This is a rare article from Forbes, reposted here to prevent it being destroyed.
By Richard C. Morals
Forbes, April 1997
IF YOU'VE DIMLY wondered what is happening in
Albania, we can, in a brief sentence, explain:
George Soros' friends are coming out on top.
Late in February, armed gangs led by gangsters and
ex-Communists, many of them veterans of the old
secret police state, all but toppled an elected
liberal government, and forced the president to
appoint a neoCommunist as prime minister. While
this was happening, George Soros sat in his London
town house and calmly told FORBES that his
A!banian Foundation is "an excellent group very
much on top of the situation."
On top is right: Soros has kept afloat a
newspaper, Koha Jone, that egged on the coupists
with inflammatory antigovernment propaganda. A
pyramid scheme had collapsed, costing many people
their savings, and the Soros-supported paper
effectively made a call to arms. A top official of
the Soros foundation in Tirana boasted to stunned
observers: "[President] Berisha's going. We got
him."
In an age-old tradition of European political
patronage, this multibillionaire speculator
routinely taps his billions to fund journals,
politicians and educators in Europe and elsewhere.
More often than not, these have an exclusively
left-wing bias.
Soros, 67, is Hungarian-born but a U.S. citizen.
He recently caused a flutter in the February issue
of the Atlantic Monthly by penning a windy attack
on free market capitalism.
Why is George Soros so cozy with people and causes
that might be expected to view his kind as
parasites?
To understand his charitable works Forbes visited
the Soros FoundationHungary's cream-colored villa
in the hills of Budapest. Hungary is not only
Soros' native land but where his charities have
the longest history. There we met Miklos
Vasarhelyi, the 80year-old president of the
Sorosfunded foundation. This man, who dispenses
millions of dollars a year in a rather poor
country, has an intcresting past. Vasarhelyi was
press officer to Imre Nagy, the Communist Prime
Minister exccuted in 1958 for being too
independent. Vasarhelyi stood trial along with
Nagy after Soviet tanks crushed the 1956 Hungarian
uprising. Nagy and most others were hanged or
sentenced to life. Vasarhelyi got just five years,
the lightest punishmcnt of the pack.
Thanks to George Soros, this former Communist has
risen again. A political party he helped found is
a partner in the present government. That
government is a coalition of ex-Communists (now
the Hungarian Socialist Party) and a leftlibcral
group, the Alliance of Free Democrats, a coalition
that came to power in 1994 after defeating a
rather ineffectual moderate government. Soros
blessed the election results.
"These are strong, serious-minded people," he
publicly said of the victorious ex-Communists. "I
have great expectations in general." Not everyone
agreed. One prominent foreign businessman who
first considered, then rejected, doing business in
Hungary, described the current government as a
"bunch of clowns who haven't a clue as to how
to run an ecconomy."
Soros has since banged heads with Socialist Prime
Minister Gyula Horn, but remains close to his
coalition partner, the Alliance of Free Democrats.
He provides many AFD leaders with income. Besides
Vasarhelyi, for example, Soros' Hungarian lawyer,
Alajos Dorubach, is a top-ranked AFD official and
a legal adviser to the foundation.
Soros is the great philanthropist of our age--or
so his press constantly remind us. Every year,
according to his flacks, he gives away more than
$300 million through a network of 1,000 employees
in 30 countries. When Russian scientists were
starving he gave each a year's salary; he brought
fresh water to besieged Bosnians; he's providing
kindergartens for Gypsies. Good deeds, all.
But there is another side to the giving, a rathcr
nutty political side. The 50 offices maintained by
Soros money are spread from Haiti to Mongolia, and
all claim that their works are based on
philosopher Sir Karl Popper's views of tolerant,
open societies. Thus a common name: Open Society
Institute.
Behind the nuttiness, there is a consistency. "The
people Soros hires," says Mark Almond, a respected
Oxford University lecturer, "are noted for their
anti-Thatcherite views. You'll be hard-pressed to
find a religious dissident or staunch
anti-Communist in his foundations."
Johnathan Sunley, the Budapestbased director of
The Windsor Group, puts it even more strongly:
"Soros is engaged in a one-dimensional ideological
laundering of the old Communist/nomenklatura at
the expense of those who didn't get trips abroad."
Sunley means, of course, that real anti-Communists
couldn't travel abroad in Communist days; only
those in official favor could. Soros has adopted
many of these formerly pampered, generally
moderate Marxists.
Johnathan Sunley, The Windsor Group Conservatives
like Sunley say Soros Is "laundering" former
Communists.
"Soros," says Peter Bod, a former cabinet minister
and central bank governor in Hungary, "is the most
influential nonelected politician east of the
Alps." His power stems not from the ballot box but
from his bank account. He wants to see that the
old left-wing dictatorships are replaced--not with
free market democracies, but with left-wing
democracies.
"Yes," the prickly billionaire conceded in an
interview with FORBES, "clearly there is a
political bias in the [Soros] foundation."
Look at the trustees of his U.S. foundation and
you will see where the bias lies. One of them is
the notorious Lani Guinier, the law professor Bill
Clinton tried to nominate as head of the civil
rights division of the Justice Department. Once
her intemperate brand of politics was
examined--such as minority veto power over
legislation--even Clinton backed away from her
and withdrew his support.
"Yes," says the prickly billionaire. "Clearly
there is a political bias in the [Soros]
foundation."
President of the Open Society Institute in the
U.S. is Aryeh Neier, a human rights advocate who
often embraces extreme liberal positions.
So be careful when you apply the term
"philanthropy" to Soros' spending. Not all his
causes are political, but he's clearly a would-bc
social engineer. You wouldn't get far in a U.S.
election running on a Soros-style platform, but
you might feel quite at home in a lot of U.S.
universities.
But back to Hungary. Soros has been working in his
native Hungary for the past 13 years. In the early
1980s he was quietly supporting dissidents in
Central and Eastern Europe. It was then that the
mercurial Vasarhelyi showed up at Columbia
University in New York, where he met Soros. The
ex-Communist hack seems to have had a considerable
influence on the billionaire. With Vasarhelyi's
help Soros made a deal in 1984 with the
then-government. The first Soros Hungarian
foundation had a budget of $3 million and was
jointly run by Soros and the Communists. "One of
Soros' conditions was that I should be his
personal representative," says Vasarhelyi. "He had
excellent judgment," says Soros, "and a good
understanding of what was possible and what
wasn't."
Interesting guy. Vasarhelyi's understanding of
what is possible has undergone a number of
changes. In 1936 and 1937 he studied political
science in Rome because he thought "Italian
Fascism showed the way out of an unjust society."
He secretly joined the Hungarian Communist Party
in 1939 and officially became a member of the
Social Democratic Party. "[The Communist Party]
instructed [me] to join the Social Democratic
Party," he wrote in his 1989 autobiography, "to
try and get a hold of key positions, but to
continue following the leadership of the Communist
Party."
By the late 1940s the Communists ruled Hungary and
Vasarhelyi became a top-ranked "journalist"
spouting pure Communist propaganda. Then he turned
his coat again. By the mid1950s, he had joined
the ranks of "goulash" Communists disenchanted by
Stalinism, but still in love with Karl Marx. After
serving his relatively mild prison term,
Vasarhelyi eventually got a job at a literature
academy, was given a passport and allowed to
travel. The dissidents we talked to said
dissidents normally didn't get such perks. Says
OSI's Neier: "We always regarded him as strongly
committed to the Open Society principles, and he
is held in high regard."
Everyone likes Vasarhelyi. References to him are
to be found in recently released internal records
of Communist Party meetings about a 1989 political
demonstration. Vasarhelyi and others negotiated
with the government on behalf of the dissidents.
According to the records: "it is worth talking
to...Vasarhelyi on whom we have influence" and "if
the [speeches] get into Vasarhelyi's hands we
would be able to get ahold of them." Vasarhelyi
strenuously denies collaborating with the
Communists.
Maybe that was wishful thinking, but it's a
revealing comment nonetheless. Vasarhelyi of
course no longer calls himselfa Communist but
neither is he a big believer in free markets. "I
was and always am very critical of capitalism,"
Vasarhelyi tells FORBEs.
Give Soros credit. His money does do considerable
good. Between 1984 and 1989 he and Vasarhelyi
helped uudermine the Communist Party's control of
information by trading photocopying machines to
cultural and educational institutes for Hungarian
currency; the currency was then used to give
grants to dissidents and to writers of all
political stripes.
But along the way Soros seems to have developed
delusions of grandeur. He wasn't satisfied with
helping end Communist totalitarianism. He wanted
to decide what kind of government would replace
it. In 1990 a new center-right coalition
government was voted into power in Hungary which
killed the Soros-government agreement. That's when
the foundation began its partisan support.
Vasarhelyi denies that there is any political bias
in his foundation. The Soros Foundation, for
example, gives to the youth clubs and pays for
Gypsy dance troupes (the Gypsies are a repressed
minority in Europe).
A press officer told us over a five-star buffet we
should see what Soros "means to the little
people."
Gabor Ivanyi is a former AFD member of parliament,
and a Methodist minister who runs homeless
shelters in Budapest. Last year Soros Foundation
Hungary gave Ivanyi $38,000 for mattresses, an
ambulance to pick up homeless who were freezing on
the streets and for TB treatments. Ivanyi is a
genuine man of goodwill.
But study the foundation's 1980s modus operandi
and you'll see it always mixed applauded works
with politically motivated projects. With
Vasarhelyi's AFD pals in power again, we found the
relationship with certain sectors of governmerit
very cozy. The AFD-controlled culture ministry and
the Soros foundation, for example, both subsidize
periodicals. We matched the most recently
published lists of subsidies and found 77% of the
periodicals that got major government handouts
also received subsidies from the Soros
foundation. It seems to us a foundation dedicated
to an Open Society would go out of its way to
assist periodicals not supported by the government
of the day.
How reformed are Soros' ex-Communists? Not very. A
few years back, Gyorgy Litvan, a Soros friend of
longstanding, a former adviser to the
foundation's board and director of an institute
given Soros' grants, attacked historian Maria
Schmidt. She had uncovered secret police files
indirectly confirming that Alger Hiss had been a
Soviet spy. Her work was widely published in the
U.S. and led to a Reader's Digest article in
Hungary. Then she bumped into Litvan. Schmidt says
Litvan lambasted her for her "mentality," and said
he would do everything he could to stop her
working as an academic in Hungary.
Litvan tells FORBES he never said such a thing,
but admits he used his power to block her from
making a documentary on the secret police. "I
dislike her," he says. "She is on the far right."
This Soros friend has an interesting idea of what
constitutes "far fight." It seems to be anyone to
the right of Alger Hiss.
Interviewing him in London, FORBEs asked Soros
why he supports turncoats likc Litvan and
Vasarhelyi. His reply was--shall we say--a bit
confusing. "They [as exCommunists] know better
what democracy is than perhaps those who were
always opposed to [the regime]." What an insult to
those true democrats who paid, sometimes with
theirlives, for their beliefs.
That's outrageous, typical Soros gobbledygook.
Exactly what does he believe in? A utopian vision
of a sort of borderless, multicultural world,
where people respect one another and the
well-to-do take care of the lesswell-off. But
Soros' friend Byron Wien, managing director of
Morgan Stanley International, comes closer to the
truth when he says: "Soros is terrified of
right-wing nationalism."
Understandable perhaps in a man who spent his
boyhood watching Nazis aud their Hungarian
supporters at work. In testimony to the U.S.
Congress in 1994, Soros insisted that Eastern
Europe's ex-Communists "want to get away from
Communism as far as possible. Their reemergence
constitutes a welcome extension of the democratic
spectrum." Soros went on: "The real danger is the
emergence of would-be nationalist dictatorships.
They are playing in a field definitely tilted in
their favor."
Thus, for Soros, a rosy glow seems to surround the
left, while conservatism seems, to him, a stand-in
for Nazism. That may seem relatively benign when
expoundcd in American universities. It is pure
poison in Eastern and Central Europe, which badly
need to develop their free markets.
Soros annually pumps some $60 million into
outfits in Hungary, among them his Central
European University, whose goal is to educate an
"administrative elite." Here students can not only
bone up on macroeconomics but also on such
American imports as feminist literary theory and
how the media "constructs gender and sexuality,
whether heterosexual or homosexual."
We found Soros' "cultural elite" unbelievably
arrogant. A chirpy Open Society Institute press
officer told us over a five-star Kempinski Hotel
breakfast that she wanted FORBES to see what Soros
"means to the little people."
Vatlay Klaus, the Czech Republics prime minister
and a tireless advocate of free markets, has a
good notion of what Soros' ideas mean to "the
little people." Klaus, in effect, kicked Central
European University out of Prague. The no-nonsense
Klaus wasn't afraid of Soros' ideas. He just
didn't want Soros money buying up Czech
intellectuals.
Soros returned the insult: "Klaus embodies the
worst of the Western democracies." Maybe, but
the Czech Republic is easily the most prosperous,
modern economy in Central or Eastern Europe.
Say this for Soros: He knows his way around the
law. His country foundations are usually local
legal entities but often receive funds, says his
New York press officer, from the New
York-domiciled foundations. That's very
interesting.
According to the IRS tax code, to enjoy tax-exempt
status a private foundation cannot "intervene,
directly or indirectly, in any political campaign
on behalf of (or in opposition to) any candidate
for public office .... "
You can dismiss George Soros as a kooky rich man
who uses his money to collect politicians and
intellectuals the way some rich people collect
castles and old masters. And in a way he is
ridiculous, flying about the world, holding press
conferences and writing books and articles that
nobody can understand.
On the other hand, money can do a lot of harm in
politics, especially in poor, small countries.
Instability
IN BUDAPEST in 1944 George Soros lived a double
life. His father, a lawyer and editor of a journal
in Esperanto (a now almost forgotten effort to
develop a common language for the world), forged
official papers to disguise the family's Jewish
heritage. The papers saved the family, and during
the Nazi occupation, when German and Hungarian
fascist allies rounded up 300,000 Jews, young
Soros posed as the Christian godson of a Hungarian
government official. The 14-year-old George Soros
sometimes found himself accompanying his supposed
godfather as he seized the property of Jewish
families bound for slaughter.
Heroic? No, but how many heroes are there when
survival is the issue and resistance futile? It's
typical of Soros that he purports to remember that
time not as a terrifying ordeal but as an
adventure. "The happiest year of my life," he
calls it.
Read George Soros' frank personal statements and
meet the billionaire in his elegant but slightly
tatty London home-light switches falling out of
the wall, piles of laundry on the bathroom
floor--and you can't help but rather like the man.
Yet sometimes the openness seems a bit phony.
Example: After George Soros challenged Europe's
Exchange Rate Mechanism in 1992, becoming the "man
who broke the Bank of England" and probably the
first person to make $1 billion in a month, he
lectured: "It behooves the authorities to design a
system that does not reward speculators." Yeah, I
did it, but you shouldn't have let me. It's the
system. So he's a capitalist but hedges his bets
by supporting socialist causes.
The key to understanding George Soros is that he
skirts, by his own admission, a kind of lunacy.
It's both his strong point and his weak point.
"Next to my fantasies about being God," Soros told
British television, "I also have very strong
fantasies of being mad. In fact, my grandfather
was actually paranoid. I have a lot of madness in
my family. So far I have escaped it." Just.
One bout of instability came in the early 1980s.
His fund was doing extremely well when he walked
away from his partner, first wife and family. It
was a "very intense emotional process to correct
errors [in the financial markets]," he explains.
"The psychic cost of running the fund was very
high. The more successful I was, the more I was
punished by having more money to run."
During this turmoil Soros walked through the City
of London and was convinced--wrongly-that he was
having a heart attack. "It made me realize that
maybe it wasn't worth it. To have a heart attack
and be knocked out is really losing the game."
He spent a few years devoting himself to his
intellectual and charitable interests, remarried
and eventually pulled off his greatest financial
coup by betting against the British pound.
Unable to resist pondering his navel, eager to
dazzle with his erudition, Soros has produced
several books, all impenetrable to the point where
some people think he is pulling their leg. His
recently published Atlantic Monthly article, "The
Capitalist Threat," is a collection of pretentious
and incomprehensible musings about capitalism, the
implication being that, though he didn't mention
them by name,' Reagan and Thatcher were bad guys.
"The article was misunderstood," he says. "I was
not attacking the capitalist system. I was
attacking the excesses of the capitalist system."
Oh. When he went through his personal crisis in
the early 1980s, he says he felt he was acting out
the conflict between his parents. We couldn't
resist asking: Are you projecting onto capitalism
and the financial markets your own personal
anxieties?
"Maybe so," he answered. "The insecurity I feel
actually corresponds to the conditions in the
market better than the equilibrium that the
professors of economics deal with."
Looking into himself, Soros sees the world.
Looking at the world, he sees--George Soros.
Madness is close to genius.
