“Trust is a key component of the social capital that “enables participants to act together more effectively to pursue shared objectives.”¹
Yet trust, and how we build more of it, is strangely absent from most discussions around economic growth or around the success of policy implementation.
Everybody talks about how we live in an angry world fuelled by social media bubbles driving ever greater polarisation. Yet, as this month’s chart shows, in many countries the level of interpersonal trust has increased over the last decade. There are exceptions (the US and Italy from among the countries we show in the chart). But mainly there has been an increase in interpersonal trust.
This seems counterintuitive. It’s not clear that we know why it’s happening. Maybe we don’t even look at why it’s happening because we’re all pre-programmed to believe that the trend must be flowing in the opposite direction.
It doesn’t seem to be.
Denmark and the other Scandinavian countries seem consistently to outperform other countries. Speaking to some Danish friends, they are not surprised. Apparently, the importance of being trustworthy, and therefore also able to trust others brought up in the same culture, is imbued into Danish children from their first day in kindergarten.
There seems to be evidence of a strong relationship between trust and economic performance. While there is a degree of correlation between the two (see figure below), some have argued that it’s not just correlation, but that trust actually drives economic growth.²
This is not hard to imagine when we reflect on the costs of lack of trust that we observe every day of our plives. From the high transaction costs in anything we do because we don’t trust (think of all those lawyers’ fees) To the ever more bloated costs of compliance incurred by companies of all sizes. To the breakdown of trade and cooperation when trust breaks down.
As can be seen from the figure, some countries – notably Scandinavian ones as well as China and India, trust levels are higher than would be expected for their level of wealth. Others (the US, France, Italy) fall below the line.
The UK does about as expected or slightly better in terms of trust when correlating trust and economic growth. As we all suffer through the current election campaign, maybe we should evaluate which parties’ platforms even mention building trust as an underpinning of their policy programme and driver of growth and which, instead, thrive on fomenting division and mutual distrust.
Maybe that is a better metric than any other by which to judge where to place one’s vote.
¹ Putnam, R. D. 1995. “Tuning In, Tuning Out: The Strange Disappearance of Social Capital in America.” Political Science and Politics 28 (4): 664–65.
² Algan, Y., & Cahuc, P. (2013). Trust and growth. Annu. Rev. Econ., 5 (1): 521-549.
