Trust

Trust

I had intended to write about attending breakfast with the Polish minister of employment and social policy and to reflect of the vexed question of employment – or, rather, unemployment and what to do about it but, on hearing an interesting story the other day, I was drawn to thinking about the equally vexed question of trust – or the lack of it – in the public sphere.

Most of us instinctively trust those with whom we come into contact in our daily lives and believe that what we are told is correct. Indeed, life would rapidly become intolerable if we had to live in a constant state a cynical distrust. Of course, we should always take care when entering into important transactions – whether this means checking facts carefully or taking appropriate professional advice – or making important decisions, and no amount of trust is a substitute for common sense (alas, less common than it used to be). But the act remains: trust is our instinctive reaction.

Trust is, of course, the basis for many business relations whether or not there is a written agreement. This is graphically demonstrated in the motto on the coat of arms of the London Stock Exchange: dictum meum pactum (my word is my bond) and to this day vast amounts of financial instruments are, in effect, traded on the assumption of both parties that the bond will be honoured. Indeed, when the City was a more intimate market place, peer pressure effectively enforced this ideal. If one party failed to honour his bond, not only would his counter party not do business with him in the future but nor would any of the counter party’s friends and associates. Nowadays such self regulation has largely been replaced by ever more voluminous rule books with the result that a party may cheat with impunity while demonstrating (with aid of expensive professional advice, no doubt) that, in fact, no rules were actually broken. This is surely a step backwards. At the heart of the financial crisis which began in 2008 are who actually breaches of trust, whether by senior bank staff towards their employers (and shareholders) or whether the banks towards their customers. None of which would be so bad were it not for the fact that taxpayers have been left to foot the bill with, so far, very few individuals answering for their failings – so much for moral hazard. More recently, the LIBOR scandal has undermined trust in those setting key index used in all manner of financial transactions.

And the response from the politicians: the typical call for more regulation, seemingly indifferent to the fact that this is a more a moral than a regulatory issue and also oblivious of the fact that trust in politicians has probably never been lower. The lack of trust poses a great danger because distrust breeds cynicism which breeds apathy and lack of engagement with the political process which then allows the politicians a free hand: the less carefully we are watching or are interested, the more they have the potential to be get up to no good. It is remarkable, for example, that one response to the Euro crisis has been to remove the democratically elected governments of two countries with very little protest. There may have been protests against “austerity” but there seems to have been very few against this most serious attack on democracy. The lack of popular protest will only reinforce the prevalent view among EU apparatchiks that decisions are too important to be entrusted to the people. A breach of trust is not cured by indifference.

However, the people are not completely forgotten and nor is the story I mentioned at the outset. No doubt for public consumption, it was reported in the Polish media that during a gathering in Brussels the other week, the Polish prime minister had two hours of “tough discussions” with the British prime minister over the proposed EU budget. Poland would like to continue to receive large amounts on money from the EU (i.e. taxpayers of other member states) and the British government would like to see the budget capped given that each member state’s budget is under pressure. Interestingly, comments from a British government minister appear to suggest that while the two may have met briefly there was not a face to face wrangling of the sort implied in the Polish media. Who is right? I don’t know (but I have my suspicions) – but whom should or can we trust?

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