Economics
America’s trust in its institutions has collapsed
AS FAR AS stereotypes go, brash national self-confidence has long been a defining feature of how Americans are viewed abroad. In 2006, when Gallup first started asking Americans about their trust in key institutions, the country ranked at the top of the G7 league table, tied with Britain. In 2023, for the first time, America came last.
New data from Gallup show that American trust in several national institutions is on the decline. That may not be surprising, given the fraught state of the country’s politics, but the cumulative fall over the years is startling (see chart). Twenty years ago Americans had the highest confidence in their national government of people in any G7 country. Today they have the lowest. Americans are tied with Italians in having the lowest trust in the judicial system, and come last in faith in honest elections. Even the army is suffering from a dip. Although still high at 81%, American trust in its armed forces is now lower than at any point since 2006, and—gasp—lower than in France.
The reasons behind this crisis of confidence in the self-declared greatest country on Earth are varied. The roots of a (healthy) scepticism of government can be traced back to the Vietnam war and the Watergate scandal of the early 1970s. The gradual dying out of the Greatest Generation, which had significantly higher institutional trust than later generations, also plays a role. However, more recent developments help explain the sharp decline of the past years.
Donald Trump’s “constant barrage” of unfounded accusations about the 2020 presidential election clearly plays a big role in Americans’ low trust in the electoral system, says Henry Brady of the University of California, Berkeley. This no doubt also contributes to growing distrust of the judiciary—just last week Mr Trump called the criminal “hush money” trial against him “a communist show trial”. But few things seem to have done more to directly erode trust in the judiciary than the Supreme Court’s decision in 2022 to overturn Roe v Wade. Before this ruling removing a constitutional right to abortion in America, Democrats and Republicans trusted the court in roughly equal measure; afterwards, confidence among Democrats dropped through the floor.
The divergence with Britain is especially striking. Whereas British confidence in the country’s judiciary and electoral system is higher than at any point in the history of the survey, America has moved in the opposite direction. Some 70% of Britons now say that they have confidence in the honesty of elections, compared with only 44% of Americans.
“Like America, the UK has seen a pretty steady decline in confidence in national government,” observes Benedict Vigers, from Gallup, “but this more core belief in the foundation of the democratic system and in fair elections is still pretty strong.” The same cannot now be said about America. Even within the broader OECD club of mostly rich democracies, only Hungary, Turkey and Colombia have less trust in honest elections.
Yet more than the loss of trust overall, what really worries Mr Brady is the increased polarisation of trust in America. Having some institutions that Democrats trust more (journalism, higher education, science) and others that Republicans trust more (religion, the armed forces and the police) is a matter of concern, particularly for the institutions themselves. The problem is even starker when the workforces of such institutions become increasingly homogenous, something that has happened in predominantly progressive higher education as well as in the predominantly conservative military services.
Strong and credible institutions count among the best guarantors of a country’s long-term stability. People who broadly trust authority are more likely to comply with government directives, such as filing their tax returns. During the pandemic, people who had high trust in government were more likely to get vaccinated and comply with public-health guidance on lockdowns or social-distancing rules, according to a meta-analysis by Daniel Devine of the University of Southampton and colleagues. Blind trust in authority is dangerous, and a degree of scepticism can be healthy. But America’s slide towards becoming an ever more distrusting place has perils of its own. ■
Production at the VW plant in Emden.
Sina Schuldt | Picture Alliance | Getty Images
The struggling German economy has been a major talking point among critics of Chancellor Olaf Scholz’ government during the latest election campaign — but analysts warn a new leadership might not turn these tides.
As voters prepare to head to the polls, it is now all but certain that Germany will soon have a new chancellor. The Christian Democratic Union’s Friedrich Merz is the firm favorite.
Merz has not shied away from blasting Scholz’s economic policies and from linking them to the lackluster state of Europe’s largest economy. He argues that a government under his leadership would give the economy the boost it needs.
Experts speaking to CNBC were less sure.
“There is a high risk that Germany will get a refurbished economic model after the elections, but not a brand new model that makes the competition jealous,” Carsten Brzeski, global head of macro at ING, told CNBC.
The CDU/CSU economic agenda
The CDU, which on a federal level ties up with regional sister party the Christian Social Union, is running on a “typical economic conservative program,” Brzeski said.
It includes income and corporate tax cuts, fewer subsidies and less bureaucracy, changes to social benefits, deregulation, support for innovation, start-ups and artificial intelligence and boosting investment among other policies, according to CDU/CSU campaigners.
“The weak parts of the positions are that the CDU/CSU is not very precise on how it wants to increase investments in infrastructure, digitalization and education. The intention is there, but the details are not,” Brzeski said, noting that the union appears to be aiming to revive Germany’s economic model without fully overhauling it.
“It is still a reform program which pretends that change can happen without pain,” he said.
Geraldine Dany-Knedlik, head of forecasting at research institute DIW Berlin, noted that the CDU is also looking to reach gross domestic product growth of around 2% again through its fiscal and economic program called “Agenda 2030.”
But reaching such levels of economic expansion in Germany “seems unrealistic,” not just temporarily, but also in the long run, she told CNBC.
Germany’s GDP declined in both 2023 and 2024. Recent quarterly growth readings have also been teetering on the verge of a technical recession, which has so far been narrowly avoided. The German economy shrank by 0.2% in the fourth quarter, compared with the previous three-month stretch, according to the latest reading.
Europe’s largest economy faces pressure in key industries like the auto sector, issues with infrastructure like the country’s rail network and a housebuilding crisis.
Dany-Knedlik also flagged the so-called debt brake, a long-standing fiscal rule that is enshrined in Germany’s constitution, which limits the size of the structural budget deficit and how much debt the government can take on.
Whether or not the clause should be overhauled has been a big part of the fiscal debate ahead of the election. While the CDU ideally does not want to change the debt brake, Merz has said that he may be open to some reform.
“To increase growth prospects substantially without increasing debt also seems rather unlikely,” DIW’s Dany-Knedlik said, adding that, if public investments were to rise within the limits of the debt brake, significant tax increases would be unavoidable.
“Taking into account that a 2 Percent growth target is to be reached within a 4 year legislation period, the Agenda 2030 in combination with conservatives attitude towards the debt break to me reads more of a wish list than a straight forward economic growth program,” she said.
Franziska Palmas, senior Europe economist at Capital Economics, sees some benefits to the plans of the CDU-CSU union, saying they would likely “be positive” for the economy, but warning that the resulting boost would be small.
“Tax cuts would support consumer spending and private investment, but weak sentiment means consumers may save a significant share of their additional after-tax income and firms may be reluctant to invest,” she told CNBC.
Palmas nevertheless pointed out that not everyone would come away a winner from the new policies. Income tax cuts would benefit middle- and higher-income households more than those with a lower income, who would also be affected by potential reductions of social benefits.
Coalition talks ahead
Following the Sunday election, the CDU/CSU will almost certainly be left to find a coalition partner to form a majority government, with the Social Democratic Party or the Green party emerging as the likeliest candidates.
The parties will need to broker a coalition agreement outlining their joint goals, including on the economy — which could prove to be a difficult undertaking, Capital Economics’ Palmas said.
“The CDU and the SPD and Greens have significantly different economic policy positions,” she said, pointing to discrepancies over taxes and regulation. While the CDU/CSU want to reduce both items, the SPD and Greens seek to raise taxes and oppose deregulation in at least some areas, Palmas explained.
The group is nevertheless likely to hold the power in any potential negotiations as it will likely have their choice between partnering with the SPD or Greens.
“Accordingly, we suspect that the coalition agreement will include most of the CDU’s main economic proposals,” she said.
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