Thursday

24th Aug 2017

Focus

Trust is 'gold' in digital age

  • Trust is not only a good thing to have morally - it is also economically smart, says the Nordic Council's secretary general Dagfinn Hoeybraaten. (Photo: Lars Lauritzen/norden.org)

The lady behind the reception desk at the Nordic Council’s headquarters in Copenhagen looked disoriented when I arrived for my appointment, asking for Mr. Hoeybraaten, the council's secretary general.

“Who? Can you please repeat the name," she asked and checked her computer once more, before realising with a big smile: "Ah, you have a meeting with Dagfinn?" referring to her boss's first name.

Sometimes small things can tell a bigger story. In this case, it is about the general low levels of hierarchy in the Nordic region.

Equality and trust are key factors in understanding the relative success of the Nordic countries over the last 100 years, when benchmarked against other regions in the world on almost any issue – growth, equality, education, transparency and low corruption.

Norway came first in the World Happiness Report 2017, followed by Denmark, with all the five Nordic countries among the 10 happiest nations in world.

"Citizens are less happy when the economy is weak, which also has a negative impact on the functioning of society, with a risk of greater criminality and greater difficulties in maintaining parts of the democratic base," concludes the new report: Trust - the Nordic gold, published by the Nordic Council on Friday (16 June).

It takes a deeper look into the reasons for the numerous Nordic top-rankings, but it also warns that challenges lie ahead.

”Many parts of the world do not appreciate that trust is society's most precious and fragile asset,” said Rachel Botsman, an Australian researcher and expert on the sharing economy who teaches at University of Oxford, Saïd Business School.

”The Nordic countries understand that trust is a currency that can have enormous economic, political and social benefits," she told EUobserver.

”I think that the Nordic countries should draw closer links between high levels of social trust and the benefits people experience in the region, from individual happiness to lower crime and long-term unemployment. And they should communicate these messages to other parts of the world,” she added.

”The tie is not always explicit and societies take for granted and eventually squander what they do not value. That is what is happening in many parts of the world right now and is one of the reasons why trust is at a critical tipping point”.

Trust is not a natural resource

Trust is not a natural resource in the Nordic area in the same way as copper, lumber, or oil.

It was never granted to the Nordic societies by nature or divine power, but something that has been created over a long period and through various interacting processes, the report concluded.

First of all, trust is derived from equality among people and the absence of a permanent underclass in the Nordic countries – where wealthy people’s incomes are also not perceived as being too unfair.

“I think many would say that it has been here since the time of the Vikings, but maybe forced by the reformation and the Protestantism that preceded the development of equal, low-hierarchy kind of societies where people could read and participate,” secretary general of the Nordic Council, Dagfinn Hoeybraaten told EUobserver.

“The middle-class is big and there are few very poor and few very rich in the Nordic countries,” he said, adding that “any increase of inequality is a threat. And could lead to a reduction of trust levels”.

“Both organisationally and economically it would be a big burden for society and it could possibly end the whole social model of Nordic societies if we were to put in place controls and bureaucracies and regulations to make up for a loss of trust levels,” Hoeybraaten warned.

“We launched this report to attract attention to this feature of the Nordic model, to make all of those who are keen on promoting the Nordic model aware of it. It is more about creating a debate and a consciousness than actually launching any political process because this [trust] is underlaying all political processes,” he said.

Trust in the digital age

Rachel Botsman’s research has focused on how technology enables trust in ways that are changing the way we live, work, bank and consume.

“Trust has only evolved in three significant chapters throughout the course of human history, local, institutional and what we are now entering: distributed,” she explained.

“Until the mid-1800s trust was built around tight-knit relationships. If someone cheated, you would know the person and not do business with this person again”.

In the mid-1900s, society went through tremendous changes again. People moved to fast-growing cities. The local banker was replaced by large cooperations that didn’t know us as individuals.

“We put our trust into authorities, legal contracts, regulation and insurance. Trust became institutional,” Botsman explained.

But these days we are starting to realise that the institutional trust wasn’t designed for the digital age.

She mentions the Volkswagen emission scandal, abuse in the Catholic church, the fact that only one banker went to jail after the great financial crisis, or the Panama Papers revealing how the rich can exploit off-shore tax regimes.

“These are major breaches of trust,” she said.

The good news is that, in the digital age, we will also find new tools to build trust.

“Online trust is built by ratings, that will make us more accountable in ways we can not yet even imagine,” she predicted.

“Trust is no longer top-down and blockchain will revolutionise trust,” she argued. Blockchain technology allows for the decentralised storage of verified information, which cannot be retroactively changed, providing for much more transparency - and trust.

She adds her prediction that blockchain "will remove the need for any kind of third-party, such as a lawyer to facilitate the change."

Ridesharing apps Uber and Chinese Didi are early but powerful examples of how trust is created by technology in a scale that was never possible before.

“By seeing a name, and someone’s photo and their rating makes them feel safer and behave a little more nicely in the taxi cab,” Rachel Botsman said.

"We need to redesign health, political, financial and many other systems so that they are much more transparent, inclusive, personalised and accountable. The old rules of trust do not apply to the digital age."

Threats to Nordic welfare

Many surveys have shown that public trust in institutions, political parties and the media is beginning to crumble, with the Nordic area being no exception.

Denmark is, for example, struggling to re-establish public trust in its tax authorities after losing around €1.6 billion to foreign-based fraudsters, who hide in tax havens and are not likely ever to be prosecuted.

The government announced this week that the national Danish tax authority will be split into seven regional branches to improve and regain public trust.

“Other countries fight to keep trust in the police or other very important institutions that really need a high level of trust in order to do their job and in order for the society to be trusted,” Hoeybraaten said.

The Nordic report mentions “increasing heterogeneity in the Nordic societies, caused by, for example, increased economic differences, immigration and political polarisation.”

"People may perceive that other citizens are ‘free riders’, making it difficult to maintain common norms, and the individual is less inclined to contribute to society," the report stated.

Bo Rothstein, professor at the University of Oxford, explained in the report what is at risk if social trust declines: "The individual finds it less meaningful to pay tax, use the social insurance systems appropriately, sort their waste, respect laws, and not accept corruption."

"Perhaps the most dangerous feature here is that people who have lost trust in each other will find it hard to recreate it, even if they are aware that everyone would benefit from increased collaboration," Rothstein added.

Hoeybraaten issued the reminder that: “Trust is something you build long-term, and you lose short-term.”

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