From George Soros on Project-Syndicate.org. (Nov. 4, 2009), his vision of the new world order.
My comments are in italics.

NEW YORK – Twenty years after the fall of the Berlin Wall and the collapse of communism, the world is facing another stark choice between two fundamentally different forms of organization: international capitalism and state capitalism.

LILA: International capitalism is also state capitalism and state capitalism (Chinese) has its international face.

The former, represented by the United States, has broken down, and the latter, represented by China, is on the rise.

LILA: Again, state-capitalism is the system and China represents a different and more local, autarchic form of it, not an opposition to it.

Following the path of least resistance will lead to the gradual disintegration of the international financial system.

LILA: If the international financial system is the mess that it appears to be, gradual disintegration is the best thing that could happen to it. Why does Soros worry about it?

A new multilateral system based on sounder principles must be invented.

LILA: No doubt run by Soros & Co…

While international cooperation on regulatory reform is difficult to achieve on a piecemeal basis, it may be attainable in a grand bargain that rearranges the entire financial order.

LILA: Yes, negotiating your way peacefully is hard work because you have to respect other people’s rights and preferences. Naturally, a latent totalitarian like Soros would prefer a “grand bargain” (bargain, as in “hold to ransom” – after all, wasn’t that what the bankster bail-outs were about?)

A new Bretton Woods conference, like the one that established the post-WWII international financial architecture, is needed to establish new international rules, including treatment of financial institutions that are too big to fail and the role of capital controls.

LILA: Ah, yes. Now the banksters have got ahead of the competition, they have to cut them down to size and keep them manageable (too big to fail won’t apply to Government Sachs, I’m sure). And capital controls will prevent the population from eluding the tax-man.

It would also have to reconstitute the International Monetary Fund to reflect better the prevailing pecking order among states and to revise its methods of operation.

LILA: Let’s centralize power even more among the Western oligarchs, via the  little-known Financial Stability Board, while pretending to expand the IMF leadership to empower the G20.

In addition, a new Bretton Woods would have to reform the currency system. The post-war order, which made the US more equal than others, produced dangerous imbalances. The dollar no longer enjoys the trust and confidence that it once did, yet no other currency can take its place.

LILA: Indeed the dollar has lost world trust. Largely through the efforts of the speculator-hedge funds, banks and Federal Reserve that have colluded for a century, and most recently, since the 1970s, to turn the economy into a casino that works to their benefit and no one else’s.

The US ought not to shy away from wider use of IMF Special Drawing Rights. Because SDRs are denominated in several national currencies, no single currency would enjoy an unfair advantage.

LILA: The word “fair” here reveals that Soros is not for free markets, but for managed markets

The range of currencies included in the SDRs would have to be widened, and some of the newly added currencies, including the renminbi, may not be fully convertible.  This would, however, allow the international community to press China to abandon its exchange-rate peg to the dollar and would be the best way to reduce international imbalances. And the dollar could still remain the preferred reserve currency, provided it is prudently managed.

LILA: Yes. manage international currencies from a central board, so that insiders can rape the system more easily than they already do.

One great advantage of SDRs is that they permit the international creation of money, which is particularly useful at times like the present.

LILA: Take the money- making power outside national borders, where they might be under popular scrutiny and pressure.

The money could be directed to where it is most needed, unlike what is happening currently.

LILA: And George and his buddies (known and unknown) will decide where it’s most needed…which is already what they’re doing but they’d like to do more of the same, please

A mechanism that allows rich countries that don’t need additional reserves to transfer their allocations to those that do is readily available, using the IMF’s gold reserves.

LILA: Who determines what is “needed” or not? Soros? Countries with surpluses will be coerced into transferring allocations to where the banksters “need” them, with the IMF being the central exchange where there will be ample room for hanky-panky in obscure off balance-sheet transactions, double entries of all kinds, and special purpose vehicles.

Reorganizing the world order will need to extend beyond the financial system and involve the United Nations, especially membership of the Security Council. That process needs to be initiated by the US, but China and other developing countries ought to participate as equals. They are reluctant members of the Bretton Woods institutions, which are dominated by countries that are no longer dominant. The rising powers must be present at the creation of this new system in order to ensure that they will be active supporters.

LILA: Oh, doesn’t that sound good? Lure emerging markets into the same shady international game with promises of becoming one of the big boys.

The system cannot survive in its present form, and the US has more to lose by not being in the forefront of reforming it. The US is still in a position to lead the world, but, without far-sighted leadership, its relative position is likely to continue to erode. It can no longer impose its will on others, as George W. Bush’s administration sought to do, but it could lead a cooperative effort to involve both the developed and the developing world, thereby reestablishing American leadership in an acceptable form.

Lila: Didn’t Soros just write (see previous paragraph) that the developing countries were to be “equal”? Now he writes the US is to “lead the world” “far-sightedly”.  Only instead of openly “imposing its will,” Soros-style imperialism would refashion US hegemony into an “acceptable form.” (Bush with a French accent)

The alternative is frightening, because a declining superpower losing both political and economic dominance but still preserving military supremacy is a dangerous mix. We used to be reassured by the generalization that democratic countries seek peace. After the Bush presidency, that rule no longer holds, if it ever did.

LILA: Uh-oh. Scare tactics. A new Bretton Woods is needed because otherwise we’re going to whack you. We’ll do just like Bush did, and it will be your fault for not letting us “lead far-sightedly” with SDRs.

In fact, democracy is in deep trouble in America. The financial crisis has inflicted hardship on a population that does not like to face harsh reality.

LILA: The population would be able to face harsh reality if the media outfits you pay handsomely weren’t doling out propaganda all the time.

President Barack Obama has deployed the “confidence multiplier” and claims to have contained the recession. But if there is a “double dip” recession, Americans will become susceptible to all kinds of fear mongering and populist demagogy.

LILA:  Apparently, George wants to retain the monopoly of demagogy.

If Obama fails, the next administration will be sorely tempted to create some diversion from troubles at home – at great peril to the world.

LILA: If? Obama’s in full fail mode. And he’s done nothing but create diversions.

Obama has the right vision. He believes in international cooperation, rather than the might-is-right philosophy of the Bush-Cheney era. The emergence of the G-20 as the primary forum of international cooperation and the peer-review process agreed in Pittsburgh are steps in the right direction.

LILA: International arm-twisting is preferably to international storm-trooping, but actually, it looks like Obama does both. The G-20 is simply PR.  Real power is elsewhere.

What is lacking, however, is a general recognition that the system is broken and needs to be reinvented. After all, the financial system did not collapse altogether, and the Obama administration made a conscious decision to revive banks with hidden subsidies rather than to recapitalize them on a compulsory basis. Those institutions that survived will hold a stronger market position than ever, and they will resist a systematic overhaul. Obama is preoccupied by many pressing problems, and reinventing the international financial system is unlikely to receive his full attention.

LILA:  And the people who were in the forefront of breaking the system, the Fed Reserve and banksters, should now reinvent it?  And the banks are the only villains of the piece? Not the Federal Reserve or the hedge-funds or the regulators or the global agencies?

China’s leadership needs to be even more far-sighted than Obama is. China is replacing the American consumer as the motor of the world economy.  Since it is a smaller motor, the world economy will grow slower, but China’s influence will rise very fast.

LILA: Veiled threat here. If the US government doesn’t shape up the way he wants it, Soros and his buddies will use China to make it.

For the time being, the Chinese public is willing to subordinate its individual freedom to political stability and economic advancement. But that may not continue indefinitely – and the rest of the world will never subordinate its freedom to the prosperity of the Chinese state.

As China becomes a world leader, it must transform itself into a more open society that the rest of the world is willing to accept as a world leader.  Military power relations being what they are, China has no alternative to peaceful, harmonious development.  Indeed, the future of the world depends on it.

LILA:  The international system is free and China isn’t. For China to become free it must become more like the rest of the international system. It must change from a local, nationalistic state-capitalist system to allow complete domination by international globalists.

Copyright: Project Syndicate, 2009.
www.project-syndicate.org
For a podcast of this commentary in English, please use this link: http://media.blubrry.com/ps/media.libsyn.com/media/ps/20091103Soros.mp3