“Trust Me,” He Lied…

Joseph Stiglitz, the Nobel-winning Columbia economist, has a mind-boggling article in the New York Times today bemoaning the our “trust deficit,” the “undervaluing” of trust in American society, the “cascade of trust destruction” that has been “unrelenting.”

“No economy, not even a modern, market-based economy like America’s,” he writes, “can function well without a modicum of trust.” He makes the same arguments coming, going, and in the middle:

• Trust is what makes contracts, plans and everyday transactions possible; it facilitates the democratic process, from voting to law creation, and is necessary for social stability. It is essential for our lives. It is trust, more than money, that makes the world go round….
• As the trust deficit persists, a deeper rot takes hold: Attitudes and norms begin to change. When no one is trustworthy, it will be only fools who trust. The concept of fairness itself is eroded….
• Strong values enable us to live in harmony with one another. Without trust, there can be no harmony, nor can there be a strong economy.

Well, sure. What is troubling here is not Stiglitz’s insistence on the importance of trust and lament at its decline. What is truly remarkable is his finger-pointing argument that trust was tortured and then murdered by the evil, greedy 1% and its enablers, the bankers. Stiglitz’s first sentence:

In America today, we are sometimes made to feel that it is naïve to be preoccupied with trust. Our songs advise against it, our TV shows tell stories showing its futility, and incessant reports of financial scandal remind us we’d be fools to give it to our bankers.

Unfortunately, however, trust is becoming yet another casualty of our country’s staggering inequality: As the gap between Americans widens, the bonds that hold society together weaken. So, too, as more and more people lose faith in a system that seems inexorably stacked against them, and the 1 percent ascend to ever more distant heights, this vital element of our institutions and our way of life is eroding….

And again and again, such as:

AMERICA faces another formidable hurdle if it wants to restore a climate of trust: our out-of-control inequality. Not only did the actions of the bankers and government policies influenced by the right directly undermine trust, both contributed greatly to this inequality.

And then there is the evil one percent:

When 1 percent of the population takes home more than 22 percent of the country’s income — and 95 percent of the increase in incomein the post-crisis recovery — some pretty basic things are at stake. Reasonable people, even those ignorant of the maze of unfair policies that created this reality, can look at this absurd distribution and be pretty certain that the game is rigged. 

But for our economy and society to function, participants must trust that the system is reasonably fair. Trust between individuals is usually reciprocal. But if I think that you are cheating me, it is more likely that I will retaliate, and try to cheat you…. When Americans see a tax system that taxes the wealthiest at a fraction of what they pay, they feel that they are fools to play along. All the more so when the wealthiest are able to move profits off shore. The fact that this can be done without breaking the law simply shows Americans that the financial and legal systems are designed by and for the rich.

As the trust deficit persists, a deeper rot takes hold: Attitudes and norms begin to change. When no one is trustworthy, it will be only fools who trust. The concept of fairness itself is eroded.

If bankers and the rich are the problem, it’s easy to predict the Stiglitzian solution. Yes, you’re right:

I suspect there is only one way to really get trust back. We need to pass strong regulations, embodying norms of good behavior, and appoint bold regulators to enforce them….

Inequality in America is degrading our trust. For our own sake, and for the sake of future generations, it’s time to start rebuilding it. That this even requires pointing out shows how far we have to go.

By now I trust (if you’ll pardon the expression) that you will  suspect I must be omitting a crucial element of Stiglitz’s explanation of the decline of trust, but I assure you that I have omitted nothing. That’s right: in a long article about how ripping out the trust thread has frayed the social fabric, there is not one word about what may be the most colossal string of lies ever committed on the public by an American president! And not just any president but one whom many, like Barbara Walters, thought was going to be “the next Messiah.”

Since those epochal presidential lies were not deemed worthy of discussion, it will not be surprising that the IRS’s violation of trust that it would not divulge citizens’  private information or treat some less favorably because of their politics was also neglected.

One need not defend the one percenters’ perfectly legal decision to export their capital to avoid exorbitant taxes or the practices of Wall Street bankers in order to regard Stiglitz’s partisan silence in the face of monumental presidential whoppers necessary to produce a restructuring of one sixth of the nation’s economy while blaming rich people and bankers for a decline of trust as bordering on bizarre. But then he is an economist, and many of them do seem to live in a world quite different from the one inhabited by most of us.