By Eric Beinhocker, Professor of Public Policy Practice, University of Oxford

For 23 years, the Edelman Trust Barometer has studied public trust in key institutions around the world. While levels of trust have ebbed and flowed year to year, over the last few years there has been a worrying decline in faith by the citizens of many countries that institutions, including government and the media, are doing what is right.

In parallel, over the past decade there has been a sharp rise in political populism — particularly authoritarian populism rooted in racial, ethnic, national or religious identities — in countries as seemingly different as the U.S., Brazil, India, Turkey, Hungary and the Netherlands.

Many explanations have been offered for this lack of trust and rise in populism: economic dislocation, demographic shifts, immigration and, of course, the growth of social media. All have certainly played a role. But given the diversity of societies affected, it begs the question of whether there might be a deeper, more universal explanation. Recent research suggests there is: When human beings feel their sense of fairness is violated — or to put it more crudely, when they feel “screwed” — they react in ways that seem on the surface to be irrational and even harmful to themselves and their societies. But these highly emotional, seemingly irrational reactions have an underlying logic to them.

To understand why the emotions of fairness violation may be playing a role in shaping politics and society today, we need to begin by looking into our ancestral past. Humans are among the most cooperative and social species on the planet. As Harvard evolutionary biologist Martin Nowak puts it, we are “super cooperators.” Throughout our history, individual survival was often tied to group survival, so our species evolved strong instincts to initiate and sustain cooperation. Those instincts have a positive side, what researchers call “prosocial behaviors,” such as generosity, reciprocity and the desire to build trust in relationships. But they also have a dark side. When people feel they have been cooperative and contributed, but others have not played their part and have instead been free riders who lie, cheat and take advantage of the nice cooperators, then they react with a sense of moral outrage and a desire to punish those who have violated cooperative norms.

In fact, experiments show that people are willing to dish out punishments that are more costly to themselves than any possible benefit. We see this not just in the lab but in the real world. Consider acrimonious lawsuits or divorce cases where the aggrieved parties sue each other into financial oblivion. While standard economic theory might say such behavior is “irrational,” it makes sense from an evolutionary perspective. When people go a bit crazy and dish out punishments that are costly for themselves, they are in effect taking one for the team and helping enforce norms of cooperation for the group as a whole. Researchers call this “altruistic punishment,” and it means that potential cheaters and free riders pay a higher cost for their bad behavior than if every individual was strictly “rational.” Further experiments show that without altruistic punishment, free-riding and cheating go up, and it is very hard for groups to establish and sustain cooperation.

Another common reaction when people feel fairness is violated is to team up with other people who feel cheated as well. If cooperation is broadly breaking down, it makes sense to seek out people like yourself, who you can trust, and fight back together against the perceived violators. In history, the notion of “people like me” has often meant people who share some common identity (e.g., ethnic, religious, regional, cultural). So, when larger-scale societal cooperation breaks down, identity-based tribalism often goes up.

Before the advent of agriculture around 10,000 years ago, cooperation happened mostly in groups ranging from a dozen to 150 or so individuals, mostly of kin, near kin and others with close, personal bonds. By contrast, our 21st century world is predicated on complex, large-scale cooperation among “strangers.” Firms, markets, global supply chains, governmental bodies, religious communities, cultural organizations and many other groups consist of thousands or even millions of people cooperating toward shared ends, most of whom will never meet. Instead of personal bonds, in modern societies we rely on institutions, ranging from informal norms and codes of conduct to formal structures, such as the law, government, business and civil society, to help build trust and cooperation. However, as the 2023 Edelman Trust Barometer shows, with the exception of business, key societal institutions are not trusted or seen as competent. It is thus not surprising that we have seen a rise in identity-based politics and inter-group conflict, as well as the heightened emotions that come with it.

This fraying of trust in institutions eats away at the core of what political philosophers and social scientists call the “social contract.” Such a “contract” implies a two-way mutuality of commitments: An individual voluntarily aligns their behaviors with the interests of a collective, agrees to contribute effort and resources toward shared goals and submits to being governed by social arrangements enforced by the group, in exchange for the collective providing some set of benefits in return. These benefits are made possible by the gains generated from large-scale cooperation. In theory, everybody gains more from submitting to a social contract than they ever could realize by acting on their own.

But here’s where fairness again comes into play. A core claim of social contract theory is that individuals who voluntarily submit to being governed by such arrangements must by definition view them as fair and legitimate — or at least “fair enough.”⁠ When they do not, the response is to either withdraw their cooperation or only submit to collective governance when made to do so. Examples of responses to feelings of a broken contract include disengaging from politics and refusing to vote, refusing to pay taxes, political protests, labor strikes, disengagement at work, increased corruption (“If everyone else is doing it, why shouldn’t I?”) and conflicts with groups perceived to be doing the contract-breaking (e.g., governments, political parties, big business, media, elites generally). Much of the discord we see today is symptomatic of feelings of broken contracts.

The final piece of the puzzle is getting clear on what we mean by “fairness.” While the evidence is somewhat circumstantial, people’s perceptions of fairness in social arrangements seem to anchor around three dimensions: process fairness, relational fairness and distributional fairness. Imagine you are a child on a playground playing a game. The game seems fair if we’re all included, all know the rules, all follow the rules and the rules are equally enforced. That’s process fairness. And conversely, a game that doesn’t have those characteristics would be perceived as unfair.

Relational fairness captures how the players interact with each other. If everyone is contributing, playing their roles to the best of their abilities, working well together as a team and sharing in the benefits of the game, then that’s fair. And if hierarchies on the team are based on merit and help everyone achieve their shared goal, that too is fair (e.g., the team captain is the best player). Again conversely, if some players are shirking, not cooperating, free riding and hogging all the glory, then that’s not fair. And if the coach takes a bribe and appoints the worst player captain, that’s not fair either. Relational fairness thus tends to anchor around feelings of reciprocity, trustworthiness and deservedness.

Finally, distributional fairness refers to whether we perceive the outcomes of the game as fair. If the game process is fair and relations between the players are fair, then we expect the outcome will be fair too. We will accept the score of the game. And again, the converse is true. If we think the process is bad and relations between players are unfair, we will not trust the outcome to be fair.

But exactly what constitutes a fair outcome — and specifically whether an equal or unequal outcome is fair — depends on the nature of the game. For example, if the game is a room full of people flipping coins, we would say a highly equal outcome, where most people flipped roughly half heads and half tails, was fair. And if one person flipped an extremely improbable sequence of heads, we would suspect that person of cheating. But on the other hand, if the game was a 100-meter running race pitting random people against world record holder Usain Bolt, we would expect a highly unequal outcome. And if everyone crossed the line at the same time, we would suspect the race was rigged and unfair. So, it is possible for either equal or unequal outcomes to be perceived as fair — it depends on the nature of the game and people’s expectations.

In the game of the economy, people don’t expect equal outcomes. They know that people have different levels of skills, creativity, drives to work hard and other attributes that influence economic success. So, in judging whether it is fair that someone is very rich when lots of other people are very poor (a distributional outcome), people will typically ask questions about how that rich person made their money (procedural fairness) and how they treated people along the way (relational fairness). Likewise, people will look at distributional outcomes as a signal of procedural or relational unfairness — e.g., if people expect modest levels of economic inequality but then things rise to robber baron levels, they will start to suspect that wealthy people are rigging the system and abusing their power.

Which brings us back to today’s discord and unrest. There is growing evidence that people believe our society’s economic and political games are unfair, that their social contracts as workers, consumers, voters and citizens have been broken. There’s not much Donald Trump and Bernie Sanders agree on, but one belief they and their supporters share is that the system is “rigged.”

These widespread perceptions of a broken contract have roots in reality. In the U.S. and other countries since the 1980s, worker productivity has gone up significantly, but the gains of those productivity increases have not flowed into worker wages, going instead into the pockets of the wealthiest 10 percent. Likewise, economic security for many families has declined, with more volatile employment and income, less health and retirement security, higher costs for housing, childcare, college and other pillars of middle-class life, and more families are just one missed paycheck away from disaster. According to a 2023 Pew Research Center poll, only 23 percent of those surveyed said the economic system “is generally fair to most Americans.”⁠

If the economic contract has been broken, then the political contract in many countries has been shredded. Political scientists have documented how the political systems of the U.S. and other democratic countries have become less responsive to voter concerns and more captured by special interests. Combined with scandals, corruption, perceptions of incompetence and a media environment that feeds off outrage, it’s no wonder voters have lost faith in the elites who govern them. And while those feelings began to grow several decades ago, they have been amplified by traumatic events such as the 2008 global financial crises and Covid-19.

Populist politicians exploit this broken contract anger. They stoke feelings of tribalism and dangerously create “others” as the violators who deserve that anger — foreigners, other racial, ethnic or religious groups, immigrants, other regions, opposing political parties and elites. While the most high-profile populist politicians have tended to be on the political right (e.g., Trump, Bolsonaro, Orban), these feelings of broken contract anger cross the political spectrum. In the U.S, for example, those on the left express outrage at excessive corporate power, the rich not paying their fair share of taxes, ongoing injustices based on race, gender and sexuality, and the wanton destruction of our natural environment. On the right, the outrage tends to be directed at welfare cheats, illegal immigrants, foreign countries and others who allegedly aren’t playing by the rules and taking advantage of those who are. While the targets of outrage differ, the psychological structure of that outrage is the same; it stems from feelings of process, relational and distributional unfairness, provoking feelings of moral righteousness and a desire to punish those perceived to be violators and to restore justice and fairness.

What we are seeing is not just a decline in trust and rise in populism, but a dangerous breakdown in the very bonds of cooperation that hold complex societies together.

History and the research discussed would suggest we now have two choices: We can let things continue to spiral down in accelerating doom-loops of outrage, recrimination, othering, tribalism, punishment and potentially even conflict and violence. Or we can try to rebuild the social contract, re-establish fairness and rein in the forces that profit from driving us apart.

The challenge is immense. Reform on any one of the issues that today trigger broken contract outrage — immigration reform, limiting corporate power, welfare reform, tax reform, trade reform or improving economic security and opportunity for working families — would be a heavy lift in the best of political circumstances, and we are not in those circumstances.

The specific issues and challenges differ by country, but a common theme is this widespread perception of broken political systems. So, political reform — limiting the power of special interests, rooting out corruption, showing that governments can be competent and get things done and making systems more responsive to what voters actually want — must be at the heart of any changes aimed at social contract repair.

The behavioral research suggests that there is a job of emotional repair too. The strong emotions (and underlying neurophysiology) of fairness violations only begin to reset when people feel heard, their anger channeled, and their trust is carefully rebuilt step by step. Leaders in politics and business must be honest about the failures of the current system and the legitimacy of people’s feelings. They must also find ways to redirect strong emotions away from blaming others and toward a zeal to make real changes that will restore the contract. And finally, they must look for places and pockets where trust still exists and rebuild from there. For example, in many countries, governments at the state and local level are more trusted than the national government. So, starting reforms at the local level, building coalitions, showing they work and creating confidence to scale up to the next level can be an effective strategy.

When the social contract is broken, it is very hard to put the moral outrage genie back in the bottle. But history shows it is possible. Late 19th century America saw bloody labor strife, historic levels of inequality, bitter divisions following the Civil War, stresses from immigration, political scandals, corruption, a series of devastating financial panics and the rise of fire-breathing populists like William Jennings Bryan. Yet, that period was followed by one of the country’s most consequential eras of reform, most famously led by Teddy Roosevelt, but made possible by the courage, actions and leadership of countless reformers in politics, business and civil society.

We need that kind of leadership again.

Eric Beinhocker is a Professor of Public Policy Practice at the University of Oxford’s Blavatnik School of Government and Executive Director of the Institute for New Economic Thinking at the Oxford Martin School (www.inet.ox.ac.uk). This essay is based on his academic paper “Fair Social Contracts and the Foundations of Large-Scale Collaboration”, available here.