## Trust and the Future of Multilateralism

_IMF News, April 30, 2018_

## Source details

**Canonical URL:** [Trust and the Future of Multilateralism](https://www.imf.org/en/news/articles/2018/04/30/sp042618-trust-and-the-future-of-multilateralism)

## Other formats

- [Markdown version](/en/news/articles/2018/04/30/sp042618-trust-and-the-future-of-multilateralism/index.md)
- [Structured JSON version](/en/news/articles/2018/04/30/sp042618-trust-and-the-future-of-multilateralism/index.json)
- [Bundle manifest](/en/news/articles/2018/04/30/sp042618-trust-and-the-future-of-multilateralism/bundle-manifest.json)

## Bibliographic details
- Published: April 30, 2018

---

### Introduction
- Speech title: Trust and the Future of Multilateralism
- Occasion: Introductory Remarks for the Eurofi High Level Seminar
- Speaker: IMF First Deputy Managing Director David Lipton
- Date: April 30, 2018
- Core message: Rising doubts about the global order have produced an erosion of trust in institutions at national, regional, and global levels; the speech focuses on trust and its implications for the multilateral system and how the IMF will evolve.

### What is meant by "trust"
- Academic framing: trust defined as “civic capital”, meaning “those persistent and shared beliefs and values that help a group overcome the free rider problem in the pursuit of socially valuable activity”.
- When trust is present and reciprocated, it produces “confidence” in policies, institutions and systems that enables higher economic achievement.
- When trust is depleted, people believe the system “does not reflect their values, is not under their control, and no longer works to their benefit,” leading to economic underperformance.

### Drivers of the erosion of trust
- Dislocations from globalization:
  - Perception that globalization “has not delivered fair outcomes” and a perceived “lack of accountability for leaders and those who have gained the most.”
- The global financial crisis and its aftermath:
  - The “global financial crisis, and the slow, decade-long recovery that followed” exacerbated distrust.
  - Governments were blamed for failing to prevent the crisis and for failing to engineer a swift recovery.
  - Recent surveys show that trust in banks is now returning, which is presented as evidence that “trust can be rebuilt.”
- Technology:
  - The rise of “automation, AI, big data, e-commerce, and fintech” has vast potential but increases worries about the future of work, business sustainability, cyber-criminality, and the weaponization of data.
  - Loss of trust in large internet companies exemplified by pressure on Facebook over privacy issues.

### Consequences and dynamics of the "trust recession"
- Observable consequences:
  - Rise of populist political parties.
  - Growth of protectionist sentiments.
  - Anger about income inequality.
- Social and political shifts:
  - Movement toward fragmentation and decentralization: people identify with localized entities (civil society organizations, single-issue movements, online groups) where they feel more control and belonging.
  - Downside of fragmentation: decentralized trust reduces the authority of those trusted to address problems requiring centralized or global cooperation.

### Regional focus — Europe
- Trust in some European institutions has suffered from concerns about overreach, contributing to political backlashes (e.g., recent votes cited as from the UK to Italy).
- Europe’s vulnerabilities:
  - Incomplete elements of the regional construct, including unfinished work on banking union and harmonization of national regulations and practices in the financial sector.
  - Risk that new problems will erode trust if Europe is not prepared.
- Policy trade-off:
  - Difficulty in balancing risk reduction (legacies of crisis and national policy indiscipline) with building elements of risk sharing.
  - If the balance is not struck, “citizens in some countries see themselves as payers and others as receivers,” making trust hard to maintain.
- Upside: progress on further integration could renew trust.

### Global level — trade, investment, and institutions
- Distrust is most evident in trade and foreign direct investment:
  - Turn toward bilateral negotiations and treaties and talk of unilateral actions and retaliation.
- Policy prescription:
  - Cooperation rather than unilateral action is necessary to avoid damaging escalation in trade tensions.
  - Globalization needs to be based on free and fair trade and investment practices to secure sustained, broad support.
  - Countries should update rules and institutions to match growing sophistication and complexity of the global economy and technological change.
  - All countries should improve domestic policies and work together to address dislocations from globalization and technology.

### Trust and IMF governance — findings and recommendations
- The IMF has faced distrust through crises and controversies and recurring pressure to reform.
- Recent steps:
  - Over the past decade, the IMF has taken important steps to make decision making “more reflective of changes in the global economy, with emerging market countries gaining a larger voice.”
- Ongoing agenda:
  - Reforms are “only a first step” and “will continue.”
  - The IMF must be “better attuned to ideas and grievances coming from all corners of the globe.”
  - The IMF must demonstrate it is a “learning, evolving, and competent institution.”
- Restoring confidence:
  - Demonstrate that cooperation yields “concrete gains that benefit all people, and that these gains are widely shared.”
  - Rebuild trust in institutions by regaining the sense that “something concrete can be achieved by working together.”
  - Prepare multilateralism for a world where “trust and authority are more decentralized.”

*Introductory Remarks for the Eurofi High Level Seminar — IMF First Deputy Managing Director David Lipton, April 30, 2018*

---


## References

- [David Lipton](http://www.imf.org/external/np/omd/bios/dl.htm)
- [United States and the IMF](http://www.imf.org/external/country/USA/index.htm)
- [Speeches](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2018/04/30/sp042618-trust-and-the-future-of-multilateralism_