11 - Consequences of Transparency

Summary

Truth never damages a cause that is just.

– Mohandas (Mahatma) K. Gandhi

Popular enthusiasm for transparency abounds. Many readers might therefore expect the authors of a book on transparency to conclude with an unadulterated endorsement of transparency and its zealous supporters. Indeed, our original measure of transparency, focusing on data disclosure, could even be used as a metric to shame and pressure governments that lag behind in the quest to produce ever-increasing amounts of data on the functioning of their economies.

Instead, however,we caution readers against the wholesale embrace of transparency as a goal in and of itself. Data disclosure offers many benefits – economic and political. It also entails costs. In this chapter, we consider, in a methodical fashion, the benefits and costs of transparency identified by our research. For democracies, we do recommend transparency. For autocracies, however, our conclusions are nuanced.

ECONOMIC BENEFITS

Economically, data disclosure appears to benefit society. Broadly speaking, transparency increases investment. The effect of transparency on foreign direct investment (FDI) holds across both democracies and autocracies. Interestingly, the effect on domestic investment – while evident when we examine both political regimes together – is weaker under authoritarianism. We suggest in Chapter 8 that this weaker effect on domestic gross capital formation results from the privileged position of economic elites under autocratic political regimes. Because of their especially intimate ties to the ruling leadership, wealthy investors under autocracy may have access to economic data even in the absence of full public disclosure. The effect of making economic data public is lessened, therefore, because key economic actors have access to the relevant information either way.

This is not to say that transparency has no effect on investment under autocracy, but rather that the economic benefits of data disclosure appear, overall, more convincing for democracies. Even as we focus on the economic benefits of transparency, differences emerge across political regimes.

TRANSPARENCY AND DEMOCRACY

Of course, the logic of political survival differs across regime types. Unlike their autocratic counterparts, who survive by cultivating a loyal elite constituency, democrats survive in office by winning elections. Pursuing policies that promote the welfare of large segments of society therefore serves to help keep them in power.