George Soros: Financial Markets Are Inherently Unstable | 1998 | Summary and Q&A

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December 6, 2020
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George Soros: Financial Markets Are Inherently Unstable | 1998

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Summary

In this video, the speaker discusses the flaws and instability of the global capitalist system. They argue that the prevailing belief in market fundamentalism, which excludes government regulation and international institutions from the economy, is misguided. They emphasize that financial markets are inherently unstable and that imposing market discipline can result in further instability. They advocate for the introduction of additional principles, such as maintaining stability as an objective of public policy. The lack of global institutions is also highlighted as a challenge in tackling these issues.

Questions & Answers

Q: What is the prevailing belief in the global capitalist system, according to the speaker?

The prevailing belief in the global capitalist system is market fundamentalism, which argues that governments should not regulate the economy, and international institutions should not be involved. This belief is centered around the idea of laissez-faire, but the speaker suggests that market fundamentalism is a more accurate term to describe this belief.

Q: What is the speaker's opinion on market fundamentalism?

The speaker believes that market fundamentalism is built on the wrong principles, as financial markets are inherently unstable. They argue that this goes against the received wisdom of economic theory, which promotes the idea of equilibrium. By imposing market discipline, which is often advocated, the speaker argues that instability is being further imposed. They suggest the need for an additional principle, which is maintaining stability as an objective of public policy.

Q: With the presence of a global economy, why does the speaker think global institutions are necessary?

The speaker believes that global institutions are necessary because we now have a global economy, but lack the corresponding global institutions to regulate it. While national institutions exist and are functioning well, the absence of international institutions poses a challenge. The speaker emphasizes that the global capitalist system cannot rely solely on national institutions to address the inherent instability of financial markets.

Q: What advice does the speaker give to policymakers regarding these challenges?

The speaker suggests that as soon as the current issues subside, there should be a serious re-examination of the system. They argue for institutional changes and propose improvements to the existing international institutions, such as the IMF and the World Bank. Drawing from historical examples like the Bretton Woods Conference, the speaker argues for a similar discussion on necessary actions and improvements to address the challenges of the global capitalist system.

Q: Does the speaker believe that the international institutions should be abolished?

No, the speaker does not believe that the international institutions like the IMF and the World Bank should be abolished. They actually argue that we are fortunate to have these institutions, as they have prevented the collapse of the system multiple times in the past. However, the speaker suggests that just as central banking has evolved and improved in response to crises, the international institutions also need to adapt to the current challenges and strengthen their roles in regulating global financial markets.

Takeaways

The speaker highlights the flaws of the global capitalist system, emphasizing the instability of financial markets and the misguided belief in market fundamentalism. They argue for the introduction of additional principles, such as maintaining stability as a goal of public policy. The lack of global institutions is seen as a challenge, and the speaker advocates for serious examination and improvement of existing international institutions like the IMF and the World Bank. While they acknowledge the importance of these institutions in preventing system collapses, they also emphasize the need to adapt and strengthen them to address the current demands of the global economy.

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