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Introduction

Introduction
The New Trust Compact
by Richard Edelman

Lordstown, Ohio, 2019

A striking worker ends his picketing shift outside the plant where GM used to build the Chevrolet Cruze. “Buffalo” Joe Nero had worked for GM for 42 years; now he’s studying heating and air-conditioning in the hope of finding new work. “I’m 62 years old and I have to go home and do homework,” he said.

In the mid-1990s Francis Fukuyama’s influential book Trust: The Social Virtues and the Creation of Prosperity laid the foundation for studies of societal trust and informed the creation of the şÚÁĎÉçTrust Barometer. Fukuyama argued that only those societies with high levels of trust and “social capital” (shared values and ties beyond family connections), supported by strong legal frameworks, would be able to compete successfully in the then-burgeoning global economy. In The End of History, he famously claimed that the liberal democratic system had conquered rival ideologies like hereditary monarchy, fascism, and communism to become “the final form of human government” and as such constituted “the end of history.”

Fukuyama’s insights were valid for his era, but in the 25 years since then, the long-standing assumptions that supported his arguments have been challenged. The post-WWII triumph of liberal democracy and its solid legal framework has fallen to doubts about the effectiveness of democratic government. A society that was built on the success of business is now questioning capitalism’s ability to improve the fortunes of all, not just elites.

Non-democratic societies have become global economic forces, while in developed democracies, stalled income and fears of downward mobility overwhelm people’s optimism about the future. A media that once proudly stood for its freedom from influence is now slanted with opinion and polluted with fake news that forces us to question whether information is truthful. A dispersion of authority has evolved a top-down world into a peer-driven one; people now look to each other more than to leaders.

These enormous changes have brought about the need for a new trust compact between societal institutions and the people they serve. Throughout 20 years of studying how trust is won, violated and lost, we have learned that the two essential elements of trust are effectiveness and ethical conduct. These qualities have always been critical to any trusting relationship. What has changed profoundly are the expectations for what institutions must do to meet these promises before people will trust them.

We can trace the emergence of these new expectations back to our very first study. We conceived the şÚÁĎÉçTrust Barometer in 2000 as a direct response to the “Battle in Seattle,” when non-governmental organizations stormed the World Trade Organization to protest globalization as an unfair distribution of wealth. The initial study polled opinion shapers in the U.S., U.K., France, Germany, and Australia on their trust in NGOs relative to media, government and business. We were stunned to learn that NGOs were the most trusted institution in the world (now no longer the case), a clear sign of discontent with the effectiveness of traditional leadership.

Trust Inequality Remains High

Trust Index, 16-market average

    Key
  • Informed public (age 35–64)
  • Mass population
201220132014201520162017201820192020
475552515859566162
424544444744444648

The WTO protest was indicative of five seismic events in the first decade of the new century that would significantly alter people’s trust:

  • Concerns about globalization: The celebrated benefits of free trade were supplanted by concerns about economic dislocation, due to the outsourcing of jobs to lower-cost markets. For example, manufacturing employment in the U.S. fell over 28 percent, or by nearly 5 million jobs, from 2000 to 2018.
  • The Iraq War: The ill-conceived invasion of Iraq led to a destruction of trust in the United States and the U.K. and their governments.
  • Global recession of 2008-09: Global business titans such as GM, Citibank, Royal Bank of Scotland and AIG were compelled to accept emergency government assistance, while 13 million Americans lost their homes in the subprime mortgage crisis. The crash was foreshadowed by the burst of the dot-com bubble of the late 1990s and the economic downturn in developed countries in the early 2000s.
  • The advent of social networks: Social media accelerated the deterioration of the traditional media business model, forcing drastic cutbacks in reporting staff, and fueled a stunning change in the trust construct. Trust moved from the classic top-down vertical model, dependent on traditional leaders such as CEOs or Prime Ministers, to a horizontal one, in which people rely more on friends, family and “a person like me.”
  • The rise of China and India: The World Bank called China’s economic rise “the fastest sustained expansion by a major economy in history.” India joined the boom in the late 2000s. One billion people were lifted out of poverty, and by the end of the next decade, China, India and the U.S. would rank as the world’s top three economies.

Seattle, Washington, 1999

Police use tear gas against demonstrators protesting a World Trade Organization conference in Seattle. The protests are seen as the beginning of the anti-globalization movement and were one of the first mass movements organized over the internet.

In the second decade of the century, people began to question whether global institutions could be trusted to protect them from the aftershocks of these events – five interlinked trust tsunamis that formed the foundation of populism and are still being played out today:

  • Mass-Class Divide: Over the past several years, trust among the informed public has soared to record highs while the mass population continues to distrust institutions. This profound ideological divide is now in the double-digits in more than two-thirds of markets, providing ample ground for nationalism, protectionism and insurgent grassroots movements. We now observe an Alice in Wonderland moment of elite buoyancy and mass despair.
  • New Expectations of Business and CEOs: In the past two years, “my employer” has ranked as the top institution, more than 20 points higher than business in general. This is a function of full employment and empowered employees who are demanding that companies be governed by societal values, not simply shareholder value. They expect their company CEO to speak out on issues of the time, from diversity to retraining, that historically have been the province of government. Employees are taking action, confronting their employers through walkouts and boycotts of work assignments not consistent with company purpose. Citizens are organizing into spontaneous protest groups such as the Yellow Vests in France or Women’s Wall in India, not waiting for traditional NGOs to lead them.
  • The Failure of Government: Government rode to the rescue after the Great Recession, and the economy recovered. But it didn’t return to normal, as wages of middle-income earners were stagnant while the top 1 percent soared. Beginning in 2012, a gaping chasm in opinion of institutions opened in the U.S., U.K. and France, the beginning of populist outrage against elites. Trust in government dipped first in developed markets after the Brussels impasse on Greek debt relief, then in developing markets, as a wave of corruption through Latin America and Africa engulfed elected officials (e.g., the bribery scandal surrounding Odebrecht, the Brazilian engineering conglomerate). The sole exception continues to be state-run economies like China and the UAE, where government trust is high.
  • The Battle for Truth: An increasing dependence on social media as a primary source of information allowed individual experience to eclipse expertise as the basis of content. Social media brought about an epidemic of fake news that is now undermining democratic institutions. The public is increasingly opinionated, reverting to thought bubbles that reinforce presumption and bias. Fake news also has raised levels of skepticism and gullibility; responsible content counters both.
  • The Dominance of Fears Over Optimism: Despite near full employment in most countries, a majority of respondents do not believe that they and their families will be doing better five years from now. Eighty-three percent of the general population are worried about losing their jobs; 58 percent believe that they are not sufficiently well-trained for the jobs of the future. The rise of populism in recent years is a response by general population employees to government’s bad stewardship of these fears and others, including globalization and income inequality.

Strong Relationship With My Employer Around the World

Percent trust, general population, in “my employer”

These powerful shocks to the system make it necessary to evolve Fukuyama’s trust model into a new trust compact. Twenty years of ethical misdeeds – government and business corruption, bribery, fake news – and doubts that our institutions are able to lead us into the future have spurred an urgent desire for change (73 percent globally). In the new trust compact, people’s propensity to trust is based on how well they believe institutions get things done and whether they do the right thing.

The compact has two elements. First, trust must be built through participation. People expect that their voices will be heard and that they will be invited to help chart an institution’s future course. For business, they want to influence product development, supply chain, sustainability and policies that advance diversity and inclusion. Trust is predicated on transparency and flexibility and continually shaped by the give-and-take of stakeholders.

Second, trust has moved toward the local. The most trusted people are now my employer and, after scientists, my fellow citizens in my country and in my community. Multi-nationals should evolve into multi-locals, expressing global initiatives in local terms, conscious of politics and historical sensitivities, and insourcing local manufacturing. Employees and peers are among the most credible voices for building trust in your efforts.

No institution can go it alone. Job retraining should be the mutual responsibility of business and government. Media, business, and government must join forces to fight and win the battle for truth and ensure that people get the quality information they need to make good decisions for their lives. NGOs can help the other institutions embrace the “new power” of peer-led movements that are driving change around the world.

Paris, France, 2018

Demonstrators overturn burned-out cars near the Champs-Elysées during one of the weekly protests staged by the so-called Gilets Jaunes, or Yellow Vests, movement. The protests were sparked by a proposed fuel tax rise but grew to include widespread anti-government sentiment.

“We cannot live only for ourselves,” wrote Herman Melville, the author of Moby Dick. “A thousand fibers connect us with our fellow men; and among those fibers, as sympathetic threads, our actions run as causes, and they come back to us as effects.” Trust is the tie that binds us in our shared quest for a better future

Events 2001–2010

Concerns şÚÁĎÉç Globalization

The Iraq War

Global Recession of 2008–09

The Spread of Social Networks

The Rise of Automation

Impact 2010–2020

The Weakening of Government

Mass-Class Divide

New Expectations of Business and CEOs

The Battle for Truth

The Dominance of Fears Over Optimism

Baghdad, Iraq, 2003

U.S. Marines in Firdos Square, central Baghdad, pull down a statue of Iraqi dictator Saddam Hussein after the U.S.-led invasion of Iraq brought about the end of Saddam’s regime.