[Congressional Record Volume 140, Number 105 (Wednesday, August 3, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: August 3, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
  GEORGE SOROS' INSIGHT ON THE PROMISES AND PITFALLS OF BUILDING OPEN 
                               SOCIETIES

                                 ______


                            HON. TOM LANTOS

                             of california

                    in the house of representatives

                        Tuesday, August 2, 1994

  Mr. LANTOS. Mr. Speaker, it is quite commonplace to observe today 
that the initial euphoria after the fall of the Communist regimes in 
Eastern Europe and the former Soviet Union has given way to widespread 
alienation, suspicion, and disenchantment as the peoples of these 
regions continue to see their expectations for a better material life 
unfulfilled, while crime, corruption, and unemployment mount daily. 
While there appears to be little reason to fear a return to the 
totalitarian regimes of the past, there is no certainty that stable 
democratic, market-oriented regimes will develop either.
  Instead, some scholars, like Philippe Schmitter at Stanford, have 
noted the possibility of ad hoc democracies that muddle through but 
never really take root and gain legitimacy. They continue almost by 
default, but as time goes by they are beset by an ever increasing 
number of internal and sometime external threats to their survival. 
Obviously, that situation provides fertile ground for extremists who 
seek to advance their narrow, sectarian interests at the cost of the 
general good. They are more than happy to attack the institutions of 
pluralistic society, why they perceive as inimical to their goals. Of 
course, it has happened before in that part of the world and could 
happen again if these peoples are not vigilant in promoting and 
protecting their newly won liberties, and if they do not receive much 
greater material support from the West.
  My good friend, George Soros, explained the problems and pitfalls and 
possibilities most eloquently in a statement he made yesterday at a 
hearing of the Subcommittee on International Security, International 
Organizations and Human Rights, which I have the honor to chair. George 
Soros does not paint an optimistic picture, and unfortunately I share 
his concerns.
  Gerge Soros needs no introduction here in the Congress, but I will do 
it anyway. Not since John Maynard Keynes have we had an individual like 
George Soros who combines both great practical financial acumen and an 
intellectual understanding of the subtleties of international affairs. 
It is an intellectually stimulating treat to spend and hour with George 
to discuss these issues.
  George Soros, who has born in Hungary and has extensive experience in 
the former Soviet Union and Central and Eastern Europe, is president of 
Soros Fund Management and Chief Investment Advisor to Quantum Fund, 
N.V., a $12 billion international investment fund, which is generally 
recognized as having had the best performance record in the world 
during its 25-year history.
  In addition to his business interests, Mr. Soros founded the Open 
Society Fund in 1979, and he has established a network of foundations 
operating in 24 countries throughout Central and Eastern Europe and the 
former Soviet Union, as well as South Africa and the United States. 
These foundations are focused on helping to build open and democratic 
societies. The Soros foundations have contributed some $300 million to 
assist the new Republics of the former Soviet Union and the countries 
of Central and Eastern Europe in their transition to democracy. I wish, 
Mr. Speaker, that other governments including our own were as generous.
  In his appearance before our subcommittee yesterday, George Soros 
gave a particularly insightful and thoughtful presentation regarding 
the problems of building open, pluralistic, and democratic societies 
since the fall of the Soviet Union. Mr. Speaker, it will be several 
weeks before the full transcript of that committee hearing will be 
available to Members of Congress. I ask that Mr. Soros' prepared 
statement from that hearing be placed in the Record, and I ask that my 
colleagues give it serious and careful attention.

                       Testimony of George Soros

       I welcome this opportunity to testify before your committee 
     on the dangers of the post-communist world. I feel reasonably 
     well qualified to speak on the subject and I have a great 
     deal to say--perhaps too much for this hearing.
       I have devoted much of my time, energy, and money to 
     Central and Eastern Europe and the former Soviet Union in the 
     last five years because I believed that the collapse of the 
     Soviet system was a historic, revolutionary event and that 
     the outcome would shape the course of history.
       I have established a network of foundations whose aim is to 
     help and promote the transition from a closed to an open 
     society. Actually, I set up the foundation in 1979 and 
     started the first local operation in my native Hungary in 
     1984, but my involvement increased as the collapse of the 
     Soviet system accelerated. There are now foundations 
     operating in 23 different countries and my annual 
     contributions have risen from three million dollars in 1979 
     to 300 million dollars in 1993--but the amount of dollars 
     spent is not the best indication of the efficacy of the 
     operation because some of the best projects take the least 
     money.
       At the time I became involved, communist dogma had given 
     rise to a closed society in which the state was dominated by 
     the party and society was dominated by the state. The 
     individual was at the mercy of the party-state apparatus.
       Communist dogma was false exactly because it was a dogma 
     that claimed to incorporate the ultimate truth. It could be 
     enforced only by doing a great deal of violence to reality 
     and, even then, it could not be sustained indefinitely. The 
     gap between dogma and reality became ever more evident--the 
     sway of dogma over people's minds ever more tenuous--until, 
     eventually, the regime collapsed in a rapidly accelerating 
     fashion that amounted to a revolution.
       There was a moment of euphoria, in 1989, when people felt 
     liberated from an oppressive regime and that moment could 
     have been used to set into motion the transition to an open 
     society. That was the opportunity I saw which induced me to 
     throw all my energies into the process. But I must now admit 
     that the moment has passed and the opportunity has been 
     missed.
       The breakdown of a closed society does not automatically 
     lead to an open society, because open society is a more 
     advanced, more sophisticated form of organization that a 
     closed one. Freedom is not merely the absence of repression. 
     A society in which people are free requires institutions 
     which protect freedom and, above all, it requires people who 
     believe in those institutions. The institutions themselves 
     need to be much more sophisticated because they must allow 
     for the expression of different view and interests, whereas a 
     closed society recognizes only one point of view, the ruling 
     one. In short, the transition from a closed to an open 
     society is a step forward and upward and it cannot be 
     accomplished in one leap without a helping hand from the 
     outside. That was my motivation for getting so involved. But 
     the open societies of the free world were not similarly 
     motivated. There was a lot of good will toward Eastern Europe 
     at the time, but somehow it was not translated into effective 
     action. Government policy, both in Europe and in the 
     United States, were characterized by a singular lack of 
     comprehension and lack of vision.
       Compare the reaction to the collapse of the Soviet empire 
     with the collapse of the Nazi empire. Then, the United States 
     still had the vision, and the generosity, to engage in the 
     Marshall Plan, and the Marshall Plan worked wonders. It did 
     not merely provide assistance, it provided a framework for 
     the countries of Europe to cooperate. It did not merely send 
     technical experts to impart their wisdom, it brought large 
     numbers of Europeans to the United States and allowed them to 
     form their own agenda. We seem to have forgotten all these 
     positive experiences. By the time the Soviet empire 
     collapsed, there was no political support for any kind of 
     large-scale assistance and the Marshall Plan had become a 
     dirty word.
       In the absence of Western leadership, the collapse of the 
     Soviet system did not lead to the emergence of open 
     societies. Moreover, there can be no assurance that what was 
     not accomplished in the heat of the revolutionary moment 
     would be attained by a slower, more laborious process. On the 
     contrary, insofar as a pattern is emerging, it is pointing in 
     the opposite direction.
       The breakdown of a closed society based on the universal 
     dogma of communism has led to a widespread rejection of all 
     universal ideas, and the countries which used to constitute 
     the Soviet empire are trying to find an organizing principle 
     in their own particular history. There are, of course, 
     exceptions to the rule. But the dominant theme which seems to 
     be merging is national or ethnic identity rather than any 
     universal concept such as democracy or human rights or the 
     rule of law or open society.
       This creates a very dangerous situation because national 
     grievances can be exploited to form more or less closed 
     societies, and that is a recipe for conflict. In order to 
     mobilize society behind the state, you need an enemy and, if 
     you do not have one, you have to invent one. That is what 
     Hitler did when he identified Jews as the enemies of the 
     German Volk, and he has many imitators in the post-communist 
     world. Unfortunately, there is no shortage of grievances, 
     because communist regimes used to suppress all national or 
     ethnic aspirations which did not suit their purposes.
       Although some of the nationalist leaders are former 
     dissidents, former communists are usually more adept at 
     exploiting national sentiment because they understand better 
     how to operate the levers of power. They can forge greater 
     national consensus than democratic leaders striving for an 
     open society. Look at Milosevic in Yugoslavia, Tudjman in 
     Croatia, Meciar in Slovakia, and Kravchuk in Ukraine, and 
     compare the kind of majorities they could muster at the 
     height of their popularity with the narrow political base 
     that pro-Western democratic governments have had to contend 
     with in countries like Russia, Poland, Bulgaria, or 
     Macedonia.
       In the context, I do not find the recent electoral 
     victories of former communist parties in countries like 
     Hungary, Poland or Lithuania disturbing at all. These are 
     reform communists who want to get away from communism as far 
     as possible. Their re-emergenee constitutes a welcome 
     extension of the democratic spectrum. I am particularly 
     pleased with the outcome of the recent elections in 
     Hungary. The nationalist line was rejected by the 
     electorate, and the fact that the Socialist party entered 
     into a coalition with the Free Democrats on the basis of a 
     well-conceived and well-articulated reform program augurs 
     well for the future. In the case of Poland, the changeover 
     is less fortunate because the radical and painful reforms 
     and undertaken in 1990 had just begun to bear fruit and 
     the government had just begun to function properly when it 
     was defeated. But the course of reform is irreversible and 
     Poland is probably the most dynamic country in Europe 
     today, both in terms of its economy and its spirit. The 
     worst that can happen is that it loses some momentum.
       All in all, I see hardly any chance of a reversal to 
     communism. Communism as a dogma is well and truly dead. The 
     real danger is the emergence of would-be nationalist 
     dictators--I call them ``NADIs'' for short. They are playing 
     in a field that is definitely tilted in their favor. It is 
     much easier to mobilize society behind a real or imagined 
     national injury than behind an abstract idea like democracy 
     or open society. Building the open society is essentially a 
     contructive process, and it is only too easy to use ethnic 
     conflict to undermine its foundations.
       Take the case of Yugoslavia, a relatively prosperous 
     country which had been open to the West for twenty years and 
     had developed the intellectual resources which are needed for 
     an open society. I remember 1990, when monetary reform was 
     introduced in Yugoslavia and Poland at the same time. 
     Yugoslavia was much better prepared to carry it out. It had a 
     group of people who had been trained by the IMF and the World 
     Bank, and the reform was, in fact, much more successful than 
     in Poland. That was in May 1990. Then Milosevic raided the 
     treasury in the course of his electoral campaign and 
     destroyed monetary stability. That was the end of the attempt 
     to transform Yugoslavia into an open society.
       And now we have an even more striking example: Greece. Here 
     is a country that is a member of the European Union, of NATO, 
     fully integrated into the international community. Yet it has 
     been possible to whip up national sentiment to a frenzy over 
     the name ``Macedonia.'' A small and weak neighbor to the 
     north is blown up into a threat to the territorial integrity 
     of Greece. Admittedly, there is a minority in Macedonia which 
     harbors irredentist dreams based on ethnic injuries suffered 
     in the past. But the government of Macedonia is genuinely 
     devoted to the creation of a multi-ethnic, democratic state. 
     It is ready to make every concession short of giving up its 
     own identity. But Greek public opinion resonates to the 
     Macedonian extremists, not to the Macedonian government, and 
     the issue has been exploited for domestic political purposes 
     in Greece.
       In the meantime, the Macedonian economy, already severely 
     damaged by the sanctions against Serbia, is collapsing under 
     the weight of the Greek embargo. The railroad connections 
     runs north and south, and Macedonia is cut off on both sides. 
     As a result heavy industry, which relies on rail 
     transportation, has been brought to a standstill. The 
     economic crisis is endangered political stability. The multi-
     ethnic, democratic coalition is threatened by extremists on 
     both the Slavic-Macedonian and the Albanian sides. It may 
     easily fall apart in the next elections and, if Macedonia 
     falls apart, we have a third Balkan war.
       As you can see, there is plenty to worry about in Eastern 
     Europe. When I embarked on my project, I was planning on a 
     short-term campaign to seize the revolutionary moment and to 
     provide an example that would be followed by the more slowly 
     moving, more cumbersome institutions of our open societies. 
     But I was sadly mistaken. Now I must think in biblical 
     terms--forty years in the wilderness. The battle for pen 
     society is not lost, as the examples of Poland and Hungary 
     demonstrate, but it will take a long time and a lot of help 
     from the outside and that is what I am worried about.
       I have always been aware of a fatal weakness in the concept 
     of open society. The weakness is that people living in an 
     open society do not even recognize that they are living in an 
     open society, let alone treat open society as a desirable 
     goal for which it is worth striving and making sacrifices. In 
     one way, freedom is like the air: people struggle for it only 
     when they are deprived of it. When it is there, they take if 
     for granted. But, in another way, freedom is very different; 
     if you do not care for it, and do not protect it, it has a 
     tendency to disappear.
       If there is any lesson to be learned from the revolutionary 
     events we have witnessed in Eastern Europe since 1989, it is 
     that freedom is not merely the absence of repression, and the 
     collapse of a closed society does not automatically lead to 
     an open society.
       The trouble is that this lesson has not been learned. When 
     the Soviet empire collapsed, we had no hesitation in 
     declaring it a victory for the free world. But, equally, we 
     had no inclination to make any sacrifices for the sake of 
     establishing free and open societies in that part of the 
     world. The consequences are now painfully obvious, but we 
     have not even started to recognize them.
       What has gone wrong? I believe our concept of freedom has 
     changed. In the Second World War, it was promoted into an 
     idea that we were ready to fight for and to sacrifice for. 
     And the idea as it was then conceived involved freedom not 
     only in our own country, but also in the countries which were 
     the victims of a totalitarian regime. This conception carried 
     over into the post-war period. It was responsible for the 
     dismantling of colonial regimes and the forging of an anti-
     communist alliance.
       But gradually the idea faded and another idea emerged which 
     explicitly rejected the pursuit of freedom as a valid 
     objective for foreign policy. that the idea was 
     ``geopolitics'' which maintained that states ought to pursue 
     their own self-interest as determined by their geopolitical 
     situation, and moral or ethical considerations have only a 
     secondary role to play. They can be useful for propaganda 
     purposes--mobilizing public opinion at home or abroad--but 
     you can get into a lot of trouble if you actually believe 
     your own propaganda.
       The companion piece to geopolitics in international 
     relations was the concept of laissez-faire in economics, 
     which enjoyed a miraculous revival in the 1980s. As you know, 
     it holds that the unhampered pursuit of self-interest leads 
     to the best allocation of resources. These have been the two 
     main concepts which have guided us in our response to the 
     collapse of the Soviet system and which continue to guide 
     us today. I find that they are woefully inadequate for the 
     situation at hand.
       As long as we were locked in deadly combat with the Evil 
     Empire we lived in a stable world order and we had a clear 
     view of our own place in the world. The world order was 
     stable because both sides had the capacity to destroy each 
     other and therefore neither side could risk all-out war. And 
     we could define ourselves in terms of our enemy: we were the 
     leaders of the free world. But the stability of the world 
     order has been destroyed by the internal disintegration of 
     the Soviet empire and, what is worse, we have lost our sense 
     of identity. We still want to be a superpower and leader of 
     the free world but we do not know what these terms mean. We 
     do not know what the free world stands for and, what is 
     worse, we don't know whether we should stand for the free 
     world because we have come to believe that our way of life is 
     based on the pursuit of self-interest, as exemplified by the 
     doctrines of geopolitics and laissez-faire.
       In some ways the present situation is unprecedented. In the 
     past, peace and stability have been maintained either by an 
     imperial power or by a balance of powers or by a combination 
     of the two. Right now, we do not have either. The United 
     States does not have the capacity, or the interest, to 
     dominate the world the way Britain did in the 19th century. 
     Britain derived enough benefit from free trade to justify 
     maintaining a fleet in being; but the United States is no 
     longer the main beneficiary of free trade and it cannot 
     afford to be the policeman of the world. We must depend on 
     collective action but we have no clear idea what the 
     collective interest is.
       The result is a dangerous power vacuum. There was some hope 
     that it would be filled by the United Nations, but the United 
     Nations is no better than the states that constitute it. 
     Indeed, it is worse, because the member states generally 
     pursue their own national self-interest, to the detriment of 
     the collective interest, and the U.N. is managed by a 
     bureaucracy that is more interested in its own survival than 
     in the survival of our civilization. There has been no 
     instance in history when peace was maintained by an 
     international institution and there is no reason to believe 
     that the current situation will be any different.
       What is to be done? I don't have all the answers, but I 
     have a suggestion which may help. I propose that we should 
     declare the creation and preservation of open societies as 
     one of the objectives of foreign policy, and in the case of 
     the former Soviet sphere we should declare it as the main 
     objective. I draw a distinction between the former Soviet 
     sphere and the rest of the world because the Soviet system 
     has irretrievably broken down; what system takes its place 
     will have a profound influence on the course of history and 
     therefore on our own future. In the rest of the world, the 
     promotion of open societies is one of many competing 
     objectives, but in the former Soviet sphere it is of 
     paramount importance. In my opinion even the nuclear issue 
     ought to be subordinated to it.
       When I speak of open society, I mean a form of organization 
     that can be loosely described as democracy. But the concept 
     of open society is more comprehensive. It means not only a 
     democratically elected government but also a society that 
     is not dominated by the state; that means a strong civil 
     society and the rule of law. And it is not enough for the 
     government to be elected by a majority; it must also 
     respect minorities and minority opinions. In other words, 
     I propose substituting the framework of open and closed 
     societies for the old framework of communism versus the 
     free world. The old framework was highly suspect even when 
     it was relevant, because anti-communism could be used to 
     justify actions which were incompatible with the behavior 
     of an open society. The new framework allows us to define 
     ourselves in terms of what we stand for rather than in 
     terms of our enemies. It provides a perspective which is 
     woefully lacking at present. For one thing, it tells us 
     that nationalist dictatorships are as much of a threat 
     today as communism used to be.
       How can this perspective be translated into policy 
     recommendations? First, we need a strong European Union 
     capable of taking foreign policy decisions. This is missing 
     today, as the quagmire in Bosnia has so sadly demonstrated. 
     Second, the European Union needs to become more open, 
     especially towards the East, and not turn into a fortress 
     protecting itself against the turmoil outside its walls. The 
     countries of East Central Europe need the clear prospect of 
     being able to join the European Union in order to complete 
     the transition to open societies. They need private 
     investment more than they need government aid, and the 
     prospect of membership is the best recipe for attracting 
     private investment. I believe that the United States and 
     Germany, if not all the other members of the European Union, 
     would agree on this point.
       Third, NATO--which is essentially an alliance between North 
     America and Europe--ought to serve as a mainstay of the new 
     world order. Whether a direct link is needed between NATO and 
     our Asian allies like Japan and Korea is an open question. 
     But one thing is certain: NATO cannot fill the power vacuum 
     that has been created by the collapse of the Soviet empire; 
     there needs to be an alliance between NATO on the one hand 
     and Russia and the other successor states on the other. NATO 
     can be extended to include the Central European states which 
     are candidates for membership in the European Union but, if 
     it also included Russia, it would be so diluted as to become 
     meaningless. That is the origin of the Partnership For Peace 
     but, in its present form, it does not even begin to fulfill 
     the function for which it was designed. It is not much more 
     than an empty gesture. It is a worthy successor of the 
     vacuous and dilatory policies of the Bush Administration, and 
     it is perceived as such in Russian. Here is the point where a 
     fresh perspective could come in useful.
       I have argued that Russia and the other successor states 
     are in need of outside assistance in order to make headway 
     with their internal transformation. They do not perceive 
     issues of external security as a threat; rather, they see 
     them as opportunities to divert attention from their economic 
     failure and to mobilize political support. In these 
     circumstances a Partnership For Peace, on its own, is bound 
     to remain an empty gesture. It needs to be accompanied by a 
     ``Partnership For Prosperity,'' a latter-day version of the 
     Marshall Plan, to give it substance.
       The idea is not a preposterous as we have conditioned 
     ourselves to believe. It could be financed by the IMF with an 
     issue of Special Drawing Rights and, if successful, it could 
     be repaid in full. It would solve the most burning issue of 
     the region: how to create a common economic space without 
     total political domination by Russia. In this context, the 
     recent presidential elections in Ukraine which produced a 
     president who is genuinely interested in economic reform 
     offers an opportunity which I hope we shall not miss. A 
     genuine Partnership For Peace, coupled with a Partnership For 
     Prosperity, would provide a firm foundation for a new world 
     order. In its absence, we are going to have world disorder.
       Let me end with Macedonia. This is a clear case where an 
     ounce of prevention can save us tons of troubles. We ought to 
     make it a matter of priority to come to the aid of this tiny 
     country with a democratic, multi-ethnic government, which is 
     on the verge of economic collapse for reasons which are 
     beyond its control.

                          ____________________