THE BLOG
01/29/2016 04:35 pm ET Updated Jan 29, 2017

For Business Leaders, The 'Grand Illusion' Has Come to an End

Bloomberg via Getty Images

Granted, Davos is a place for debate, not action. However the four days in the Swiss mountains taught global leaders a lesson; if they fail to act on it, there will be trouble ahead.

I worry less about the global economy; a surprisingly large number of business leaders told me in private that they're upbeat about everybody's economic prospects.

Their real unease is based on the realization that a 'Grand Illusion' has come to an end.

This 'Grand Illusion' was the lingering notion that elites would lead and the mass population would follow. It's the historic model of governance: elites have access to superior information and align their interests with the broader public; and everybody who works hard can become "an elite."

Not anymore. This classic pyramid of influence has been upended, as rising income inequality, high-profile revelations of greed and misbehavior, and the digitalization of media have destroyed the most important underpinning of influence: trust.

The result is a yawning trust divide between the world's elites and the broader population. The 2016 Edelman Trust Barometer shows that trust in leading institutions has reached a 15-year-high among the elite or "informed public" group -- those with at least a college education, who are very engaged in media and earn an income in the top 25 percent. However, in the mass population trust levels have barely budged since the Great Recession. On average, the trust gap has reached 12 points; in the U.S., the difference is a massive 19 points. After the economics of inequality, as described by Professor Thomas Piketty in his best-seller, Capital in the Twenty First Century, we now observe the inequality of trust.

In the U.S., the "trust gap" between high income and low income respondents has grown to 31 points; there are double-digit trust gaps in 18 of the 28 countries surveyed. And the problem is set to get worse. In two-thirds of countries surveyed, a majority fears that -- five years from now -- they will not be better off. People who don't believe they have a stake in a country's prosperity, stop trusting their leaders.

These findings go far to explain anti-establishment anger around the world -- which helps drive the popularity of Donald Trump and Bernie Sanders in the U.S. and the rise of far right and far left parties across Europe.

If nothing is done, brace yourself for more political turmoil, and more resistance to free trade and innovation and immigration reform. There will be political gridlock as people retreat into the echo chambers of self-affirming online communities and television news. The most credible source of information on social networking sites is now "my friends and family."

How can we end this disconnect, restore trust and re-align the expectations of the elites and mass population?

One of the solutions, surprisingly, is business. A decisive 80 percent of the general public expect that business can do both: improve economic and social conditions, and increase shareholder value. Business is seen as the institution best able to keep up with rapid change -- well ahead of government and even NGOs.

Trust in CEOs has also risen smartly, probably thanks to leaders such as Paul Polman of Unilever and Howard Schultz of Starbucks, who have tackled important issues such as the environment, sustainability and youth unemployment.

During Davos, "trust" was a constant topic of discussion. Many CEOs told me that they "get" the need to close the trust gap; they are searching for solutions -- and partners -- to align their business with the public's values and expectations.

In Davos, these CEOs could meet leaders of the millennial generation, with ideas how to create win-win situations that deliver on business goals, reduce inequality and restore trust. The real work, though, has to start now that Davos is over.

We live in a time of technology disruption that creates business opportunities, but also causes societal problems. That's why smart leaders will ensure that disruption also delivers inclusive growth. To avoid destructive upheaval, we have to move beyond the 'Grand Illusion'; we have to find new ways of engaging and communicating with the public, to regain and rebuild trust every day.