Rebuilding trust is good for business
Should you care about all of this if you’re a Trump supporter or someone who thinks UKIP are a pretty decent bunch? Definitely, says Professor Papaioannou. “Rebuilding trust is a good business proposition. Business leaders need to realise the importance of trust in their customers and in the citizens of the society in which they operate.”
This isn’t about a nice cosy feeling, it’s about avoiding a grim alternative. “A business operating in a society characterised by distrust will have to deal with a lot of regulation and red tape when it wants to expand. A distrustful society’s attitude to a company wanting to operate a new factory or a new plant is to produce formal barriers to entry. It will require them to fill in endless forms and obtain numerous licences.
“In contrast, doing business in a country like Scandinavia, where there are high levels of trust in business and society, is far easier. The public expects high quality and high ethical standards. Businesses comply with the rules. This reinforces general and business trust, which in turn promote civic values and improves the administration.
“Another reason for businesses to care is that distrust and red tape come in tandem with corruption. Firms want to operate in places with low levels of corruption, good supervisory and regulatory mechanisms and low levels of red tape. So it’s crucial for people to have a sense of trust in the core pillars of modern societies and especially in businesses. Policymakers wanting to restore trust should remove administrative barriers to entry that fuel corruption and impede competition.”
So trust matters. What can we do to rebuild it? Professor Papaioannou suggests three key ways:
1. Celebrate and promote openness and open-mindedness
Trust grows between people from different backgrounds when they are exposed to each other on a daily basis. For instance, there is evidence that the strong correlation between antisemitism in the 1930s and medieval times in Germany breaks down in cities at the intersection of rivers that served as commerce hubs. Governments should promote an outward-facing economy.
2. Support the underprivileged
Recognise and help those households and individuals that have been hit hardest by the financial crisis or by globalisation’s side-effects. For example, workers in manufacturing in industrial countries (the US and UK among others) have been hit by rising competition from low-income countries such as China and automation. In addition, many households, especially in the periphery of Europe, have suffered from deep and lasting recessions. Governments and business should offer safety nets to the unemployed and help them re-integrate into the economy.
3. Choose the right kind of education
Research by Yann Algan, Pierre Cahuc and Andrei Shleifer shows that countries where schooling involves teachers who lecture and children who memorise should alter the curriculum towards more group activities, team projects and critical discussion. Trust can be built from early childhood in this way. The first eight or nine years are where children learn – or don’t learn – non-cognitive skills that are crucial for success such as trust, empathy and perseverance.
How trust varies
Levels of trust vary between countries. A recent World Values Survey (WVS) on trust asked respondents, “Generally speaking, would you say that most people can be trusted or that you need to be very careful in dealing with people?” Within Europe, the Netherlands, Finland, Sweden and Norway came out as the most trusting nations; Cyprus, Turkey and Macedonia the least. Beyond Europe the differences were even more striking.
Trust levels also vary within countries. For example, trust and civic capital differ considerably between the north and the south of Italy. There are also sizable differences between eastern and western Germany. Historical legacies play a crucial role. Even when you look across German towns in the once-communist east, there is a correlation between those where there were more Stasi [secret police] informants and a lower level of trust among the people who live there today.
It makes sense: if you grew up in a society where you never knew if the friend you were having coffee with was an informant, why would you trust anyone? (See also The Lives of Others.) And distrust is passed down through the generations – embedding what Professor Papaioannou calls the inertia in trust. Ingrained attitudes are hard to transform. “Changing people’s beliefs and promoting civic engagement won’t happen overnight.”
He points to another study, this time focusing on Africa, which has demonstrated lower levels of trust among people from those ethnic groups that were most affected by the slave trade – people whose ancestors saw their kin kidnapped to be sold to traders and shipped to the US, over several centuries. Slavery has been abolished but trust can’t be legislated for.