Economic Crisis and Social Trust: Reviewing the effects of economic polarisation on social and institutional confidence

Abstract

The economic crisis of 2008 led to a significant erosion of trust in the countries that were hit hardest. However, whether this fall can best be explained by external economic factors or by the lack of response on the part of the institutions to civic needs and demands is unclear. This study uses the extreme case of Spain to bring new insights to this debate. Its aim is to analyse, in comparison with perceived institutional performance and other factors, the effect of increasing economic inequality and its polarisation on levels of social and institutional trust. The study examines the respective impact of these factors upon different social groups according to their degree of exposure to the effects of the crisis. It uses a simultaneous equations model to jointly examine interpersonal and institutional effects. Our results show that the social groups most severely affected by the recession lose a great deal of trust in others. We also find that polarisation of economic conditions has different effects depending on the institution. Institutional trust seems to vary according to the interest of different groups, but the economic position is an underlying factor, especially for specific segments of the population. Without calling into question the importance of institutional performance, our research sheds new light on the importance of economic polarisation and its joint impact on social and institutional trust. We suggest that, in severe economic recession scenarios, rising inequalities have a direct impact on the institutional trust of certain social groups and deteriorate a lot interpersonal confidence among the most disadvantaged.