An abundance of social science research indicates that high economic inequality comes along with several undesirable outcomes, such as higher levels of violence and lower levels of health, happiness and satisfaction with life. But inequality has been rising in almost all developed countries since the 1970s, which raises an important question. If high inequality is detrimental to the well-being of a large majority of the populace and if democracy is about realizing “the will of the people,” why has inequality been allowed to increase in most democracies? Put differently, if most people would benefit from enhancing equality, why have voters not elected politicians who would implement policies to do that? This is one of the most significant paradoxes of our time.
Scholars provide a variety of explanations: Some point to the limited foresight, knowledge and rationality of voters. Others argue that the increased power of money in politics has prevented politicians who would launch redistributive policies from coming to power. A third view is that economic changes have weakened the power of trade unions, which used to be a strong force supporting equality. A fourth argument is that the political agenda has changed. For various reasons, issues about economic inequality have received less attention in political debates, whereas questions about ethnic, sexual and other identities have become more central.
I would like to add yet another factor to this discussion—trust, in two distinct forms. One is social trust, the extent to which people trust most others in their society. An important asset for any community, it influences how likely individuals are to participate in politics or civic organizations, how tolerant they are of minorities and even how optimistic they are about their life chances. The other kind is institutional trust—the extent to which people believe their public institutions can be trusted.
Surveys conducted since the 1960s indicate remarkable variation in both types of trust among countries. For example, the World Values Survey that was completed in 2014 shows that in Sweden and the Netherlands, more than 60 percent—and in Norway, more than 70 percent—believe “most people can be trusted.” In highly unequal countries such as Brazil, Colombia, Ghana, Romania and Tanzania, fewer than 10 percent trust others. Institutional trust also varies hugely—not only among countries but also among different parts of the public sector. For example, you may distrust the current government if the political party you support is not in power, but you may still trust the courts or the social security and tax administrations.
Also significant is the change in trust levels over time. In Nordic countries, social trust has increased slightly since the 1980s. But in the U.S., according to data from different surveys, it has declined dramatically—from 77 percent of Americans being “trusters” in 1964 down to 56 percent in 1968 and further down to between 31 and 38 percent in 2014. Similarly, institutional trust has risen sharply in Denmark and dropped just as steeply in the U. S. In the early 1960s more than 70 percent of Americans believed they could trust the federal government “always” or “most of the time.” But in 2014 less than 20 percent thought that to be the case. An index constructed by the Pew Research Center shows an almost parallel decline of institutional and social trust in the U.S.
The Corruption Factor
Such rapid change indicates that neither form of trust is ingrained in the inherited culture of a society. Both kinds are highly correlated, however, across countries and time spans with inequality. That gives rise to a chicken-and-egg question: Which came first?
Some scholars, such as social epidemiologist Richard Wilkinson and political scientist Eric Uslaner, hold that high economic inequality intensifies social hierarchies and leads to low social trust. In a very unequal society, say, Brazil or Romania, the lives of the rich and poor hardly ever intersect: They go to different schools and hospitals, and they live in different areas—gated communities or slums. Having little familiarity with the “other,” they also tend to be suspicious of anyone from a different social class.
I contend, on the other hand, that yet another factor stands at the head of the causal chain—having cascading effects on institutional trust, social trust and inequality. That fountainhead is corruption, which undermines not only trust in public institutions but also social trust. If people perceive that public servants are generally dishonest, incompetent or discriminatory, they are likely to make two inferences. To begin with, if you cannot trust the judges, police officers or tax collectors who are supposed to act in the public interest, why should you trust anyone else? If most people have to pay bribes or use personal contacts to get what they need from the public sector, how can they be trusted? If powerful, moneyed lobbies are observed to extract undue favors from the government, as seems all too common today, especially in the U.S., that too undermines institutional trust and, in consequence, social trust.
Crucially, corruption in the public sphere also increases inequality by transferring resources from the public to the elites and, more generally, from the poor to the rich. Studies in Africa and elsewhere show the poor have to pay more in bribes as a fraction of their income than both the rich and middle classes, who have ways to circumvent corruption or to take advantage of it. For example, corrupt countries have much less social mobility because the rich use their connections and their money to get their untalented or unambitious offspring into good schools and good jobs. In a corrupt system poor people have neither the contacts nor the money to help their children climb up.
In unequal societies these interlinked factors feed on one another in very destructive ways. One of the most effective ways for decreasing economic inequality, for example, is via universal or broad-based public services and benefits such as universal health care and pensions, child care allowances and free higher education. Because all or most segments of the population are included in such programs, they require relatively high taxes. These taxes do not impose an extra burden on the economy, because the things they pay for are necessities in a developed society and are likely to be more expensive if market mechanisms provide them. For example, the U.S. spends twice as much of its gross domestic product, or GDP, on health care as does Sweden, yet it shows worse results in almost every standard measure of population health.
The willingness of citizens to pay higher taxes for public services and benefits is conditioned, however, on several leaps of faith. First, one must trust that most other citizens are also paying their taxes. Second, one must trust that most other citizens are not overusing or cheating the various programs. Third, one must be confident the tax administration can collect the money in a fair and impartial manner. Fourth, one must trust that the taxes the government collects will not disappear in various forms of corruption. Fifth, someone is not likely to part with money if the person believes the service or benefit will not be delivered when he or she needs it. And sixth, when the service is delivered, people want it done in a way that respects their integrity and dignity.
Trapped by Distrust
Recent surveys in Europe show that people who say they want lower inequality and who are confident the tax administration and public health care in their countries is competent and impartial also say they would willingly pay higher taxes for more public services. But those with the same “left-leaning” political ideology who believe their public institutions are incompetent and corrupt express unwillingness to pay higher taxes for increased public spending. For instance, a self-identified leftist in Rome would refuse to pay higher taxes because she does not trust the authorities, but one in Copenhagen would agree to because she does. The upshot is that the desire to live in a more equitable society is not enough; people must also trust that the nation’s institutions can deliver. If they do not have that trust—which is more likely if they live in a highly unequal society in the first place—they will not support policies that increase equality.
The problem is that once trust is lost, it is very difficult to get it back. Societies can thus get trapped in a feedback loop of corruption, distrust and inequality. Corruption drives inequality and distrust, whereas distrust drives even deeper inequality. Voters may realize they would benefit from policies that reduce inequality, but their distrust of one another and of their institutions prevents the political system from acting in the way they would prefer.
These linkages indicate that fixing corruption in the public sphere could be key to escaping the trust trap. Nordic states, for example, were highly unequal two centuries ago but were able to solve the problem of systemic corruption in the mid-19th century. As a consequence, their populaces became willing to pay higher taxes to support public services, and inequality dropped. Exactly the opposite situation prevails today in Latin America, Africa, much of southern Europe and the U.S.
In the recent presidential election campaign candidate Donald Trump accused his opponent, Hillary Clinton, of corruption—and much of his rhetoric bashed the country’s public institutions. Such distrust of government dates back to Ronald Reagan’s famous assertion: “Government is not the solution to our problem; government is the problem.” Some scholars argue, however, that skepticism about the integrity of public servants can be traced even further back, to the post–Civil War period, when pension distributions to war veterans fell prey to corruption.
Even so, whether or not the U.S. is highly corrupt is debatable. Many would say the exceptional role money plays in U.S. politics, not least in the Trump presidency, amounts to corruption. For whatever reason, Americans’ trust in their institutions and their fellow citizens began to decline in the 1960s—and has continued to do so. According to Gallup, as of 2014, an astonishing 75 percent of Americans believe corruption is “widespread throughout the government in this country.” For those who would like to see the launching of effective policies against the rising inequality, doing whatever is necessary to change this very negative perception of public institutions must be a very important first step to moving the country out of its current trust trap.