Trust is essential for economic and social interactions. But numerous scandals have created a climate of suspicion. How can we recreate the trustworthiness on which trust depends?
Trust makes economic transactions smoother and more efficient and is the basis for social interactions. Yet most people do not trust government or business and many are suspicious of the media. The reasons vary in each case, but today’s attitudes have their origins in the recession. Corporate greed and bad management are seen as the initial cause of the financial and economic crisis, but governments are blamed too, both for failing to prevent the crisis from happening in the first place, and for appearing to propose only solutions that made life worse for victims such as the unemployed, those on low incomes or users of public services.
Despite all the warnings about the dangers of “business as usual”, corporate scandals have continued to make the headlines. Banks manipulating interest rates, multinationals paying little or no tax, or food manufacturers deceiving consumers about the ingredients in their products destroy confidence and reinforce mistrust. Government responses to these issues are often perceived as too lenient, and encourage the feeling that there is one law for the rich and powerful, another for the rest of us.
But before asking how we can restore trust, perhaps we should ask why we should restore it. The evidence suggests that, left to themselves, many institutions cannot be trusted to work for the public good. The question is how we can oblige them to be trustworthy. Democracy allows us to sanction a government we don’t trust, either by waiting for an election or forcing one to be held. But what about other major actors in public life?
A business’s first responsibility is to its shareholders. If it can boost dividends by paying less tax for example, it will do everything the law allows to reduce its tax bill. That may be legal, but taxpayers in the country where the untaxed profits are made see it as unfair. The general term for the methods used to avoid tax is “Base Erosion and Profit Shifting” (BEPS) – reducing a national tax base by shifting profits to other jurisdictions. The OECD Forum 2013 will present a number of ideas on what can be done to make the tax system more equitable, including an action plan to be presented in June 2013 that will identify actions needed to address BEPS; set deadlines to implement these actions; and identify the resources needed and the methodology to implement these actions.
Trust means much more than just paying taxes of course. The Forum will also provide an opportunity to discuss wider issues of governance and regulation that need to be tackled to reduce the trust deficit. For example, as governments turn to the private sector to provide services, there are debates about the trustworthiness of public services that are run for profit. And there is growing public concern that public officials’ private interests should not influence government decision-making.
Everyone benefits when levels of trust and trustworthiness are high. But getting there from the present climate of suspicion will take time and coordinated efforts from all sections of society.