Economic inequality and trust from a Smithian perspective

Abstract

Globally, and specifically in South Africa, income and wealth inequality are on the increase. This has negative consequences for socio-political stability and sustainable economic growth. These negative consequences are in many cases directly linked to the breakdown of trust in financial institutions and society in general. However, the breakdown is encompassing and also includes interpersonal relations, trust in institutions and systems, and general perceptions of the unfair distribution of wealth. Trust is one of the pillars of economics and social stability in the work of Adam Smith. Although the economics of Smith’s time (18th century) were far less complex and technologically not as advanced as contemporary economics and markets, his work is the foundation of contemporary economics and it remains important because it provides a value- driven and empirical perspective on economics. This value-driven and empirical perspective delves into the cognitive aspects of our being and instincts that are crucial to build trust. The purpose of this article is to revisit the notion of trust in the work of Smith to provide an analysis of trust and possible alternatives for sustainable economics and the flourishing of society. Generally, Smith views trust as multidimensional, with two dimensions of trust that can be distinguished, namely relational and structural trust. I will argue that multidimensional trust is important for the functioning of society and for economic justice.