The Myth Of Transparency

The other assumption is even more tenuous. The notion that with openness comes a greater likelihood of sustainable growth is appealing, certainly. But the world is full of highly competitive, innovative companies that are anything but transparent. China Mobile is the largest and arguably most successful wireless service provider on the planet, with 400 million customers and growing. Yet while a portion of it is publicly traded, much of the company is embedded in the complex state-business web that dominates the Chinese economy. Its stock, despite a recent downturn, has been on a tear, generating returns in excess of 300 percent in the past two years alone. It also delivers reliable coverage and ever-expanding options to its customers. Hardly a paragon of transparency, it has nonetheless been a stellar performer.

Many East Asian and Indian conglomerates are dominated by the state and/or family, and are notoriously resistant to sharing information. They have also been crucial to the success of their economies in recent years. The fact is that sometimes, less transparency leads to greater efficiency, much as the undemocratic China has been able to grow more quickly and raise more people out of poverty more rapidly than a democratic—though not more transparent—India.

The China Mobile example highlights a final uncomfortable fact: transparency has become a code word to use against non-Western companies. The veiled assumption is that Americans and Europeans have it, and non-westerners don't. Along with human rights and democracy, transparency has become another watchword that demonstrates the supposed moral superiority of the West over the rest. And like those other litmus tests, the rest invariably fall short. Enron and Parmalat are only two of hundreds of examples where the motes in one's own eye are just as pronounced.

Today lack of transparency is being used as a cudgel against sovereign wealth funds and foreign companies whose inner workings are indeed opaque. The concerns may be legitimate, but it is hard not to wonder how much of that discomfort is a product of a lack of transparency and how much is about the shifting power balance in global finance.

Karabell is president of River Twice Research

© 2008