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The Open Society Institute and Central European University: Three Campuses, Three Outcomes

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The Open Society Institute and Central European University: Three Campuses, Three Outcomes Center for Strategic Philanthropy and Civil Society Teaching Case Revised: April 26, 2007 The Open Society Institute and Central European University: Three Campuses, Three Outcomes GEORGE SOROS Born in Budapest in 1930, George Soros grew up in a family of educated, middle-class, secular Jews. Thirteen years old when the Nazis overran Hungary and began deporting the country’s Jews to extermination camps, Soros managed to escape capture during the war. In 1946, as the Soviet Union took control of Hungary, Soros attended a conference in the West and defected. He arrived in England in 1947 and supported himself by working as a railroad porter and a restaurant waiter while attending university. At the London School of Economics, Soros became acquainted with the work of Austrian- born philosopher Karl Popper, whose ideas on open society had a profound influence on Soros’s intellectual development. Soros’s experience of Nazi and communist rule attracted him to Popper’s critique of totalitarianism, The Open Society and Its Enemies, which maintained that societies can flourish only when they allow democratic governance, freedom of expression, a diverse range of opinion, and respect for individual rights. After graduating from the London School of Economics, Soros obtained an entry-level position with an investment bank. In 1956 he immigrated to the United States, working as a monetary trader and analyst until 1963. During this period, Soros adapted Popper’s ideas to develop his own theory of “reflexivity,” a set of ideas that seeks to explain the relationship between thought and reality. By applying reflexivity to monetary markets, he successfully anticipated, and profited from, emerging financial bubbles. He soon concluded that he had more talent for trading than for philosophy. In the late 1960s Soros helped establish an offshore investment fund, and he set up a private investment firm that evolved into one of the first hedge funds. “I used the financial Teaching Case Writing Program Director Barry Varela prepared this teaching case under the supervision of Professor Joel Fleishman and Associate Professor Kristin Goss as a basis for class discussion rather than to illustrate either the effective or ineffective handling of an administrative situation. Copyright © 2006 by Duke University. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Duke University. The Open Society Institute and Central European University: Three Campuses, Three Outcomes 2 markets as a laboratory for testing my ideas,” Soros wrote in 1991. “The results were rather encouraging: one thousand dollars invested in my fund, the Quantum Fund, at its inception in 1 1969 has grown to more than half a million dollars by now.” VARIETIES OF TOTALITARIANISM AND POST-TOTALITARIANISM: HUNGARY, CZECHOSLOVAKIA, POLAND Among political theorists, the standard taxonomic model divides modern Western political systems into three major regime types: democracy, authoritarianism, and totalitarianism.2 Democracy is characterized by high levels of political, economic, and social pluralism; respect for individualism, the rights of minorities, and the rule of law; little state-sponsored mobilization but high voluntary participation in civil society; and the conduct of free elections.3 Authoritarian regimes may permit a fair degree of economic and social pluralism; engage in little state-sponsored mobilization; and are not guided by a utopian ideology. Power is exercised without the consent of the governed by a leader or small group of leaders who operate within rules that are often poorly defined formally but predictable in practice.4 Argentina under Perón is an example of an authoritarian state. In contrast, a regime can be characterized as totalitarian if it: . has eliminated almost all pre-existing political, economic, and social pluralism, has a unified, articulated, guiding, utopian ideology, has intensive and extensive mobilization, and has a leadership that rules, often charismatically, with undefined limits and great unpredictability and vulnerability for elites and nonelites alike.5 The Soviet Union under Stalin, and China under Mao, are examples of totalitarian states. Linz and Stepan observe that totalitarianism may decline from the ideal type, however, without evolving into either democracy or authoritarianism. They argue that such dissipated regimes form a fourth distinct major regime type, the post-totalitarian. In post-totalitarian states, limited social, economic, and institutional pluralism is permitted; lip service is paid to the guiding ideology, but actual faith in it weakens; mobilization of the population in regime-created organizations wanes; and political leadership becomes less charismatic and more technocratic. The Soviet Union of the 1970s and 1980s is an example of a post-totalitarian state. For a summary of Linz and Stepan’s four defining regime characteristics (pluralism, ideology, mobilization, and leadership), see Exhibit A, “Regime Types: Totalitarianism versus Post- Totalitarianism.” Irony and cynicism are perhaps the defining features of daily life in a post-totalitarian society. The Czech playwright and dissident Václav Havel captured the mindset of people living under post-totalitarianism: 1 Soros, George, Underwriting Democracy. New York: Free Press, 1991, p. xiii. 2 Linz, Juan J., and Alfred Stepan, Problems of Democratic Transition and Consolidation: Southern Europe, South America, and Post-Communist Europe. Baltimore: John Hopkins University Press, 1996, p. 38. The analysis of regime types, totalitarianism, and post-totalitarianism in this case study borrows heavily from the work of Linz and Stepan. 3 Linz and Stepan, Problems of Democratic Transition and Consolidation, pp. 44-45. 4 Linz and Stepan, Problems of Democratic Transition and Consolidation, pp. 44-45. 5 Linz and Stepan, Problems of Democratic Transition and Consolidation, pp. 40. The Open Society Institute and Central European University: Three Campuses, Three Outcomes 3 The post-totalitarian system touches people at every step, but it does so with its ideological gloves on. This is why life in the system is so thoroughly permeated with hypocrisy and lies: government by bureaucracy is called popular government; the working class is enslaved in the name of the working class; the complete degradation of the individual is presented as his or her ultimate liberation; depriving people of information is called making it available; the use of power to manipulate is called the public control of power, and the arbitrary abuse of power is called observing the legal code; the repression of culture is called its development; the expansion of imperial influence is presented as support for the oppressed; the lack of free expression becomes the highest form of freedom; farcical elections become the highest form of democracy; banning independent thought becomes the most scientific of world views; military occupation becomes fraternal assistance. Because the regime is captive to its own lies, it must falsify everything. It falsifies the past. It falsifies the present, and it falsifies the future. It falsifies statistics. It pretends not to possess an omnipotent and unprincipled police apparatus. It pretends to respect human rights. It pretends to persecute no one. It pretends to fear nothing. It pretends to pretend nothing. Individuals need not believe all these mystifications, but they must behave as though they did, or they must at least tolerate them in silence, or get along well with those who work with them. For this reason, however, they must live within a lie. They need not accept the lie. It is enough for them to have accepted their life with it and in it. For by this very fact, individuals confirm the system, fulfill the system, make the system, are the system.6 What Havel termed “living within a lie” his fellow Czech writer-dissident Milan Kundera called simply “forgetting.” Within the category of post-totalitarianism, Linz and Stepan identify several subtypes, including early post-totalitarianism, frozen post-totalitarianism, and mature post-totalitarianism. The subtypes varied in distinctive ways along Linz and Stepan’s four defining regime characteristics, pluralism, ideology, mobilization, and leadership: Early post-totalitarianism is very close to the totalitarian ideal type but differs from it on at least one key dimension, normally some constraints on the leader. There can be frozen post-totalitarianism in which, despite the persistent tolerance of some civil society critics of the regime, almost all the other control mechanisms of the party-state stay in place for a long period and do not evolve (e.g., Czechoslovakia, from 1977 to 1989). Or there can be mature post-totalitarianism in which there has been significant change in all the dimensions of the post-totalitarian regime except that politically the leading role of the official party is still sacrosanct (e.g., Hungary from 1982 to 1988, which eventually evolved by late 1988 very close to an out-of-type change).7 The three countries in which George Soros founded campuses of Central European University experienced widely varying conditions of totalitarianism and post-totalitarianism. For a brief summary of the postwar history of the Soviet bloc, see Exhibit B, “The Soviet Bloc: Capsule History, 1945-1991.” 6 Havel, Václav, translated
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