We often think about technological change, access to capital, increases in educational attainment, greater population, or income growth as the drivers of aggregate economic growth. While these elements play a role in growing and sustaining the modern economy, I’d like to submit to you that there are far more ancient factors at play in economy every day: trust and hope.
Trust is a basic function of every economic exchange. Think about the simplest act of going to the grocery store. We trust that the store will have when we want to buy. We trust the product will perform as advertised. We trust that the store will take our money (or our credit card). We trust that if there’s a problem with the product, we can bring it back. We even trust that the store is going to provide you with a safe shopping environment. We place these “trust bets” without even thinking about them. Our brains are cognitively conditioned from the time we’re young to expect trust in our environment. The desires to trust others and to seek those we can trust are fundamental components of being human. What happens when that trust is broken? Economic exchanges are delayed or denied. Such effects can even happen over small breaches of trust. I recently needed to make a financial transfer that I couldn’t complete online. So, I went to my financial institution with the intent of engaging an Electronic Funds Transfer (EFT). For those of us of a certain age, we remember a time when an EFT was the only electronic means of moving money about. I walked into the institution and told the staff member that I wanted to make an EFT (I even used the full term) and I explained that money would be moving from one institution to another. It quickly became clear the staffer could not only not do an EFT, but also hadn’t been trained on the topic. Cutting to the quick, I lost trust in the staffer, and I delayed the financial transaction until I found a method that I could trust. What should have been a 10-minute exercise ended up costing me an hour or two and eroded my confidence in the institution’s ability to serve me as a customer. As they say: Trust is built in drops and lost in buckets.
Unfortunately, we’re in the middle of a worldwide trust recession driven by technological and economic change, bad actors, and the strain of current events. In the mid-1980’s nearly half of Americans would agree with the statement “most people can be trusted”. The current portion of the country agreeing to that statement is just 30 percent. That’s a one-third decline in the trust factor and, as high-trust countries grow faster than low-trust countries, enough of a percentage point drop in trust to shave one percentage point off annual economic growth. Over decades, a loss of one percentage point in growth adds up to a U.S. economy that’s a trillion or two smaller than it should be.
If trust is the economy’s lubricant, hope is what gets us to start the engine. Fundamentally, hope is the belief that tomorrow will be better than today. It is a necessary condition to setting and achieving goals. With hope we invest in a better tomorrow whether that means educating ourselves, having and raising children, creating, and building businesses, investing in the stock market, or giving our time to charitable organizations. Without hope we fail to make those investments, or we move into “harvest mode” extracting as much as we can as quickly as we can. It doesn’t take much to look around our local, state, and national economies to find places where owners are clearly harvesting instead of investing. If they believed in the future (i.e., had hope) they’d be more likely to invest in renewing their assets.
Hope is fundamentally psychological capital that can be spent when times are tough or when we need to take risk. Those of us who are high in hope (i.e., have higher levels of psychological capital) have a greater buffer against negative stress and tend to generate better outcomes. As with trust, hope has been harder to come by of late. The COVID-19 pandemic is entering its third year, and while the economy is growing, the experience is hardly smooth. Over the last decade, when asked, a majority (but not an overwhelming one) of Americans have said that the country’s best days were ahead of it. I won’t speak for you, but there have been times particularly in the last two years where my hopefulness could have used a boost and when I was less hopeful, I was less likely to make bold business and life decisions.
I want to argue that a bit more individual investment in hope and trust in 2022 would make a large collective difference for all of us. There are scientifically proven ways to build hope which can then give us the bravery to make trust bets which can then help lead to a stronger and more robust economy (saying nothing of the mental health and community benefits). You can find multiple articles on building hope, and they all basically boil down to the same half-dozen concepts:
- Be clear on the path you want to take by developing goals and understanding the steps necessary to reach those goals.
- Recognize times in your life when you’ve succeeded.
- Have a role model who accomplished something similar.
- Create small successes by doing things you’re already good at doing.
- Perform acts of kindness consistently.
- Turn to faith and/or practice mindfulness.
Personally, I try to be a practitioner of #1, #3, #4, and #5. I can struggle with #2 and try as I might the mindfulness practice of #6 still eludes me.
As 2021 turns into 2022 my hope for all of us is that we’ll each do our part to own how we affect our personal levels of hope and trust and the hope and trust of others. Investing in hope and trust takes bravery, but the long-term success of our economy depends on it.
Jonathan’s Takeaway: My family and I wish you peace and joy in this holiday season. We believe that 2022 will be better than 2021 as 2021 was better than 2020. We want you to know that there are plenty more seats on this bus should you choose to join us.
Jonathan King is a consulting economist and Certified Professional Coach. His firm, Halcyon Consulting, is dedicated to helping clients reach their goals through accountability, integrity, and personal growth. Jonathan has 24 years of social science consulting experience, including 18 years in Alaska. The comments in this blog do not necessarily represent the view of employers and clients past or present and are Jonathan’s alone. Suggested blog topics, constructive feedback, and comments are desired at firstname.lastname@example.org.