The cornerstone for healthy business and the government may surprise you

Trust is a central theme in this year’s elections. Polls show record-low and declining trust in government, including the integrity of elections. In this politicized environment, politicians on both sides of the aisle attack capitalism, free trade, big business, the financial system, and the rich. It’s a mistake for politicians to think that fomenting mistrust in capitalism will do anything to improve trust in government. It’s also a mistake for business leaders to believe trust in business will improve much as long as trust in government stays low.    Interpersonal trust drives economic growth. It may seem intuitive that we invest more in trading with partners we think are reliable, capable, and truthful. Economists have established a causal relationship between societal trust and economic activity and outcomes. Low trust levels increase transaction costs. People look for ways to evade the norms and rules of a system they don’t trust, making economies less dynamic and hampering growth. Do Americans trust capitalism?  It’s an excellent time to look at realities and myths.  Most Americans trust business and approve of capitalism  Surveys such as the Edelman Trust Barometer show that more Americans trust businesses than the government. My research partner, Kylie King, and I use the Confidence in Capitalism Barometer tool we developed to ask American adults about capitalist principles, the economy, and the government’s role. In our most recent survey, 80% agreed with a very straightforward statement: “The free enterprise system is necessary for a free government.”  An even higher number, 90%, agreed with this statement: “In a democracy, everyone has the right to be an entrepreneur.”  Seventy percent said they support capitalism (whether they like it or not) as the best economic system for America. The youngest age cohort, Gen Zs, registered 60% support, but 87% of the same group also told us it’s their economic right to make investments to earn a profit.    Younger Americans trust their workplace culture  Some of our surveys focus specifically on the economic views of Americans born after 1980. In one, we collected opinions on work and workplace culture. Most younger Americans value work: 70% say work is essential for the pursuit of happiness, and employees give good marks to their workplace culture on many metrics.  Seventy percent say their workplace culture fosters trust.   However, 81% of respondents who work for a small business say their workplace culture fosters trust, compared to 65% of respondents who work in companies with more than 500 employees. These kinds of divides between trust in small and large enterprises show up in other metrics asking about company culture: Does leadership communicate a positive vision for the future, treat people well, and instill pride and respect in employees?  Big business has more difficulty fostering trust  Humans generate trust from positive personal interactions. Large organizations must manage scale and distance, and leaders may not be able to have personal relationships with everyone. So, from one perspective, this trend should not be surprising. Trust in big business is also sensitive to the state of the economy and political climate. When Pew researchers took the pulse of American attitudes towards corporations, outcomes ranged from 70% favorable in 1966, a year of high consumer confidence, to 49% in 2007, the year the government and financial industry created a crisis that nearly unraveled the economy.    More worrying to me is that the CEOs of big businesses are beginning to appear as distrusted as most politicians. When we ask younger Americans if they think entrepreneurs, small business owners, and the CEOs of large publicly traded firms positively impact society, 79% of younger Americans say small business owners do. This drops to 71% for entrepreneurs and 47% for the CEOs of large publicly traded companies.   Ideology strongly drives outcomes. Only 28% of strong liberals (about 14% of our survey group) say the CEOs of large publicly traded companies have any redeeming value to society, compared to 45% to 60% of liberals, moderates, conservatives, and strong conservatives. Even for entrepreneurs, there is a significant split: 60% of strong liberals think they positively impact society compared to 74% of everyone else. Only small business owners show no significant ideological difference in their approval rating.   General interpersonal trust has mostly stayed the same, so why don’t we trust leaders more?  For decades, the World Values Survey has used straightforward questions to measure interpersonal trust as an aspect of national culture. Just under 40% of all American adults agree most people can be trusted. Our surveys find about the same among younger Americans: 37% trust others. Americans are less trusting than Danes (74%) and more trusting than Peruvians (4%). Ronald Reagan’s famous statement, “Trus