Fortunately, I got my “two hits” and theoretically, at least, I should be free to roam the world. Before that, a small detour to John Prescott, former British Deputy Prime Minister from 1997 to 2007, who, attacked (an egg was thrown) while on an election web, retaliated with his fists against his attacker . As a result, he was nicknamed “Two Jabs Prescott”. Prescott came to mind when I read the physical assault on French President Emmanuel Macron.
What was remarkable was not the aggressor’s stupidity but Macron’s response afterwards – he said his role was to go out and meet people, hear their concerns and restore trust with them. With that, he put his finger on one of the central political problems of our time – that people no longer trust their governments and the institutions that govern them. In France there is (misplaced I think) speculation that Marine Le Pen is going to take power, and in the UK and beyond a growing awareness that Boris Johnson individually is untrustworthy.
More broadly, a few surveys paint a worrying picture. The PEW Center in the United States shows that trust in government is very low – only 24% of Americans trust their government (the low point was 17% under the Trump administration), up from 50% after 9/11 and 77% under Kennedy. time.
The OECD Trust in Government Project shows a similar picture – globally, only 45% of people trust their governments and have a much higher level of trust in education and health systems ( in the United States, the health and military personnel are among the most trusted professions – with politicians, bankers, and journalists at the bottom of the trust scale).
Across the companies, an interesting picture emerges. The Global Values Survey shows that in small advanced economies – the Nordic countries and Switzerland for example – people have a high level (60%) of trust in each other (this may be due to the size of the countries, culture and proximity to populations), but in many emerging countries with weak institutions and rule of law (i.e. Colombia, Brazil, Ecuador and Peru), trust between companies is much lower (10%). What is striking is that trust levels in China are high, underlying a cohesive society and where the “contract” between the government and its people is still intact, which is largely underestimated in the West. .
Trust in small states
Yet this widespread lack of trust in government and this large variation in trust between companies has many implications for politics and commerce. The PEW Center also reports that in the United States, France and the United Kingdom, a majority of people want a major change in their political system (with citizens’ assemblies and referendums among the solutions proposed here, in the manner Ireland and Switzerland).
This suggests that in the democratic world (which, according to many surveys like the EIU’s, is shrinking) governments need to invest more in transparency and in new ways of giving voice to their citizens – whether in local level or for example using social media to collect feedback.
At the institutional level, many institutions are not at all well understood by those they supervise, with central banks being among them the first. An example that I often point out is the EU, whose leaders now speak of “European values” but which, at the same time, have not reflected on what this means in practice for the various nationalities that make up the Union, and how, in a pragmatic way, way, that could bring them together.
Institutions need trust
Moreover, with regard to the new institutions of the 21st century, whether they are the guardians of the climate or cyber activity or organizations that will mobilize new forms of money, public confidence will be one of the most important criteria that will drive their construction.
In trading, there are two trends to watch out for.
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 together in a technologically sound transaction or contract. In particular, the idea of decentralized finance is that it operates outside the framework of governments and central banks – bodies that are less and less trusted. One could even interpret the decision of Ecuador – a country with very low trust and institutional quality – to adopt bitcoin as a currency, as an assertion of the above.
Crypto Rises As Confidence Falls
If you plot a graph of declining trust in government and the market value of cryptocurrencies, there is a good (reverse) fit, albeit with only eight years of data. So a provocative way for governments to limit the use of bitcoin could be to build the credibility of their own actions!
At the same time, banking systems – which are in many cases too damaged or too poorly trained to be trustworthy – are being replaced by other, more trustworthy brands. In Kenya, for example, the MPensa mobile payment system is widely used and trusted, in part because it is operated by a brand (Vodafone) that Kenyans trust (anecdotally).
The idea of trust in the economy is a big and complicated question, my own preference is that we have governments and institutions that 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 the realm of money and democracy, the ugly part and hopefully the constructive sum.