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Inward Investment Guides

Editor's Note Winter 2012: "A Crisis of Trust"

Geraldine Gambale, Editor, Area Development Magazine (Winter 2012)
As 2011 ended, the U.S. economy appeared to be picking up steam. Fourth quarter economic indicators confirmed this: The Commerce Department reported that U.S. GDP expanded at a rate of 2.8 percent in the final quarter of 2011 - up from 1.8 percent in last year's third quarter. And two thirds of the economists who participated in the December 2011/January 2012 NABE (National Association for Business Economics) survey said they expected the U.S. GDP to grow at a rate above 2 percent this year.

Nevertheless, unemployment remained at 8.5 percent, down only slightly from the recession's higher rates. And although factory production also surged 1.5 percent above its recessionary low of two and half years ago, and companies are flush with cash, business executives are reluctant to spend and hire. Caution has become the watchword.

What's causing this stagnation? Sixty-five percent of those responding to Area Development's 2011 Corporate Survey, the results of which appear in this issue, said "economic instability" is preventing them from spending more of their earnings on investment in U.S. facilities. They are worried about excessive government regulation and high corporate taxes, and have little faith in U.S. monetary policy. In other words, there's a lack of trust.

A new book from Stephen M.R. Covey and Greg Link - Smart Trust: Creating Prosperity, Energy and Joy in a Low-Trust World - notes, "The headlines and the statistics leave no doubt that the world is in a crisis of trust. What is less clear is that this crisis is simultaneously having a profound impact on economic well-being and quality of life around the globe."

This crisis of trust was on the minds of government officials and business leaders who recently met at the World Economic Forum in Davos. According to Infosys CEO S.D. Shibulal, who led a panel discussion at the Forum, the two groups will need to work together to rebuild that trust by fostering growth and creating jobs. CEOs also must strengthen governance and improve transparency in order to rebuild the trust, he noted.

Shibulal further added, "Beyond governments, corporations are the largest and most influential bodies that can drive large-scale socio-economic development. They create jobs.and they contribute to the improvement in the general standard of living."

With renewed trust - and caution giving way to confidence -businesses will begin to invest in their future and simultaneously improve the future for the citizens of the communities in which they operate.

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