Luckily I got my “two jabs” and at least in theory I should be free to roam the world. Before I do that, a quick detour to John Prescott, former UK Deputy Prime Minister from 1997 to 2007, who was attacked on an election proposal (an egg was thrown) and responded with his fists against his attacker. As a result, he was nicknamed “Two Jabs Prescott”. Prescott came to mind when I read about the physical attack on French President Emmanuel Macron.
What was noteworthy was not the attacker’s stupidity, but Macron’s reaction afterwards – he stated his role was to get out and meet people, listen to their concerns and build trust in them. In doing so, he summed up one of the most important political issues of our time – that people no longer trust their governments and the institutions that rule them. In France there is speculation (I find it inappropriate) that Marine Le Pen will come to power, and there is growing awareness in the UK and beyond that Boris Johnson is untrustworthy as an individual.
In general, some surveys paint a worrying picture. The PEW Center in the US shows that trust in the government is very low – only 24% of Americans trust their government (the low was 17% during the Trump administration), compared to 50% after 9/11 and 77 % during the Kennedy era.
The OECD project Trust in Government paints a similar picture – only 45% of people around the world trust their governments and have a much higher level of trust in education and health systems (in the US, health and military personnel are among the most trusted professions Politicians), bankers and journalists at the lower end of the trust spectrum).
An interesting picture emerges across all societies. The World Values Survey shows that in smaller industrialized countries – for example in Scandinavia and Switzerland – people have a high (60%) degree of trust in one another (this can be due to the size of the country, the culture and the proximity In many emerging countries with weak institutions and the rule of law (e.g. Colombia, Brazil, Ecuador and Peru), social trust is far lower (10%). It is striking that there is a high level of trust in China, which underpins a coherent society and in which the “contract” between the government and its citizens is still intact, which is greatly underestimated in the West.
Confidence in Small States
Still, this general lack of trust in government and the high variance in trust between societies has many political and economic implications. The PEW Center also reports that in the USA, France and Great Britain a majority of the people want a fundamental change in their political system (with citizens’ assemblies and referendums under the solutions proposed here, a la Ireland and Switzerland).
It suggests that governments in the democratic world (which according to many surveys like one of the EIUs is shrinking) need to invest more in transparency and new ways to give their citizens a voice – either at the local level or, for example, with social media for feedback to collect.
At the institutional level, many institutions are not at all well understood by the people who oversee them, including central banks. One example that I often point to is the EU, whose leaders now speak of “European values” but at the same time have not thought about what this means in concrete terms for the different nationalities that make up the Union and how pragmatic it is could it bring them closer together.
Institutions need trust
With regard to the new institutions of the 21stst In the 20th century, be it the guardians of the climate or cyber activities or institutions mobilizing new forms of money, public trust will be one of the most important criteria driving their construction.
There are two trends in retail that are worth watching.
The first is the rise of the blockchain and blockchain-enabled means of exchange like Bitcoin. The theory behind the blockchain is that its protocol binds two parties to a technologically trustworthy transaction or contract. In particular, the idea of decentralized finance is that it operates outside the purview of governments and central banks – institutions that are becoming less and less trusted. We could even interpret Ecuador’s decision – a country where trust and institutional quality is very poor – to adopt Bitcoin as money as a confirmation of what has been said above.
Crypto goes up when trust goes down
Graphing the decline in confidence in the government and the market value of cryptocurrencies results in a good (inverse) fit, albeit with only eight years of data. So a provocative way for governments to curb the use of Bitcoin could be to add credibility to their own actions!
Accordingly, banking systems – which in many cases are too tarnished or too badly formed to be trusted – are being replaced by other more trustworthy brands. In Kenya, for example, the MPensa mobile payment system is widely used and trusted, partly because it is operated by a brand (Vodafone) that Kenyans (anecdotally) trust.
The idea of trust in business is a wide and complex topic. I prefer that we have governments and institutions that we trust and that we can admire, but the reality is that there is little innovation and dynamism in institutions today. Instead, I suspect that the next decade will see a wave of entrepreneurship in money and democracy, some of it ugly and hopefully overall constructive.