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Eastern Europe: Analysis From Washington--Capitalism Versus Democracy

Washington, 16 January 1997 (RFE/RL) - Challenging one of the most widely-held beliefs of the post-Cold War world, billionaire financier George Soros argued on Wednesday that capitalism may in fact subvert democracy rather than support it.

For the last decade at least, conventional wisdom in the West has been just the opposite. Western writers have regularly insisted that free market capitalism is a necessary -- if not always sufficient -- condition for the creation and maintenance of a democratic society.

They have based their argument on the fact that capitalism tends to decentralize power and thus create the possibility for the establishment of a civil society out of which a democracy can arise.

Such a perspective, of course, is of more than academic interest. It has led many Western countries to conclude that if they succeed in promoting free markets in post-communist countries, these states would almost magically become democratic without the need for specific intervention directed to that end.

But developments in many of these countries have called that happy assumption into question. In some of these states, moves toward free market capitalism have not led to democracy but rather toward greater authoritariansim. And in others, moves toward democracy appear unrelated to the pace of economic reform.

This lack of correspondence between expectations and reality has already led a number of people to question the assumptions underlying the prevailing view. But because of his prominence and special role in the region, Soros seems likely to set off a much broader debate on these issues.

As that discussion begins, it is important to keep in mind both what Soros has said and what he has not.

On the one hand, Soros has advanced an argument far broader than a simple rejection of the conventional view aboout the prospects for post-communist countries.

Writing in the Stockholm newspaper :Dagens Nyheter," Soros has called into question not only the role of free market capitalism in promoting democracy in formerly communist countries but also the role of capitalism in existing democratic societies.

He suggested that "the unrestrained intensification of laissez-faire capitalism and market values spreading through life is threatening the future of our open and democratic societies."

Among the threats now emanating from the free market capitalism, he said, were "exaggerated individualism, too much competition, and too little cooperation."

As a result, Soros said, ever more people have taken the view that everyone "should be left to look after themselves," an idea that subverted community both within countries and among them.

But on the other hand, Soros has in fact made a claim less broad than the one he appears to be making.

He argues against the "unrestrained" intensification of market forces, not market forces as such. And thus his attack on capitalism is less a call to arms against it as a system than an appeal for seeing democracy as an independent value and for using democratic procedures to limit the otherwise untrammeled forces of the market itself.

Soros' suggestion that the West must adopt programs designed to promote democratic institutions directly rather than rely on the forces of the market to do so for them is likely to prove to be his most influential argument.

But it too needs to be put in context. Twenty years ago, most Western policy analysts argued that democratic societies were likely to continue to move in the direction of a combination of free markets and an ever larger state sector.

That assumption was challenged by a number of Western and especially American theorists, and their intellectual victory coincided with the collapse of communism in Europe. And as a result, the new anti-statist perspective has guided much thinking and policy toward the former communist states.

In his article, Soros is thus not saying something quite as new and radical as he or some may believe.

Instead, he is suggesting that Western countries should return to an earlier perspective which he and others may see as offering a way out of the current political and economic difficulties of the countries in the former Soviet bloc.