Wednesday, January 28, 2009

Trust in business plummet

BOSTON - TRUST in business plummeted worldwide last year, as the global economic crisis sent financial institutions pleading for government support, leaving average people to question industry's ability to bring prosperity, according to a survey released on Tuesday.

Some 62 per cent of informed adults aged 25 to 64 told the Edelman Trust Barometer that they trusted businesses less than they had a year ago, with respondents in the United States and Western Europe more suspicious than those in emerging economies.

The biggest drops came in Ireland, where 83 per cent of respondents said they had lost trust in business; in Japan, where 79 per cent grew more wary; and in the United States, where 77 per cent became more suspicious.

Trust evaporated as the world's most severe economic crisis since the Great Depression caused millions to lose their jobs and wiped out billions of dollars of invested capital.

'This is not 2001-2003; this is not limited to the dot-com New Economy concept companies ... This is General Motors; this is your big bank,' said Richard Edelman, president and chief executive of US public relations firm Edelman, which commissioned the survey. 'It's affected you in the pocketbook and also it's been the mainstays of the economy.'

Last year a downturn that started with investors losing confidence in obscure securities from the US mortgage market snowballed, pushing Wall Street banks including Lehman Brothers Holdings Inc to their knees and even bringing the North Atlantic nation of Iceland to the brink of bankruptcy.

In the United States, just 38 per cent of respondents aged 35 to 64 said they trusted business, down from 58 per cent a year earlier and the lowest rating in the survey's 10-year history. The reading is lower even than results in the wake of the dot-com bust and collapse of Enron Corp.

While the survey has been conducted for 10 years, this is the first time questioners have specifically asked whether their trust in business had declined over the past year. The survey has grown to include more countries and a wider age range of respondents over its history.

Suspicious eye towards banks, carmakers

Americans were least trusting of the auto and banking industries - both of which last year turned to Washington for billions of dollars to tide them through financial crises.

The US government has already paid out more than US$270 billion (S$404 billion) through its Troubled Asset Relief Program to prop up financial institutions including Bank of America Corp, Citigroup and American International Group, and has made multibillion-dollar loans to automakers General Motors Corp and Chrysler LLC.

Respondents in emerging economies were the least likely to say they had their confidence in business shaken.

Just 21 per cent of Brazilians said they had lost confidence in business last year, while 32 per cent of Indonesians grew more doubtful and 49 per cent of Indians and Russians reported a loss of faith in business.

'In the developing world the consensus would be: 'Business has brought us prosperity,' and I think America would be in that camp until this year, until Madoff and Lehman Brothers,' said Edelman, referring to the disgraced money manager who is accused of running a US$50 billion fraud. 'America has now moved into the realm of business skeptics.'

Still, unease with business could spread to the developing world as large corporate scandals begin to erupt there, he noted, saying: 'I wonder if we did the study today in India how optimistic they would be after Satyam.'

The founder of Satyam Computer Services Ltd, India's No. 4 software services exporter, resigned earlier this month after admitting to falsifying profits for years.

The telephone poll of 4,475 people in 20 countries was conducted from Nov 5 through Dec 14. Polling was limited to 'informed adults' - defined as those with college educations and top-quartile household income who followed business and public policy news. -- THOMSON REUTERS
blog comments powered by Disqus