In last month’s column, I discussed how trust in government is at an all-time low. The Gallup Organization finds that trust in private institutions is similarly low. The only institution that enjoys widespread trust is small business, where 68% of Americans’ trust it a “great deal” or “quite a lot.” Trust substantially decreases for other institutions. Only the medical system and organized religion are trusted by more than 30% of Americans. Twenty-to-thirty percent of Americans trust unions, banks, tech companies and newspapers, while big business and television news are only trusted by 10%-20% of Americans.
Survey data from the Pew Research Center found that 52% of respondents said “most [people]can be trusted” while 47% said most could not. However, 58% of respondents said that most people would take advantage of them if given the chance rather than be fair and 62% of respondents said most people just look out for themselves rather than try to help others. This indicates that American society is shifting from a high-trust society to a low-trust one.
This is a problem because every day-to-day interaction is underpinned by trust. When you go to a store and purchase a good, you are trusting that the good will work as advertised and if it does not, you will be able to get your money back or have the situation rectified. When you book a flight or hotel reservation for several weeks in the future, you are trusting that the airline and hotel will not just simply take your money while not honoring the reservation. When you walk or drive down the street, you are trusting that others near you will not physically harm you and if they do, you will have legal recourse in an impartial court system. If you buy a piece of property, you are trusting that your property will be protected from theft and vandalism.
Given this, it is clear why shifting from a high-trust to a low-trust society is problematic. If trust is low, people are less likely to transact and undertake long-term investment in expanding production of goods and services. Consequently, economic growth and the standard of living are lower in low-trust societies compared to high-trust ones. This degradation of social trust likely – at least partially – explains why Americans remain pessimistic despite unemployment remaining below 4% and economic growth being robust.
As I discussed last month, solving long-term problems is nearly impossible in a low-trust society and there are many such problems to address, such as the budget deficit, the solvency of Social Security and Medicare, and infrastructure. Political and business leaders should be engaging in self-reflection to learn why Americans have lost trust in their institutions and what they can do to restore this trust. I do not see evidence that this is happening, meaning I expect the loss of trust to continue in the short-to-medium run at least, which poses an underappreciated risk to the U.S. economy.
