image: Profile photo of Professor Gert Tinggaard Svendsen, view more
Credit: Lars Kruse, Aarhus University
Professor of Political Science Gert Tinggaard Svendsen from Aarhus BSS and Professor Gunnar Lind Haase Svendsen from the University of Southern Denmark offer their explanation for how trust creates economic benefits in their book "Trust, Social Capital and the Scandinavian Welfare State - Explaining the Flight of the Bumblebee" (Edward Elgar Publishing).
"The whole book came about because we were puzzled by why Denmark is so wealthy. If you look at the traditional production factors, education may serve to explain approximately half of a country's wealth. A quarter of a country's wealth stems from its physical capital such as North Sea oil, factories and bridges. It is, however, difficult to explain where the last quarter stems from. To explain the Danish wealth, you therefore need to look beyond the normal factors. And here trust is an obvious choice," says Professor of Political Science at Aarhus BSS Gert Tinggaard Svendsen.
Trust creates economic benefits
According to the researchers behind the book, trust may boost the economy as the presence of trust allows for things to be done cheaper. The transaction costs are lower when there is a high level of trust, as verbal agreements are sufficient rather than expensive written contracts.
"You could say that the higher the level of trust, the easier it is to cooperate, because the risk of being cheated is low. The Scandinavian countries have some of the highest levels of trust, and this is beneficial to the economy," says Gert Tinggaard Svendsen.
The high level of trust also allows for a universal welfare state like the one we have in Denmark. Here, a precondition is the existence of a certain level of trust. You must be able to trust that you are not the only one working, paying taxes and contributing to society, but that your fellow citizens also do so if they are able to.
The other precondition is that you must be able to trust that the authorities spend our tax money sensibly and actually pay us back in terms of education, health care, roads and bridges.
The system invites cheating
Living in the trusting Danish society does have its drawbacks, however. Because the country offers such high social security benefits, the welfare system very much invites cheating.
"It might be a completely rational strategy to simply lean back and be a passive receiver of different kinds of welfare benefits," says Gert Tinggaard Svendsen.
The professor emphasises how important it is that the politicians work to ensure that the number of free-wheeling people is kept at a minimum. If there are too many of such people in a society, financing the welfare state becomes a problem.
To avoid cheating, it is, according to the researchers, important to ensure good access to the Danish labour market - also for low-skilled people and immigrants. Also, it must pay to work.
The social security benefits should not become too high compared to what you can earn by working. The system must be designed in such a way that people are rewarded for doing the 'right' thing," says Gert Tinggaard Svendsen.
Control is costly
Another very important aspect in connection with the future welfare, is that control does not repress trust. "Right now we are lucky enough to be living in a society of trust. But if we allow control to take over, the risk is that it represses trust. 100 per cent control equals 0 per cent trust, and this would destroy the welfare society," says Gert Tinggaard Svendsen.
In relation to the economy, Denmark's competitiveness is based on how good Danes are at showing trust. Because Danes have the highest levels of trust in the world, we also have the least control. This allows us to save money on all the costs related to control that most other countries have to deal with.
"In the US alone, the costs of making a deal are often enormous. It's incredible the lengths people will go to in order not to be cheated. Lawyers are involved, and so are contracts that are several meters long. So control is costly. If you can avoid some of these costs, you can allocate resources to other more productive initiatives," says Gert
One example is the New Public Management tradition, which tends to measure everything and everyone all the time. In the healthcare sector, filling out forms makes the hands of healthcare employees grow "cold" when they ought to be "warm" by looking after the patients.
Avenging the system
Examples of New Public Management are found in the healthcare sector, where a single case with a home help may led to stricter control with all home helps throughout the country, because the politicians want to demonstrate their ability to take action.
"Setting up a control system to monitor all home helps costs a fortune. Instead, you should address the few people who represent a problem, but there is no reason to distrust the rest who are doing their job. I don't think that all politicians are aware of the importance of trust and the idea that control can repress trust," says Gert Tinggaard Svendsen.
When people feel distrusted, they will secrete the aggressivity hormone testosterone, and this leads to a desire for revenge. This may lead to employees who work less, take all the sick days to which they are entitled, and do as little as possible.
"Whereas before you might have enjoyed your job, were trusted and wanted to perform well at work, you might start feeling the opposite. In this way, mistrust may backfire," Gert Tinggaard Svendsen explains.
Denmark is the land of opportunity
In international society research, you find the expression "Getting to Denmark". Denmark has the highest level of trust and the lowest level of corruption, so naturally many countries in the world would like to get to where we are. There is no clear recipe for how to achieve a society such as the Danish, but a good suggestion is anti-corruption initiatives, as a high level of trust is linked to low corruption.
The world record in trust, our welfare society and good economy make Denmark the land of opportunity. As professor Robert Putnam from Harvard puts it in his new book "Our Kids", this is no longer the case with the US. If you have the "wrong" parents in the US today, you have no chance of climbing the ladder, he says.
But you still have the chance to do so in Denmark. In principle, you have the opportunity to do well in Denmark regardless of who your parents are, provided that you can be bothered and are talented. As long as there are well-functioning schools, clubs, associations and public libraries, you have every opportunity provided you have the abilities.
"We are lucky! It would be nice if we could keep our two gold medals for having the most trust and the least corruption in the world," Gert Tinggaard Svendsen concludes.
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