Last week we imagined a world in which the government tracks every penny you spend and restricts what you can buy based on your spending habits or its social agenda. For example, instead of trying influence society by applying a “sin” tax to alcohol and tobacco, the government could just monitor your spending, decide you drink too much, and restrict you from buying more than a set amount in a given time period. The mommy states dream come true!
This week we’ll look at the tool that when combined with a digital currency makes an authoritarian’s dream come true, social credit systems.
What is a Social Credit System?
In the “Nosedive,” the 1st episode in the 3rd season of “Black Mirror,” people use mobile devices and eye implants to share and rate each other’s daily interactions which ultimately culminate in a score which determines one’s socioeconomic status. While it will likely be sometime before the world sees something like this, “Nosedive” has been widely compared to the Social Credit System being developed by the government of China. The professed purpose of the Chinese system is to provide financial and social credit scores alongside a national blacklist database. The origin of the system lies in a desire to provide a financial credit system for individuals and small businesses, especially in rural areas, which lacked documented records. This would provide Chinese citizens with a service not unlike that provided by Equifax and Transunion for American and Canadian citizens. The system would differ in that it would also have a social assessment function which would seek to address trust issues “such as food safety scandals, labor law violations, intellectual property thefts and corruption” and it’s stated purpose is “to help Chinese people trust each other again.” At the moment there are multiple pilots underway, and a single national Social Credit Score does not exist.
This all sounds well and good so what’s the problem?
In 2018, U.S. Vice President Mike Pence described the Chinese social credit system as "an Orwellian system premised on controlling virtually every facet of human life." Criticism has also come from the left with George Soros saying in 2019 that it would give the Chinese government "total control over the people of China.” These concerns, while real, may be a little premature. The Chinese plans for a social credit system are very much in flux. Adjustments have been made based on pilot program findings and Covid appears to have set the timetable back an unknown amount of time. Much of the concern in the West has been criticized as misreporting and misperceptions and so our analysis must focus on how such a system could be abused rather than how it is being used.
The Financial rating component of this system is the least troublesome. In 2016 the authorities recommended that those with “outstanding financial credit records” be given preferential treatment by market entities. In other words that “market entities” in China behave like capitalist entities. Making it easier for companies and individuals with good credit to borrow money is hardly authoritarian. The problem would arise from the workings of the Social Credit Rating System.
Social Credit Rating
The main concerns with social credit scores come down to a few simple questions:
What would be scored?
What would be the penalties?
Who does the reporting?
The numerous pilots in China give us some idea of what could be penalized. These have included failure to pay fines, “violence against doctors, counterfeit medical supplies, refusal to comply with pandemic prevention measures, and wildlife trade violations” as well as “government petitions and online comment…reservation no-shows or cheating in online games, and…for littering or jaywalking. Realistically, the number of “anti-social” behaviors that could be tracked is almost limitless, but tracking is one thing, penalizing is another and it’s the penalties that are the first major concern.
As the overall system is intended as a financial credit system, whatever is tracked could potentially impact an individual’s credit score. So yes, it is conceivable that cheating in online games or jaywalking could be factored into a citizen’s financial credit score. The system is, after all, about “building trust” as well as assisting with loans so why loan to people who don’t behave the way a good citizen would? Penalties, however would unlikely be restricted to financial credit scores and the pilot programs show us that the authorities have toyed with travel restrictions and flight bans. China’s existing blacklist system gives us further examples of the penalties that could be expected. These include:
Holiday trips
Leasing "high-grade" office buildings, hotels, or apartments
Purchasing high-premium insurance products
Purchasing "non-business essential" vehicles
Purchasing real estate
Sending children to high fee private schools
Staying at star-rated hotels or golf courses
Travelling via plane, high-speed train, or first class non-high-speed train
Other non-life and non-work essential consumption behavior.
The 9th bullet shows us that the limits on the system come down to what the government is willing and permitted to do and as Samantha Hoffman of the Australian Strategic Policy Institute points out, “in China there is no such thing as the rule of law.”
A Chinese social credit system would rely on an extensive policing and monitoring system including CCTV and internet surveillance and integration with the police and the courts, but it would also likely rely on the citizens as well. We needn’t look to Orwell for a description of what happens when an authoritarian state seeks total control of its citizens as the history of the Soviet Union has already given us a real-life demonstration. Snitching under Stalin was a way of life, not just as a way to prove one’s loyalty to the state but as a means of getting payback on neighbors and family members for real and perceived slights. Citizens might even see their credit scores increased for reporting “anti-social” behavior. Think of it as reward program for snitches, “see something, say something, earn rewards points.”
How worried should we be?
The ambition of those designing the Chinese Social Credit system combined with the Covid pandemic have slowed implementation of a working system in China but the desire remains, and progress continues. In the West while many have voiced concerns over the dystopian potential of such as system, too many others seem unconcerned, pointing out that the Chinese have so far shied away from the more draconian measures in the naïve believe that “hasn’t done it” equates to “will never do it.”
While China leads the world in this area, it is not the only country looking for “better” ways to promote “social order” and guard its citizens’ “safety.” One need only look at the UK and US to understand attractive this is to many:
Great Britain, already one of the most surveilled countries has rating systems which use date from sources including credit scores, phone usage, and rent payments to determine access to social services, filter job applications, and influence custodial decisions.
In the US, which has more CCTV cameras per capita than any other country (yes, including China), private companies, including Merrill Lynch, have begun to use ESG (Environmental, Social and Governance) scores to assess individuals to help lenders decide “who they extend services or credit.” In other words, if you have a steady job, pay your bills on time, and save money you may still not qualify for a mortgage if your energy bill or waste management practices don’t measure up. From diginex:
In Canada GoFundMe famously froze $10 million dollars in donations from supporters of the “Freedom Convoy,” a move seen by many as a politically motivated and in support of a government who’s ideology aligned with that of GoFundMe’s management.
Conclusion
For the time being China and the world are sometime away from a working social credit system even remotely similar to that described in Black Mirror. However, the fact that an all-encompassing system that assigns citizens one score doesn’t exist does not mean we shouldn’t be concerned. Evidence shows that bureaucracies, both public and private, desire control and as James Madison pointed out power is prone to abuse.
The essence of Government is power; and power, lodged as it must be in human hands, will ever be liable to abuse.
-- James Madison
Our greatest protection from the threat of social credit systems is, somewhat ironically, also our greatest weakness, our fellow citizens. In a democracy it should not be possible to implement something like what the Chinese are working on unless we want it. However, those who desire this system have two powerful tools, claims that social credit systems will combat “threats to safety” and the average citizen’s belief that “if you have nothing to hide, why worry?”
Today there are many voices in government who oppose social credit systems, rightly viewing them as Orwellian in nature. Times and politicians change though. Government statements that begin with “we won’t…” can quickly move to “circumstances have changed but it’s only temporary” and finally “it’s for your safety, get used to it.” Westerners have little to fear from the Chinese experiment with Social Credit Systems but the same may not be true about privately controlled systems.