28/1/17: Trust in Core Social Institutions Has Collapsed

The latest Edelman Trust Barometer for 2017 shows comprehensive collapse in trust around the world in 4 key institutions of any society: the Government (aka, the State), the NGOs (including international organizations), the Media (predominantly, the so-called mainstream media, or established print, TV and radio networks) and the Businesses (heavily dominated by the multinational and larger private and public corporates).

Here are 8 key slides containing Edelman's own insights and my analysis of these.

Let's start with the trend:

In simple terms, world-wide, both trust in Governments and trust in Media are co-trending and are now below the 50 percent public approval levels. For the media, the wide-spread scepticism over the media institutions capacity to deliver on its core trust-related objectives is now below 50 percent for the second year in a row. even at its peak, media managed to command sub-60 percent trust support from the general public, globally. This coincided with the peak for the Governments' trust ratings back in 2013. Four years in a row now, Governments enjoy trust ratings sub-50 percent and in 2017, mistrust in Governments rose, despite the evidence in favour of the on-going global economic recovery.

In 2017, compared to 2015-2016, Media experienced a wholesale collapse in trust ratings. In only three countries of all surveyed by Edelman did trust in media improve: Sweden, Turkey and the U.S. Ironically, the data covering full 2016, does not yet fully reflect the impact of the U.S. Presidential election, during which trust in media (especially the mainstream media) has suffered a series of heavy blows.

 In 2016, 12 out of 29 countries surveyed had trust in Media at 50 percent or higher. In 2017, the number fell to 5.

Similar dynamics are impacting trust in NGOs:

 Of 29 countries surveyed by Edelman, 21 had trust in NGOs in excess of 50 percent in 2017, down from 23 in 2016. Although overall levels of trust in NGOs remains much higher than that for the Media institutions, the trend is for declining trust in NGOs since 2014 and this trend remans on track in 2017 data.

As per trust in Government, changes in 2017 compared to 2015-2016 show only 7 countries with improving Government ratings our of 29 surveyed. This might sound like an improvement, unless you consider the already low levels of trust in Governments.

In 2017, as in 2016 survey, only 7 countries posted trust in Government in excess of 50 percent. This is the lowest proportion of majority trust in Government for any survey on record.

Based on Edelman analysis, the gap between 'experts' (or informed public) view of institutions and that of the wider population is growing.

 And as the above slide from Edelman presentation shows, the gap between informed and general public is substantively the same in culturally (and institutionally) different countries, e.g. the U.S., UK and France. All three countries lead the sample by the size of the differences between their informed public trust in institutions and the general public trust. All of these countries have well-established, historically stable institutions and robust checks and balances underpinning their democracies. Yet, the elites (including intellectual elites) detachment from general public is not only massive, but growing.

These trends are also present in other countries:

As Edelman researchers conclude: the public in general is now driven to reject the status quo.

All of the above suggests that political opportunism, ideological populism and rising nationalism are neither new phenomena, nor un-reflected in historical data, nor fleeting. Instead, we are witnessing organic decline in trust of the institutions that continue to sustain the status quo.

12/3/2012: Social partnership is Ireland's institutionalized corruption

This is an unedited version of my article for the current edition of the Village magazine.

Illegal corruption – in its various forms and expressions – is hardly a rarity in Irish society. So much we know. Perhaps less well understood, are the legally permitted forms of corrupt behaviour that contribute to social and economic degradation and undermine democratic institutions and state legitimacy.

Economists identify corrupt activities to include illegal abuses of the system, such as bribery, cartels,  explicit collusion, price fixing, and embezzlement. But corruption also includes activities that fall into grey areas of the law – tacitly allowed: cronyism, nepotism, patronage, implicit collusion, and influence-peddling.

Over the years, the Irish state recognised that both types of these activities exist in the realm of private and semi-state business, and in order to restrict the former forms of illegal corruption, has decided unofficially – of course – to give the perpetrators of the latter quasi-legal ones the strongest political representation in the land – direct access to policy formation. In recent decades our Government and elites Left and Right, went so far as to institutionalise the arrangement.

Since 1987, Social Partnership has constituted a closed shop with membership restricted to select organisations, representing certain subsets of Irish society. Since this membership restriction is codified and since Partnership is explicitly concerned with fixing prices for some forms of capital and inputs into production (for example – wages, that serve as the compensation for human capital, and via planning restrictions linked to State-determined development agenda, to land), it is both de jure and de facto a cartel. That it is a public cartel, as opposed to a private one, does not change its corrupt and corrupting nature.

This cartel actively and with State support promoted policies that led to gross distortions of the markets and of competition between the market players; and also led directly to the relegation of the State’s duty of care to consumers and ordinary investors. An unobservable, but nonetheless equally distorting feature of the system is the effect this system had on preventing formation of competitive enterprises and entrepreneurship, as Social Partners colluded to restrict and re-allocate (to their benefit) investment and employment opportunities, and re-shape the space of new policy ideas formation, formulation and expression.

Social Partnership rubber-stamped a policy of ‘Never at Fault, Never Responsible’ for our financial regulatory and supervisory regimes. It trumpeted the culture of unaccountability in the public and protected private sectors. Without Social Partnership support, it is hard to imagine the State sustaining the very regimes that led to open, but never-prosecuted violations of the law (e.g. breaches of regulatory liquidity-requirements), ethical codes (e.g. loans-for-shares machinations and misclassifications of deposits), MiFID (Markets in Financial Instruments Directive) requirements (e.g. the mis-selling of investment products by at least four banks in Ireland, explicitly uncovered two years ago) and violations of prudential ethics in financial regulation (e.g. resistance to full public-data disclosure and investor-suitability testing and protection in the case of property transactions).

Neither the Unions, nor any other Social Partners stood up at the Partnership Table in support of the handful of whistleblowers pointing to the above failures. The ‘straw man’ argument is that the Unions always advocated ‘more regulation’. Alas, history shows that other priorities miraculously took precedence time and again over the proper regulation of finance, the protected professions, quangos and pretty much every other aspect of Irish governance. These, of course, were pay and conditions for the Unions’ members, slush-funds for ‘training’ and ‘research’ activities, and state-board appointments, including to the boards of financial regulation and supervision bodies. Having been bought by the ‘robbers’, the self-appointed ‘cops’ have, since the late 1980s, stayed nearly silent lest they damage the regulatory charade performed by the Government and rubber-stamped by their own members in charge of the regulatory bodies.

The Unions, of course, were neither unique, nor the most active participants in regulatory capture of the state by vested interests. Irish semi-state companies, banks, protected professions and public sector own (outside the Unions-led) self-interests were. Nonetheless, by deploying the rhetoric of ‘integrity’ and by relying on the arguments that their actions ‘protected the vulnerable’, the Unions were some of the most damaging – ethically speaking – players in the game.

In effect, the Irish state didn’t just tolerate corruption, it actively managed and encouraged it. Even debating the merits of the form of corruption embodied by Social Partnership shows how instrumental ethics replaces real values when the cancer of corruption metastases. Social Partnership is simultaneously a collusive cartel, a conduit for influence peddling, a vehicle for patronage and a price-fixing mechanism. Its goal is to preserve the status quo of wealth and income distribution, skewed in favour of the Partners.

It should come as no surprise that in 2011, Ireland ranked 19^th in the Transparency International Corruption Perception Index (CPI) – the lowest of all small open economies in the Euro Area, bar Estonia and Cyprus. As the Moral Sages of our Left ardently decry market economics, its flagships – New Zealand (ranked 1^st in the world), Singapore (5^th), Switzerland (8^th) and Hong Kong (12^th) – are less corrupt than the Social Partnership-governed Ireland. In Political Risk Services International Risk (PRSIR) rankings, Ireland is placed between 26th-31^st in the world – alongside Uruguay, the UAE, Botswana, Israel and Malta. The only euro area country that scores below us for overall political risks is Estonia.

Higher corruption overall is associated with a significantly lower quality of economic institutions. The correlation between the CPI score, the Economist Intelligence Unit Country Risk Assessment score, the IMD World Competitiveness score and the PRSIR score is in excess of 0.9 or, in statistical terms, nearly perfect. This shows the costs we pay for corruption in terms of economic institutions quality.

In 2011, in Ireland, trust in the Government as measured by the Edelman Trust Barometer – another metric of democratic institutions quality that correlates strongly with CPI – stood at 20%, against an average of 52% for the 23 countries surveyed in the report, making Ireland the lowest ranked country in the study. On the back of 2011 elections, the reading rose to 35% in 2012 and remains significantly below the 43% global average. As of today, of all institutions of the society – private and public – the Irish Government has the lowest trust of its people compared to businesses and NGOs, and equivalent to that of the Irish media.

Years of institutionalised corruption, sanctioned by the State and sanctified as Ireland’s panacea for industrial conflict and policy stalemate – Social Partnership – have definitely come home to roost.