When you think about it, most of us have a limited group of people we trust and even fewer we trust implicitly. So, it is surprising that so much of our everyday lives involves interactions in which we are totally dependent on strangers to respect.
Trust underpins the cooperation required in so many complex aspects of our lives that we are not fully aware of it. This includes everything from what we buy to what we buy it with, from the supply of electricity and water, to the smooth functioning of traffic – road, air and sea – and markets, as well as the systems that protect our homes and cities. All of this is often based on little more than trust that commonly accepted conventions will not be violated by any of the hundreds, even thousands, of people tangentially involved.
Tim Harford, author of the discontinued Financial Times blog “Undercover Economist”, began one column describing a trustless world. He depicted a scene where a person walked into a corner store to buy a carton of milk, only to find the refrigerator locked. Once the shopkeeper was persuaded to retrieve the milk, the situation deteriorated into an argument over whether the shopkeeper would hand over the milk first or the customer the money. Eventually, an elaborate simultaneous exchange is organized.
Yet, even this transaction was far removed from a Hobbesian world of “war of all against all.” After all, the shopkeeper didn’t demand payment in precious metals and the customer didn’t insist that the quality of the milk be tested and certified by a public notary before the purchase – and neither resorted to gunfire.
Virtually every commercial transaction has within itself an element of trust Kenneth Arrow
Scientists say that it is virtually unheard of for any species, even our own prehistoric ancestors, to cooperate with anyone outside their extended family group. Paul Seabright, an economist from the University of Toulouse and author of The Company of Strangers
Trusting strangers, a risky rather than a reasonable act in the natural world, enabled elaborate task-sharing – the division of labor – between genetically unrelated members of the same species. This is a phenomenon as uniquely human as language and, ultimately, this sense of cooperation and trust underlies every aspect of modern civilization, he comments.
There is a mounting body of work supporting this. Research shows that trust influences a range of economic and political phenomena. Nobel Memorial Laureate Kenneth Arrow touched upon its importance in “Gifts and Exchanges ” . His oft-used quote states that “virtually every commercial transaction has within itself an element of trust, certainly any transaction conducted over a period of time.”
In his book, The Moral Basis of a Backward Society , political scientist Edward C. Banfield investigated an impoverished town in southern Italy. He concluded that the region’s poverty was not due to class or national economic planning, but because of the inhabitants’ refusal to trust, and therefore cooperate, with anyone not a member of the immediate family. This prevented people from acting together for their common good and doomed them to economic backwardness.
Almost omnipresent in human society...©Jan von Holleben
In Trust , Francis Fukuyama examined both traditional low-trust societies, such as China and Italy, and high-trust societies, such as Germany, Japan and the United States. He argued that the level of trust has a large and measurable economic value, and is the cultural key to prosperity.
More recently, economists such as Stephen Knack (see The Value of Trust Does Social Capital Have an Economic Payoff that an increase in a country’s level of trust can have a positive impact on economic growth. The pair argues that “trust and civic norms are stronger in nations with higher and more equal incomes, with institutions that constrain predatory actions of chief executives, and with better-educated and ethnically homogenous populations.”
We see a period of distrust in politicians and politics, but not other people Christian Bjørnskov
All of this seems a huge burden for one small word to shoulder. Eric M. Uslaner, professor of government and politics at the University of Maryland, gently mocked some of the more extreme claims when he wrote that it seemed trust was “the chicken soup of social life.”
Even if the definition of trust may become entangled with discussions of “social capital” and the benefits of civic engagement are infinitely debated in academic circles, it is clear that trust is an important lubricant for the effective functioning of societies.
So, what does it say about our current period in history that trust seems to be plummeting? By many available indicators, whether it is the Chicago Booth/Kellogg School Financial Trust Index, the US General Social Survey (GSS), Pew Research or the Edelman Trust Barometer, there appears to be a crisis of trust in many of our institutions.
A CRISIS OF TRUST
According to the Edelman Trust Barometer, an unprecedented nine-point global decline in trust in governments was recorded at the beginning of after a period of political brinksmanship on the debt ceiling in the United States, dysfunction on bailouts in the European Union, corruption in Brazil, India and Ireland, and a natural disaster in Japan. Confidence in business, shattered by the financial crisis, is still low.
Such results have led some pundits and scholars to worry that we face a crisis of trust. Many think trust is in decline in a number of advanced democracies, including Canada, Sweden and the United Kingdom.
For example, in the United States, trust has been steadily declining for decades, as tracked by the General Social Survey. More recently, Democratic senator Michael Capuano was speaking for the vast majority of citizens when he told eight bank CEOs, “America doesn’t trust you anymore.” His comments could apply equally to the entire financial system (Chicago Booth/Kellogg School Financial Trust Index, January) as well as government and political institutions.
Certainly, as Emilio Galli Zugaro argues there is a decided lack of trust in institutions, corporations, media and governments. Particularly for businesses, a loss of trust can be a death sentence and many need to repair the damage inflicted upon their reputations.
Such an environment can have significant implications for long-term savings. Gold, a traditional barometer of falling trust in government’s and currencies, is back in fashion. For pension savings and investments, one of the ultimate statements of faith in the future, trust is absolutely critical. Yet, with many prospective retirees reeling from losses incurred during the financial crisis and governments, particularly in eastern Europe, pilfering funded pensions in an attempt to stave off short-term financial woes (see A sorry state of pension affairs
As an example, in a recent workplace survey, the National Association of Pension Funds in the United Kingdom found public trust in pensions was at an all-time low. This is at a time when confidence in pensions needs to be bolstered if societies are to have any chance to pay for their old age.
Talking to the don of trust
What can the mafia teach us about trust? In a word, nothing, says University of Oxford sociologist Diego Gambetta. However, the growth of institutions such as the mafia can illustrate how societies need to find even a cheap replacement for trust to add some social cohesion and certainty. Professor Gambetta shares some of his conclusions after a lifetime of studying trust in the exclusive interview “Talking to the don of trust. ”
Even if trust is extremely fragile at the business or institutional level, it often proves surprisingly robust and resilient elsewhere. Many academics note that there has been little noticeable change in personal trust, as opposed to institutional trust, since the financial crisis commenced.
Christian Bjørnskov from Aarhus University in Denmark, whose work has investigated the link between trust levels within countries and their economic benefits, sums up this argument: “No, I don’t believe we are seeing a crisis in trust. What we are seeing is a period of distrust in politicians and politics, but not other people,” he comments.
Bjørnskov notes that a lack of trust in governments – should it continue – may result in social unrest, a questioning of the legitimacy of governments and even laws and, ultimately, have an economic impact on people’s lives, though the data is not currently reflecting this.
Another reason why we may be under the perception that trust is declining is because of the way it is measured. Although Alexis de Tocqueville was writing about American society and exclaiming its civic virtues as far back as the 1830s, it is really only within the past few decades that trust has been intensely studied and measured through surveys and experiments in game theories.
Since its inception in, the GSS has been the source for much of US evidence on trust and social capital, but many researchers find the attitudinal questions contained in it too abstract. This, plus the relatively short time scale for research on trust, means the results can be difficult to interpret.
For example, while personal trust in the United States is said to have declined for a long period, before levelling off this decade, it could be falling from abnormally high levels of trust to begin with. Robert Putnam highlights this in Bowling Alone , but the country still performs well in global comparisons, such as the World Value Survey. These surveys are found to be a good indication of overall honesty and trustworthiness within a society based on the return of “dropped-wallet” experiments in capitals around the world.
This is no reason to be complacent about trust. Trust is not a resource in the sense that it can be depleted through use. On the contrary, when trust is used it can foster greater trust, but it can also be dissipated, particularly when inequality grows within society.
We are living in an age where inequality in both developed and developing nations is growing significantly. It would be to the disadvantage of us all, if we squander what could be one of our greatest renewable resources.
