24 PERSPECTIVES ON BUSINESS AND ECONOMICS | VOL 41 | 2023 Benefits and pitfalls of Denmark’s high-trust society Raihan Alam Denmark exhibits some of the highest levels of trust in the world. Many attribute the country’s social and economic successes to its citizens’ strong trust in its institutions and in other people. However, the socioeconomic costs of such high levels of trust have been less explored. This article reviews both the benefits and costs of Denmark’s high levels of trust and discusses ways the country can make the best use of this crucial resource. Introduction Denmark is known as the “land of trust.” It is hard to understate the value of this nonmaterial resource in Danish society. Many social scientists have argued that Denmark’s robust response to the COVID-19 pandemic, low levels of crime, high levels of happiness, gender equality, economic cooperation, and support for green reforms are all products of the Danes having high levels of trust regarding both individuals and institutions (Andreasson, 2017). Trust can be divided into two categories: social trust and institutional trust. Social trust generally refers to the level of trust people are willing to extend to those individuals outside their own social circles, while institutional trust usually refers to trust of specific institutions like the government and other civil society organizations. The role of the media in Denmark and the nation’s response to the COVID-19 health crisis are particularly revealing of this phenomenon of trust; however, even though the benefits of trust are important and generally understood, there often are unstated pitfalls that are less well understood. Social trust The European Social Survey is one of the largest cross-national attitude surveys that measures social trust (European University Institute, 2022). Since 2001, thousands of citizens from 32 European countries have responded to the European Social Survey question, “generally speaking, would you say that most people can be trusted, or that you can’t be too careful in dealing with people? Please tell me on a score of 0 to 10, where 0 means you can’t be too careful and 10 means that most people can be trusted.” Compared to the rest of Europe, including their Scandinavian neighbors, Danes have the highest levels of social trust, averaging a score of 6.9 (Tingaard, 2020). Benefits Social trust provides Denmark with many economic benefits. For example, researchers have conceptualized Denmark’s high level of social trust as “an absence of the need to verify other people’s actions” (Andreasson, 2017). Such an absence means a business environment with fewer legal and formal hurdles to conduct economic transactions, which saves both time and money. Such trust has also been associated with increased foreign investment (Zak & Knack, 2001). Some researchers have gone so far as to argue that for every 10% increase in a society’s level of social trust, a 0.5% increase in the country’s economic growth can be expected (Bjørnskov, 2005). Beyond economic benefits, social trust is a strong basis for psychological well-being. There is a strong, established relationship between social trust and individual happiness. Rodriguez-Pose and von Berlepsch (2012) examined this relationship in over 48,000 people from 25 European countries. They found that social trust was a significant predictor of subjective happiness, even when controlling for sociodemographic variables, such as education and marital status, as well as macroeconomic variables, such as inflation and income inequality. This effect was largest for Scandinavians. Research has also found that individuals with high levels of social trust feel more hopeful about their future and believe they have greater control over their lives (Rothstein, 2013). These positive feelings may be because in high-trust environments people can live their lives confident that other people around them are honest and share prosocial tendencies (Radcliff, 2022). Conversely, in low-trust societies, people must constantly be on guard and are suspicious, looking out for the possibility that someone may exploit or deceive them, thus expending their emotional resources on monitoring their everyday interactions. In high-
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