Why Trust Matters for Your Well-being
Unsurprisingly, according to the latest Pew survey, a majority of the advanced economies of the world continue to hold a negative view of China. In fact, some countries’ unfavorable opinion about the Middle Kingdom is at record highs. The percentage of people with a negative outlook on China stood at 88% in Japan (no shock there), 80% in Sweden, 78% in Australia, 77% in South Korea and 76% in the U.S. Apparently, Chinese officials have now been tasked with some hard core re-imaging of the country. They now have to transform the Red Dragon’s international image to “trustworthy, lovable and respectable”. Their work is clearly cut out for them.
Which brings us to trust. The crux of any kind of relationship. Trust cannot be bought, manufactured or forced. Trust can only be earned. There is no shortcut to this nor can it be created by a PR campaign. Trust is an integral part of the foundation of any successful economy, business or relationship. Yet, in the field of economics its study has been neglected, along with many other social realities that are crucial to the understanding of how the stakeholders in an economy function. Everything cannot always be equated to dollars and cents.
Why does trust matter in an economy? According to Benjamin Ho, an American economist who has studied trust “the economy is fundamentally a network of relationships built on mutual expectations. More than that, trust is the glue that holds civilization together.” (Ho, 2021). In other words, without trust, it is likely that a civilization will fall apart. We trust the financial system to keep our wealth safe, we trust the education system to teach our children, we trust the judicial system to uphold our rights, we trust the armed forces to protect us from attacks, we trust the healthcare system to keep us alive and we trust the government to govern us justly. Unmistakably, trust is central to the functioning of an economy. Research tells us that when citizens have faith in these systems, economic outcomes are better for everyone. People who trust each other tend to cooperate in many ways including trade, entrepreneurship and innovation[1]. When the people of a country do not trust any or all of these systems, the fallout can be catastrophic.
Studies show that one of the main reasons for lack of trust within an economy is inequality. The Edelman Trust Barometer, 2020[2] reveals that the higher the income inequality in a country the lower the level of trust in that country’s government. In fact, the report found that economic growth affects trust less than income inequality. A large body of research shows that governments will not be able to garner the required support to solve pressing problems in a society that is distrustful. Their policies do not get implemented effectively hampering any benefits to the population these policies target.
“Trust is built when someone is vulnerable and not taken advantage of.” — Bob Vanourek
Be the change
In the last decades, our generation has borne witness to way to too many movements fueled by various forms of inequity: #MeToo, Black Lives Matter, the Arab spring, LGBTQ+ rights. Unfortunately, the list goes on. The seeds of a trust deficit were planted across the globe, long ago. The COVID19 pandemic has laid bare the impact of this distrust in almost every economy. Many governments struggled, not only to convince their populations to adopt COVID appropriate behavior but more markedly that the dangerous and sometimes fatal coronavirus exists. The phenomenal number of casualties, which is still growing, is a direct result of people lacking trust in their country’s systems. Current realities like the slow rate of vaccinations, poor tax collection and a thriving parallel economy (read black markets) all stall economic growth. And they are all a result of distrust.
Right now, we are only at the beginning of experiencing the economic impact of the COVID tragedy. By many accounts the existing economic and financial inequities have deepened. Many lives have been lost, families left hungry, children orphaned. For them and countless others the future is unimaginably dark. For a better tomorrow for all of us, we need to bestow trust its rightful place in the economy. If we hope to provide our future generations a quality of life that eludes us, we need to implement policies that create a level playing field for all. Policies that seek to restore trust by reducing wage gaps and wage dispersion, raising the minimum wage, strengthening collective bargaining or increasing fairness in hiring and taxation, fairness in access to quality healthcare and in the treatment of the criminally accused, appear to be promising ways to move forward.
[1] IMF, 2017 https://blogs.imf.org/2017/05/10/the-economics-of-trust/
[2] Edelman Trust Barometer,2020 https://www.edelman.com/sites/g/files/aatuss191/files/2020-01/2020%20Edelman%20Trust%20Barometer%20Global%20Report_LIVE.pdf