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If Business Is Open to Scrutiny, Government Should Be Too

Megan McArdle is a Bloomberg View columnist. She wrote for the Daily Beast, Newsweek, the Atlantic and the Economist and founded the blog Asymmetrical Information. She is the author of "“The Up Side of Down: Why Failing Well Is the Key to Success.”
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As the revelations about Hillary Clinton’s e-mail practices have mounted, her supporters have hit on a counterintuitive defense: perhaps she shouldn’t have had to disclose them anyway. This argument basically has three prongs:

  1. In this day and age, e-mails are basically like phone calls, and we don’t make officials keep copies of their phone calls.
  2. The Freedom of Information Act is outdated.
  3. Officials need to be able to speak frankly in order to do their jobs, and therefore we should dial back on forcing them to cough up the written evidence of their deliberations.

The first argument doesn’t really work. Did we exempt phone calls because we wanted to give officials a safe harbor from public scrutiny, or because they’re really hard to file, index, and search? Now that we have the digital tools to do that, maybe this is an argument, not for exempting e-mails from disclosure requirements, but for including phone calls and meetings.

To be sure, it’s hard to get anything done under 24-hour surveillance. People need to be able to say things that may get the public angry at them. As my Bloomberg View colleague Cass Sunstein argues, this may be a reason to focus on output transparency, while being cautious about input transparency, which is to say, watching the internal processes by which policies get made.

It’s a compelling argument. In fact, it’s so compelling that I have to ask: Why limit it to government? Investment bankers, power plant operators and pharmaceutical manufacturers could surely lower costs and get more done if they didn’t have shareholders, regulators and attorneys general peering over their shoulders. Like government officials, these folks often go to cumbrous lengths to prevent their private and uncensored opinions from becoming exhibits in a lawsuit.

Why shouldn’t bankers, then, be able to put their e-mails off limits to outside eyes? We can see business outputs too, after all, so why do we pay so many regulators to monitor, not just what is done, but how companies do it?

Maybe the answer is that while some transparency is required, existing freedom-of-information laws demand more scrutiny than companies face with regulatory queries and subpoenas.

I put that proposition to a securities lawyer of my acquaintance. His response: "In practice, almost anything could be deemed relevant at some point (especially in hindsight). Which makes the possibility of publicity realistic for just about anything, which people who actually work in regulated industries and are subject to investigations or subpoenas know well. So they are - or at least should be - scared about anything put into an e-mail."

It’s fair to argue that we need that scrutiny to keep companies honest, so too bad if they don’t like it. But should we worry less about keeping government honest? Government is democratically controlled in a way that corporations aren’t, of course, but political scientists have done loads of work showing all the ways in which voting fails to express some coherent “will of the people.”  

Moreover, customers also have a voice in how businesses run, because they can move to a competitor if they don’t like your performance. Arguably, this gives them more control over businesses they deal with than over their elected officials, which is why you get better customer service from your cell phone company than from your local purveyor of building codes. Why, then, should I have a right to know not only what options Goldman Sachs sold me, but what they thought of them, if similar government deliberations are shielded from view?

We want to see the internal deliberations of Goldman Sachs because that protects us against fraud. But consider how you’d feel about a presidential administration that sold its new health-care overhaul by saying, “If you like your plan you can keep it,” and then later discovered that this was untrue. Then consider how you’d feel if its leaders knew that this promise was false and made it anyway. Even a well-run administration will make honest mistakes. But an administration that lies about one policy proposal will probably lie about them all, and you’ll want to adjust your faith in its promises accordingly. Which means you have a stake in knowing, not just what happened, but the internal process that led to that promise.

We could argue, I suppose, that government employees should be protected from scrutiny because it’s especially important that government be able to do its job well, which means that officials have a greater need to be able to speak freely. But we could not argue this very convincingly. Public and private sectors are both important, and it’s hard to say that one matters more than the other. A bank can do terrible damage to the economy out of malice or stupidity. But a stupid or malicious secretary of state can also make Americans worse off.

In the case of banks, we have regulators who aim to curb excesses. In the case of government, the regulator is the American people. Like any regulator, citizens need access to information to judge how well the government is doing its job — and that information probably goes well beyond dry statistics.

This is important because the government takes it upon itself to regulate so many aspects of our lives. Government officials should not ask other people, or organizations, to do anything that they are unwilling to do themselves. The legitimacy of a democratic system depends on the fact that government employees are public servants, not a privileged caste. If government officials want less transparency for themselves, they should offer it to everyone else. But if they think the benefits of transparency outweigh the costs, they should be willing to take their own medicine.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Megan McArdle at mmcardle3@bloomberg.net

To contact the editor responsible for this story:
Jonathan Landman at jlandman4@bloomberg.net