Europe South Asia Asia Pacific Americas Middle East Africa BBC Homepage World Service Education

Front Page



UK Politics







Talking Point
On Air
Low Graphics

Tuesday, September 15, 1998 Published at 20:24 GMT 21:24 UK

Business: The Economy

Capitalism 'falling apart'

George Soros: Earlier predictions of economic crisis in Russia

International investor George Soros has warned that the global capitalist system is "coming apart at the seams."

George Soros in Washington: "The US Congress bears an awesome responsibility"
Mr Soros said the panic withdrawal of capital which had spread to Latin America could lead to financial collapse in Brazil and then spread to Argentina.

He warned that a "global credit crunch" was in the making and would probably lead the world into recession.

He also slammed the West's response to the Russian crisis and called for greater intervention by leading nations if a full blown crisis was to be averted.

George Soros: "We need to pump money directly into countries"
He described the leading industrial nations' response to the financial market meltdown in Russia as "woefully inadequate".

Mr Soros was testifying before the US House of Representatives Banking Committee.

Call for greater intervention

Mr Soros said further turmoil could only be prevented "by the intervention of international financial authorities but these prospects are dim."

He said the global capitalist system involved not only free trade, but more importantly, the free movement of capital in "a gigantic circulatory system" in which capital was sucked up by markets and institutions at the centre and pumped out to the periphery.

Mr Soros said the Asian crisis had reversed the direction of the flow of capital. It had begun to flee the periphery, taking refuge in the centre.

This was not good for either the periphery or the centre in the long term.

New rescue agency

Mr Soros renewed a previous call for a new global credit insurance body to complement the efforts of the International Monetary Fund (IMF) and World Bank.

Mr Soros proposed the creation of special drawing rights whereby countries which could not repay their debts could restructure their loans to easier terms if their governments pursued policies approved by the IMF.

[ image: Russian crisis: A
Russian crisis: A "wake-up call"
He said countries should be rewarded for biting the bullet and confronting their problems - unlike Malaysia which has closed itself off to the world in a negative move that would hurt its neighbours.

"If there is no reward for good behaviour, meltdowns will multiply," he said.

He said the loan programmes of the IMF had so far not worked but urged the US Congress to pass the IMF funding bill the agency needs to continue its work.

"Unless Congress is willing to support the IMF the disintegration of the global capitalist system will hurt US financial markets because we are the centre of the system."

Advanced options | Search tips

Back to top | BBC News Home | BBC Homepage | ©

The Economy Contents

Relevant Stories

15 Sep 98 | The Economy
Clinton calls for global summit to stave off collapse

13 Aug 98 | Europe
Soros says Russian economy faces meltdown

Internet Links

US House of Representatives banking committee: George Soros testimony

International Monetary Fund

Soros Foundation: George Soros biography

Soros Foundations Network

The BBC is not responsible for the content of external internet sites.

In this section

Inquiry into energy provider loyalty

Brown considers IMF job

Chinese imports boost US trade gap

No longer Liffe as we know it

The growing threat of internet fraud

House passes US budget

Online share dealing triples

Rate fears as sales soar

Brown's bulging war-chest

Oil reaches nine-year high

UK unemployment falls again

Trade talks deadlocked

US inflation still subdued

Insolvent firms to get breathing space

Bank considered bigger rate rise

UK pay rising 'too fast'

Utilities face tough regulation

CBI's new chief named

US stocks hit highs after rate rise

US Fed raises rates

UK inflation creeps up

Row over the national shopping basket

Military airspace to be cut

TUC warns against following US

World growth accelerates

Union merger put in doubt

Japan's tentative economic recovery

EU fraud costs millions

CBI choice 'could wreck industrial relations'

WTO hails China deal

US business eyes Chinese market

Red tape task force

Websites and widgets

Guru predicts web surge

Malaysia's economy: The Sinatra Principle

Shell secures Iranian oil deal

Irish boom draws the Welsh

China deal to boost economy

US dream scenario continues

Japan's billion dollar spending spree