The following is a transcript of a Radio 68H interview with OSI chairman George Soros in Jakarta. Rebecca Henschke (executive producer, Asia Calling) and Andy Budiman (chief editor radio, 68H News Agency) conducted the interview. The program was broadcast throughout Indonesia on Radio 68H and internationally on Asia Calling. Audio of the interview is available for download below.

Can you define what an open society is?

I define it as an imperfect society that recognizes that all our human constructs are imperfect and therefore in need of improvement, and actually holds itself open to improvement. That's my definition. To be more specific, that has to be done by the society themselves. So that Indonesian open society has to different from, let's say, American open society. So each society has to decide what sort of open society it wants.

But do you believe the international community has a role to play in creating open societies in Asia? Or is the development of civil society something that can only come from within?

Well it has to come from within and I don't think it can really be introduced from the outside, and certainly you can't create democracy by using military force. That is where I have some differences with the Bush administration.

As the Bush administration does use the same terms, they talk about promoting freedom, about creating democracy in the region, similar ideas to the ones you express and promote.

I'm very happy that President Bush has made this a high priority, at the same time I'm very concerned, because I'm afraid that it's a genuine need in the world, but the Bush administration is exploiting it for its own needs. They are not really concerned with the needs of the countries; they're concerned with their own needs, because they made a terrible blunder in invading Iraq. They did it on false pretenses. When it became evident that there were no weapons of mass destruction and no connections with al Qaeda, then they were left with this last excuse, that they were introducing democracy. That I'm afraid is exploiting a valid idea, namely introducing democracy, for your own needs. But what's wrong with international assistance generally, is that it always serves the needs of the donors rather than the needs of recipients, and this is a glaring example. I'm very worried that it actually gives spreading democracy, which is what we have been trying to do, a bad name.

I personally question this idea of the war on terror; it's a false idea, but it has become accepted in America as the natural way to respond to the terrorist threat. I think it is the wrong way to respond, but that idea I have not been able to get across in America . That is my greatest frustration.

Are you concerned about the influence the so-called war on terrorism is having on this region of the world, the close ties that are being created between the American military and the Indonesian military, for example, due to the war on terrorism?

Yes, I'm worried because the terrorist threat in Indonesia is doing Indonesia a lot of damage. But I'm encouraged by the way Indonesian society is responding. I had a meeting with Gus Dur, the former Indonesian president, and a group of people that he collected, and they looked at the terrorist threat differently. They were marching for peace and when there was a terrorist attack in a Christian community, the Islamic communities reached out to provide support. Islamic activists were guarding Christian churches. I'm told that one man was actually killed in that process. Now that is what defeats terrorism. I think that the terrorists are not achieving their objectives in Indonesia. Even though it's very precarious because to some extent certainly the military and also communities are responding by blaming Islam. That's how the terrorists achieve their purpose. It's very difficult to resist, the very natural tendency that when you are hit, you want to hit back.

But since the terrorists are not visible by their nature, they keep hidden. So, when you hit back, you hit innocent people in the process. So in fighting terrorism, we must avoid doing the same thing. Since war by its nature claims innocent victims—it always does—we must avoid war! And yet, we responded to the terrorist attack in America by declaring war on terror. That's doing Bin Ladin's bidding, which is exactly what he wanted us to do, and that's why actually the terrorist movement is still flourishing.

You spend a lot of money trying to create open societies and spreading democracy around the world; why are you so optimistic about the future of democracy?

I'm not so optimistic, but I think exactly because it's not a foregone conclusion that we will have democracy, that we have to really work for it and make sacrifices for it and make investment in it. That's why I'm engaged in it, because it's a desirable form of organization, but it's not at all a forgone conclusion. Open society is always in danger. You know I started out with a scheme of open and closed society. I thought that open societies were endangered by repressive regimes like the Soviet regime and the Nazi regime. I personally suffered from those regimes so that's what got me so involved.  But then when I got involved in the former Soviet Union, I discovered that open society is also endangered from another side, from the lack of a functioning state, a failed state, because that's what the Soviet Union became. That's also a danger to open society. Then, to my greater surprise, I found that actually open society is endangered in the best established open society in the world, the United States; that some of those principles are not recognized and not sufficiently supported in the United States, because the most important thing is really how to deal with reality. How to face reality, and the United States is currently unwilling to face reality. You go into a fantasy world created by the people around Bush which can really lead you astray. That's how we got involved, you know, with the war on terror and then the war on Iraq. I personally questioned this idea of the war on terror. It's a false idea actually but it has become accepted in America as the natural way to respond to the terrorist threat. I think it's the wrong way to respond, but that idea, I have not been able get across in America. It's my greatest frustration.

How do you see the rise of fundamentalism in the world now? Is this a threat to democracy?

Very much. You see, the global economy and the world is extremely complicated and very uncertain and people don't like uncertainty. So they are looking for answers that they can believe in. You know, the ultimate solution to problems. And there are people who offer those ways of getting to that ultimate solution. So you've got people who believe in the market, so you've got this market fundamentalism and then you've got religious fundamentalism. So fundamentalism of all kinds is a great danger to open society, because it offers final answers and, since nothing is perfect, final answers are not available, therefore whatever these final answers are, they are bound to be false. And that means that they somehow misinterpret reality, believe in a fantasy world and we get into a situation where we ignore reality. And you have to face reality.

A lot of people in this part of the world believe you caused the Asian economic crisis. How do you respond to these allegations?

I don't control the market, you see. So I try to guess what the market does, and if I guess right, I make money, if I guess wrong, I lose money.

The authorities control policy. And they had a certain policy on the exchange rate which was a faulty policy. So they are the ones who are responsible for the crisis and I would say that the IMF has some responsibility. [Former Malaysian prime minister] Mahathir, who I consider my best publicity agent—because who would have heard of me in Asia unless Mahathir had made me famous—I think got it wrong.

So it is only because of Mahathir that the claim that you had a role in creating theAsia economy crisis is widely held by people in the region?

I think it came entirely from Mahathir. You know, I'm better known in China than in America. And I can thank Mahathir for that.

But the debate that was sparked by Mahathir's accusation against you did raise a lot of interesting questions about ethics in the financial world. Do you believe there needs to be more control over the flow of capital around the world?

Yes, I think markets don't reflect reality, they participate in creating reality, so markets do need to be controlled in certain ways, particularly the exchange rate market.

How would you see that process working, in reality what controls can you put in place?

Whatever system you introduce is going to have some faults, whatever exchange system you introduce there are going to be faults in it. It is important to look for the faults and try to keep the adverse consequences to a minimum, but it's impossible to have a perfect system. There are, though, many crises that have been avoided, in many ways now there is greater transparency etc., many improvements have been made. But I don't think we have seen the last crisis, and I can already see the beginning of the next crisis actually. Its going to come from a totally different source. You see you have an imbalance in the current account of the United States, a big deficit which is ever-growing. I think the problem will come, and it's already on the horizon; American consumers will not be able to finance the extra consumption. Right now American households actually spend more than they earn.

What role do you think China will play, though, in avoiding such an economic crisis? Its rapid economic growth is obviously having a huge impact on this region of the world. What are your predictions about China's economy?

China is in fact the greatest beneficiary of the overconsumption of the United States. They will have to reorient their economy to domestic growth and there is a tremendous need for infrastructure investment, and this is where global warming comes in. China is the fastest-growing polluter in the world and they will need to develop clean sources of energy. I think they will have to make that a priority project.

And that will be an essential part of their development?

I think so, and it is globally the case. I think the global warming issue is neglected; the Bush administration is in denial. Unless we do something about it our civilization is going to end, come to an end.