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Trust in small states
Still, this generalized lack of trust in government and high variance in trust across societies has many implications for politics and commerce.The PEW Centre also report that in the US, France and the UK, a majority of people desire a major change in their political system (with citizens assemblies and referendums amongst the solutions proposed here, a la Ireland and Switzerland).
It suggests that in the democratic world (which according to many surveys such as one by the EIU, is shrinking), governments need to invest more in transparency, and in new ways of giving voice to their citizens – either at a local level or for example using social media to gather feedback.
At an institutional level, many institutions are not at all well understood by the people they oversee, central banks being prime amongst them.One example I often flag is the EU, whose leaders now speak of ‘European values’ but who at the same time have not thought out what this means in a tangible sense to the diverse nationalities that make up the Union, and how in a pragmatic way, it might bring them closer together.
Institutions need trust
Moreover, with respect to the new institutions of the 21 st century, be they the guardians of the climate or cyber activity or bodies that will marshal new forms of money, public trust will be one of the most important criteria that drives their construction.
In commerce, there are two trends worth keeping an eye on.
The first is the rise of blockchain, and blockchain enabled means of exchange such as bitcoin.The theory behind blockchain is that its protocol works to bind two parties in a technologically trustworthy transaction or contract.More particularly, the idea of decentralized finance is that it operates outside the ambit of governments and central banks – bodies that are increasingly less trusted.
We might even interpret the decision of Ecuador – a country where trust and institutional quality are very low – to adopt bitcoin as a money, as an affirmation of the above.
Crypto rises as trust falls
If you draw a graph of the decline in trust in government and the market value of crypto currencies there is good (inverse) fit, albeit with only eight years of data.So, a provocative way for governments to curb the use of bitcoin might be to boost the credibility of their own actions!
Relatedly, banking systems – which are in many cases too battered or too ill formed to be trusted – are being replaced by other more trustworthy brands.
In Kenya for example, the mobile payments system MPensa is widely used and trusted, in part because it is operated by a brand (Vodafone) that is (anecdotally) trusted by Kenyans.
The idea of trust in the economy is a vast and complicated issue, my own preference is that we have governments and institutions we can trust and admire, but the reality is that there is little innovation and dynamism in today’s institutions.
I suspect that instead, the next ten years will see a wave of entrepreneurship in money and democracy, some of it ugly and I hope, the sum of it constructive.
Follow me on @levellingbook
I am the author of a book called The Levelling which points to what’s next after globalization and puts forward constructive ideas as to how an increasingly fractured … Read More
I am the author of a book called The Levelling which points to what’s next after globalization and puts forward constructive ideas as to how an increasingly fractured world can develop in a positive and constructive way.The book mixes economics, history, politics, finance and geopolitics.
Markets are the best place to watch and test the way the world evolves.Most of my career has been spent in investment management, the last 12 years at Credit Suisse where I was the chief investment officer in the International Wealth Management Division.I started my career as an academic, at Oxford and Princeton.Read Less.
