Democracies Must Build Trust to Drive COVID-19 Recovery

11.01.2021 | CIPE Insights | Anna Kompanek

“Trust” means having a confident relationship with the unknown.

According to Rachel Botsman, Trust Fellow at Oxford University’s Saïd Business School, that includes enabling small and large acts of cooperation that add up to increased economic efficiency.

Likewise, it is necessary for people to have trust that their elected representatives will act in their best interest and cooperate for the greater social good. Democratic and market institutions are undergoing the most severe crisis of confidence in decades, one deeply rooted in the general decline of trust among citizens in their governments. This decline is exacerbated by the COVID-19 crisis. Democracy cannot thrive if citizens lose trust that it can deliver broad-based economic opportunity. Yet, in today’s environment, trust in government can be in very short supply.

The threat to public trust in democracy globally has been rising over time. “There is a growing danger that the [democratic] recession could deepen and tip over into something much worse,” political scientist Larry Diamond warned in a Journal of Democracy article already back in 2015.

The imperative now is for governments to create policy environments that support digital economies and digitally enabled trade.

COVID-19 intensified this threat and the world is witnessing Diamond’s “much worse” scenario today. Many countries are experiencing accelerated degradation of political and economic freedoms and institutions through poor governance, weak rule of law, lack of transparency, and authoritarian-leaning responses to COVID-19 that enable corruption, cronyism, and abuse of power. Large flows of public funds toward post-COVID rebuilding in particular create additional corruption risks when injected into already fragile governance ecosystems with pre-existing problems that strain the societal fabric.

According to the 2021 edition of the Edelman Trust Barometer, commenting on the predominant global perceptions of the public sector, “Government briefly seized the high ground, emerging as the most trusted institution in May 2020, when people entrusted it with leading the fight against the pandemic and restoring economic health. But government failed the test and squandered that trust bubble.” Thus, the pandemic raised serious questions about the ability of governments everywhere to respond effectively, further undermining already low trust in public institutions.

What is more, COVID is not the only pressing issue. Deeply ingrained inequalities and social frustrations bubble up to the surface even as the pandemic’s Delta variant rages on. For example, pro-democracy demonstrations rocked Bangkok in September, as citizens were angry about the Thai government’s is mishandling the coronavirus outbreak. In Hong Kong, China is cracking down on critics and arresting pro-democracy advocates. In the United States, of course, lawmakers are still reckoning with the January 6 storming of the Capitol building and social polarization persists.

COVID-19 exposes just how interconnected and interdependent we are, from the global level through national governments and all the way down to local communities.

Businesses and democratic governments must work together in constructive and collaborative ways to strengthen trust. In fact, governments are looking to the private sector to deliver post-COVID recovery. Sectoral and business associations in particular now have a chance to come together and offer constructive input into policy priorities, both immediate and down the road as economies reopen.

In addition to mobilizing local business communities into action where the governments were slow to respond, the COVID-19 crisis also served as a growth-trigger for some sectors, especially in the digital economy, which has seen plenty of innovation during the new reality of social distancing. This trend is expected to continue even after the immediate health emergency is over and digital solutions are likely to be more robustly incorporated into core business strategies going forward.

The imperative now is for governments to create policy environments that support digital economies and digitally enabled trade. From CIPE’s perspective, this also includes helping chambers of commerce and business associations better understand how they and their members can effectively and safely use technology in their work.

Another notable trend has been the discussion about restarting economies as an opportunity to do things better on issues such as sustainability or protecting gig economy and low-paid essential workers. Many businesses already began to respond to public demands for greater attention to environmental, social, and governance (ESG) factors in how they operate. Governments can support such efforts, for instance by considering ESG standards in foreign investment screening and public procurement decisions in order to facilitate constructive capital flows.

Democracy cannot thrive if citizens lose trust that it can deliver broad-based economic opportunity. Yet, in today’s environment, trust in government can be in very short supply.

Trust in democratic and market systems overall will continue to dwindle unless there is a greater degree of public confidence. Governments must give all their citizens a realistic path to become full democratic and economic actors in their countries. CIPE supports such efforts by facilitating public-private dialogues around the world on vital economic policy issues and by helping to disseminate and localize international best practices, standards, and norms. Successful models for reform from around the world can help other governments and local stakeholders, including the private sector, work together to build economies that are resilient and inclusive.

Examples of successful approaches are important to inspire tangible action for greater change and are especially needed in the era of disinformation where illiberal actors advance a negative narrative of democracies failing to meet the needs of their citizens during COVID-19.

In The Theory of Moral Sentiments, Adam Smith writes that a rational person “is sensible too that his own interest is connected with the prosperity of society, and that the happiness, perhaps the preservation of his existence, depends upon its preservation.” COVID-19 exposes just how interconnected and interdependent we are, from the global level through national governments and all the way down to local communities. The pandemic also makes clear that well-functioning democracies and markets are as much about cooperation as competition, and they need to deliver trust.

As governments are rethinking their recovery strategies, larger policy frameworks can be constructively shaped if they engage with businesses in public-private dialogue on the pressing policy issues related to COVID and beyond.