Book Review: Trust by Francis Fukuyama

Francis Fukuyama’s Trust is an engaging exploration of the role that habits, customs, and norms play in the formation of sociability, which in turn impacts civil society and governance. A key claim is that economic life and cultural life are interconnected, as opposed to the conventional 20th century view that economic structures determine politics and society.

So while the book is called Trust, it is primarily an inquiry into macroeconomic and cultural constructs. Since the impact of economies on culture is a well worn path, Fukuyama digs into the impact that culture has on economies. He considers three groups of societies: those categorized as “low trust” (China, Italy, France), “high trust” (Japan and Germany), and a weird hybrid (America). He notes that the conditions that may lead to high or low trust societies may differ, for example Confucianism and China; absolute monarchy and France. America he characterizes as an interesting case study. It is frequently cited as an individualistic society however it has been deeply communal throughout its history. America's communal aspect has flown under the radar because in America communal action has traditionally been driven by religious communities, professional communities, and social and civic clubs, as opposed to by governmental fiat. He noted (in 1995 no less) that the decline of these communities poses a danger for America in the sense that these are the supports that have enabled America’s high trust society.

So does this book have anything to say to about Trust at the more personal level? Yes.

Fukuyama claims that high trust societies enjoy significant economic benefits, because the transaction costs associated with business transactions and everyday life are lower than those incurred in a low trust society. Handshake agreements become long contracts; careful accounting of debits and credits arise; and everything is negotiated. “People who do not trust one another will end up cooperating only under a system of formal rules and regulations, which have to be negotiated, agreed to, litigated, and enforced, sometimes by coercive means.”

Trust is an important enabler in a society, in a marketplace, or in a team. Fukuyama quotes Kenneth Arrow: “Now trust has a very important pragmatic value, if nothing else. Trust is an important lubricant of a social system. It is extremely efficient; it saves a lot of trouble to have a fair degree of reliance on other people’s word. Unfortunately this is not a commodity which can be bought very easily. If you have to buy it, you already have some doubts about what you’ve bought. Trust and similar values, loyalty or truth-telling, are examples of what the economist would call “externalities”. They are goods, they are commodities; they have real, practical, economic value; they increase the efficiency of the system, enable you to produce more goods or more of whatever values you hold in high esteem. But they are not commodities for which trade on the open market is technically possible or even meaningful.”

Trust may not be uniform within a society. The nature of the cliques of trust within a society are an important determinant in economic growth, according to Fukuyama. Two examples are the horizontal solidarity among the working class in Britain, and the affinity with the company in Japan. Fukuyama claims “Vertical group solidarity … would appear to be more conducive to economic growth than its horizontal alternative.” It's interesting to consider where such vertical group solidarity exists in 2024, and how it could be developed.

On the other side of the equation, what happens when trust is breached? There be dragons: “Past a certain point, the proliferation of rules to regulate wider and wider sets of social relationships becomes not the hallmark of rational efficiency but a sign of social dysfunction.”

“Alvin Gouldner argues that reciprocity is a norm that is shared to some degree by virtually all cultures: that is, if person X does a service for person Y, that person Y will then feel grateful and seek to reciprocate in some manner. But groups can enter into a downward spiral of distrust when trust is repaid with what is perceived as betrayal or exploitation.”

What does Trust suggest about individual motivations and behaviors? First, that there is a relationship between the nature of a community and trust within and outside the group. Fukuyama says, “in general, the more demanding the values of the community’s ethical system are and the higher are the qualifications for entry into the community, the greater is the degree of solidarity and mutual trust among those on the inside.”

With respect to motivation, Fukuyama says, “the prospect of alienation as industries move from craft to mass production raises another fundamental question about the nature of economic activity. Why do people work? For the sake of the wages they earn, or because they enjoy and are fulfilled by it?... people are both productive and consuming creatures and find satisfaction in the mastery and transformation of nature through work.”

A sense of meaning can engender trust and therefore low friction productivity. “To the extent that workers regard work not merely as a burden or a commodity to be exchanged for other goods, the workplace becomes a less alienating venue, one that is better integrated into the worker’s social life.”

So while Trust primarily relates to the economic and social organization of societies, it has much to say about the impact of norms, customs, and habits on communities. It also provides direction to those who wish to create durable, high trust groups.