The Global Trust Crisis: 'Truth Matters More Than Ever'
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The Global Trust Crisis: 'Truth Matters More Than Ever'

In the short-term, Donald Trump's victory may help businesses with their government affairs agenda. But the crisis of trust that allowed Trump to flourish has a dark downside that must be addressed.

Paul Holmes

The Global Trust Crisis: 'Truth Matters More Than Ever'

Good news, big banks: those pesky regulations designed to prevent another global financial meltdown are almost certainly history, along with the agency that protects consumers from financial exploitation.

Congratulations, coal and oil executives: frack to your heart’s content and don’t worry about global warming; apparently, it’s all in our imagination.

Way to go, pharma bros: nobody is going to stand in the way of predatory pricing for life-saving medication.

Happy day, pretty much every business in America: no increase in the minimum wage; in fact, it might be time to question whether we need a minimum wage at all?

And get ready to enter nirvana on earth, lobbyists: the Trump administration wants you to help staff the agencies that oversee business affairs.

In other words, with President Donald J Trump in the White House and Republicans in charge of both the House and the Senate—and soon, presumably, the Supreme Court too—it looks like American business leaders are about to get pretty much everything on their government affairs wish list.

Chris Matthews, writing at Fortune, sums it up (in an article suggesting that JP Morgan Chase CEO Jamie Dimon—who feels banks were wrongly scapegoated for the financial crisis—is being considered for Treasury Secretary): “Trump’s crusade against Wall Street during the campaign was purely rhetorical. He used the fact that Hillary Clinton raised a lot of money from Wall Street to insinuate that she would bestow gifts on the financial industry through her policy positions.

“But her proposals—whatever their merits—included new regulations on the banking sector that it would not welcome, while Donald Trump’s only promise was to repeal Dodd-Frank regulations that have restricted risk-taking behavior and forced banks to raise more capital.”

Under the circumstances Richard Edelman sounds like a bit of spoilsport when he warns, in a recent blog post, “The temptation might be for business to use the Republican dominance in both Houses of Congress and in the executive office to seek less oversight in environment, financial services, and health care. This would be a mistake of monumental proportions, seen as the politics of self-interest.”

Be careful what you wish for….

Meanwhile, what of those who delivered the Oval Office to Trump and the levers of political power to Paul Ryan and Mitch McConnell, the white working men (and women) whose anger at the establishment and the “elites” has been fueled by the conviction that their cultural values are viewed with contempt (“deplorable,” per Hillary Clinton) and their economic interests have been ignored.

They are more likely to find their hopes realized on the former issues than on the latter.

There’s a pretty good chance that President Trump will be able to appoint the two new Supreme Court justices necessary to either eliminate of severely limit abortion rights. Trump’s VP Mike Pence and his top domestic policy advisor are both virulently anti-gay, raising questions about the future of same sex marriage. And there’s not much question that immigrants—both Hispanic and Muslim—and social justice movements like Black Lives Matter are likely to face a far more hostile environment than they have in many years.

But on the economic front, there is far less reason for optimism.

Trump’s proposed tax cuts will result in a dramatic redistribution of wealth to the richest Americans—the top 5% will receive two-thirds of the benefits—while the budget cuts made necessary by the resulting revenue shortfall will be disproportionately felt by lower income groups, with cuts to Medicare and Medicaid and the privatization of Social Security. The repeal of Obamacare will likely result in 20 million people—most of them at the lower end of the economic ladder—losing their jobs. The elimination of environmental protections will hit the poorest Americans hardest, as the people of Flint, Mich., have discovered to their alarm and chagrin.

And the trade tariffs that were a central plank of Trump’s platform (some of which he can implement unilaterally even if he can’t get more orthodox Congressional Republicans to go along with them) would likely cost jobs rather than restoring the American manufacturing base—and would certainly raise prices on a wide range of consumer products.

So while some Trump voters may be satisfied with an agenda that curbs immigration, makes abortion less accessible, and prevents transgender people using the public restroom of their choice, others—like the workers at Carrier Air Conditioning in Indianapolis—clearly expect Trump to deliver on his economic promises and save their jobs.

And what happens if Trump fails those voters is—at this point—anybody’s guess.

The 'Twilight of the Elites' takes a dark turn

Because what we have seen in Trump’s victory—and earlier this year, in the vote to take the United Kingdom out of the European Union—can be attributed to a lack of confidence in the establishment, in authority, in the system, in what people see as “the elite.”

During the Brexit debate, disdain for experts was explicit. Pro-Brexit politician Michael Gove dismissed the views of economists, central bankers, the International Monetary Fund and world leaders with a simple truth: “People in this country have had enough of experts.”

Joe Twyman, head of political and social research at the polling firm YouGov, explained: “What we’re seeing is a rise in the number of people who are dissatisfied, disapproving, distrusting of political institutions, political parties, the establishment, the media and, wrapped up with that, the experts. A certain proportion of people don’t believe a word of what they hear from those they consider part of the metropolitan elite.”

If experts came out of the Brexit debate looking less credible than ever, the mainstream media was forced to confront its growing irrelevance in the aftermath of the US presidential election. Edelman points out that Hillary Clinton was endorsed by more than 200 US newspapers—including many traditionally Republican publications. Trump was endorsed by just six.

What we were seeing play out in both of these votes was a phenomenon identified four years earlier by MSNBC commentator Christopher Hayes. In Twilight of the Elites, Hayes argued that “as inequality has grown, as its negative consequences have become harder and harder to ignore,” ordinary Americans have come to believe that the “elites” in politics, business, media, and academia not only have failed to find solutions—they have failed even to try.

“Political elites have failed to communicate properly, not only with lower social strata but with societies at large,” says Christopher Storck, managing director at German consultancy Hering Schuppener and professor of communication management and strategy at Quadriga University Berlin. “They have made themselves comfortable in a bubble. But this is not what has made ordinary people to withdraw the license to operate. This is resulting from the impression that politicians do not care about the fate and interests of ordinary people anymore. And this does not seem to be a wrong impression.”

“The Grand Illusion of the elites is coming to an end,” in the words of Richard Edelman. “The illusion was premised on three concepts: that elites had superior information, that elites were acting in the best interests of the mass population, and that someday a few in the mass population could become elites. But the Pyramid of Influence, with elites at the top holding authority and influence, has been flipped on its head, with mass population now in control and wielding influence.”

Hayes argues that the answer to this problem is a new movement, “One that marshals insurrectionist sentiment without succumbing to nihilism and manic, paranoid distrust. One that avoids the dark seduction of everything-is-broken-ism. One that leverages the deep skepticism of elites into a proactive, constructive vision of a moral, equitable and connected social order.”

It may be too late for that. In America at least “the dark seduction of everything-is-broken-ism” is triumphant.

When people trust nobody, they will turn to anybody

“During times of low or no economic growth, demagogues flourish and they are traditionally fast and loose with the facts,” says Charles Lewington, founder of UK public affairs consultancy Hanover.

My colleague Arun Sudhaman and I discussed this new era—dubbed “post-truth politics” by some observers—in a podcast earlier this year.

During the Brexit debate, that meant blithe acceptance of the implied promise that the money Britain “saved” by not paying EU dues (there was no mention of the far larger contribution the EU made to UK gross domestic product) would be redirected to the ailing National Health Service.

During the presidential campaign, it meant accepting a litany of lies from the Trump campaign, which painted a dystopian view of America—on issues from immigration to unemployment, from crime to economic growth—that bore little resemblance to reality.

And yet they resonated with a significant minority of Americans—enough to ensure him a victory in last week’s election.

That’s because the arguments emanating from the political establishment—President Obama’s impressive job creation record; a steady economic recovery that would almost certainly have been strong but for Republican obstructionism of the stimulus front; the massive decline in illegal immigration from Mexico—simply did not jibe with the real-life experiences of ordinary Americans.

Trump, on the other hand, seemed to understand the emotional "truth" of their lives and their experiences, even if some of his statements were factually untrue.

Lindsay Paterson, group managing director in the London office of international public affairs firm Interel, adds: “Politics and the process of political decision making is becoming more and more remote from people’s real lives and their actual experiences.

“The prevalence of ‘career politics’ is largely to blame for this. People don’t go into politics from ‘ordinary’ backgrounds, but tend to have studied politics, worked in politics or government before standing for election. This creates a ‘fake’ understanding of the challenges that people with jobs outside of politics face.”

Similarly, information gleaned from mainstream media seems less credible, less reliable, than information received from sources closer to the intended audience. In this election, from churches or groups like the National Rifle Association.

American sociologist Theda Skocopl argues: “Trump voters are not disportionately affected by trade disruptions, factory closings,” and other economic phenomena, but they were influenced by “organized networks”—the NRA, the Christian Right, and others—“that amplified the right media attacks on Hillary Clinton nonstop and persuaded many non-college women and some college women to go for Trump.”

Edelman’s 2016 Trust Baromter, meanwhile, found that the informed public and elites (college plus education, top 25% of income, significant media consumption) had much higher trust levels in institutions than the mass population, particularly in the US and UK.

What ordinary Americans understand—perhaps instinctively—is that the United States now has the greatest income inequality of all Western nations and that social mobility is lower than in Europe or Canada.

Says Edelman, “Income inequality correlates with trust inequality, with a 31-point gap between high and low income respondents in the US on trust in institutions. Trump’s victory is a vote of no confidence in institutions and in the establishment.”

In 2013, money manager Barry Ritholz observed that "inequality in America today is twice as bad as in ancient Rome, worse than it was in in czarist Russia, Gilded Age America, modern Egypt, Tunisia or Yemen, many banana republics in Latin America…. Extreme inequality helped cause the Great Depression, the current financial crisis and the fall of the Roman Empire.”

A year later, MarketWatch columnist Paul Farrell warned, ”America may soon be at what we call Bastille Day levels, an inequality gap so great it is the fuel and trigger that can ignite an angry people into revolution.”

And in a report on inequality two years ago, the British charity Oxfam warned: “The consequences [of rising inequality] include the erosion of democratic governance, the pulling apart of social cohesion, and the vanishing of equal opportunities for all.”

Comedian Chris Rock put it even more bluntly in an interview last year, "Oh, people don’t even know. If poor people knew how rich people are, there would be riots in the streets."

So when a candidate like Donald Trump claims that the “system is rigged,” it’s easy for them to see how that plays out in their own communities, in their own lives. And when a candidate offers easy answers—no matter how implausible those answers may sound to elite opinion makers—those who feel ignored or disdained by the existing political establishment will grasp at any straw.

In lieu of (or perhaps as a prelude to) “riots in the street,” we get a political revolution, one in which UK voters vote for Brexit and Americans (to extend Ritholz’ comments on ancient Rome) elect as president our own Caligula, a narcissistic sexual predator whose public pronouncements betray paranoia, vindictiveness, bigotry and dishonesty on a level that ought to worry anyone concerned about political, social and economic stability—even those who might benefit from some specific policy changes.

It’s a global issue

In its 2014 report, Oxfam pointed out that the 85 richest humans now hold more wealth than the 3.5 billion people in the bottom half, and blaming “political capture”—the wealthy using their economic power to make sure “the rules bend to favor the rich, often to the detriment of everyone else.”

Richard Edelman says his firm’s most recent Trust Barometer found that while “the US and the UK have seen the greatest erosion of trust, and the effects of globalization have been most profound in the US and the UK,” there are issues throughout the world. “This is an issue in Germany and France. It’s an issue in India and China.”

Madan Bahal, who leads Indian public relations firm Adfactors, agrees: “The real problem lies with the neglect of ordinary people. In America, as in the rest of the world, one% of the population owns over 50% of the wealth. The bottom 50% owns four to five%. Real incomes have not grown for the ordinary people for over 15 years. The helplessness and frustration has reached an inflection point.

“Even when the establishment and elites make an effort to communicate, there is little credibility they enjoy with the common audience. From a common man’s point of view, all democratic institutions including the mainstream media seem to be working together in one grand conspiracy.”

Bahal points to other examples: President Duarte in the Philippines; the Arab Spring movement across the Middle East and North Africa; and the election of the AAM Aadmi party in Delhi.

There are concerns in Europe too, where far right parties have been emboldened by the success of the Brexit campaign and the Trump victory.

Says Hering Schuppener’s Storck: “This is true for western societies in general. Despite different electoral systems, populist parties won the last elections in Hungary and Poland, and became part of the government in Finland, Greece, and Norway. And who knows what is going to happen in France and the Netherlands next year?”

And the opposite is true in parts of the world that have not yet embraced liberal democracy.

According to Interel’s Paterson, “Our China team says that Trump’s victory has made China’s elite meritocracy more appealing and shows ‘democracy’ in a bad light. The same is true of Brexit, which to Chinese eyes is crazy: China is trying to join multi-national trade institutions, and the UK has voted to leave the largest one in the world.”

It is easy to imagine leaders from China to Russia to the Middle East making the case that if this is democracy, they want no part of it.

What is the role of business?

If soaring inequality is part of the problem, corporate executives must acknowledge their own role in creating this crisis of trust. But they most also understand that they can be part of the solution.

To be fair, business leaders have not been in denial about the potential consequences of rising inequality and declining trust. In Davos two years ago, a report authored by risk assessment specialists Marsh & McLennan and European insurers Swiss Re and Zurich Insurance Group warned: “Widening gaps between the richest and poorest citizens threaten social and political stability as well as economic development.”

At the same event this year, as my colleague Arun Sudhaman reported, Oxfam executive director Winnie Byanyima told the same event: "Companies like pharmaceuticals and others have used their wealth and power to skew the rules. They put so much money into lobbying governments, to slip away regulations, in order to capture growth at the disadvantage of the majority."

Now, Edelman says, it is time for business to move beyond rhetoric to action, if it wishes to restore trust.

“The need for business to lead has never been more evident, whether on supply chain, pushing for free trade, or on immigration,” he says. “CEOs should fill a leadership void, educating employees and their communities on issues such as trade.

The election reflects a deep suspicion about the pace of change, the threat posed by globalization and the rise of the sharing economy…. There must be a better explanation of the how and the why, not simply the what. Any sense of cultural condescension must go away, in favor of a narrative that can be shared with employees and their families.”

In the absence of trust and credibility, anything companies have to say will be treated with skepticism, if not downright hostility. Only actions will matter.

“Trust restoration will be based on behavior of business, politicians, governments, media and in many markets even the judicial institutions,” says Bahal. “Only a behavioral change can bring some credibility to communications. In common view, the behaviour of the establishment and elite is dictated by collective greed and ‘take it all’ policy. No one learned from the global downturn.”

Hilary Rosen, a partner at Washington, DC, public affairs firm SKDKnickerbocker, argues for a fundamental rethink of business priorities: “Shareholder gains have determined issues like CEO pay for too long. That means that profits can consistently be increased at employees expense and it breeds resentment. CEOs need to do a better job of promoting growth and communicating a broader sense of mission to their employees and their communities.”

Storck echoes those thoughts: “Business leaders have to reconnect with society again. Companies have to create value for all stakeholders. They have to establish and maintain mutually beneficial relationships with all individuals, groups and communities who provide resources that the organization wants to deploy in its value creation process.”

What is the role of public relations?

"While smartness is necessary for competent elites," says Twilight of the Elites author Hayes, "it is far from sufficient: wisdom, judgment, empathy, and ethical rigor are all as important, even if those traits are far less valued."

All of those are characteristics that PR people must strive to bring to their company’s communications on political, social and economic issues.

Alon Feuerwerker, head of the political practice at Brazilian firm FSB, suggests that tone is critical: “We need to invest in attention to real life occurrences; intellectual honesty; modesty; real efforts to understand the opinions of others; curiosity about facts and numbers that might disprove or weaken our own arguments; disposition to dialogue; and a predisposition to be convinced of something.”

“In a world with easy access to multiple sources of information, it is not enough to repeat the message,” he adds. “You must understand that it will interact with many other versions and that the final result will probably be a synthesis. If deindustrialization produces massive losses of jobs in the Rust Belt, it is not enough to repeat that the situation is inevitable because of globalization and that people should look for other options. Repetition will not convince people to surrender.

“You need to dialogue and interact to obtain attention and trust from those affected. You need to avoid arrogance. If someone does not agree with me, it is not necessarily because I was not able to explain the situation correctly. Maybe my solution does not fulfill the desires and aspirations of that person.”

In addition, companies need to recognize that as the credibility of the mainstream media declines—that third-party endorsement we have crowed about for decades is surely less powerful than it has ever been—companies need to learn to use new channels.

“Peer to peer communication either on social or directly was often considered a more reliable source of information than the mainstream media,” says SKDK’s Rosen. “There has been a blend of opinion and journalism in a way that people dont know or understand the difference. So people ascribe it all to opinion.”

Says Edelman: “The short-form, speed and consistency of communication by Trump beat Clinton’s nuanced, detailed and long-form communication. Trump came across as more genuine, Clinton as less than transparent. Trump engaged directly with his community, Clinton spoke through the media in a careful and less frequent manner.”

In such an environment, he says, institutions are “better served by going direct to end users, establishing a channel for direct dialogue and feedback…. [The] mass population relies on search and social, not mainstream media. Our content has to be short-form, shareable and with an opportunity for consumer generated response and engagement.”

And finally, most important—and perhaps counterintuitively, given Trump’s success with the opposite approach—“truth matters more than ever,” Edelman says.

If corporate executives can adopt business practices that balance the short-term with the long, their own interests with those of all stakeholders, and if PR people can find ways to tell stories with authenticity, empathy, and honesty, perhaps trust can be restored and an even greater crisis averted.

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