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The Forum > Article Comments > Trust and markets > Comments

Trust and markets : Comments

By Andrew Leigh, published 18/10/2010

In the modern economy, it is easy to see plenty of instances in which trust and commerce run together.

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Good as far as you go Andrew.

Now please wean your Party off neoliberalism, which subverts everything decent people want, including trust and community. Or change its name, it hasn't been a Labor party for a generation. Intimidated by Neoliberals and Devoid of Vision Party would be an option.
Posted by Geoff Davies, Monday, 18 October 2010 2:04:16 PM
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Andrew misses the point that Smith's reference to 'two people interacting' is a very rare instance in a corporate economy, where most interactions are done with large companies. Who is the 'person' with whom I interact at Woolworth's or Coles, or when I speak with an anonymous call centre operator, or respond to a bill in the mail?

CEOs are part of a largely self appointed class of executives and directors whose main goal is their own enrichment, subject to a minimum level of satisfaction for shareholders. They are not alone in this of course, but the power they have (and the powerlessness of shareholders) will always tempt them to take advantage of their positions. People are wise to be wary of this tendency.

Andrew needs a new theory of ethics more relevant to the reality of the current economy.
Posted by Godo, Monday, 18 October 2010 3:09:07 PM
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I just want to register my disgust with this tripe. Congratulations on a thoroughly nauseating scribble, Andrew Leigh. The concept of 'cultural capital' is shameful to contemplate, but in economics 'social capital' is an asset, right? like having money in the bank. After all these years of dog-eat-dog and today's transcendental cynicism, Adam Smith the benevolentist is surely anachronistic, isn't he?
I despise CEO's on principle (and I'm no moralist); the fact that they're good liars, or believe their own excremental logic, puts them on par with economists and politicians, and just as remote from veracity.
Posted by Squeers, Monday, 18 October 2010 5:37:32 PM
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What you are saying rings true. Of course, many of these matters of trust are invisible to the retail customer. Sure, if a supermarket sells us dodgy goods and refuses to rectify the situation (or does so only grudgingly), that supermarket may lose a customer. Word of mouth may cost the supermarket several customers, assuming of course that competition is available.

The trust issues that make or break businesses happen much further away from the public eye. I know of a fast food chain that did the dodgy on the supplier and maintainer of its kitchen equipment. The immediate repercussion for the fast food chain is the loss of a contract with that service provider. The less immediate consequence is loss of goodwill. In a relatively small market, commercial catering equipment providers (and maintainers) are less likely to do business with that company. This narrows their range of options when it comes to choosing a new provider and, as a result, lessens their chances of securing the best equipment and the best maintenance.

All of this is still behind the scenes. We, the retail customers, only become involved when the food is of a lesser quality, takes longer to prepare or is unavailable because the equipment is broken and nobody is interested in coming to the rescue. It is at that point that the fast food chain loses sales, loses a portion of its market share and loses money. This stems from a simple violation of trust - one that we, the retail customers, are unlikely to know about. If the same executives do dirty deals on their napkin providers, their furniture providers, the suppliers of their foods, the companies that clean their restaurants and maintain their toilets, the business goes downhill quickly. Even when they provide service with a smile and speak to us in fluent English.
Posted by Otokonoko, Tuesday, 19 October 2010 1:05:37 AM
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There is a very great difference between a capitalist systems and say a Marxist system.

In a capitalist system, the employee is required to smile at the customer, because they want the customerís money, and they want the customer to return.

In a Marxist system, no one is required to smile at anyone, and everything tends to go into decline.

People such as Marxist/feminists find it very difficult to get anyone to smile (or if a Marxist/ feminist ever did smile at you, it is time to become seriously worried).
Posted by vanna, Tuesday, 19 October 2010 7:56:02 AM
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Andrew actually makes a very valid point.

In my last business, I took a very different approach to my
competitors. I provided a very high quality product and
listened to my customers. I was completely honest with them
about what we could and could not provide, made no claims that
were not correct. Result, they came back week after week,
for years. Our advertising costs were non existant as a result,
a huge saving.

I paid my suppliers as much as possible, under the circumstances.
Result, I got the best suppliers, with the best quality,
which thrilled our customers.

We trimmed our overheads, cut out waste. In the end I did
extremely well, because volumes went through the roof.

Creating win-win situations based on trust, is indeed highly
profitable. You only screw most people once, then need to
spend a fortune on advertising, to find another sucker.
Posted by Yabby, Tuesday, 19 October 2010 10:22:07 AM
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