The Politics of Transparency: Ambiguity and the Liberalization of International Finance [chapter]

Jacqueline Best
2003 Turbulence and New Directions in Global Political Economy  
The second lesson [of the financial crisis in Asia] is that transparency and free trade are more necessary than ever. . . . Rigging the markets-through corruption or denying them transparency-can only bring short-term relief. The markets always know, and they impose a heavy penalty. The discipline of the market is not always welcome, but it is a powerful ally of truth, efficiency and transparency." Robin Cook, British foreign secretary, May 15, 1998. 1 The recent call for transparency is the
more » ... est in a series of policy prescriptions which insist that the solution to our international financial ills is more and better information. The markets are not to blame for recent instabilities, the policymakers insist; investors simply didn't have enough information to make the right decisions. This is a powerful rhetorical move: the language of transparency represents recent problems as technicaland therefore above politics-at the same time as it invokes a rich set of moral and political connotations which contrast transparency with secrecy, corruption and dishonesty. If we want to question the transparency of this argument, we must begin by taking a step back. We must place this contemporary turn to the politics of transparency within the context of the broader move to liberalize global finance, and we must examine the theoretical terms through which it has been articulated and justified. Theorists and policymakers alike have turned to transparency as yet another means of resolving the uncertainties of a liberalized international financial system. Yet, I will argue, the neoliberal focus on uncertainty is just one, rather narrow, attempt to solve a far more pervasive problem in international finance-that of ambiguity. This chapter begins from the premise that every mode of financial governance must come to terms with the problems of economic ambiguity, whether in the form of informational uncertainty, contestation over economic concepts, the vagaries of confidence, or the complexities of mutual interpretation. For neoliberal theorists and policymakers, the solution to the problems of ambiguity rest in the market itself. Free the market from the uncertainties of political decision-making, they suggest, and you will create a stable and efficient international economy. 3 This chapter examines the pursuit of financial liberalization over the past two decades and considers the transformations that this process has wrought in the definition and management of political economic ambiguity. I will begin with a brief discussion of the central problem of ambiguity in international political economy and examine the ways in which new-classical economic theory has sought to foster and to justify a particular means of managing them. I will then consider several major trends in contemporary financial governance, and suggest that the move to financial liberalization has created as many new ambiguities as it has resolved, and has proven particularly vulnerable to crisis. Current trends in international financial governance in general, and the Asian crisis in particular, demonstrate the destabilizing consequences of the neoliberal failure to come to terms with the full force of economic ambiguity. The new emphasis on transparency represents both an attempt to shore up the neoliberal project in the face of these instabilities and a logical extension of that strategy through political and normative means. We are witnessing a new attempt to instill a global "spirit of transparency" and thus to create the universal economic subjects which new-classical economics purports to describe. Theorizing ambiguity Ambiguity plays a perverse but pervasive role in modern economic thinking. It is ruled out by definition in pure classical and neoclassical equilibrium models: in such an economic universe agents are fully rational, information is perfect, exchanges are frictionless and hence the market always clears. Yet, considerable scholarly attention in the past few decades has focussed instead on the problems of informational imperfection, market failure and uncertainty, thus implicitly tackling the problem of ambiguity. 2
doi:10.1057/9781403918451_8 fatcat:u224moxobnhuxjobiydbrx5wru