Trust and Distrust in Digital Economies

Philippa Ryan

• Publisher: Routledge
• Year: 2019
• Print ISBN: 9781032241005
• eBook ISBN: 9781351104821
• Edition: 1
• Topic: Law
• Subtopic: Marketing
• Index: Law

In digital economies, the Internet enables the "platformisation" of everything. Big technology companies and mobile apps are running mega marketplaces, supported by seamless online payments systems. This rapidly expanding ecosystem is fueled by data. Meanwhile, perceptions of the global financial crisis, data breaches, disinformation and the manipulation of political sentiment have combined to create a modern trust crisis. A lack of trust constrains commerce, particularly in terms of consumer protection and investment. Big data, artificial intelligence, automated algorithms and blockchain technology offer new solutions and risks.

Trust in our legal systems depends on certainty, consistency and enforceability of the law. However, regulatory and remedial gaps exist because the law has not kept up with technology. This work explores the role of competency and good faith, in the creation of social and legal relationships of trust; and the need for governance transparency and human accountability to combat distrust, particularly in digital economies.

Part I

Introduction and Classification

1 Introduction

Employers can get into legal trouble if they ask interviewees about their religion, sexual preference or political affiliation, so instead of posing these questions in an interview, an employer can simply conduct online research to filter out applicants based on their beliefs, looks and habits as disclosed by candidates via social media websites. Laws forbid lenders from discriminating on the basis of race, gender and sexuality. Yet they can refuse to give a loan to people if (for example) their LinkedIn resumés do not match their profiles on Facebook; or if a computer algorithm judges them to be socially undesirable. These regulatory gaps exist because laws have not kept up with technology and these gaps exist and are widening in every digital domain.¹ Meanwhile, using the power of this same technology can help build trust between complete strangers, because social media and the platforms upon which our digital economies run is not just efficient; it is the social glue that establishes trust.

Botsman argues that trust and efficiency have been core requisites in all marketplaces for centuries. Trust has proven to be integral to economic development and human security, because trust is central to exchange and growth.² It works to cross barriers and calm fears. It can therefore ‘revolutionise what is possible’.³ Reports on findings from interviews with fledgling entrepreneurs reveal that trust is a prime requisite for success, including in societies that have been culturally depraved for many years.⁴

Today, technology is developing and being adopted on an exponential curve and is impacting almost everyone everywhere. Changes at a rate that once took centuries now happen in decades, sometimes years. The processing power for computers and devices from 1956 to 2015 has experienced a one trillion-fold increase in performance over those six decades. The computer that guided Apollo 11 to the moon in 1969 has just twice the processing power of the Nintendo 64 entertainment system. A single Apple iPhone 5 has 2.7 times the processing power of the world’s first ‘supercomputer’: the 1985 Cray-2.⁵ And while processing power and speed has gone up, the price of new technology has come down. A full human genome sequence that cost $100 million in 2002 could by 2014 be done for $1,000; and will likely cost less than a cup of coffee by 2020.⁶

The law and ethics are struggling to keep up with changes in new digital economies – online platforms for marketplaces and social relationships. Consider the question of privacy. The Common Law’s modern extension of the tort of breach of privacy has its origins in a suit brought by Prince Albert seeking an injunction against William Strange to stop the latter from publishing and selling a catalogue of drawings made by members of his family, including his wife – Queen Victoria.⁷ The etchings had been surreptitiously removed from the royal household and fell into the hands of William Strange. The Prince claimed a personal confidence in relation to the drawings. The Court found for the Prince, holding that the jurisdiction in confidence is based not so much on property or on contract as on a duty of good faith.

The decision in Prince Albert v Strange established in the English legal system that confidential information of a personal and private nature may be protected by an action for breach of confidence. Corresponding United States’ laws also date back to the 19th century, although bit later than the English precedent. The trigger in the United States arose when newspapers first started reporting personal information and Boston lawyer Samuel Warren objected to social gossip published about his family. This led his law partner, and future United States Supreme Court Justice, Louis Brandeis to co-author the article ‘The Right of Privacy’.⁸ In both cases, the printing press was enabling widespread reproduction and distribution of personal images and potentially scandalous or defamatory information.

The disruptive impact of the printing press dates back to the 1400s and publishing technology continues to be inextricably connected with the development of privacy, copyright law and free speech. Copyright law starts with early privileges and monopolies granted to printers of books.⁹ The computer is the modem analogue to the printing press. Both inventions facilitate the dissemination of information, the difference being in the mechanics.

The invention of the printing press had a revolutionary impact on the value of free speech in 15th-century England by both nourishing it and threatening it. Indeed, it is fair to say that the threats to freedom of speech arose out of its nourishment, out of a fear by the British government that this new technological device, which made speech more indiscriminately accessible, required legal curbs not previously thought to be necessary.¹⁰

The advent of the Internet is a quantum shift in the speed with which information can be distributed. Seen in this light – after centuries of relying on manual and then automated printing presses – the invention of the personal computer was merely an incremental innovation. While the main casualties of the printing press and desktop publishing were privacy and copyright protection, the thirty years since the invention in 1989 of the World Wide Web (‘the Web’) by Tim Berners-Lee has seen an explosion in the generation of data and the publication of all forms of political, economic and personal expression by both individuals and organisations. And this explosion of data – in particular consumer data – has changed the way we do business.¹¹

In 1994 there were just 10,000 websites globally.¹² In 2001, the launch of Google enabled fast and uncategorised searches across the entire Web. With this e-commerce took off and, in Google’s first year, more than 100 million Americans made an online purchase.¹³ The relationship between Google and rise of e-commerce is not to be underestimated. As well as the almost omnipresence of Google’s search engine and advertising content, other major players in the online market have grown over the past ten years.

Social media has emerged as a major online presence with Facebook and Twitter, in 2004 and 2006 respectively. Smart phones (particularly Apple’s iPhone) brought the Internet to mobile phones in the early 2010s and have ‘completely changed the way that people consume content on a daily basis’.¹⁴ The majority of Internet time is now spent on mobile devices worldwide, and around 50% of people get their news from a digital source, such as a website, application or notification.¹⁵ The media’s role in mediating experience by bridging the gap between events and audiences is a broad but extremely important one,¹⁶ and media organisations now have to take into account the presentation of their news more than ever, as users of digital media place high importance on the dissemination and delivery of news.

The Modern Trust Crisis

Much has been written over the past twenty years about the erosion of trust in our institutions including government and politicians,¹⁷ banks and financial services providers,¹⁸ and journalists and news services. Importantly, these three great institutions are the pillars of democracy. Dissatisfaction with and lack of confidence in the functioning of the institutions of democratic government has become widespread. The narrative of this modern trust crisis probably begins with Watergate and spikes in the wake of the 2008 Global Financial Crisis.

Former United States Senator Howard Baker’s most enduring moment came in the middle of the Watergate scandal, when he asked: ‘What did the president know and when did he know it?’ Journalism’s precise role in Nixon’s demise is impossible to measure definitively. To the conservative writer Paul Johnson, the ‘Watergate witch-hunt’ was ‘run by liberals in the media’, especially the Washington Post, and led to ‘the first media Putsch in history’.¹⁹ The television anchorman Dan Rather also viewed the media’s role as pivotal – and heroic.

In their 1975 report ‘The Crisis of Democracy’ to the Trilateral Commission,²⁰ Crozier et al. set off a debate on what they called ‘the increasing delegitimisation of authority’, describing a decline in the confidence and trust that people have in government and in their leaders.²¹ The consequences of political trust are surprisingly understudied, even though the relevance of political trust to the quality of representative democracy and the stability of its institutions has been a recurrent theme in the literature since the 1970s.²² While The Watergate scandal had a devastating effect on American politics, Baker’s refrain – ‘What did the president know and when did he know it?’ – could be applied to every United States president since. Some argue that we (the United States and its allies) still live in the era of Watergate.²³

Ten years on, the reverberations from the global financial crisis are still shaking up the world order. Perceptions of the global financial crisis, corporate rigging and complaints against business erode public trust. According to the Edelman Trust Barometer, after steady improvement between 2011 and 2017, the financial services sector has seen declines in trust among the informed public segment in the United Arab Emirates, Hong Kong, Brazil, Colombia and France, with the United States suffering the steepest decline – in the double-digits.²⁴ These trends are significant and important because financial services are based on trust between various parties, and trust is important in making financial decisions. A lack of trust can lead to poorer individual and societal outcomes. It also suggests that a tendency to financial self-sufficiency comes with risk that may impact well beyond monetary losses.²⁵

A lack of trust in financial institutions can hamper efforts to improve financial inclusion – particularly in less developed countries and poor communities generally. Greater digital finance can lead to greater financial inclusion, but special challenges face communities where there are cultural or religious beliefs that are hostile towards embracing technology in f...

Table of contents

• Cover
• Half Title
• Series Page
• Title Page
• Copyright Page
• Table of Contents
• Acknowledgements
• PART I: Introduction and Classification
• PART II: Social Relationships of Trust in Digital Economies
• PART III: Legal Relationships of Trust in Digital and Crypto Economies
• PART IV: Key Challenges and Conclusion
• Index