Trust: the invisible Danish resource

People in Denmark are among the world’s most trusting of people they do not know. This high level of trust, closely intertwined with Denmark’s welfare model and non-corrupt institutions, contributes to strengthening the nation’s economy. Trust is also an attractive factor for foreign companies wanting to do business in Denmark.

“Nordic exceptionalism”
Trust is such a cornerstone of the Danish welfare society, business world and economy that Danes are considered to be the most trusting people in the world. Denmark topped the list of 86 countries in a study of trust in society, while the four other Nordic countries also placed in the top ten.

The ranking, compiled by Aarhus University political science professor Gert Tinggaard Svendsen, draws in part on data from World Values Survey, a global research project on values.

Despite very limited natural resources, Denmark is among the world’s most prosperous nations. Svendsen deems that up to a quarter of this wealth can be attributed to trust; this is the part that economists cannot otherwise attribute to production capacity, infrastructure, education or innovation. “Trust saves a lot of bureaucratic problems and control activities,” he says.

Svendsen also notes that even though Danes hand over a large portion of their personal income in taxes, they are not overly concerned about the risk of benefit fraud, whereby others improperly receive public benefits from the state. “Apparently, only a limited minority cheat. And Danes are happy to pay high taxes because they feel that they receive something in return. They don’t have the concerns about health care and children’s education seen in many other countries.”

Other international trust researchers, including American Eric M. Uslaner and German Peter Graeff, reach the same conclusion that trust is widespread in Denmark and the other Nordic ountries and therefore has a special value. “In Denmark and other countries with a high level of equality in society, there is a very high level of trust. Citizens feel that what happens to others can also happen to themselves.

Therefore, they are happy to pay high taxes and are very willing to contribute – beyond charity – to making society even better. There is a sense of collective responsibility,” says Uslaner, a professor of government and politics at University of Maryland, College Park. Uslaner speaks of a “Nordic exceptionalism” in this area; he has conducted his own study of countries and trust, in which Denmark and Sweden share first place. In countries with high inequality, Uslaner says that trust rarely extends far beyond family and close friends.

Safety net provides security
The welfare state is one of the three main explanations researchers cite for the high level of trust, the other two being cultural heritage and political stability. A welfare state offers benefits for all, including free education, free health care and economic redistribution to families with children, the elderly, the poor and the ill, which likely results in fewer social conflicts and less crime. Some researchers also point to well-functioning public institutions, including the police and judiciary.

In a comparison published by the Danish Ministry of Justice Research Office in September 2014, Denmark has the next highest score among more than 30 European countries in terms of public trust in the police, and tops the ranking of public trust in the judiciary.

A peaceful nook
Other trust experts hold that trust – and thus the welfare state – is a culturally determined phenomenon built up over time. According to this perspective, social trust is primarily learned during childhood from parents and teachers, potentially bolstered by participation in voluntary associations, and lasts for a lifetime.

Other scholars point to the historical aspect of trust. The Nordic region has been a relatively peaceful nook in Europe, free of devastating wars and bloody revolutions. “Denmark and the other Nordic countries have had the stability needed for democratic development over a long period and they were early in the establishment of a stable political system supported by the population. People are largely able to act according to their free will, while social norms provide an organised way of helping people they don’t know,” says Peter Graeff, professor of sociology at Kiel University in Germany.

A high degree of trust is associated with a low level of public bureaucracy and almost non-existent corruption. Citizens do not necessarily have to know the right people to succeed. In this merit-based system, people have access to social mobility in terms of education and jobs, according to their abilities.
Equal opportunities also promote strong competition, which contributes to economic growth. Companies that offer the best prices or the highest quality win the orders. The end result is a more efficient and effective society.

Denmark so strongly reflects the preceding description that it scored best among 175 countries on the organisation Transparency International’s 2014 list of perceived corruption in the public sector. Three other Nordic countries were in the top five. A country without corruption is a predictable system for companies and saves them the added expense of bribery.

Denmark’s friendly regulatory environment is also reflected by its third place standing in the World Bank’s Doing Business 2016 - rankings of the ease of doing business in countries around the world.

Good for business
The trust study conducted by the Confederation of Danish Industry in November 2014 shows that company executives find it rewarding to abide by agreements with customers regarding delivery time, price and quality. This increases the probability of return customers, while the trust-based relationship eliminates the need to put a lot of conditions into writing.

Open and honest communication is also fruitful in relation to both customers and employees, say the executives. For example, a CEO cannot demand internal cutbacks while splurging on an expensive company car. Executives also find that clear targets promote trust internally in business organisations – and that trust increases employees’ job satisfaction, productivity and the quality of the company’s products and services. “You can have trust in company organisations with a certain hierarchy, but I believe that Danish companies have an advantage with their horizontal management structure and ability to make quick decisions at lower levels. As knowledge- intensive work accounts for an ever-growing share of overall production activities, it becomes more difficult for management to be involved in all processes. A modern company performs best by being flexible and quick,” says Annette Thornberg, senior adviser at the Confederation of Danish Industry.

Thornberg adds that trust is also an attractive factor for foreign companies investing in Denmark or setting up operations in Denmark, given its multifaceted contributions to business efficiency and success.

 

Source: Focus Denmark no. 4/2015

 

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