TCS Daily

The Open Society Institute and Its Enemies

By Stephen Schwartz - January 12, 2004 12:00 AM

For months, domestic and international media have been a-twitter with the tale of George Soros, global hedge fund speculator, and his transformation into the angel of the Democratic party and the broad American left.

How a man once associated with capitalist ruthlessness -- when he bet his fund against the British pound -- suddenly became the savior of progressive politics, would make an interesting study in social psychology. Why, when Soros brags about throwing $15.5 million into the anti-Bush effort -- including a major donation to, the group that equates Bush with Hitler -- is there little or no questioning of how his Quantum Fund accumulates its money?


But even more remarkable is the silence about the record of the Soros Foundation Network, mainly consisting of Open Society Institute branches scattered across the planet, in effectively advancing the cause of worldwide democracy.


Soros continually gets credit for handing off $5 billion of his hedge-fund profits to expand democracy in the former Communist states, as well as in the lagging democracies of Africa and the Asian heartlands.


Yet anybody who spent time in any of the targeted countries, and who is not utterly cynical, must react with bitter laughter at the suggestion that, having traveled the world sowing cash as the seed for open societies to grow, Soros is in any position to positively influence the American political system.


I know whereof I speak because I contracted with the OSI in Croatia and Bosnia-Hercegovina, and because I have observed in exceptional detail the situation in those countries, as well as Soros-funded activities in Kosovo. I have no reason to expose any specific information about contracts in which I was involved, but am pleased to offer some general observations about the goals and effects of the programs.


He Has Abandoned Them


The 2002 Soros Foundations Network annual report skips lightly over the fact best known to the citizens of the former Communist lands in which Soros money was spent: that he has abandoned them. For example, it notes, In Central Europe, we have reduced our expenditures because the accession process [i.e. integration into the European Community] itself addresses many of our concerns. For example, the accession countries are required to improve the protection of minority rights in accordance with EU legal standards. Thus, Soros downsizing in countries like Bosnia-Hercegovina is presented as a consequence of success in realizing its goals.


The political and intellectual class in Sarajevo will remember the history of the Soros Open Society Institute there quite differently. I vividly recall the decision of Soros to cut his funding in Bosnia-Hercegovina in 2000, when he came to realize that he could not simply purchase and install a turn-key civil society in a country devastated by ethnic aggression.


In general, Soros activities in countries like Bosnia have a politically-correct, do-gooder quality. In the 2002 report, we are told that $5 million was expended in Bosnia on such projects as reform of secondary schools in the city of Tuzla; establishment of a youth information agency; a student entrepreneurship program; vague assistance to municipalities to improve local governance, and empowerment of Roma (also known as Gypsy) communities.


But to anyone who knows the situation in Bosnia even superficially, such largesse compares to offering a single bandage to a man in need of a heart transplant. Postwar Bosnias Muslim-majority zone is utterly impoverished. Its Serb zone is dominated by an underground economy. Nothing has been done by the so-called international community to create a new economic life for Bosnians. To a considerable degree, Bosnia remains stuck in the legal and commercial system inherited from Titos self-managed socialism. There has been no reform of pensions; estimates of unemployment range between 25 and 40 percent; labor reform is never debated. Privatization is almost never seriously discussed.


Economic life goes on, with small businesses and cafes popping up, usually with a limited inventory and menu, but often with unoccupied young men of a gangsterly mien hanging around. But nobody visiting the country for the first time would ever imagine that Bosnia-Hercegovina was once considered a success story in the Yugoslav context.


With no serious investment in the country, many state enterprises operating in a semi-clandestine manner, considerable income unreported and untaxed, and the visible growth of a mafia, what help is provided by the establishment of youth information programs?


In addition, while it sounds great to a foreigner to hear that high schools in the city of Tuzla are being reformed and Roma are being assisted in integration, Bosnians and foreigners who know the country recognize these as, in effect, tickets to a free ride. Tuzla remains the countrys main bastion of Tito-nostalgic, multiethnic brotherhood and unity, and getting its school curricula to promote forgetfulness about the atrocities of ethnic cleansing (i.e. attempted genocide) is no great achievement. Bosnia is also one country in which Roma do not suffer exceptional discrimination, and improving their lot does not represent a great challenge.


Roma have a much tougher situation in neighboring Croatia, and there the Soros institutions also make assistance to them a centerpiece of a $4.6 million budget that concentrates on marginal items: curriculum improvement, advice to local governments, and youth programs.


But Croatia also faces serious challenges in gaining improved investment, labor reform, and broad administrative transparency, and Soros programs in that country are also of marginal effect. Similar efforts are described in Kosovo, Montenegro, and Macedonia.


The Fallacy


The fallacy of the Soros approach to the Balkans is a simple one: belief that the erection of civil society precedes and encourages the growth of capitalism, when, in reality, the opposite is obviously the case. The United States began as an entrepreneurial society based on investment, contract, and accountability, which gave it the resources, both economic and political, to establish a democracy. Every society that has grown into capitalist prosperity and stability begins on a sound economic base and proceeds to develop institutions embodying civility and commonwealth.


The belief that Croatians, Bosnians, Kosovar Albanians, Macedonian Slavs, Montenegrins, Serbs, and other victims of the Yugoslav tragedy must be nice to each other again, and only afterward can be blessed with substantial economic assistance, runs through all aspects of the Soros approach. It is also visible in the other ex-Communist states Soros has favored. Reduced to its basics, this sensibility holds that Communism, ethnic conflict, and economic collapse occurred because people were bad, and that if they can now be induced to be good, they will flourish.


Blaming the victims of Communism for their plight is about as heartless a concept as one can imagine, but it matches the cockeyed, quack mentality visible in Soross generosity to American political groups that believe Bush is evil personified. It is the outlook of a rich man separated from the real world of enterprise -- a speculator.


Someone should tell George Soros that he does not need to educate Americans in democracy, and that the time has come for him to reflect on the failures of his investment in open societies elsewhere. Nobody can say he is bad -- just vain and heedless.


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