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The Trust Deficit

Mal Fletcher
Posted 27 May 2012
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‘If once you forfeit the confidence of your fellow-citizens,’ wrote Abraham Lincoln, ‘you can never regain their respect and esteem.’

In any economic tightening, the currency that potentially suffers most is the currency of public confidence.

Economic confidence is a fragile thing and once shaken it can take years to re-establish. Yet trust in public leadership is even more fragile and if a general culture of mistrust sets in, the damage can be long-lasting – economically and socially.

The emerging situation in Australia is a good case in point.

On the financial front, despite some signs of a slowdown, Australia is still in relatively good shape, having escaped the worst effects of the near-global financial crisis.

The OECD revealed last week that it expects Australia's growth rate to rise this year and again in 2013. This is good news compared with the OECD’s prognosis for, say, Europe.

Australia’s economic growth, it says, will be underpinned by the ongoing mining investment boom. At the same time, though, a high-value dollar and the Australian government's plan to cut spending will slow other parts of the domestic economy.

Australia’s recent Federal Budget forecast a surplus by 2013, yet current signs are that it may take a little longer. The Reserve Bank has lowered its growth forecast amid fears that the country’s export-led boom is coming to an end, in part because growth has slowed slightly in the economies of China and India.

On the domestic front, the recent housing boom is no more, with sales in many areas now at their lowest level in a decade.

A shortage of affordable housing stock, plus tedious approval processes, are strangling the market. The Demographia Housing Affordability Survey has found that Australia has 22 ‘severely unaffordable’ cities – compared with just 19 in the UK and 11 in the USA.

Meanwhile, lending institutions are holding back on loans, both for businesses and individuals. Having gained from government guarantees in 2007-8, banks have failed to pass on any subsequent benefits to the public and are becoming less popular as a result.

So, whilst Australia was shielded from much of the financial crisis of a few years ago, it is now feeling the pinch a little more.

The Currency of Confidence

Confidence, not paper or digital money, is the key currency in any capitalist system. This is perhaps best seen in the rapidly emerging world of Web 3.0 online commerce.

Here, a trust revolution has been underway for some time. It has driven the rapid rise of person-to-person retail networks such as eBay. It is also the foundation of growing micro-lending services, which allow people to lend to the working poor in the developing world.

Trust also drives online crowd-sourcing, which replaces old-school approaches to venture capitalism with sizeable loans spread across large numbers of people.

Yet public confidence is a fluid thing. It is subject to all the vagaries of human emotion and subjectivity.

Trust is viral, as is the lack of it. A culture of trust in leadership encourages positive risk-taking and the investment of people’s money and talent. A culture of suspicion is anathema to innovation and therefore stifles economic progress.

Building a trust culture provides the engine that drives economic growth in both the online and offline worlds. As a result, the impact of even a slight economic slowdown is exacerbated when leaders of national institutions operate under an ethical or legal cloud.

Establishing trust and confidence are the primary responsibilities of national leaders. They are, in a sense, cultural architects.

In fact, this is the primary role of leaders at every level of society: to create an environment in which people flourish and projects fly.

Good leaders, through their example as much as their policies, proactively shape the cultures of the groups they lead. Those cultures in turn impact on human choices, which shape the future more than technology ever will.

Yet even from a distance, the current tenor of Australian political life seems to inspire very little in the way of trust or confidence.

Australia’s national leaders are struggling to overcome a growing sense in the public mind that they suffer from a severe integrity deficit.

In a hung Parliament situation, people might expect political leaders to demonstrate a higher than normal level of cooperation. Yet the present political tone seems more than a little self-serving, with leaders who seem motivated more by mutual suspicion than by a desire to work for the common good during a tight season.

For weeks, the nation’s front pages have been filled with stories about alleged impropriety by members of the national parliament.

Accused of misappropriating funds during his pre-parliamentary career at the Health Services Union, MP Craig Thomson spoke out in parliament against what he called conspiracies by the media. He also attacked former colleagues, yet offered no concrete support for his innocence.

Before that, Peter Slipper, the speaker of Australia’s parliament, stood down after a sexual harassment law suit was brought against him by a former employee. In a smaller-scale echo of the MP’s expenses saga, he has also been accused of misusing taxpayer-funded taxi dockets.

A denial of the charges by both MPs has apparently done little to allay a widespread public sense that their government is in trouble. 

Were both of these accusations to be proven, it would leave many wondering how certain individuals manage to be nominated for high office in the first place.

Meanwhile, a recent editorial in the Australian newspaper raised questions about a possible lack of honesty or full disclosure on the part of the Australian Greens in their support for changes to the institution of marriage. It asks whether their ultimate aim might not include support for polyamorous relationships.

The more of these stories that emerge and the longer they run, the more damaging it is to the people’s confidence not just in the national parliament but in public leadership generally.

The Trickle Down

If left unchecked, the trickle-down effect of all this will be the downgrading of the public’s attitude to leadership in general.

It will breed mistrust of leaders in all kinds of important social institutions, including businesses, local governments, third sector and religious organisations and other organs of civic life.

As a result, leaders at all levels of society will find it increasingly difficult to create cultures of innovation that give people the courage to spend and invest.

As the CEO of Business South Australia noted recently, ‘A failure of political leadership is [already] undermining confidence in spending.’

Whilst not perhaps on the same scale, the Australian situation is analogous to that of Great Britain throughout 2010-11. The Australian context is different, both economically and politically, but the nation risks heading in a similar general direction.

Throughout that period, British society went through a house-cleaning operation the like of which it hadn't seen for perhaps a generation. 

In the wake of various scandals and inquiries, almost every major institution, from the Parliament, to the courts, the police service, the news media and the business sector – particularly the banks – was held up to unprecedented scrutiny.

British people experienced a maelstrom of public unease and a growing distrust of institutions which had traditionally provided the foundations for a stable social order.

In a sense, the setting up of the first coalition government in Britain for decades was necessitated by this deep sense of national frustration.

Even now, public trust is not yet fully restored. Once lost, trust is hard to regain. Recent council elections saw the national coalition parties routed in almost all key locations, barring London. Britain’s second dip into recession is, at least in part, another hangover symptom of this lingering trust deficit.

Three years ago, the Times newspaper featured a graph which it said showed the incidence of certain words appearing in its articles from 1985 to the present.

Predictably, the word ‘terrorism’ showed a sharp incline towards the end of 2011. What caught my eye, though, was the line representing the word ‘sorry’ as spoken in the public square. It showed a steady increase from the mid-80s onwards.

As politics have become more personality-driven, people have come to expect a greater level of personal accountability, honesty and transparency from their political leaders.

Australia and Britain are different in so many ways. As a proud Australian who also holds British citizenship, I know all too well the differences between the culture of my homeland and that of the UK.

Yet in one thing Australians and Brits stand together, as do people in all liberal democracies: we demand a high level of authenticity, integrity and accountability in our leaders.

We require that they set a personal and professional tone that inspires trust, not least because this gives us the courage to fulfil our own potential and produce growth for the wider community.

Abraham Lincoln also mused that: ‘Character is like a tree and reputation like a shadow. The shadow is what we think of it; the tree is the real thing.’

In the present day, where shadows abound in political life, we are all of us looking for the real thing.


Hear Mal Fletcher's interview on this issue on Australian radio: click here.




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