Trustmark AB
"Thriving markets and human security go hand in hand; without one, we will not have the other."

Kofi Annan, UN Secretary-General

July 16, 2002
Testimony of Chairman Alan Greenspan

Federal Reserve Board's semiannual monetary policy report to the Congress Before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate

”…our market system depends critically on trust – trust in the word of our colleagues and trust in the word of those with whom we do business. Falsification and fraud are highly destructive to free-market capitalism and, more broadly, to the underpinnings of our society…

…An infectious greed seemed to grip much of our business community. Our historical guardians of financial information were overwhelmed. Too many corporate executives sought ways to ‘harvest’ some of those stock market gains. As a result, the highly desirable spread of shareholding and options among business managers perversely created incentives to artificially inflate reported earnings in order to keep stock prices high and rising. This outcome suggests that the options were poorly structured, and, consequently, they failed to properly align the long-term interests of shareholders and managers, the paradigm so essential for effective corporate governance. The incentives they created overcame the good judgement of too many corporate managers. It is not that humans have become any more greedy than in generations past. It is that the avenues to express greed had grown so enormously.”

Building Trust
World Economic Forum 23 - 28 January 2003.

”The 33rd Annual Meeting of the World Economic Forum (WEF) takes place during an extraordinary climate of global uncertainty and complexity. The past year witnessed the breakdown of trust in many sectors of society. ”Restoring confidence in the future is the most important leadersip challenge today,” says Jose Maria Figures, managing director of the WEF.
Consequently, Building Trust, the theme of the Annual Meeting, is more timely than ever.
For many corporate leaders, leadership today means coping with the hangover from the boom years, managing overcapacity, realizing the benefits from industry consolidation and adjusting to new corporate governance standards, while navigating a difficult economic climate.
The Annual Meeting aims to provide a platform for discussion and, whenever possible, to lay the groundwork for sustained growth and development across the entire global community by helping leaders identify emerging risks, and theit possible impact on the world.
A substantial part of the programme will focus on business, development, economics, leadership, security and values.. In addition, the programme will explore issues and trends across a variety of fields, ranging from science and technology to arts and humanities.
The opening plenary will have the Malaysian Prime Minister Mahathir bin Mohamad as the star speaker. He will speak on trust and governance in a new era. If regaining the trust of shareholders, customers and employers is the main issue in its business sessions, the themes to be tackled in other sessions include the role of aid in development, how far is the world from a sustained recovery, new forms of governance, new leadership models, the threat from terrorism and the role of tolerance, respect and love in society.
”How do you think confidence in the global economy can be restored? Has your trust in the world business and politiacal leaders been shaken?”

The World Economic Forum unveiled (7 November 2002) a major global public opinion survey that suggests that trust in many key institutions has fallen to critical proportions. The Voice of the People survey of 36.000 people conducted by Gallup International and Environics International reveals that ”trust” will be one of the major issues in 2003. The results disclose a dramatic lack of trust in democratic institutions and global and large national companies; and trust is even low when it comes to non-governmental organizations (NGOs), trade unions and media organizations around the world.
The Lack of Political Trust
Trust has been eroded far beyond the corporate sector. Two-thirds of those surveyed were of the opinion that their country was not ”governed by the will of the people.”
Additional opinion polls coupled with declining voter turnout – particularly among the young – point to an increasing disenchantment with politicians and political institutions. The current breakdown of trust also reflects an uncertainty about contemporary values. A solid foundation for well-functioning societies requires shared common values, including respect an tolerance for diversity. The strengthening of this foundation is one the greatest challenges for global leaders.
The string of corporate scandals in 2002 contributed to the serious undermining of trust as an intrinsic value.
It is difficult to measure the precise economic impact of trust. However lack of trust leads to weaker business partnerships, higher risks, higher interest rates and lower profit margins.
At the same time in Brazil:

The World Social Forum
Porto Alegre, Brazil 23 - 28 January 2003:

The World Social Forum (WSF) is an open meeting place where groups and movements of civil society opposed to neo-liberalism and a world dominated by capital or by any form of imperialism, but engaged in building a planetary society centred on the human person, come together to pursue their thinking, to debate ideas democratically, for formulate proposals, share their experiences freely and network for effective action.
The three first editions of the World Social Forum were held in Porto Alegre, Brazil, on the same dates as the World Economic Forum was meeting in Davos. By proposing to strengthen an international coalition of the widest range of social movements and organizations, on the principle of respect for differences, autonomy of ideas and forms of endeavour, the WSF ceased to be a single focus of convergence for the struggle against neo-liberal globalization and sought to become a world progress.
The next meeting of the World Social Forum, 2004 will take place in India.

The Promise of a High Trust Economy
By Diane Coyle

The scene: a large, brightly lit seminar room with picture windows on two sides looking down over the River Thames and the London skyline, the gray dome of St Paul´s Cathedral in view on the opposite bank. It is gloomy and pouring with rain outside, making the room feel like an ark, a haven of warmth and cheer. Rows of chairs are arranged in a horseshoe around a central table; at the side, trays of canapés and wine.
Dramatis personae: a group of about 25 artists and actors, theater administrators and business executives, The tribes are easily distinguished by their dress: the businessmen (and most are men) in their uniform gray suits, the theatre folk (mainly women) in bright linen and silk.
Enter stage left, a bearded and bespectacled man wearing a suit, but with jacket off and shirt sleeves rolled. It is Bill Sharpe, a former Hewlett Packard scientist now running The Applience Studio, a design and technology consultancy.
Sharpe: Absolutely everything is going to be an information technology product. What business do will no longer be defined by technological capacity, because that capacity will be there. It´s not in question.
An executive: In that case how will I define what it is that my business does?
Sharpe: That´s the big issue. What values do organizations stand for and how will they embody them? I predict that in 10 years´ time you will see a list of credits on the products you buy. Producing anything will become a performance. The idea of a performance delivered by a troupe is natural for technology-based innovation. The most important part of any product is its design and the sevice it provides to customers. This will not be just a table in future (the thumps the table by his side) but a whole table-experience.
The event was a meeting of the business-arts forum organized by the biennial London International Festival of Theatre. The highly successful forum answers an appetite amongst a growing number of people in business to address a question so vague that few can spell it out: what is it that produces value - both in the sense of what customers will pay for, and in the deeper moral sense?
The source of value in the economy is changing. It is created, not by processing raw materials or accumulating financial capital, but rather by specifically human contributions: design or marketing, creativity, flair, imagaination, empathy.
This point has been flagged up by Alan Greenspan, the chairman of the U.S. Federal Reserve, in a numer off speeches. He pointed out that GDP weighed about the same near the end of the 20th century as it had at the beginning, despite being 20 times larger in real terms.
Much more of the economy consists of services, not physical goods at all. It costs around USD 3 billion to produce a new aircraft engine, but the cost of the second is just USD 50–100 million, so great is the expense of design relative to physical production. A growing share of output is conceptual, not physical.
Technology is behind this transformation. But making the adjustment from a haeavy industrial age economy to a weightless information age is more than the invention of some new technologies. These have to be implemented by investment in new equipment, the reorganization of companies and work, and complementary investment in newinfrastructure, training, legal frameworks, and so on. In short, it is and entire system change.
This makes it easy to see why a technology that obviously has very wide applications does not make any apparent difference to economic growth for a very long time. It might even impose large transitional costs before it starts contributing to the economy. The so-called ”productivity paradox”, summed up by economist Robert Solow as ”You can see evidence of the computer revolution everywhere apart from the productivity figures” is easily explained.
The fact that putting in place a new, general-purpose technology involves huge social and institutional changes puts the spotlight on its incredible social potential, however. The new economy contains seeds that could germinate into a fairer and more prosperous society.
For the more complex the technological basis of the economy, the more complicated and subtle the society needed to operate it. The high-tech economy is a high trust economy. 21st century capitalism could be fairer than its 20th century beta version, because of the nature of the technologies that are underpinning future prosperity. They depend crucially on the exchange of ideas. And that means people engaging with other people.
After all, markets do not exist in a vacuum, and a free-market economy is not some kind of abstract force. On the contrary, the more marketized the economy, the more important the social framework and institutions that support those markets. Without that vibrant social context, marketss will not function efficiently.
So fears about inequality a polarization between the rich and poor are exaggerated. The weightless economy requires a stronger social infrastructure than ever to work well. Countries will need to be fairer places with an even more highly educated wokforce to thrive economically. They will have to have vigorouslegel and poltical institutions. As we are too well aware, healthy economics do not exist where social capital has been depleted by war, or bad government or extreme inequality and poverty or widespread corruption.
For today´s elites, the potential of the new technologies is not good news. Like the courtiers of the Sun King, officials, politicians, and corporate executives are oblivious to the sound of the tumbrils rattling towards them over the cobbles. The centralized, bureaucratic economy in place since the 1920s is as corrupt as any ancien régime, and on its way to the guillotine. Anti-capitalist campaigners fail completley to understand the radical possibilities opening up now. This is a time of upheavel, the best of times to ensure capitalism delivers what it promises.
It is not going to be possible to build a vigorous modern economy without building a fair society too. In an age of increasingly intelligent machines it is human skills that are in short supply. The technology is making people more, not less, important.

Diane Coyle is an award-winning journalist and economist, the author of three critically acclaimed books on technology and globalization: The Weightless World (Capstone 1997), Governing the World Economy (Polity Press 2000), Paradoxes of Prosperity (Texere, 2001) and Sex, Drugs and Economics (Texere 2002).
She is currently Managing Director of Enlightenment Economics, a consulting organization, and a Visiting Research Fellow at the London School of Economics ´Centre for Economic Performance’.
Diane Coyle received her undergraduate education at Oxford, and received her MA and PhD in Economics from Harvard University. She was Economics Editor of The Independent from 1993 until 2001, and remains a columnist for the newspaper. In 2000, she was the winner of the prestigious Wincott Award for Senior Financial Journalist.
She serves on the Council of the Royal Economic Society, the executive of the Centre for Economic Policy Research and is a Fellow of the Royal Society of the Arts. She lives in London.