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The Limits of Transparency: Ambiguity and the History of International Finance.

The Limits of Transparency--Ambiguity and the History of International Finance.

By JACQUELINE BEST. Ithaca and London: Cornell University Press. 2005. Pp. 1,220. Bibliographical references, index.

This thought-provoking book on the history of the Bretton Woods system forces us to ask whether ambiguity can be helpful to understand ambiguity itself and the lack of transparency in international finance. Do the words "ambiguity" and "transparency" refer to the same level, kind or plane of understanding? Is the search for transparency in international finance misguided due to inexplicable ambiguities?

The book title is already ambiguous because the limits of transparency can be explained in terms of cognitive limitations rather than explicated by ambiguity. Ambiguities require explications as "critical scrutiny, where the result is a recommendation or proposal as to how it might best be understood in order to achieve certain philosophical or theoretical objectives" (Fetzer: Philosophy of Science, 1993: 11). Could it be that the primary 'political objective' is not to explicate certain ambiguities in order to 'manage' them with 'spin'?

When transparency is interpreted as enlightenment then we ought to make serious efforts to describe the world unambiguously, to explain it causally and to predict its course cogently, convincingly, correctly and truly to ourselves (and assuredly to others). Ironically, assurances to others can be intentionally ambiguous. Some people may even want to believe them as explanations. Thus, ambiguities can become make-believe schemes! Although not irrelevant, the important question "when is ambiguity unethical?" is not raised in this book.

Best's definition of ambiguity is broad: "[S]omething is ambiguous when there is more than one answer to a given question or problem" (p. 14). She distinguishes three types of ambiguity that she calls technical ("produced by uncertainty and insufficient information"), contested ("created by fundamental and persistent conflicts"), and intersubjective ("produced by mutual interpretation and communication") in order to develop "a theoretical framework that will shape my [her] discussion of the governance of international finance" (pp. 13, 14) and leads her to postulate "that ambiguity is both pervasive and potentially constructive" (p. 32).

To "manage ambiguity" can therefore mean both to clarify and to obfuscate information for practical purposes. Any information we are aware of may be misperceived, because the signs are not properly related to each other (syntax); they may be mistaken for something other than what they are intended to stand for or to represent (semantics); and they may be misinterpreted as being of relevance or irrelevance to the respective user(s) and appropriate in various contexts (pragmatics). Since misunderstanding can be caused by ambiguity, synonymy and context, ambiguity can be advantageous to some ("winners") and disadvantageous to others ("losers"). This poses epistemological, ontological, and deontological challenges for those who (want to) govern (in) the world and to the designers and operators of governance systems such as those of international finance, but they are not discussed in this book.

Accountability is another form of transparency essential for financial governance and also of concern for buyers and sellers and principals and agents. Current financial accounting information may be considered technically, contested and inter-subjectively ambiguous by some and justifiably so by others; however, should we give up on attempts to make it syntactically, semantically and pragmatically unambiguous and contextually relevant in order to keep its users enlightened rather than deliberately disinformed (confused), misinformed (deceived) or uninformed (ignorant) with its ambiguities?

Best's theoretical framework of governance in general and financial governance in particular consists of her "central postulates that ambiguity is both pervasive and potentially constructive" (p. 32); however, her theory is extremely pragmatic and ideological rather than "counterintuitive": It supports practically any workable solution to problems and questions, "although too much ambiguity can be destabilizing, too little can also be a problem" (p. 7).

Despite the various methodological and theoretical ambiguities, Best's book is historically informative, interesting, insightful, readable, stimulating and--evidently-thought-provoking. Chapter 1 is introductory and tries to establish the framework to illustrate that "the process of defining and managing ambiguity is, by its nature, political" (p. 7); however, it neither defines political, e.g., as (all) attempts by individuals, special interest groups or states to increase, maintain, or share power or wealth, nor does it explicate or explain why this is (or should be) so. Does what is called "political" rest on a semantic ambiguity?

Chapter 2 includes a critique of schools of thought with seemingly dogmatic and simplistic attempts to "manage ambiguity" when trying to explain the world in economic-political terms: "Neoliberal institutionalists" trying to reduce the neoclassical insight of risk and uncertainties primarily by means of well-informed institutions; "power-based analysts" trying to resolve contested conflicts primarily "through the exercise of power or the imposition of hegemony" (p. 18) while "power itself can be ambiguous" (p. 9); and "Kantian-inspired" and "conventialist constructivists" believing more or less naively that social and political norms, rules and regulations are sufficient for transparency (p. 21). These attempts to delineate intellectual connections "toward a theory of ambiguity" illustrate (to me) "the limits of theorising ambiguity" along the author's lines of thought. The arguments in support of "the irreducibility of ambiguity" as a theoretical construct (p. 21) can only support uncritical or irrelevant explications, insufficient or false explanations and un-assuring predictions.

Chapter 3 is an attempt to "explain the paradoxical importance of both conflict and consensus in the creation of the Bretton Woods Agreement" (p. 34). If ambiguity provides the key to this puzzle, then all other explications and all inferences from the available historical evidence with respect to actual or potential threats to, vulnerabilities of, the actual economic, financial or social decline, success or survival of nations, organizations and individuals would have to be false, insufficient or irrelevant rather than best explanations in given circumstances. I submit that ambiguity is not the proverbial last word in the history of international finance.

Chapter 4 describes and illustrates the interesting complexity of the postwar situation and the challenges, difficulties, and successes of maintaining and regaining consensus among unequal partners such as the United States and Britain (with respect to sterling convertibility and devaluation) and the United States and Europe (with respect to European recovery--the Marshall Plan), and among the Europeans themselves (with respect to the European Payments Union).

Chapter 5 recasts historical accounts of the evolution of international finance in the author's ambiguous terms and types of ambiguity. Based on the available and interesting historic evidence, it is possible to identify clear intentional cases of syntactic ambiguity such as "stable system of exchange rates" (p. 121); of semantic ambiguity such as "special drawing rights" (pp. 97-98) and "exercising firm surveillance" (p. 120); and of various types of pragmatic ambiguity in terms of their intended effects, each with critical and relevant explications and best explanations as to why they did or did not materialize. However, this would be 'a scientific study on the scope and limits of various types of explicated ambiguities in international finance.'

Chapter 6 should have referred to complexity rather than ambiguity because of our continuing difficulties with understanding 'international finance' both ontologically and epistemologically. It summarizes the rationale(s) behind the liberalization of international finance and the various crises and events associated with it quite well, but it lacks both explications and explanations. We still don't know why the financial markets behave as they do in various circumstances; however, since we know that hedge funds seek to avoid (better) accountability, ambiguity may pay off in order to keep the losers disinformed, misinformed, or uninformed.

The eventual rescue of the whole financial governance systems stem from the scandalous destabilization caused by the mis-speculation of the Long Term Capital Management (LTCM) hedge fund in 1998 (with the involvement of Nobel Laureates in Economics!) is the prime example and a case in point: The statistical ambiguities in the system backfired and forced a massively expensive single-case clean-up. None of the explicably relevant evidence should be ignored when imagining or hypothesizing what could have happened in the case of LTMC's unmitigated success and why that might have been unethical.

Chapter 7 argues correctly for more flexibility, self-reflexivity and negotiability in financial governance, but for ambiguous reasons. To claim that "by recognizing the pervasive role of [ambiguously defined] ambiguity, such a regime [of political-economic methodology] would recognize the limits of its own understanding of the world economy" (p. 167) merely begs both the ambiguity and the transparency questions in international finance. However, just that kind of pragmatic theory may be expedient for the survival of governance organizations themselves.

Ambiguity can be very humorous and provide convenient, expedient or lucky short-term shortcuts; however, it may also be devious or inhumane in its intended effects or consequences and thus unethical. If there are no clear-cut cognitive situations imaginable in democracies, economies and international finance, then the criterion for proper governance reduces to managing ambiguity ambiguously. If that should be the main message of this book, then it deserves more discussion. Happy reading!

Hart J. Will is Professor Emeritus of Accounting, Auditing and Information Systems in the School of Public Administration at the University of Victoria.
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Author:Will, Hart J.
Publication:Canadian Public Administration
Article Type:Book review
Date:Sep 22, 2006
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