We all have a responsibility to build trust, encourage a sense of belonging and a community of welcome and optimism.
Ambitious New Year resolutions perhaps? But these goals, from the latest Scanlon social cohesion report are much more than just “nice to haves”.
Trust has strong economic as well as social benefits. As I show in an article published in the Australian Economic Review in December.
So it’s concerning that the latest Scanlon report found “our social cohesion is under pressure and declining on some fronts”. The United States provides useful cautionary evidence on the malevolent drivers of such trends. Data over the last 50 years shows a major decline in US social trust levels. That decline has especially occurred in years with Republican administrations. A strong factor has been the economic and social policies of those administrations.
Trust and economic performance
Trusting societies are, simply, better places to live. People in countries with high trust levels are generally richer, healthier, and more socially active than those with lower levels of trust. And societies with higher social trust and cohesion levels had better outcomes in the Covid pandemic.
The strong relationship between trust levels and economic performance is shown in the graph. It uses the standard international survey question measuring social trust. Respondents are asked to choose between “on the whole, most people can be trusted” or “you can’t be too careful”. The graph compares responses to this question with countries’ income levels.
The graph, from Our World in Data, shows people in richer countries are much more likely to say they can trust other people. A secondary factor affecting trust levels in richer countries is the level of inequality. For example, the United States, with greater inequality, has lower trust levels than New Zealand, which has higher trust levels despite lower incomes.
The graph clearly shows a strong correlation between trust levels and income levels. However, even with a strong correlation, it is still important to ask about causation. I reviewed that evidence in my article. The causation works both ways. Higher levels of trust encourage more economic activity, as people are more confident they will see results from hard work and more investment. And higher levels of income, showing those results, build further trust.
Similarly, reductions in social cohesion and trust have negative economic results.
Factors reducing trust
So what factors lead to declining trust? The Scanlon report notes “greater financial stress, increased concern for economic inequality and growing pessimism for the future”. However, as that report shows, there are also grounds for optimism. One is the considerable stability in Australians’ responses to the Trust question. Since 2007, a consistent half have agreed “most people can be trusted”.
Clues to factors corroding trust can be seen in the much less optimistic pattern seen in the United States. The trust question has been asked since 1972 in the General Social Survey conducted by the National Opinion Research Center at the University of Chicago. The graph shows the strong declining trend.
Major social disruptions, such as the Global Financial Crisis in 2008-9, and the Covid pandemic in 2020-1 had impacts. But over these 50 years, a key factor in the decline has been the political colour of administrations. The percentage saying “most people can be trusted” has fallen 17.4 points from 47.7 in 1972 to 30.3 in 2020. Republican presidents have presided over most of this decline.
Tracking the changes during each Republican administration, the Nixon/Ford Republican administration (1972-76) saw a decline of 4.9 points. Reagan/Bush (1980-92) saw a stronger decline, of 5.7 points, George Bush (2000-2008) a decline of 3.4 points and Trump (2016-2020) a decline of 2.7 points.
In contrast, Democratic administrations have seen more modest changes. Carter (1976-80) actually saw an improvement, of 1.3 points; Clinton (1992-2000) little change (-0.1 points); and Obama (2008-16) a decline of 1.9 points.
Why has the decline in trust occurred mainly on the watch of Republican presidents? There have been some marked differences in the economic policies of the two parties. Republicans have emphasised fewer constraints on businesses, and significant tax cuts for the wealthy. Both have damaged trust. Business deregulation has led to numerous well-publicised cases of companies cutting corners – encouraging people to think “if they can get away with that . . .” And the tax cuts have reinforced the considerable widening of inequality in the United States since 1980. Numerous studies have found widening inequality has a corrosive effect on social trust.
For Australia, the Scanlon report had a guarded conclusion:
Social cohesion in Australia has been remarkably resilient through the challenges of recent years. However, we continue to face difficult national and global circumstances.
In tackling those circumstances, the US experience provides a cautionary tale. Social trust is important in maintaining a strong society and economy. Policies either that allow businesses to flout rules or that foster inequality work directly against those goals.
For reference:
Tony Ward is, since 2011, a research fellow in history at the University of Melbourne. Prior to that, he had a varied career in academia, senior executive positions in the state public service, and 17 years as principal of an economic consulting company. Tony has published two books: Sport in Australian National Identity (Routledge, 2010) and Bridging Troubled Waters: Australia and Asylum Seekers (Australian Scholarly Publishing, 2017). He has also published numerous articles in academic journals, ranging across the economics of inequality, sports history, and Australian migration history. In addition, he has written several well-read pieces on The Conversation website, and contributed to several submissions to the government on economic and social impacts of public policies. Tony has a PhD in economic history from Monash University (1984).
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