Mario MarcelDeputy Director, GOV

Stéphane JacobzoneDeputy Head of Division, GOV

New Approaches to Economic ChallengesSeminar on Project C1, 4 March 2014

REVISITING THE SOCIAL CONTRACT: REBUILDING TRUST FOR SUSTAINED ECONOMIC RECOVERY

TRUST IN GOVERNMENT: ASSESSING THE EVIDENCE, UNDERSTANDING THE POLICIES

"The crisis is calling for a redefinition of the balance between the state and markets, and for new instruments to boost citizens' trust in both." Angel Gurría, Secretary-General

“The world urgently needs to rebuild trust in leaders, in governance systems and among countries if the international community is to shape new models and collaborative approaches to solve global challenges”, closing session of the World Economic Forum’s Summit on the Global Agenda 2011.

“As governments seek to restore long-term growth potential and to address the social impact of the crisis, they also face a significant challenge to restore the trust of citizens and markets in the ability of governments to address current challenges and implement reforms that will deliver fair and resilient growth” - OECD MCM Chair’s Summary

Trust: an issue for the attention of leaders

• A double dimension for Trust: – An attitude, influenced by experience, that

shapes behaviour – A perception

• means holding a positive perception about the actions of an individual or an organisation.

• Subjective perception, in the eyes of the beholder• Confidence of citizens in the actions of a

“government to do what is right and perceived fair”

• Not actual, but perceived performance matters

What does Trust mean ?

• Citizen/customer trust in the public sector: related to other outcome variables: citizen satisfaction with public services, civic engagement, well being,

• Public sector trust in citizens customers: matters for policy effectiveness, compliance, taxation, etc..

• Trust within government and the public sector: smarter more effective government

Trust in what and in whom ?

Trust in what, and in whom ? A multi-way relationship

Interpersonal trust

SYSTEMIC TRUST

Trust in private institutions

Trust in government

Trust by government in citizens

• A key foundation upon which political systems are built: it affects government ability to govern

• Core levels of trust are necessary for the fair and effective functioning of institutions (adherence to the rule of law)

Why does trust matter?

• Trust has the potential to: Increase confidence in the economy (consumption decisions,

job mobility, hiring and investment decisions). influence individual behaviour in ways that support policy

outcomes and effectiveness (health, social policies, innovation the environment, taxation, regulation, private pensions, stock market participation).

Mitigate the possibilities of free riding and opportunistic behaviour and helps achieve positive expectations of longer term policy outcomes

Improve compliance with rules and regulations and reduce the cost of enforcement

Contribute to interpersonal trust, and reduce the transaction costs of doing business

Help government to implement structural reforms with long term benefits

Trust is key for achieving economic and social outcomes

Economic Policy-making

Source: Győrffy (2013)

Trust and the policy cycle

Design

Implementation

Delivering results

Ex post evaluation

Citizen satisfaction

Acceptance/ rejection of

reform

ComplianceMeasuring Performance

Listening to clients / users

Consulting with citizens/Businesses

TRUST

• The more directors perceive inspectors trust them, the higher their compliance at next inspection (Braithwaite & Makkai, 1994)

• The more tax payers trust the tax inspector, the higher their intention to comply (Murphy, 2004; Murphy et al, 2009)

• When mining inspectors were ‘ordered’ to distrust mining firms instead of a more cooperative approach, both parties agreed that over time mining safety had declined (Gunningham & Sinclair, 2009)

Positive effects on compliance

Source: Six (2013)

Mistrust and regulation

11

Aghion et al. (). In countries with a high level of distrust there is much more regulation. In countries where there is a lot of mistrust there is a huge demand of regulation. Paola Sapienza

Mistrust and demand for regulation

12where there is a lot of mistrust there is a huge demand of regulation.

Trust and stock market participation

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turkey

france

greece

united kingdom of great britain and nort

belgium

italyaustria

ireland

united states of america

switzerland

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australia

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Source: Sapienza et al. (2013), Kellog School of Management

• Dutch proverb: Trust comes on foot and leaves on horseback

• Many countries were badly affected by the crisis

• Still coping with the consequences• What can governments do to

restore or grow trust to the level needed to support sustained and inclusive growth ?

Trust in the crisis

UNDERSTANDING TRUST

Understanding and monitoring trust

A key concern for centres of government A concern for private companies (Edelman trust

barometer Social science : link with behavioral economics

Name of SurveyNumber of OECD countries covered

Years covered and frequency

Measurement Answer scale

World Gallup Poll 34 2005-2012 (annually)Confidence in national government

2: yes / no

World Values Survey 254 waves: 1989-93; 1994-98; 1999-2004; 2005-08.

Confidence in the government

4: : a great deal / quite a lot / not very much / not at all

Eurobarometer 23 2003-2013 (biannually) Trust in government2: tend to trust / tend not to trust

Edelman Trust Barometer

15 2001-2013 (annually) Trust in government

9 point scale: 1 means “do not trust at all” and 9 means “trust them a great deal”

Latinobarómetro 3 1995-2012 (annually) Trust in government4: a lot / some / a little / no trust

What are the available tools?

International surveys measuring trust or confidence in government

National surveys: Pew data (US), IPSOS Mori, Metroscopia

Existing cross national instruments and their limits

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% in 2012 (right axis) Percentage point change 2007-2012 (left axis)Percentage points %

Many countries have suffered

Confidence in national government in 2012 and its change since 2007

Source: Gallup World Poll

0 10 20 30 40 50 60 70 80 90 1000

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R² = 0.80326024484036

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Source: Gallup World Poll

Correlation: confidence in national government and perception of government corruption (2012)

Trust and perception of corruption

Trust and satisfaction with public services

Source: Gallup World Poll

Confidence and satisfaction across government institutions (2012)

Correlation with consumer sentiment

Short term fluctuations in trust appear to be correlated with trends in consumer sentiment

• Pew Research Center, March 2011. Percent trusting government to do what is right always or most of the time.

• Consumer Sentiment: Reuters/Univ. Of Michigan Survey of consumers, index of consumer Sentiment.

US Historical Data

HOW TO IMPROVE TRUST IN GOVERNMENT?

Building the foundations of trustWhat are the policy drivers ?

• Economic and social policy outcomes: – Economic prospects– Jobs– Actual levels of inequality against

perceived acceptable standards

• Institutional aspects : government attributes– The how, for whom and with whom

matters

What characteristics of government matter?

Reliability: the ability of governments to minimise uncertainty in the economic, social and political environment of their citizens, and to act in a consistent and predictable manner.

Responsiveness: the provision of accessible, efficient and citizen-oriented public services that effectively address the needs and expectations of the public.

Openness and inclusiveness: a systemic, comprehensive approach to institutionalising a two-way communication with stakeholders, (providing information, and fostering interaction to improve transparency, accountability and engagement).

Integrity: the alignment of government and public institutions with broader principles and standards of conduct that contribute to safeguarding the public interest while preventing corruption.

Fairness: the consistent treatment of citizens (and businesses) in the policy-making and policy-implementation processes.

Are governments taking action ?

• Centre of government survey: 37 % of respondent say that they have a strategy, and 44 % say they have taken action

• Governments working on many fronts:

Improving the reliability of government

Managing risks : • Managing fiscal risks to deliver on institutional

commitments (pensions). Long term fiscal sustainability

• Assessing and monitoring risks, mitigating risks and promoting resilience (OECD Recommendation on the governance of critical risks)

Fostering strategic capacity in the center• Three quarters of center

of government survey respondents say that they have a strategy

Improving the reliability of government (cont)

Clear rules, trust and the rule of law• Sound regulatory frameworks are essential

• Impact of the judiciary and the rule of law

Responsive government

Perception when receiving services• Closeness to public service providers matters

• Example of Citizens First (Canada). Public Sector Value Chain.

• “Show your face” for civil servants (Italy)

• Barometers of public services (France, Finland, Australia, New Zealand, etc…).

• Examples of work on responsiveness in specific areas: health care, waiting times.

Open and Inclusive government

The public sector: a “crystal bowl”? • Access to information, consultation

• Limits the scope for waste, abuse and corruption

• The “Open Government Partnership”

• Open data

• Budget transparency

• Reaching out to citizens: concrete examples• Estonia: “The People’s Assembly”, crowd sourcing

ideas on five key topics, including electoral system and financing of political parties

• Iceland: Direct democracy, crowdsourcing the new constitutional bill

• Poland: importance of transparency, trust and consultation procedures (OECD Poland PGR 2013)

Integrity and fairness

Integrity is crucial• Policy tools to address high risk areas: conflict of

interest, Standard of conducts

• Three quarter of countries have a central function for developing and maintaining conflict of interest policies

• Revolving door phenomenon: post public employment conditions: cooling off periods

• Lobbying to inform public decision making? • Potential for unfair advantages for vocal specific

interests when the process lacks transparency and accountability

• 5 000 lobbyists registered with EC, 15 000 active in Brussels. In US 3.3 Billion US spending in 2011

Integrity and fairness (cont)

Financing democracy• Money: a necessary component of the

democratic process

• Risks that unequal access to funding can distort the playing field

• Some countries have national regulations to• Balance sources of funding

• Introduce bans and limits on certain types of donations

• Limit spending during elections

• Introducing reporting and transparency requirements

• Defining monitoring and enforcement mechanisms

• Democratic countries face similar risks

THE WAY FORWARDBuilding a Trust Agenda

• Going beyond superficial perceptions to attitudes that matter for predicting future decisions, behavioural economics, nudging

• Cooperation with Statistics Committee to build a more solid and policy actionable evidence base

Measuring Trust

COMPONENTS MEASUREMENT-ATTITUDES MEASUREMENT-TRUSTWORTHINESS

Reliability Actions in relation to commitments, risks and provision of basic services

Perception that government has a strategy, prone to listen to government advice

Concrete characteristics in terms of long term strategy, risk management, fiscal risks, standards for the delivery of public services

Fairness Acts for the common good, non discretionary actions

Perception of fairness in public action: what drives legislation, provisions for senior office holders

Conflict of interest regulation, lobbying, political finance regulationInstitutional checks and balances

Integrity Public servants and senior officials are honest, bribery and corruption only exceptional

Belief that public authorities obey to the rule of law, readiness to offer money to a civil servant to speed up things, actual experience of bribe

Ethical norms, declarations of assets, enforcement of corruption

Responsiveness Government lists to people, complaints followed up, service provided in time

Actual experience with social conflicts, readiness to submit a complaint if not listened to, actual experience in waiting to access a service

Rules for managing conflicts, providing information to citizens, ombudsman, complaint management

Openness/inclusiveness

People understand government functioning, Access to public sector dealings

Actual experience to access information on the public sectorUnderstanding of policy making process

Access to information rightsOpen Data Strategies Powers of ombudsman

• Public governance streams of work: integrity, fairness of policy making processes, lobbying, risk management, fiscal risks

• Concrete case studies of trustworthy institutionsConnection with national reviews, focus on deeper national experience

E.g. Metroscopia in Spain, examples above

• Building trust in key public policiestax compliance, effective regulation, education, etc…

Policy agenda, work in progress