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George Soros says economic crisis signals end of a free-market model

23 February 2009 09:41 (UTC +04:00)

Bakuâ€“ APA-Economics. Billionaire investor George Soros said the current economic upheaval has its roots in the financial deregulation of the 1980s and signals the end of a free-market model that has since dominated capitalist countries, Bloomberg reports.

Liberalization of the financial industry begun by the Reagan administration has led to a series of crises forcing government intervention, Soros told economists and bankers at a Feb. 20 private dinner at Columbia University in New York. The global recession, triggered by the collapse of the U.S. housing market, has â€œdamaged the financial system itself,â€ he said.

Regulators are in part to blame because they â€œabrogatedâ€ their responsibilities, Soros, 78, said. The philosophy of â€œmarket-fundamentalismâ€ was now under question as financial markets have proved to be inefficient and affected by biases rather than driven by all the available information, he said.

â€œWeâ€™re in a crisis I think thatâ€™s really the most serious since the 1930s and is different from all the other crises we have experienced in our lifetime,â€ Soros said.

Soros, founder of New York-based hedge-fund firm Soros Fund Management LLC, said last month at the World Economic Forum in Davos, Switzerland, that the Obama administrationâ€™s plan to buy toxic assets from U.S. banks wonâ€™t be enough to get financial institutions to start lending again.

A more effective approach for restarting the economy would be to inject capital directly into the banks and cut minimum capital requirements, Soros, whose firm oversees $21 billion, has said.

Sorosâ€™s Quantum Endowment Fund returned 8 percent last year. That compared with an average loss of 18 percent by hedge funds, according to data compiled by Hedge Fund Research Inc. of Chicago.