Government trails business in trust

Megatrend Two:
Government Trails Business in Trust

New York, 2008

A Lehman Brothers employee leaves the company’s headquarters with their belongings after the investment bank’s collapse. It was the biggest corporate bankruptcy in history.

A quick look at the trajectories of people’s trust in business and government since the early years of the Edelman Trust Barometer would tell a fairly simple story, you might think. Among the informed public, trust in the two institutions mostly rose in parallel over the years, resulting in double-digit increases by 2020. Business has been more trusted than government every year since 2007.

But a closer look reveals that the relationship between trust in government and business is much more nuanced and more interesting than a simple growth chart. It is a multidimensional story, one of the most important of the past 20 years for helping us understand why and how the current imbalance of trust is effectively destabilizing society.

One of the major turning points for government trust occurred in 2012 after a series of global events left people’s confidence in government weakened. In that year’s report, Richard Edelman noted: The 2012 Edelman Trust Barometer sees an unprecedented 13-point global decline in trust in government among the informed public. In 12 countries, it trails business, media, and nongovernmental organizations as the least trusted institution. This has pushed more countries into the distruster category. Political brinksmanship on the debt ceiling in the United States, dysfunction on bailouts in the European Union, corruption in Brazil and India, and a natural disaster in Japan accompanied this downward trend.

Every year since, there have been double-digit gaps between business and government. Government trust has continued to rise, but it has not been able to catch up with business trust in much of the world. Sizable gaps between government and business trust can now be found in the old-guard democracies of North America and Western Europe, and the gaps are even more pronounced in Latin America, where Trust Barometer respondents do not trust government but trust business more. In contrast, in both developed and developing Asia, there is almost no government-business trust gap at all.

Informed Public Trusts Business More Than Government; Trust Gap Remains High in 2020

Percent trust, informed public age 35-64, 16-market average, and change from 2007-2020

  • Business
  • Government

The forces that drive these gaps, and more often than not put negative pressure on government trust, vary from region to region:

Income inequality. A look at income inequality in developing markets from 2013-2018 shows that it has stronger negative pressure on trust in government beginning in 2015 compared to developed markets. During a period of strong economic growth in the developing world, government failed to address a growing wage gap – essentially looking the other way as business raised these countries’ fortunes. Business suffered no such downward pressure.

Unemployment. During the same period in the developing world, business was to blame for unemployment, dampening people’s trust, whereas in developed markets unemployment correlates with more trust for government, as it attempted to remedy the problem. In the developed world, there is a 17-point gap in government trust between markets with high unemployment (24 percent trust) and markets with low unemployment (41 percent). But there is no trust gap for business between high unemployment markets (41 percent trust) and low (also 41 percent) – once again, business is shielded by governments happy with business’s economic engine and rolling back regulation to keep the fires stoked. Developed markets saw a fall in government trust – even in times of low unemployment government was blamed because GDP and income inequality have now become issues.

Economic growth. From 2012 to 2018, high-growth GDP markets were more trusting of government than they were of business, whether in the developing world (58 percent trust for government, 55 percent trust for business) or the developed world (44 percent trust for government, 41 percent trust for business). In developed markets, the trust gap for government was at 10 points between high GDP growth markets and low growth markets, but there was a -1-point gap for business, as trust in both institutions remained low.

Democracies. The markets with the strongest democratic systems are the least trusting of government. This trend has been consistent over time. Democracies are messy, and with many competing interests to juggle, rarely move quickly and make it harder to get things done. The result is that they are not viewed as effective, putting downward pressure on trust in government. Using data from the Democracy Project of the Center for Systemic Peace, the Trust Barometer determined that in the least democratic markets, from 2012-2018, people’s trust in government reached 59 percent (just below the 60 percent trust line), while in the most democratic markets, trust reached only 35 percent – a 24-point gap. Business suffered just a nine-point gap between the least trusting democracies (50 percent trust) and the most trusting (41 percent) over the same period. ›

CEOs vs. government officials. The credibility of leaders has been another signal in the ongoing disparity of people’s views of business and government. Since 2007, people have considered CEOs to be more credible than government leaders – and a three-point gap in that year has grown to a record 15-point gap in 2020. Perhaps a better indicator of the rise of business over government is that as CEO credibility grew by 20 points over the 13 years that the Trust Barometer has been measured, the credibility of government officials grew by only eight points.

General Population Consistently Trusts Business More Than Government

Percent trust, general online population, 16-market average, and change from 2012-2020

  • Business
  • Government

Athens, Greece, 2015

Crowds gather outside the Greek parliament as their representatives prepare to vote on Prime Minister Alexis Tsipras’s proposals to introduce further austerity measures to try to contain the country’s debt crisis and remain in the eurozone.

These pressures have contributed to the current environment in which government is generally considered by Trust Barometer respondents to be ineffective, lacking vision and on the wrong side of the ethical line (again, the developing Asian markets excepted). After surviving the effects of Great Recession of 2008, business trust has been on a steady rise, and business, admired for its competence and ability to get things done, has been increasingly called on to address social issues, from sustainability to LGBT rights to gun safety.

The call for business to step up and create positive change is not a new one, as noted in the 2009 Trust Barometer report: When asked what role business should play to help solve issues such as energy costs, the financial credit crisis, global warming, and access to affordable healthcare, almost two-thirds of 25-to-64-year-olds around the world believe that businesses should partner with governments and other third parties to address global issues. Less than five percent believe that business has no role in addressing these challenges.

Ten years later, consumers, customers, employees, and activist shareholders are pushing business to take on pressing societal issues more than ever before, as government bears the brunt of a decade of built-up anger. The Gilets Jaunes public demonstrations in France pitted the mass against the elite, forcing a retraction of a fuel tax. The #MeToo movement reached into corporations and the media, causing the exit of long-time executives. Employee walkouts or job actions have forced changes in company standards or lines of business. Consumers now buy or boycott based on their values – two-thirds are belief-driven buyers, according to Edelman research.

In August 2019, the Business Roundtable, an organization of prominent American CEOs, released its “Statement on the Purpose of a Corporation.” It makes an argument for widening a company’s fundamental purpose from a single focus – shareholders – to all stakeholders. It is an extraordinary call to action: business must move to a new model, which values people as much as profit. The group also states that its goal is an economy ensuring each person can succeed through hard work and lead a life of meaning and dignity.

Informed Public: Trust in Business has Surpassed Trust in NGOs

Percent trust, informed public age 35-64, 16-market average, and change from 2007-2020

  • Business
  • NGOs

Wait – wasn’t it the job of government and NGOs to protect and defend the rights of working people, foster the sustainability of our planet, and protect the world from the excesses of business?

In the very first Edelman Trust Barometer, in 2001, NGOs were the most trusted institutions in Australia, France, Germany, U.K., and U.S. People agreed that NGOs were the most credible source on social issues and the environment (it was the era of Greenpeace’s highly emotional and media-genic protests). NGOs earned points for having clear agendas, building coalitions, and communicating directly with the public.

Twenty years later, NGOs have lost some of their potency. NGOs had a six- to eight-point trust advantage over business from 2011 to 2015, but beginning in 2016, that trust advantage narrowed and was lost in 2018, when business became the most-trusted institution. NGOs are not looked to as problem-solvers to the same degree as business; they are as not as effective as business in getting things done; and they are criticized for focusing on fundraising over creating real solutions.

Our institutions are out of balance, especially business and government. Government has long played the role of business watchdog, curbing its excesses, breaking up monopolies, preventing mergers when they threaten consumer choice. Thanks to business, the world has enjoyed growing prosperity in nearly every corner over the past 20 years, but government gets less credit for a perceived lackluster performance. Although trust in government has risen overall it still seems to take the blame for the income inequality that fuels both populism and people’s growing pessimism about the future. If, as the Edelman Trust Barometer has registered, government is consistently less trusted than the entity it is supposed to be regulating, how well can our society function?

While in all regions of the world both government and business trust have increased over time, what we do not have (outside of Asia) is a state of homeostasis in which all institutions are functioning well and in balance with one another. The big four societal institutions are interdependent entities. Balance is almost if not equally important as good functioning at an individual institution level. Business may be doing well, but if government does not hold up its end, a healthy society will continue to remain elusive

CEOs Must Lead

Percent who agree

  • Training for jobs of the future
  • Ethical use of tech
  • Automation’s impact on jobs
  • Income inequality
  • Diversity

Business Must Serve All Stakeholders

Percent who ranked each group as most important

  • Customers / Clients
  • Employees
  • Shareholders
  • Communities where they operate

New York, 2018

Nike’s controversial ad featuring Colin Kaepernick, the former 49ers quarterback, on prominent display in New York. Kaepernick joined the protest against police brutality and racism by kneeling during the national anthem, angering many conservatives.