American and European leaders have made political decisions that worsened the economic crisis, philanthropist and economist George Soros told a packed audience in Low Library on Tuesday.
A recent addition to the World Leaders Forum, Soros spoke about the effects of politics on post-2008 economic recovery.
Blaming the crash on excessive credit use and borrowing, he said that the solution lies in replacing private with public credit in order to restore confidence in the market.
But due to politics and public misconceptions, Soros said that American and European leaders have made decisions that only exacerbated the crisis.
“They had to do in the short term the exact opposite of what would be needed in the long term,” Soros said.
Republicans, he said, framed the crisis as the fault of government, forcing the Obama administration to react politically to an economic issue. “The policies of the Obama administration are dictated not by financial necessity, but by political considerations,” he said.
Despite this, Soros said he also believes that the stimulus package was necessary and, despite its flaws, it helped weaken the duration and impact of the recession. He also said that an additional stimulus would be necessary, but that this would be impossible in the current political climate.
“What stands in the way are misconceptions about budget deficits exploited for partisan and ideological purposes,” Soros said.
He cautioned strongly against political solutions for economic problems, saying that the United States must reduce imbalances while keeping the debt burden to a minimum. He also cited the importance of investment in certain areas such as infrastructure and education.
In the question and answer session that followed, many inquired about Soros’ proposed relationship between economics and politics. “Misconceptions are very important in shaping history,” Soros said in response to one question. “False interpretations of reality exert remarkably far-reaching influences.”
Soros also said that politics and economics will remain intertwined so long as legislators need money from special interest groups to get elected. In response to a question on how to separate the two, he said, “I think it would require a change in ethical standards,” adding, “It’s so clear what the right policies ought to be ... But politically they are not attractive.”
Audience members after the speech said they were impressed with Soros’ arguments.
Marc Perez, a Ph.D student in the School of Engineering and Applied Science, said, “I think he [Soros] highlighted a lot of misconceptions that Americans and a lot of people around the world have…and how these are leading now in the political debate to fiscal policies that aren’t in the right direction.”
Patrick Bolton, a professor of business and economics, added, “It was a really masterful lecture. ... Soros’ pessimism on the stimulus and political constraints is right on target.”
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