The 10th anniversary of the height of the international financial crisis, considered by many economists to have been the worst since the Great Depression of the 1930s, is fast approaching. A decade on from September 2008, the fact that multiple equity markets are near all-time highs, and the global economy is growing robustly again, is disguising one of the key legacies of the period.
For one of the major ramifications of that crisis, which saw the collapse of Lehman Brothers and the global financial system teetering on the edge, is growing distrust in business, not least among the young. And in turn, this has helped fuel the post-truth phenomenon — in which objective facts have become progressively less influential in shaping public opinion than appeals to emotion — by reinforcing a wider collapse of public confidence in major institutions in both the private and public sectors.
While growing distrust in business is shown in numerous opinion polls, it is also symbolised by the significant protests since 2008, including the ‘Occupy movement’, which came to international prominence in Wall Street in 2011 in its campaign against social and economic inequality. The occupy demonstrations, often driven by younger people, subsequently spread to around 1,000 cities and more than 80 countries in all continents of the world from Canada to Norway to New Zealand.
Diminished confidence in business has reinforced key drivers of the post-truth era, adding to the broader collapse of trust in major institutions. And this underlines that, while much attention has focused on the political causes and ramifications of the post-truth phenomenon — not least with the controversies surrounding Donald Trump’s White House campaign and subsequent presidency — it has profound implications beyond democratic politics.
For business, one of the key challenges of the post truth age is that belief in what many corporates are saying and doing has been undermined as distrust has grown. This poses new hurdles for firms looking to grow and enhance reputations in a world where there is already long-standing, and growing backlash to business on issues such as executive pay, through to international trade and globalisation.
Key ways that businesses can build trust include tried and tested ones of creating good new jobs and investing in the economy, while paying workers fair wages and benefits. Yet, beyond this, a growing number of firms are using new thinking and ideas to restore credibility.
One key feature of the post-truth landscape is that while faith in big institutions and many elites — including CEOs and leading politicians — has generally been declining, trust in the views of family, friends and close colleagues — who are perceived to have more authenticity and legitimacy — is growing. And this trend relates to a second key driver of the post truth-age with the digital revolution changing the way many of us consume information through social media.
Research shows that recommendations from family, friends and colleagues we know and trust, is becoming increasingly influential in shaping opinions and behaviour. Well before Trump’s shock United States presidential election victory in 2016, the political world had been trying to get to grips with these important changes, and corporates are also increasingly addressing them too.
One way some corporates are harnessing the power of this shift is through empowering new grass-roots advocates to help rebuild trust. For instance, employees and supply chain partners have significant credibility and legitimacy as third-party validators, and social media has significantly increased the level of influence that these single persons or organisations can potentially have.
Another key feature of the global landscape is founded on the apparent paradox that while there is generally growing distrust in business, many people, nonetheless, expect the private sector to play a greater role in changing society for the better. This includes helping tackle the range of grand challenges facing the world from environmental problems such as climate change, to growing economic inequality in many countries, and also health issues such as the escalating international epidemic of obesity.
Of course, many corporates have long had sustainability, social responsibility, and/or philanthropic programmes to help address such issues. However, the scale of the challenge — and opportunity — is growing and giving rise to what leading Harvard academic Michael Porter has highlighted as a new way for firms to secure competitive advantage by creating what he calls “shared value” for society as well as shareholders.
Perhaps the key idea behind this ‘shared value’ concept is that the corporate competitiveness and the health of society at large can be mutually dependent and reinforcing. Thus capitalising on the connections between societal and economic progress, including tackling challenges ranging from climate change to obesity, can potentially help drive sustainable, inclusive economic growth and shared prosperity in the years to come, and help firms rebuilt legitimacy and trust.
Taken overall, the post-truth phenomenon is likely to continue to have profound implications for business just as for democratic politics. A decade on from the international economic crisis, with the loss of faith in big institutions and many elites showing no major signs of rebounding, this means corporates will increasing need to look for new, innovative ways to rebuild reputation.
Andrew Hammond is an Associate at LSE IDEAS at the London School of Economics.