On Globalization by George Soros

Horn Tooting Scale: 4 Toots of the Horn

• 1 toot for being scholarly nonfiction
• 2nd for being by George Soros
• 3rd for being on the International Political Economy
• 4th for being practically incomprehensible :)

Points of Interest:

• Introduced me to the concept of SDRs - Special Drawing Rights - a strange amalgam supplementary currency available through the IMF that seems a lot like Monopoly money to me
• Though this book is not intended for a lay audience, it reminded me of things that I had learned in college that had shuffled down to the bottom of my consciousness
• Finally taught me what a discount window/rate is (rate at which the Federal Reserve loans money to a bank/corporation/etc.)
• The current floating currency exchange rate has been in existence only for about 30-40 years. Before that, a fixed exchange board was standard.
  
• George Soros really understands IPE

Synopsis:

This is a collection of George Soros' list of suggestions for reforming the international economic structure. The details of his ideas were very hard for me to follow, but as I read, I became aware of a dusty corner of my brain where I had stored information acquired while achieving my International Relations BA. Soros speaks more a idealist/realist perspective that acknowledges the realities of states self-interest while arguing for changes that could support state's interests while contributing to a better distribution of wealth to the peripheral states (Less Developed Countries - LDCs).

One of George Soros' suggestions is to allow recipient states to take ownership of foreign aid, while making them accountable for how the funds are allocated. He asserts that one of the reasons that foreign aid fails is that the IMF or World Bank requires that foreign experts control the development projects and that strict bureaucratic rules be followed that are not appropriate to all situations. He also suggests that in states with corrupt or repressive regimes, aid be funneled directly to community groups. Too often, corrupt governments co-opt aid meant for the people of their country.

When Soros began explaining how he would restructure the IMF, he started to lose me. I had never even heard of SDRs! It turns out that this is a currency deposit that can supplement a state's foreign reserves and is treated like a floating currency on the market. It is an amalgam of the US dollar, the pound sterling, the euro and the Japanese yen. The SDRs daily valuation is posted on the IMFs website. The weight of the currencies are reevaluated about twice per decade. All I can say is that if you'd like to learn more, Google it. Also, I finally learned what a discount rate is, the interest rate that national banks charge to loan money to other banks, corporations, etc. This gives me something else to worry about in terms of the US economy, because now I know that it's a little scary that the Fed has dropped the discount rate so much in the last 6 months. Soros wants LDCs to be able to borrow at the discount window of these banks. An interesting suggestion. He also wants to establish a procedure for nations to declare bankruptcy and to prevent that from happening.

Mostly, George Soros wants to address the inequities of the global financial market, to establish open societies, and to create greater standards of accountability in both foreign aid and foreign direct investment. He sees global capital availability declining and argues for an increase in fluidity in the market. Reading this book might be a struggle, but it will leave you feeling very proud of yourself. Have fun!