On the Tenth Anniversary of the foundation in Russia, October 7, 1997
     
Speech at the Gala Reception
Commemorating the 10th  Anniversary
of the Foundations in Russia
Moscow, 7th October 1997 
     
     
   I should like to start by exploring how it happened that I became so deeply
engaged in Russia.  Because there can be no doubt I am deeply engaged.  For the 
last ten years, I have devoted much of my thoughts and energies and significant 
amounts of money to Russia.  I was of course involved in many other countries 
which were emerging from communist domination but I can truly state that Russia 
loomed very large both in my thinking and in my activities.  Moreover, I have 
very special feelings towards the people of Russia.
     
   My foundation, particularly in its work in preserving science and science
education, in introducing Internet, in publishing textbooks and saving the thick
journals has made a major contribution to Russian culture.  People are aware of 
the foundation and even those who are opposed to my political views respect its 
work.  Both the foundation and I personally have been often attacked, sometimes 
quite savagely, by people who resent foreign influences or oppose the idea of an
open society or suspect my motives.  A few years ago there was a hostile 
investigation of the Science Foundation in the Duma, but, after holding 
hearings, the Duma ended up by passing a vote of thanks.  And I personally feel 
a genuine sense of appreciation here in Russia, more perhaps than in any other 
country.  Moreover, I consider the appreciation well-deserved because I have 
genuinely tried to help during a period of great dislocation and distress.  I 
have tried to mitigate the pain and suffering involved in the collapse of the 
soviet system but, even more, I tried to help the transition to a better kind of
society.
     
   The extent of my involvement is quite unusual.  Those who are puzzled by it
and question my motives are right to do so.  I am a little puzzled myself and I 
shall try to analyze my motives for my own enlightenment as much as for the 
general public.  As in most cases where I find myself deeply involved I can 
discern two levels of involvement.   One is abstract and the other is personal.
     
   On the abstract level, I am inspired by the concept of the open society.  The
best way to define the concept is to point to its opposite, namely the communist
system as it used to function until it ceased functioning.  Not only was the 
Soviet Union closed to the outside with all the restrictions on travel and 
information with which you are familiar, but it was also closed on the inside. 
The official doctrine was supposed to supply all the answers and anybody who 
disagreed with it was treated as a dissident.  I consider such a system 
intolerable, because no authority can have all the answers.   Therefore an 
official doctrine of this kind can be imposed only by force.  We all know by now
to what extremes compulsion was carried during Stalin's time.  
     
   Following in the footsteps of the philosopher Karl Popper I prefer another
form of social organization, an open society which is based on the recognition 
that nobody is in possession of the ultimate truth.  In an open society people 
are not only allowed but required to think for themselves and the state is there
to serve the people rather than to rule their lives. 
     
   I have become a passionate advocate of the open society because I learned at
an early age how important it is what kind of regime prevails.  Growing up in 
Hungary, as a Jew, I could have been killed by the Nazis when they occupied the 
country during the war.  And, if I had stayed there afterwards I could have 
wasted my life under a communist regime.  Thanks to the wisdom of my father, I 
survived the war and after the war I emigrated first to England and then to 
America.  When I had made more money than I needed for myself and for my family,
I decided to set up a foundation inspired by the concept of the open society. 
Its objectives were to help open up closed societies, help make open societies 
more just, stable and equitable and to foster a critical mode of thinking.  That
was in 1979.  It led me to the establishment of the Soros Foundation in Hungary 
in 1984.
     
   When Gorbachev placed a telephone call to Sakharov in Gorky December 1986 and
asked him to return to Moscow to resume his patriotic activities, I realized 
that something had changed in the Soviet Union.  If Sakharov had been forced to 
leave the country it would have been business as usual.  But the fact that he 
was allowed to return to Moscow was a signal to me that something had 
fundamentally changed.  That is when I decided to come to Moscow and to try to 
set up a foundation here.
     
   On a personal level, I had gotten to know Russia through the eyes of my
father.  He had been an officer in the Austro-Hungarian army in the First World 
War and he was taken prisoner by the Russians and put in a prisoner of war camp 
in Siberia.  In the camp, he was elected the prisoners' representative.  When 
some prisoners escaped from a neighboring camp, the elected representative was 
shot in retaliation.  My father decided not to wait for a similar event in his 
camp, he preferred to be the prisoner who escapes.  So he got together a small 
band and they broke out.  Their plan was to build a raft and drift down to the 
sea but their knowledge of geography was deficient.  It took them several weeks 
before they realized they were drifting towards the Arctic Ocean, then it took 
them several  months to work their way back through the Taiga.   In the 
meantime, the revolution had broken out and they got caught up in the fighting. 
My father went through many horrendous adventures, but he managed to survive. He
made his way back to Hungary several years later and married my mother.  When I 
was eight to ten years old he used to regale me with his adventures in 
installments.  Every day after school we met at the swimming pool and he told me
part of the story.
     
   Later on, when the Soviet army occupied Hungary liberating us from German
occupation, I had my own adventures with Russian soldiers, so I got to know the 
Russian people but not in a very favorable light.  On a more positive note, I 
also got to know Russian culture.  I read most of  the classics of  Russian 
literature during and after the war and they made a big impression on me.  I 
also got to know the Soviet system in Hungary both before I emigrated in 1947 
and after I returned to set up a foundation there in 1984.  I had also studied 
the history of the Soviet Union so when I came to Moscow in 1987 I did not come 
as a stranger.  I seemed to find my way around better than could be expected 
from a foreign visitor.  I sought out Sakharov because I wanted to build the 
foundation around him.  But he advised me against it.  "You will end up lining 
the coffers of the KGB," -- those were his exact words.  What he forgot to take 
into account is that he was not dealing with a naive American, but with a not so
naive Hungarian.  Later, he was happy to admit his mistake.
     
   I shall not give you a blow by blow history of the foundation.  It is a
fascinating story but it would take far too long.  Let me sum it up this way. My
hope was that the foundation would spearhead the transition from a closed to an 
open society.  As it happened, the foundation itself got caught up in the 
process of transition and instead of leading the process, we went through the 
same difficulties as the rest of society.  
     
   We started out as a Soviet organization.  The people working in the
foundation could not shed their Soviet upbringing.  The result was that the 
foundation functioned as a closed society for the promotion of open society.  To
break this pattern I had to organize a putch.  This was in July 1991, just in 
time for the August putch.  This put us in a favorable position to help 
establish the institutions of an open society in the months after the August 
putch and I was fully determined to take advantage of this historic opportunity.
Unfortunately, the man who organized our own putch turned out to be worse than 
the people he replaced and disobeyed my instructions.  So I had to organize 
another putch to get rid of him but in the meantime the historic opportunity was
lost. 
     
   Even then our troubles were not over.  The next crisis was a reflection of
the next phase of development in Russian society.  Everything was for sale and 
money was scarce.  The temptation was too great and we discovered that the 
foundation kept a large deposit in a less than reliable bank.  We didn't lose 
any money and there was no actual crime involved but we had to have another 
thorough reorganization. That is when we wound up the Cultural Initiative 
Foundation and established the Open Society Institute as its successor.  Finally
we have a good organization.
     
   As you can see, the history of my involvement in Russia can hardly be
considered a chain of easy decisions and success stories.  Yet I feel that I 
have not wasted my time and money.  We were the first and we paved the way for 
others.  Even our opponents have to admit that we made a difference. We changed 
the lives of thousands of Russians - and changed them for the better. We 
supported Russian science during the most difficult and the most painful period 
of its transformation. We invested heavily in Russian education when the system 
started to fall apart. We launched major programs in the fields of culture, 
communications and environment. Whether you like it or not,  there is no other 
foundation in Russia today, whose impact on various sectors of the Russian 
society is more significant.
     
   The difficulties and frustrations I encountered in Russia are nothing
compared to the trials and tribulations that the people who live here have had 
to endure.  An all-encompassing totalitarian state collapsed.  It was an event 
almost without parallel in history and it disrupted people's lives in ways for 
which they were not prepared.  The economy disintegrated, law and order broke 
down and everyone had to fend for himself as best he could.  The old order was 
followed by disorder. Public safety was the first activity that was thoroughly 
and successfully privatized.
     
   Eventually a new order began to emerge.  I call it "robber capitalism" 
because practically the only way to accumulate capital was to steal the assets 
of a disintegrating state.  At first, the state itself was paralyzed and 
practically worthless.  Only some idiots thought that it was worth stealing -- 
they are the ones who perpetrated the putch of August 1991.  But as the process 
advanced and some people managed to acquire property, the state began to be 
valuable again because the state is the source of legitimacy.  By the time of 
the last elections it became very important who won it.  It is well known that 
the main capitalists suspended their feuds in order to ensure the reelection of 
President Yeltsin.
     
   After the elections, what I call the robber-capitalist system was
consolidated and a new oligarchy emerged.  The new order is a far cry from the 
open society that I and many others believe in.  I regard it as a travesty of an
open society.  To illustrate, open society is supposed to have free and 
independent media.  There is almost complete freedom of speech in Russia today, 
but the media are owned by competing groups of capitalists who use the media to 
further their own interests.  I have to ask myself, what is the relevance of the
concept of open society to Russia today?  It is a question that troubles me a 
great deal.
     
   It is very tempting to give a negative answer.  Open society is an abstract
idea, a universal concept and as such it is not part of the real world except as
an idea which inspires people.  But events as they unfolded since the collapse 
of the Soviet empire were not inspired by the idea of open society.  People have
been far too busy finding their own place in society or simply trying to survive
to worry about universal ideas.  And if they stopped to think about open 
society, they might say that communism was also a universal idea and look where 
it has brought us.  What is worse, the open societies of the west did not show 
any great commitment to the concept of open society, otherwise they would have 
reacted very differently to the collapse of the Soviet system.  They would have 
followed my example and would have helped to lay the groundwork for an open 
society.  Had they done so, I am convinced that history would have taken a 
different course.  But the idea hardly entered their minds.  After the collapse 
of Nazi Germany, there was the Marshall Plan; but when I suggested something 
similar, I was literally laughed at.  I must confess that has been my greatest 
disappointment.  I think I anticipated and understood the collapse of the Soviet
system better than most people.  I wrote a book about it in 1990 which, if you 
read it today, proves this point.  But I made one big mistake:  I misjudged the 
western reaction.  
     
   Since I am a believer in critical thinking I must ask myself, isn't open
society an unrealistic, irrelevant idea if neither the people in the west nor 
the people in Russia believe in it?  This is a conclusion which is hard to 
escape.  And yet -- I can also see a more positive way of looking at the 
situation.  The idea of the open society is not properly understood either in 
Russia or in the west, but if they understood it better, it could inspire them. 
People are aware that there is something fundamentally wrong with the present 
state of affairs.  They are more aware of it in Russia than in the west because 
the situation is in fact much worse, but there is also a sense of malaise in the
west.  I see a possibility that Russia could show the world the way to an open 
society.
     
   Open society is not a foreign idea imported from the West like Coca Cola or
MTV clips.  It is what people were yearning for during the Czarist and Communist
oppression.  The idea, if not the actual phrase, was a recurrent motif in 
nineteenth and early twentieth century philosophy and literature. 
     
     
   There are many disappointed people in Russia who are so disgusted with the
present state of affairs that they would prefer to return to the Soviet regime. 
And even if they recognize that the communist way of organizing the economy 
cannot possibly work, they yearn after a Russia that is as once again a great 
and powerful state.  They feel that Russia has been humiliated because it is 
weak and they want to redress the situation by making Russia strong.  Just like 
Hitler in Germany, they think in terms of military power.  But that is the road 
to disaster.   It would mean a return to a repressive and capricious central 
authority because Russia is just too big for a central authority to be anything 
but repressive and capricious.  The history of Russia consists of long periods 
of authoritarian rule interrupted by brief periods of revolutionary change. Must
past history repeat itself?
     
   There is another way: a decentralized, democratic Russia in which people are
not only allowed but required to think for themselves. There has to be a 
functioning state but the state doesn't need to rule the people the way the 
Czars or Stalin or the Central Committee used to rule.  There has to be a 
government but its powers could be divided between the central authority and 
various local authorities because, given the size of the country, there can be 
no democratic government without a great deal of decentralization.  The powers 
of the central authority need to be similarly divided among the executive, 
legislative, and judiciary branches with the appropriate checks and balances 
between them.  The military would be subject to civilian rule and the interior 
forces, if there are any, would be subject to very severe safeguards. 
Similarly, property would not be concentrated in a few hands.  There would be a 
market economy regulated by laws.  People would be free to think, to speak and 
to chose their way of life.  That is what I call an open society.
     
   Is it possible to hope and strive for such a society in Russia?  I believe so
-- and I have a reasonably good judgement on these matters even if I misjudged 
the western reaction to the collapse of the Soviet empire.   What makes my 
judgement better than most people's is that I'm willing to recognize my 
mistakes.  I foresaw the economic social and moral collapse which has occurred 
and I expected even worse.  It is all in my book written in 1990.  It was my 
fear of the worst that drove me to do whatever I could to prevent it from 
happening.  But for the first time since I became involved in Russia, I can see 
a realistic prospect of Russia moving in a more positive direction.  By this I 
mean moving from robber capitalism and the travesty of open society towards a 
more legitimate form of capitalism and something resembling an open society.
     
   I should explain what has made me more optimistic.  First, the collapse of
the old regime has run its course and the worst did not happen.  According to 
all the indications the economy has reached bottom and it has done so without 
the bottom totally falling out.  I was afraid that the vital supply lines may be
disrupted and people may starve or freeze in the winter.  A lot of people have 
suffered, but the worst is over.  Secondly, most people find the present state 
of affairs intolerable.  Very few would like to see it continued.  This holds 
true for those who are suffering in the new regime as well as for those who are 
better off.  This means that the present situation will not last.  The only 
question is, in what direction will it change.  That brings me to my third 
point.  The executive branch of the government is currently in the hands of 
people who would like to see Russia move in the direction of an open society.  I
don't agree with everything they are doing and certainly not with what they have
done.  But I do give them credit for their intentions.  Russia is very fortunate
that it has a few people in key positions who would like to see Russia became a 
more lawful and open society.  They realize that they don't have very much time 
because the discontent is very high and they must produce positive results 
within the next three years if they don't want to be swept from power.  This is 
the argument that leads me to believe that at least an attempt will be made to 
produce positive results.  It may not succeed and even if some progress is made 
it may not be enough to assure them of success in the next elections.  But in 
the near future at least, events ought to be moving in a positive direction.
     
   I am stating not my hopes but my expectations.  To show how serious I am
about it I can tell you that as an investor I have moved a significant amount of
money into Russian stocks.  My investment funds have invested more than $2 
billion in Russia.  This amounts to more than 10% of our assets.  This was not 
an easy decision for me and I must confess that the first purchases, and those 
were the most profitable ones, were made by my investment managers against my 
advice.  I was too much aware how lawless the investment scene was and I did not
want to be a part of it.   My attitude changed only recently.  I can tell you 
exactly when it happened: when Yeltsin invited Boris Nemtsov to join the 
government.  Just as Gorbachev's phone call to Sakharov was my signal to set up 
a foundation in the Soviet Union, Nemtsov's appointment was my signal for 
investing in Russia.  I want to emphasize that I was pinning my hopes not on 
Nemtsov as a person - although I know him well and have high regard for him  - 
but on the fact that someone who was not involved in Yeltsin's election campaign
and was not bound by any obligations incurred during that campaign was brought 
into the government.  I took this as a sign that the government was determined 
to move beyond the phase of robber capitalism and establish legitimacy. 
Subsequent events have reinforced my judgement although there is still a very 
long way to go.
     
   It was a very difficult decision for me to become an investor in Russia.  As
a philanthropist, I was above the fray; as an investor I became part of it.  So 
becoming an investor is a big comedown for me: a descent from Mt. Olympus.  From
the heights of Mt. Olympus it was easy to distinguish between right and wrong. 
Once you descend everything becomes much more complicated and nuanced.
     
   Nevertheless, I decided to descend, impelled by a combination of motives. 
One motivation was that I saw a great opportunity for profit.  As Russia moves 
from robber capitalism to legitimate capitalism, shareholders' rights become 
better respected and shares become more valuable.  But that was not the only 
consideration.
     
   It so happens that I also believe that the inflow of foreign investment could
be the salvation of Russia.  The ownership of assets is far too concentrated in 
a few hands in Russia today.  A financial oligarchy has emerged which is very 
unhealthy for the economy.  Capital is far too scarce and therefore it expects 
to earn exceptionally high returns.  Only the inflow of foreign capital could 
get the economy moving, and to attract foreign capital the robber capitalist 
system must be reformed.  The government has shown that it recognizes the 
validity of this argument and that is what has made investing in Russia 
attractive.
     
   Investing is not philanthropy. Let me make it absolutely clear that as an
investor my decisions are guided by profit considerations.  For instance, I 
would have no hesitation in selling my shares at the appropriate time.  But the 
decision to become engaged in investing was influenced by what is good for 
Russia.  Foreign investors are anything but angels; but in this case they are 
badly needed.    By confining myself to philanthropy, I could have stayed above 
criticism while as  an investor, I would expose myself to dirt - and the 
Svyazinvest auction did stir up a lot of dirt.  I deliberately exposed myself to
the dirt because I believed that by participating in the Svyazinvest auction I 
would hasten the transition from robber capitalism to legitimate capitalism.  I 
am very happy with my decision.  The Svyazinvest auction was a giant step 
forward in establishing legitimate auctions.  It brought significant revenues to
the State, helping the State to pay off its salary arrears - and  when those 
arrears are cleared the economy will begin to function much better.  The 
controversy and publicity surrounding the auction has made it very difficult to 
revert to the insider deals which prevailed previously.  Ironically, the losers 
reinforced the process of transition by complaining so loudly.
     
   But legitimizing capitalism and attracting foreign capital is not sufficient
to turn Russia into an open society.   After all, open society is based on the 
recognition that nothing is perfect in this world.  Capitalism is no exception. 
Capitalism breeds inequality; it brings instability; it spawns monopolies and 
oligopolies with all negative consequences and it does not, by itself, assure 
democracy.
     
       There is more to open society than capitalism.  There must be social
values not only market values.   There must be a belief in freedom and justice 
which takes precedence over the pursuit of self-interest.  I have been very 
critical of the open societies of the west for their lack of faith in the 
concept of the open society. I may be naive and idealistic, but I have great 
hopes for Russia in this respect.   It is in the Russian character to have 
faith.  And the people in Russia have good reason to value freedom and justice 
exactly because they have had so little of it.  Their yearning for freedom and 
justice could not be crushed even by the worst terror.   I don't believe it has 
been crushed by the disappointments and dislocations of the last 10 years.  I am
sure it can be revived.  That is why I believe that Russia has something to 
teach the rest of the world.  It can teach the open societies of the west about 
the meaning of open society.  That is the way for the Russian spirit to 
demonstrate its greatness.
     
   That is the hope that has brought me to Russia as a philanthropist.  Now that
I have also become an investor I am ready to expand my activities as a 
philanthropist, because, as I have said before, capitalism on its own will not 
lead to an open society.  But I realize that in the end it does not depend on me
whether my hopes will be fulfilled.  It depends on the people of Russia.  That 
is why I asked the Board of my Foundation which consists of Russian citizens who
believe in an open society to propose a strategy how best I could spend my 
money.  Now that the strategy paper  is ready, I had it published and I want it 
publicly discussed.  I shall travel around the country and meet many people. On 
my return, I shall announce my plans. At the same time,  I want to ask the 
Russian public two questions:   Do you think the idea of the open society has 
any relevance to Russia today?  Do you want Russia to become an open society?  I
look forward to your answer.