The year 1944 was the formative experience of my life. I learned at an early age how important it is what kind of political regime prevails. When the Nazi regime was replaced by Soviet occupation, I left Hungary as soon as I could and found refuge in England.
At the London School of Economics, I developed my conceptual framework under the influence of my mentor, Karl Popper. That framework proved to be unexpectedly useful when I later found a job in the financial markets. The framework had nothing to do with finance, but is based on critical thinking. This allowed me to analyze the deficiencies of the prevailing theories guiding institutional investors. I became a successful hedge fund manager, and I prided myself on being the world’s highest-paid critic.
Running a hedge fund was very stressful. When I had made more money than I needed for myself or my family, I underwent a kind of midlife crisis. Why should I kill myself to make more money? I reflected long and hard on what I really cared about, and in 1979 I set up the Open Society Fund. I defined its objectives as helping to open up closed societies, reduce the deficiencies of open societies, and promote critical thinking.
My first efforts were directed at trying to undermine the apartheid system in South Africa. Then I turned my attention to opening up the Soviet system. I set up a joint venture with the Hungarian Academy of Sciences, which was under Communist control, but its representatives secretly sympathized with my efforts. This arrangement succeeded beyond my wildest dreams. I got hooked on what I like to call “political philanthropy.” That was in 1984.
In the years that followed, I tried to replicate my success in Hungary and in other Communist countries. I did rather well in the Soviet empire, including the Soviet Union itself, but it was a different story in China.
DICTATORSHIP WITH CHINESE CHARACTERISTICS
My first effort in China looked rather promising. It involved an exchange of visits between Hungarian economists who were greatly admired in the Communist world, and a team from a newly established Chinese think tank whose members were eager to learn from the Hungarians.
Based on that initial success, I proposed to Chen Yizi, the leader of the think tank, to replicate the Hungarian model in China. Chen obtained the support of Premier Zhao Ziyang and his reform-minded policy secretary, Bao Tong. A joint venture called the China Fund was inaugurated in October 1986. It was an institution unlike any other in China. On paper, it had complete autonomy.
Bao was its champion. But the opponents of radical reform, who were numerous, banded together to attack him. They claimed that I was a CIA agent and asked the internal security agency to investigate. To protect himself, Zhao replaced Chen with a high-ranking official in the external security police. Because the two organizations were co-equal, they couldn’t interfere in each other’s affairs.
I approved this change because I was annoyed with Chen for awarding too many grants to members of his own institute, and I was unaware of the political infighting behind the scenes. But applicants to the China Fund soon noticed that the organization had come under the control of the political police and started to stay away. Nobody had the courage to explain to me the reason for it.
Eventually, a Chinese grant recipient visited me in New York and told me – at considerable risk to himself – what had happened. Soon thereafter, Zhao was removed from power, and I used that as an excuse to close the foundation. This happened just before the Tiananmen Square massacre in 1989, and it left a “black spot” on the record of the people associated with the foundation. They went to great length to clear their names. Eventually, they succeeded.