Click the link above for the audio of George Soros describing the current financial meltdown.
The full transcript of the interview with Bill Moyers and George Soros here. The wiki on Soros’ theory of financial markets is here. I’m reading Soros’ new book on the subject (as well as a few of his previous ones) for a paper for class. This guy is brilliant on this stuff. One of the few minds that really gets it (Nouriel Roubini, Peter Schiff, Michael Lewis & Crew, among others).
The key part is here:
GEORGE SOROS:Which they didn’t properly understand. And there was always a separation between the people who generated the mortgages and packaged them and sold them to you and the people who owned them. So nobody was paying attention to the quality of the mortgages because they didn’t have an interest. They — all day collecting fees. And then there were other people holding the mortgages.
I’m working on the issue of credit as growing from the notion of “belief” or “trust” (in Latin credere). Credere is the same root as Creeds. There was no ability to trust in this system because no one knew anyone else. Speculators, brokers, and the such are not the ones to be have been making these loans–from subprime on up, nor then those even further removed from the reality of relationship–e.g. those who did the securitization and SIVs and then later the CDOs on the SIVs.
That and the notion that human actions affect the market (what Soros calls ‘reflexitivity’) lie at the heart of the necessary re-think….Soros’ new paradigm. It follows in his decades long critique of economics as mimicking physics (via math). In other words, to make economics into a natural science–to describe economic behavior as conforming to natural laws. Even the more recent attempts to re-read economics along evolutionary, biological or chaotic theories has some benefit but is still trapped in what Ken Wilber calls “subtle reductionism” (as opposed to the earlier gross reductionism). For more on that distinction, this mind-blowingly brilliant manifesto by Christian Arnsperger.
So the economic theory (according to Soros) is based on the wrong psychology, the wrong anthropology really–that is the wrong view of the human being. Natural science-based economics thinking is suffering from what Whitehead termed “misplaced concreteness”. That means to confuse what is originally an insight or explanatory framework predicated on a certain context (usually a fairly easy to understand rather basic one) and universalizing that insight/frame to all contexts as if there were the “natural” state of affairs.
It is built on C.S. Peirce’s notion that what we call natural laws are actually habits in the universe. Everything starts as a moment of novelty or choice. But over time repeated actions habitutate and instantiate themselves into the woop and warp of the universe. What humans term natural laws are usually just the most basic, earliest, ways of being in the universe. They are so ground in through habitual patterning that they are essentially almost 100% determined.
In market terms, following Soros, the idea of homo economicus, the rational all-knowing actor in the market that guides so much thinking in these realms is a misplaced concreteness drawn originally from the realm of markets in durable goods, where the basic law of supply and demand and the equilibrium that grows out of those interactions basically holds. [They are in this analogy like the movements of gas molecules in a container--you can't predict how any one molecule will go but basically you can more or less predict how the entire set of molecules over time will interact].
But credit markets are not goods markets. And here we are back to choice and trust and the unknowability of the future and that the real and our actions interact and are responsive to one another. That the future is free and open. (Soros’ political vision is built out of this philosophical point). Hence the modernist worldview and formal operational cognition upon which it rides, assumes everything heads to equilibrium (in economics this is called Walrasian thought). Hence no regulation is necessary as everything left in its natural state will work out to the equilibrium–since all actors in the system are rational. Sound familiar?
Ultimately by disentangling economics from relationships (and hence from consciousness/feeling) we move into an etherealized reality, where economic value can be inflated to the point where value is accruing without any actual work/product being done. And then eventually that self-reinforcing (self-reflexive) mania will be exposed and then the house of cards comes falling down.
Religiously to have the wrong notion of the human being is to have the wrong notion of God–in other words to committ idolatry. Because humans are made in the image of God (so claims theology). To consider the market as a god (“the all-knowing” market). Idolatry socially comes out in the form of wrongly structured relationships. In the globalized frame, we exist to serve the markets, not they us. The fruit of that fundamental misinterpretation and mistaken practice is now coming to harvest.