Finance: The Unifying Theme

A profile of financier George Soros

Soros's bet against the British pound was one such play. On instructions from his Soros Fund Management think tank in New York, the Netherlands Antilles-based Quantum Fund (its offshore status frees it from U.S. regulation, and U.S. citizens, excepting Soros and a few officers of the fund, are not allowed to hold its shares) and related entities borrowed heavily in sterling, sold those pounds for German marks and French francs, and then locked in profits by repaying the sterling loans with devalued pounds. Soros made parallel bets in British stocks and German and French bonds to boost profits, which eventually came to $1.3 billion. Soros felt confident betting much on the collapse of the pound: the same process that had lifted the Iron Curtain and reunified Germany obliged the Deutsche Bundesbank to raise interest rates in order to dampen inflation, putting unbearable pressure on the recessionary British economy—and the pound.

Soros has brought much the same astuteness to his efforts in Eastern Europe. Tibor Vidos, a Hungarian political consultant, says that in 1984 Soros skillfully played on the Hungarian communist government's need to service its large foreign debt. "A billionaire stockbroker from New York was exactly the right person to have good relations with," Vidos says of Soros's approach to Budapest. Soros secured quasi-official status and then funded prodemocracy thinkers. Establishing an alternative to communist institutions heartened the opposition and helped to undermine the government. Soros encouraged the emergence of democratic movements, among them the Federation of Young Democrats, a group that today is in parliamentary opposition to the conservative nationalist Hungarian government, and could take power in the 1994 elections. "That he played a significant and historic role is without doubt," Vidos says.

Soros was a presence not only in Hungary: he backed Czechoslovakia's Charter 77 human-rights group from 1981 onward, and his Open Society Fund created a Polish foundation in 1985 to support the democratic process. But he has been as quick to cut his losses in international philanthropy as he has been in finance. He shut down his Chinese foundation in 1989, upon learning that it was controlled by the Beijing security apparatus, and he disengaged from intense efforts to rescue the Soviet economy in 1990 when the Shatalin Plan for immediate free-market conversion failed to win Mikhail Gorbachev's endorsement.

In the years since the Eastern European communist regimes started toppling, in 1989, the Soros Foundations network has widened to encompass Albania, Belarus, Bosnia, Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Macedonia, Moldova, Poland, Romania, Russia, Slovakia, Slovenia, Ukraine, and even, still, Yugoslavia. Soros has given a network offspring, the Central European University, in Budapest and Prague, a $25 million endowment with the aim of promoting understanding among the region's fractious nationalities and educating its future leaders.

Although Soros's initial objective in Eastern Europe was political—bringing down communism—the focus of his foundations now is education, nudging history by altering perceptions. His foundations also promote plurality in the media by supporting independent publications: in Romania the Soros Foundation for an Open Society spent $550,000 on newsprint for independent newspapers during last year's election campaign, and his Hungarian foundation subsidizes the newspaper Magyar Narancs (Hungarian Orange), a weekly in tune with the Young Democrats.

Ironically, communism's demise has complicated Soros's task. Funding decisions are tougher than when simple dissident status was an applicant's key qualification. Soros's dollars buy less and less as local currencies strengthen and Western prices arrive. More worrisome, Soros has become the target of anti-Semitic broadsides in Magyar Forum, a weekly published by the far-right wing of the governing Hungarian Democratic Forum. In one virulent attack, published in September of last year, an HDF parliamentarian disparaged Soros's role in the 1989 democratic transition, calling it "a self-engineered coup by cosmopolitans," the term "cosmopolitan" being a long-standing communist euphemism for "Jew." The article was titled "Termites Are Devouring Our Nation—Reflections on the Soros Regime, the Soros Empire." In Romania, as well, Soros has been maligned. Ultra-nationalists based in the ethnically mixed city of Cluj, in Transylvania, vilify Soros as a Hungarian infiltrator, and a parliamentarian representing Romania's Democratic Front for National Salvation has demanded that Soros's foundation be expelled.

Such attacks have put the various foundations somewhat on the defensive, even as their sense of mission has intensified. "We're very proud of the enemies we make, frankly," says Sandra Pralong, Soros's Romanian-born co-chair for the foundation in that country, "because the people who are most threatened by us are the ones who are most damaging for Romania." Soros "reminds the political circles in this country that the time when a society or a country could live as an [isolated] entity is over," says Andras Kereszty, the executive editor of Nepszabadsag, Hungary's largest daily newspaper. "Everything is integrated in the modern world; he represents this interrelatedness."

The Soros foundations taken together amount to a major regional institution influencing a generation of opinion-makers. The index of the Soros Foundations directory lists 641 names. The Hungarian television journalist Janos Horvat reckons that one in ten members of his country's first post-communist Parliament have had some Soros connection. For many in Eastern Europe, Soros represents success, reform, and hope. Ethan Klingsberg, an American lawyer who is the executive director of a Soros offshoot that helps new governments draft constitutions, recalls a meeting in Kazakhstan in January between Soros representatives and a group of independent intellectuals. "They had this club," Klingsberg recalls, "and they wanted to name it for him." Soros inspires fervor among his staff, too.

For all the undeniable progress to which he has contributed, Soros's outlook on the former Eastern bloc is decidedly dark. He fears that it may have shaken off communism only to succumb to nationalist dictatorships, and that "what used to be the Soviet Union may become a black hole that may eventually swallow up civilization." Soros initially envisioned his foundations as a short-term venture. He now says that "things haven't worked out, they're not going to work out, and so you've got a much longer period while I will need to be engaged." Yet he retains considerable relish for the task, which he says affords him more satisfaction than making money ever has.

This brings to mind a revealing story that Soros once told an associate about his wartime years in hiding. Holed up in a Budapest cellar at one point, he passed long hours with his father and brother playing games, a small cache of candies being the stakes. He and his brother saved up the sweets they won—but Tivadar Soros ate his winnings. "The point is that you have to do something with the bonbons," Soros said. "You can't just play with them and you can't just eat them all."

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