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5 June 2018

Protecting Democracy in a Changing World

Written by: Ed Williams, Chief Executive Officer, Vice Chairman Europe at Edelman

News, Trust

Yesterday, I spent the morning delivering a lecture on defending democracy at the Microsoft conference at the NYU Stern School of Business.

This is what I said in my opening remarks:

Twenty-five years ago, I started my career in journalism. The fall of the Berlin Wall had just marked the end of the Cold War and Francis Fukuyama’s End of History proclaimed the triumph of Western liberal democracies over communism.

The institutions that had been created after the Second World War – NATO, the World Bank, the IMF, and of course the United Nations and its agencies – sat at the top table, respected, active in shaping the world, preventing or mitigating crises and providing stability.

It was in this post-Cold War period that the G7 became the G8 with Russia’s entry to the elite club. Together they tackled geopolitical and security issues, climate change, trade, human rights and democracy. Davos and the World Economic Forum was the sanctum sanctorum for the globalists.

The internet was in its infancy back then, but poised to transform our lives for the better, providing new ways to communicate with each other, spreading ideas and galvanising global citizenship.

We were enjoying an upward economic cycle. Income inequality was narrowing, and Tony Blair’s agenda of opportunity and prosperity for all was taking off.

Today, the world looks very different… yet, many of the seeds of our problems were sown back then, notably the fallacy (just like the End of History) that we had finally constructed an economic system that was too good to fail. Had we looked a little closer, we would have seen the potential of these seeds to grow into something far more complex, volatile and problematic.

In the round, when today you consider the world, you see the ugly bloom of those seeds in the shape of five big themes that are playing out:

First, the battle for global supremacy – a declining US superpower versus the brute economic force and singular focus of China.

Second, the re-emergence of old power struggles – Russia and the West, Iran and Israel, capitalism and its alternatives.

Third, seemingly unstoppable transnational macro effects and their consequences – climate change, global displacement of people, demographic change, inter-generational challenges, populism and the rejection of elites.

Fourth, a return to strong-men leaders – Trump, Putin, Kim Jong Un, Erdogan, Orban, Duterte.

And finally, and this is really what I want to talk about today, the erosion of the norms underpinning the system and loss of trust in international institutions that have given us common cause for generations.

So, what went wrong – why have we lost trust in our institutions and what can we do about it?

First, why does any of this matter at all? If you buy into Howe and Strauss’s Fourth Turning, it doesn’t. We are simply the generation experiencing the destruction of institutions prior to their rebirth. We happen to be passengers onboard a rocket hurtling towards catastrophe. Strap in. There is nothing you can do about it.

If you don’t happen to adhere to this fatalistic worldview, you may still, as I do, believe that the threats posing our institutions as a result of declining trust must be tackled head on.

Building trust can take years; destroying it can take moments. Because it is simultaneously powerful and also ephemeral, largely because it is composed of a range of values, actions and behaviours. Paul Polman describes trust as arriving on foot but leaving on horseback.

So, in thinking about why trust matters, think about what happens when there’s an absence of it.

Motives are questioned. Collective effort and outcomes are impossible to coordinate. Transaction costs are high. Other costs soar. Credit is hard to come by. Voids are created.

It’s precisely these voids that the populist and nationalist leaders – those promising a return to the ‘good old days’ – have sought to fill.

In Italy, America, Poland, Hungary, even parts of Germany. It’s best expressed in slogans like “take back control”. Control from the technocrats, the bureaucrats, the globalists, all of whom are blamed for the decline in the economic fortunes of the masses.

So why has this happened? I would argue that our leaders (and we) failed to spot a range of undercurrents shaping the public mood. The perception of a lopsided distribution of the benefits of globalisation; of a growing divide between the haves and have nots; a set of unresolved issues stemming from the 2008 financial crisis and its aftermath; how de-industrialisation, combined with automation, completely reshaped the world of work; and how social media provided a channel to both expose and jimmy open our divides.

There is a commonality amongst all of these issues. Those in positions of trust didn’t spot them, let alone intervene to arrest them — and consequently they are left with a public feeling profoundly let down.

The picture is particularly stark when you consider the data.

Trust Barometer

The firm I work for – Edelman – has studied trust and its effect on the public for almost two decades now.

Over that time, we’ve seen how global events like the battle for Seattle, the collapse of Lehman Brothers, and so on have affected trust. Though it must be said when you look solely at liberal democracies, trust has been in short supply for many years. But it would be wrong to think that this is a universal picture.

Elite vs Mass

Beginning in 2012, we’ve seen a gap between trust levels of elites (we call them “informed publics”) and those of the mass public.

Bluntly put, those citizens on lower incomes with less education had lower opinions of those in power than did those on higher incomes with more education.

That shouldn’t really come as a surprise. But we’ve recently started to see something new – a narrowing of the gap. It’s not that the mass public are becoming more trusting of institutions… it’s that elites are now expressing the same feelings and fears. Countries like the US have seen this most acutely.

America Leads

This year’s Edelman Trust Barometer showed that the US had suffered the largest trust drop in the survey’s history. In fact, no country in the 28-country research we do saw a steeper decline than the U.S., with a 37-point drop in trust across the four institutions we measure. Bad, yes, but compounded by the fact that trust among the informed publics, fell even more sharply.

The collapse of trust in the US is driven by a staggering lack of faith in government, which fell 14 pts to 33 percent among the general public, and 30 pts to 33 percent among the informed public.

Last year the gap between the general public and the informed public was 21pts when considering in aggregate trust in government, media, business and NGOs. This year that gap has all but gone.

What we are seeing is an unprecedented crisis of trust, paradoxically not driven by current economic data. Indeed, when the research was in the field the Dow Jones was up 25% and more people were in jobs than at any point in history (125.97 million).

Trust nosedived elsewhere too. In Italy, Australia, India, Brazil, South Africa trust sunk across every metric – government, media, business and NGOs.

What is driving this perception is a belief (particularly marked in western liberal democracies) that our best days are behind us. It is no surprise then that according to our data, half of people now say they are against free trade, and three quarters prioritise protecting jobs and local industry at the expense of overall growth.

Trusted Countries

Historically, our data showed that countries moved more or less in sync with each other. Not so this year. We’re seeing a polarisation effect, with an equal number of countries pulling in opposite directions.

China now finds itself atop the Trust tower gaining 27 points to America’s 37-point slump.

Off the back of continued economic progress, a growing middle class, a seat at the table in global affairs and strategies like the Belt and Road initiative, China has rocketed up the trust rankings.

Joining China in trust gain territory are the UAE (+24), South Korea (+23), Sweden (+20), Malaysia (+19) and Poland (+17). Fewer commonalities in this grouping apart from good economic prospects.

The Pyramid and its Inversion

So what is driving trust volatility and where is influence coming from? Until the mass adoption of the internet and social media, the traditional model of influence was a pyramid (graph). The pyramid model was predicated on the belief that the informed publics have access to better information than the general public, that their interests were interconnected with institutions and that becoming ‘an elite’ was open to all of those who work hard – but you had to climb the ladder.

Democratisation of information – in other words, the internet – turned the pyramid on its head. Authority and influence are no longer concentrated in the hands of a small number of decision makers and opinion formers.

Anyone can now mobilise on social media and use powerful search to access information. You no longer need to rely on the more “informed” population as the source for ideas, nor for their distribution. It also means influence is no longer automatically granted to those in authority— authority often now follows influence. The ladder now for some is the number of followers you have on social media.

Media as an elite pastime

The tug-of-war between the elites and the mass is also behind the loss of trust in media as an institution. For many, the media represents an elite pastime and its trust scores paint a depressing picture. Looking at this year’s numbers, for the first-time media is the least trusted institution globally. In 22 of the 28 countries surveyed it is now distrusted.

One observation, perhaps for our discussion, is that the media has got too far ahead of the public. Economic liberalism, the changes in social and sexual mores, multiculturalism, have created perhaps too large a gap between the metropolitan media and the masses.

Perhaps this is why in focus groups that I have participated in, people say the media doesn’t reflect their lives and is distant and out of touch?

Social media backlash

More practically what we see in the data is that the demise of trust in the Fourth Estate is driven primarily by a significant drop in trust in social media. 6 in 10 people globally say they do not know how to tell good journalism from rumour or falsehoods, or if a piece of news was produced by a respected media organisation or not. In America the number is 7 in 10. This is a major problem.

Ironically the very channel that provided the mechanism for galvanising protest and public action, for campaigning and influencing directly, is being questioned by the people who use it. The story of low trust in social media in the UK mirrors what is playing out elsewhere. In the UK, less than a quarter of people trust social media for news and information and the vast majority of people want government to step in and regulate. Social media companies (and tech companies it has to be said) are blamed for spreading fake news, extremist content and opinions. They’re seen as complacent when it comes to cyberbullying and careless with people’s data. These concerns are felt as much by the old as by the young. The major difference is the young are voting with their feet. One in ten young people told us they’d turned their backs on the likes of Facebook in the last year.

But the issue is complex – we’re not seeing a total rejection of social media. Indeed, one person’s fake news, is another person’s killer fact – or at least ‘their truth’. And this is the point. Social media has provided a cocoon for people to live in their own realities, sharing simplified world views that strengthen their own beliefs and biases. The loser in all of this is the idea of a common, objective truth.

News avoiders and skimmers

Alongside low trust levels in social media, in traditional media (newspapers, television, radio) we are seeing evidence of declining consumption and outright avoidance of the news. A third of Britons say they are accessing news media less, and one in five choosing to avoid it altogether.

But what is most surprising is that as it stands, the more educated and higher income you are, the more likely you are to avoid the news now. The problem of news avoidance is not a low-income problem, it is a top quartile income problem. The same goes for the problem of conspiracy theories – another driver of declining trust.

Why? Because they think the news industry is biased, that the world’s problems are too depressing, or that “real stories” are supressed. Given some of the issues I’ve outlined it should be deeply worrying to us all that we are becoming ostriches – burying our heads in the sand by avoiding the news.

But… a loss of trust in media could be changing.

Green shoots

Despite the bleakness of the picture I just painted, I would point to a few trends playing out across the G8, that suggest reasons for optimism. First, the percentage of people who say they trust traditional media as a source of news now stands at 60%. Traditional has nearly three times more trust than social.

Now, I mentioned earlier that we had been watching a steady decline in this number over the past six years. This year the trend reversed. Taken together, across the G8, the year on year rise is 8 pts. In the UK, it’s up 13 pts (from 48 to 61 per cent).

Second, this is seen against a significant rise in the credibility of experts, like professional journalists. Trust in journalists as credible sources of information stands at 34 percent in the G8. It is low, but it’s the year on year uptick that makes all the difference – it is up 13 pts since last year.

It follows a trend right round the world of the turnaround in the fortunes of the “Expert”. CEOs, boards, government officials, industry analysts are all up – in some cases by double digits.

Could this herald a return of trust to leaders and by extension also our institutions? It is too early to tell – as is the question of whether this reversion to experts is a public counter-reaction to increased volatility.

I do wonder whether there is more yearning for stability in an unstable world…

Fairness

I finally want to talk about one of the meta issues that in many respects explains what we have seen over the past ten years, as trust in institutions has been on the decline. It is, in my mind, the context for all of this. That is, fairness.

When you ask the public if they think “the system” is fair? If they think they have good leadership? If they think they have a chance of finding a good job? If their family will do better in the next generation? If the system is working for them? The resounding answer is no.

Barely 1 in 10 people in Britain believe the system is working for them. 3 in 10 don’t know. Young people are marginally more optimistic with close to 2 in 10 saying the system works.

There’s very little confidence about the future and future generations’ prosperity – with a quarter of young people saying their economic prospects will worsen in the next 5 years. Poor judgements on our leaders’ ability to deliver economic change, and many thinking the machine of government is broken (2 in 5 globally), that it’s corrupt and prone to abuses of power.

In fact, it is a minority who think the system is working. Yes, this sentiment is narrow in as much as it affects Western Europe, Latin America, and the Anglo-Saxon countries. But the issues that people worry about are anything but.

Corruption, the march of globalisation, the erosion of values and the speed of change (here read automation). In our data we see significant fears in these areas. And as I pointed out earlier, this isn’t a view of just the mass, it is elites too. And it’s a view that is rapidly replacing left-right ideology.

For many, this all boils down to a simple question: is the system designed to work for me, or is it set-up to work for others? Rich people, tax avoiders, corporates, global institutions… It is precisely because this question hasn’t been adequately answered that we have a crisis of trust.

A bad ending to a bad move?

So, in conclusion…

First, the obvious point. As it stands, unless we tackle some of these issues this movie doesn’t end well. The onward march of fear-mongering, anti-immigrant, nostalgic populism will carry on with potentially disastrous consequences. Who would bet against a second Trump term, or an Italian EU referendum? In eastern Europe, it’s now an open question whether the democratic progress of the last 30 years will prove to be a brief aberration in a long line of illiberal regimes. And with seismic shifts in Spain and a coalition of extreme left and right in Italy, the problems of Europe are infecting other core member states.

Second, the is a major risk associated with the erroneous conclusion that the system has failed and its because of globalisation. This misses the fact that billions have, and continue to experience, massive improvements in their fortunes due to globalisation.

The facts bear this out…

The proportion of the world’s population living in extreme poverty is now below 10%, for the first time.

Every day, the number of people around the world living in extreme poverty (less than about $2 a day) falls by 217,000.

A smaller share of the world’s people are hungry, than at any time in history.

Literacy – once the privilege of a small minority – is now north of 85% and climbing further still.

The number of middle class consumers in the world is now somewhere between 3 and 4 billion. Brookings estimates that over the next decade this group is likely to grow faster than at any other point in history. This change may represent the single most important rise in general human welfare ever.

Bill Gates describes this as “the most beautiful chart in the world” – showing the falling rate of child mortality between 1990 and 2015 which has resulted in, Gates estimates, 122 million kids’ lives being saved.

Undeniable gains in health, income, education, life expectancy and physical safety. If misreading the collapse in trust results in a retrenchment from globalisation, this is a major problem.

Third, global challenges require global cooperation. This is going to require leaders to recognise the enlightened self-interest in sovereigns working together to tackle transnational issues. The December meeting in Morocco to agree a global compact on addressing migration is an example. We need others.

Final point – we need new policy ideas to address the underlying problems. Whether it’s George Soros’s Africa Marshal Plan in response to stemming migration, or innovative responses to re-skilling workers that we see in countries like Denmark and Singapore.

More fundamentally though, if we don’t recognise the underlying drivers for why populism has proved so salient, we risk achieving very little.

I spoke at the beginning about shifting norms, and I’ve described how this is playing out in terms of perceptions, attitudes and behaviours. But what the populists have figured out that the liberalists seemingly haven’t is an understanding that material improvement (seen in some of the statistics I just read out) may not be enough for us humans, particularly if progress comes at the cost of social cohesion or a sense of belonging.

Liberalism is rule-bound. It doesn’t pronounce a view on what society “should” look like. In fact, it more or less stands for the opposite. That’s the beauty of it. Its Achilles heel, however, is that it leaves a vacuum for those hungry for more fulfilling prophecies.

I’d argue there’s a middle ground, and you’re seeing it in the Macrons, Merkels and Trudeaus of the world.

But there’s still a big job to do. It starts with tackling some of the measurable stuff: erosion of incomes, squeezed middle classes, job fears as industries are exported to low-cost countries, automation, and so on. But it also means tackling some of the not so measurable things. These are the undercurrents we spoke about at the beginning. Our leaders mostly failed to take notice of them. Why? We were guilty of undervaluing what cannot be measured: fairness.

So how do we protect our democracy and rebuild trust in institutions? Simple… leadership in all its guises.

Political leadership to escape the handcuffs of short-term electoral concerns and focus instead on the real long-term challenges.

Business leadership to deliver what the public want from commerce – purposeful companies that do their bit for the world, beyond the selling of products and services.

Leadership from media to battle against the filter bubbles and stand for the objective truth not exploit extreme ideologies or promulgate misinformation.

And finally, civic leadership which recognises how individual action can benefit the common good.

This was delivered by Ed Williams at the NYU Stern School of Business and Microsoft conference on Monday 4th June 2018.

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