Cedric Stephens | The inherent risk posed by mistrust
Sociologist, development scientist and Gleaner columnist Peter Espeut’s June 3 article, ‘How to win the trust of the people’, despite its emphasis on political parties, should be essential reading for all leaders in society. It discusses and provides information about two recent scientific studies that explore the idea of trust in the context of Latin America and the Caribbean, including Jamaica.
President of the Inter-American Development Bank Mauricio Claver-Carone in the preface to an IDB publication defines trust as “the belief that others will not act opportunistically. It is faith in others – in their honesty, dependability, and goodwill. Trustworthy people (and institutions) make promises they can keep and keep them; they respect social norms’.
The 2022 study released by the IDB last month titled Trust: The Key to Social Cohesion and Growth in Latin American and the Caribbean, “found that whether in others, in government, or firms, (our) trust is lower in the region than anywhere else in the world”, Mr Espeut wrote.
It said that worldwide, trust fell between 1981-1985 and 2016-2020 from 38 per cent to 26 per cent or 31.5 per cent. In the LAC region, trust fell during the same period from 22 per cent to 11 per cent or 50 per cent. None of the small group of people with whom I spoke could offer any explanations for the sharp decline in trust. They assumed, like me, that the level of trust in politicians, others and our institutions remained constant or, if it declined, the rate of decline was lower than the study found.
The co-editors of the publication stated that “trust is the most pressing and yet least discussed problem confronting Latin America and the Caribbean” given that it is lower in the region than anywhere else in the world. “The economic and political consequences of mistrust ripple through society. It suppresses growth and innovation: investment, entrepreneurship, and employment all flourish when firms and government, workers and employers, banks, and borrowers, and consumers and producers trust each other. Trust inside private and public sector organisations is essential for collaboration and innovation,” they said.
Many persons, I suspect, are unaware of the societal implications of mistrust.
While I was aware that only a small number of the persons on the local voters’ list exercised the right to vote – only 21 per cent in the last general elections, according to Mr Espeut – the general level of mistrust surprised me. Politicians, members of the police force and the institutions to which they were associated, banks and insurance companies, I believed, were the main culprits. I was wrong.
The century-old Chartered Insurance in The United Kingdom, of which I am a member, describes itself as a “body dedicated to building public trust in the insurance and financial planning profession”. Four years ago, it sponsored a study on the importance of trust in the SME sector. It was found, that in a country where the level of trust among people and in institutions is higher than it is in Jamaica, the insurance sector faces a ‘mammoth’ challenge and that without trust, customers cannot be confident in what they are paying for and they are unlikely to be forthcoming with accurate information. The trust deficit damages all parties involved in business transactions.
In August 2014, the IDB, Access to Insurance Initiative and the Multilateral Investment Fund conducted a diagnostic study of the local insurance environment. The authors of the report offered recommendations under three broad headings, namely supervisory and regulatory, industry, and consumer protection. The specific recommendations that were made under groups two and three related to the promotion of trust in the industry and its products.
From my observations, none of the eight ideas that were discussed to improve trust in the industry or enhance consumer protection was ever implemented. Section 3 of the Insurance Act of 2001 describes the criteria that the regulator uses to determine whether the leadership of insurance entities meet the ‘fit and proper person’ test. Trust or trustworthiness are not mentioned. More significantly, 14 years after the law was passed, the insurance industry, supposedly founded on the principle of the utmost good faith, was not considered to be a bastion of trust, in the opinion of independent observers and consumers.
The takeaways from IDB’s latest study are:
1. Building trust is a tremendous opportunity for countries in Latin America and the Caribbean. By making trust a goal of public policy, and not simply its by-product, countries can accelerate growth and employment. Decisions to invest, employ, produce, buy, or sell all depend on trust. The most productive, skilled, and innovative individuals have greater economic opportunities in high-trust societies. Greater trust will unleash growth.
2. Mistrust in the private sector is an obstacle to inclusive growth. It is well known that the business sector tends to distrust governments, and this hurts investment and productivity. A survey of thousands of export-oriented firms in the region reveals that distrust within firms is also an obstacle to investment and innovation.
3. Mistrust in the public sector is an obstacle to inclusive growth. Trust in governments is low in the region. Our study finds that the lack of trust makes it difficult for citizens to demand better public policies and services. A survey of thousands of public officials revealed that mistrust within public agencies, and their mistrust of citizens, reduce the public sector’s capacity to serve citizen needs, including a regulatory environment conducive to growth and investment.
4. Restoring trust depends on information and empowerment. Citizens do not trust the government when they are uninformed about what the government is doing for them, and when they have little capacity to act together to hold the government accountable. Firms do not trust each other when they can do little about opportunistic behaviour. Governments can inform and empower, and the IDB is helping them do this: strengthening education and regulatory institutions; reducing barriers to entry for productive workers and firms; and, at a broader level, encouraging governments to make promises, fulfil promises, and communicate both to citizens.
This newspaper recently reported that distrust in remote employees by local ‘walk-around managers’ was a top challenge for flexible-work arrangements. This is the tip of the iceberg. Actions need to be taken to arrest the decline.
Cedric E. Stephens provides independent information and advice about the management of risks and insurance. For free information or counsel, write to: aegis@flowja.com or business@gleanerjm.com