Trust is a valuable social lubricant, facilitating cooperation between individuals and regulating dealings between corporations and governments. It is also increasingly seen as an important economic resource that may help explain the differences in GDP growth between countries.
Stephen Knack, a scholar whose work involves probing the mysterious qualities of trust, even goes so far as to suggest that the entire difference between the per capita income of the US and Somalia is down to the different levels of trust in each country.
Knack’s claim reflects one extreme view of the utility of trust to economic and social relations. The truth is that no-one agrees on the added value that trust brings to balance sheets or “community spirit.” The basic argument is quite straightforward: trust, or ‘social capital’ as the economists call it, is an invisible asset made up of the “networks, norms, relationships, values and informal sanctions” that help “shape the quantity and co-operative quality of a society’s social interactions.”
High levels of social capital in a country boosts the economy by reducing the likelihood of fraud and theft eating into revenues and saving managers thousands of working hours on supervisory duties. In an environment where bosses trust their workers, they are less likely to devote time and resources policing their activities. These savings in so-called ‘transaction costs’ could run into millions of pounds.
Could the UK economy be depressed by a deficit of trust? By linking together the research of academics like Knack with the findings of Wilkinson and Pickett in their groundbreaking book on the benefits of equality, The Spirit Level, it becomes clear that low levels of trust among Britons could be partially responsible for both the business and social problems blighting the country. Wilkinson and Pickett say “high levels of trust mean that people feel secure, they have less to worry about, [and] they see others as co-operative rather than competitive.”
The Spirit Level reveals that the UK ranks fourth lowest among the developed countries for levels of trust, behind Portugal, the US, and Singapore. Not only this, but academic studies suggest trust has been in decline in the UK for a long time now. Surveys taken in the immediate post-war period reported that between 50-60% of Britons felt they could trust their fellow countrymen. However, by 1981 this percentage had fallen to 42.5%, and by the time of New Labour, was at a historic low of 30.4%.
These figures suggest that over time individuals have become more suspicious of, and even hostile to, other people. This change in attitudes naturally has a corrosive effect on social and business relations, and may have some part to play in explaining declining levels of economic growth since the 1980s and, by extension, the current difficulties getting out of recession.
The reasons why trust levels have fallen through the floor are debateable. However, the evidence provided by Wilkinson and Pickett makes a compelling case for blaming it on the exploding economic inequalities Britain has experienced over the last few decades.
Utilising the research of Eric Uslaner in his book The Moral Foundations of Trust, they claim that “income inequality is the ‘prime mover’ of trust, with a stronger impact on trust than rates of unemployment, inflation or
Why should restoring trust within society be a priority now? Because a lack of social capital harms the prospects of young people most of all. A Cabinet Office report in 2002 stated that trust and fellow-feeling helps young adults acquire the wide network of contacts and links with associations that help them to find work. In a world where the key to satisfying employment is still who you know, not what you know, young people are disadvantaged by living in a society where people don’t trust each other enough to reach out beyond their own little worlds.
We must act now to stop trust draining out of our country. As Project M argues, there is no reason to be complacent about a depletion of social capital. “When trust is used it can foster greater trust, but it can also be dissipated, particularly when inequality grows within society.” Boosting levels of trust in society may not solve all society’s problems, but it would certainly help foster an environment where people, and businesses, are better able to work in harmony with one another.
Louie Woodall is Assistant Editor of the Young Fabians Blog