Global Future of Governance

Global Future of Governance

September 10, 2015

The Promise and Peril of Transparency

James Vreeland

Transparency endures as a mantra for many policy-makers concerned with improving life in the developing world. During her address last fall in Gaston Hall, when the Managing Director of the International Monetary Fund, Christine Lagarde, was asked by Georgetown students Camille Squires and Sapir Yarden about how to promote institutional reform, she answered emphatically: “Transparency, transparency, transparency! The tribunal of public opinion is often the strongest way to actually defeat corruption.
 

Yet, Dean Joel Hellman’s address in Gaston Hall last week highlights the difficulties of working with countries that have a “different sort of structure of institutions, a different level of quality of institutions.” The effects of transparency may depend on the domestic political institutions of the country in question. Transparency’s effects are contingent – and transparency is not necessarily a panacea that all factions of a polity will welcome.  

In my current research project, under the leadership of Professor James R. Hollyer (University of Minnesota and Princeton University) as well as the preeminent political scientist Professor B. Peter Rosendorff (New York University), we examine the determinants and consequences of a specific form of transparency: the dissemination of credible data on the economic performance of a country. Vital for efficient investment decisions, the availability of economic data varies tremendously across countries.
 

Perhaps not surprisingly, democracies – even poor democracies – are more likely to make economic data available than autocracies of a similar level of economic development. They have good reason. Transparency not only attracts foreign direct investment, it also enhances the stability of democratic regimes. Transparent democracies stand as more resilient to breakdowns.
 

The picture for autocracies is less clear. Yes, autocracies that make economic data more available do attract more foreign direct investment, but at the potential cost of political stability. As transparency increases in autocratic regimes, mass unrest becomes more likely, and the political regime becomes more fragile. Sometimes this results in a transition to democracy, but other times the unrest simply brings about a new despotic regime. Lagarde is right that transparency enhances the “tribunal of public opinion,” but the result may be political fragility and instability.
 

Policy-makers recognize the complex political economy of increased transparency under autocratic regimes. Gains in investment may not always be worth the threat to political stability.  

Elements of this research project have been accepted for publication in the prestigious academic journals, American Political Science Review, Journal of Politics, and Political Analysis. We are currently drafting a book manuscript which we anticipate publishing by the end of next year.
 

James Raymond Vreeland is a p
rofessor of international political economy in the School of Foreign Service.

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