As the British government dithers over freedom of information, international economist Joseph Stiglitz argues that true democracy requires a culture of openness.

The east Asia crisis has shown how vital transparency is in the private sector for global financial stability. But too little attention has been paid to its importance in the public sector, especially for the success of democratic processes.

One might say that, in a society with a free press and free institutions, little is lost by having secrecy in government; after all, there are other sources of relevant information. Indeed, modern democratic societies, recognising the importance of information for effective governance, try to protect the freedom and independence of the press and endeavour to promote independent think-tanks and universities - all to provide an effective check on government in many areas. The problem is that often government officials represent the only - or major - source of relevant and timely information. If officials are subjected to gagging, then the public has no effective substitute. And as James Madison, America's fourth president and one of the architects of the constitution said in 1822: "A people who mean to be their own governors must arm themselves with the power that knowledge gives. A popular government without popular information, or the means of acquiring it, is but a prologue to a farce or a tragedy or perhaps both."

Secrecy denies people the knowledge they need.

But governments - both elected and non-elected officials - have private incentives for secrecy: it shields their mistakes from exposure, it provides cover under which special interests (from which they derive so many campaign contributions, if not other favours) can exercise influence. Secrecy gives an artificial scarcity value to knowledge; not only is knowledge power but it gives rise, in the economist's jargon, to "rents", which can be exchanged for favours, not only from special interests but also from the press. During my years in Washington, I have seen at first hand how this nefarious process works. The consequence is that all too often information reported is both incomplete and distorted. Moreover, secrecy gives incumbents a distinct advantage over rivals in the political process, thereby decreasing the effectiveness of competition, as vital in political life as it is in economics.

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While there are admittedly some legitimate grounds for secrecy - such as privacy and national security - the scope of secrecy currently practised, even in relatively open societies, extends well beyond them. For instance, some have argued that open discussion of economic issues, such as monetary policies and exchange rate policies, might roil the market and adversely affect the economy. There is no evidence that this is the case, and indeed there appear to be no ill effects from the strides the UK has made in greater openness in the conduct of its monetary policy. Those who argue this position seem to exhibit too little confidence in the market and its ability to focus on fundamentals and put too little emphasis on the importance of democratic processes.

Indeed, since information eventually comes out, the current procedures, which attempt to bottle up information, result in periodic disclosures of large amounts of information. Just as the economy is likely to be more stable with frequent small adjustments in exchange rates rather than a few large ones, so too is the economy more likely to be stable with a steady flow of information.

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The more removed the decision-making process is from direct accountability - as in the case of independent agencies - the more important openness is. Greater openness will lead to better economic decisions and less corruption. It is more likely to reflect broader interests and less likely to serve narrower special interests.

We have increasingly recognised the economic importance of intellectual property. Information and knowledge produced in the process of governing ought to be public property. To use that property for private purposes, as happens so often, ought to be viewed as misappropriation of public property.

The culture of secrecy was bred by the cold war. Senator Daniel Moynihan, in his recently published book, Secrecy, makes a compelling case that the excesses of the cold war were, to a large extent, a consequence of the secrecy itself. The culture of secrecy spread like a virus, from national defence to permeate government. But the end of the cold war has provided an opportunity to re-examine the role of secrecy and openness. I would go further: a commitment to democratic processes makes such a re-examination necessary. At the same time, new technologies have provided mechanisms through which information can be more effectively shared between government and those governed. We can now have a more informed electorate than at any time in history.

Further, advances in education, of a kind unthinkable a century ago, have put more and more citizens in a position to evaluate and assess the information that can so readily be made available.

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Achieving a more open society is not easy. There are a few necessary ingredients: a vibrant free press, an active civil society, think-tanks committed to ferreting out the truth, and legislation such as the Freedom of Information Act, which was enacted in the United States in 1966, which provides the citizen with the right to access any publicly produced information, with narrow exceptions. But more is needed: a commitment by government to greater openness, to promote dialogue and open discussion, to eschew secrecy in all of its myriad forms. As important as legislation is, it has limits. The incentives of secrecy are too great and the scope for discretionary actions too wide. We need to create a culture of openness. It may not guarantee that wise decisions will always be made. But it would be a major step forward in the on-going evolution of democratic processes - a true empowerment of individuals to participate meaningfully in the decisions concerning the collective actions that have such profound effects on their lives and livelihoods.

This is a summary of the first Amnesty lecture, given by Joseph Stiglitz, former chairman of the council of economic advisers to President Clinton, in Oxford last week.