Soros forecasts rise in state capitalism in speech in Turkey

The result of the global crisis is likely to be a rise of state capitalism, George Soros, the American investor and philanthropist, said Monday.

Speaking at the World Bank and International Monetary Fund, or IMF, annual meetings in Istanbul, Soros said countries could start turning increasingly away from the current capitalist approach. "In the future international capitalism might be superceded by state capitalism, which will be operating on a bilateral basis rather than multilateral basis," he said.

Such a development would be an unfortunate and risky one, he said. "The risk of increased state capitalism is conflict between states and it is dangerous to take that route. It is not even in China's interest to do this," Soros said.

Regulators around the world should accept responsibility for maintaining the sustainability of the system, said Soros. "Regulators have refused accepting responsibility for controlling asset bubbles, saying they have no means to do so. So it is now the time reintroduce these means."

According to Soros, European states are recovering from the crisis more rapidly than the United States. "The U.S. has a long way to go, while European Union [countries] are going forward. In Europe there was less damage to consumers, and the social safety network has done its work. Revival in Europe will start sooner," Soros said.

Need for regulation:

The world now needs a comprehensive regulatory reform to protect itself from economic collapses in the future. "Deregulation prior to crisis succeeded. There is now a need to reintroduce regulation, which will not be easy," he said. "It is difficult to agree on regulation on the international level. It is a tremendous challenge because different countries have different interests. [...] But there is a need for a thorough reorganization of the financial system."

Soros also called the world for a more comprehensive recognition of the dimensions of the economic collapse. "The financial system broke down. We are at the end of an era. But unfortunately this was not fully recognized, as when the system collapsed after the bankruptcy of Lehman Brothers authorities intervened and basically guaranteed the entire system, causing repercussions, which the developing world was not able to handle. This reflected from the financial system onto the real economy, also leading to the collapse in exports, and other severe consequences, the end of what we have not seen. Since authorities intervened, they did save the system after putting it on life support," he said