Shut out of the last Iowa debate because of low poll numbers, earnest, honest, ethical, reasonable, intelligent and boring candidate Jon Huntsman gave his assessment of the event to ABC’s Christiane Amanpour, saying that the main issue facing the country was a trust deficit:

“The most important issue of all was not even touched upon and that is the deficit of trust we have in the United States, in fact it may have played right into the trust deficit. That is, nobody trusts Congress anymore. We need term limits in Congress, we need to close the revolving door that allows members of Congress to move right on into the lobbying profession. No one has trust anymore towards the executive branch, no one trusts Wall Street with the banks that are too big to fail. So I would argue that the issues that are most salient in our political dialogue today were not even touched upon last night…”

Huntsman is right. It was especially astounding that this issue wasn’t addressed in the debate (and that those crack moderators Diane Sawyer and George Stephanopoulos  didn’t mention it) after more than a month of Occupy Everywhere protests that sorta-kinda dealt with the trust issue (oh,  what a little focus could have wrought!)  and the recent “60 Minutes”  expose on insider trading by members of Congress. Also preceding the debate was this trust-buster: in July of 2008, Bush Treasury Secretary Hank Paulson held a meeting with select Wall Street fund managers and gave them advance notice of government action that they could use to make significant profits:

“Around the conference room table were a dozen or so hedge- fund managers and other Wall Street executives — at least five of them alumni of Goldman Sachs Group Inc. (GS), of which Paulson was chief executive officer and chairman from 1999 to 2006. In addition to Eton Park founder Eric Mindich, they included such boldface names as Lone Pine Capital LLC founder Stephen Mandel, Dinakar Singh of TPG-Axon Capital Management LP and Daniel Och of Och-Ziff Capital Management Group LLC…. the discussion turned to Fannie Mae and Freddie Mac. Paulson said he had erred by not punishing Bear Stearns shareholders more severely. The secretary, then 62, went on to describe a possible scenario for placing Fannie and Freddie into “conservatorship” — a government seizure designed to allow the firms to continue operations despite heavy losses in the mortgage markets…Paulson explained that under this scenario, the common stock of the two government-sponsored enterprises, or GSEs, would be effectively wiped out. So too would the various classes of preferred stock, he said.”

This inside tip generously provided by the Secretary of the Treasury to his pals, associates and cronies was almost certainly translated into millions of dollars-worth of lucrative financial transactions. It is almost impossible to trace them, because no records were kept of who was at the meeting. Paulson is refusing to comment. Still, this is the epitome of unfair and unethical dealing, confirming the worst fears of regulators and critics alike. What Paulson did is not illegal, but it was a betrayal of his duty to the public. As a cabinet official, he may not favor  some citizens over others because they are friends and supporters. He may not choose to make one individual rich with the power of information endemic to his post, while allowing another individual to invest in ignorance. Yet this is business as usual in Washington, and in corporate culture. It is what makes the capitalist system appear rigged, because this is in fact rigging. Nobody in their right mind should trust such a system, but it is the only system we have. So who do we trust to fix it?

It is not an easy question. The kind of crony capitalism practiced by Paulson is the vicious mutation of same processes that allow a free society and an open community to operate ethically. People make friendships and alliances of trust with each other by treating each other fairly, kindly, with respect and responsibly.  People continue to have social and business interactions with those they like and trust to the mutual benefit of all parties, and this encourages and reinforces ethical conduct. Social norms such as gratitude, loyalty and reciprocity, ethical concepts all, create long-standing, life-long bonds that benefit individuals, businesses, and the community. This is how civilization works.

At some point, however, these networks and alliances become exclusive, and are tied to individual power that create overwhelming inequity. Then ethical rot sets in. Then the advantages conferred by community ties, friendship, past business relationships and social interaction lead to divisiveness, secrecy, suspicion, prejudice, and distrust. This is especially true when government officials are involved. If government officials do not embrace the ethical principle that they must perform their duties and exercise their power for the equal benefit of all citizens regardless of who the officials know, owe or like, then corruption and misconduct is inevitable. Then Bill Clinton pardons Marc Rich. Then Hank Paulson tips off his favorite Wall Street wheeler-dealers.

I am on a first name basis with a U.S. Senator who also happens to represent the state I live in. I had a business opportunity that he might have been able to help me nail down at great profit, providing me with a little nudge from an old friend, and I came very close to approaching him for a favor, something I had never done before. Ultimately, I decided that it would be unethical. Meeting my request would have required him to favor my interests over another citizen’s simply because of our past friendship rather than the merits of my work. I viewed it as cheating (my friend the Senator, who is as ethical a public servant as one could find, may well have felt the same). We can push through laws and regulations by the bushel, but if those who are in power are not committed to fairness, and those of us who can benefit from special favors continue to seek them regardless of fairness, trust will continue to deteriorate.

The remedy is not in the law, and it is not in blowing up the system. The system can work, if as a society we define the ethical limits of networking and reciprocity, and reject cronyism by rejecting those who practice it. We also have to be willing to reject this even when we can be the beneficiaries. If we can trust ourselves, maybe we will begin to trust others.

Right now, however, I don’t know who we can trust. Huntsman is right about the problem, but a practical answer remains elusive.