China’s new so­cial credit sys­tem to pe­nal­ize ‘friv­o­lous’ spenders

Business a.m. - - WORLD BUSINESS & ECONOMY - busi­ness a.m.

IN 2020, CHINA WILL FULLY roll out its con­tro­ver­sial so­cial credit score. Un­der the sys­tem, both fi­nan­cial be­hav­iors like “friv­o­lous spend­ing” and bad be­hav­iors like light­ing up in smoke-free zones can re­sult in stiff con­se­quences. Penal­ties in­clude loss of em­ploy­ment and ed­u­ca­tional op­por­tu­ni­ties, as well as trans­porta­tion re­stric­tions. Those with high scores get perks, like dis­counts on util­ity bills and faster ap­pli­ca­tion pro­cesses to travel abroad.

China is cur­rently pi­lot­ing the pro­gram and some cit­i­zens have al­ready found them­selves banned from trav­el­ing or at­tend­ing cer­tain schools due to low scores. These ram­i­fi­ca­tions have led to a flurry of re­cent crit­i­cism from both hu­man rights groups and the press. This week alone, news out­lets like Busi­ness In­sider and Na­tional Pub­lic Ra­dio weighed in on China’s so­cial credit score and the strat­i­fied so­ci­ety it may foster in the com­mu­nist coun­try.

The out­cry about China’s so­cial credit score is un­der­stand­able, given that the coun­try’s au­thor­i­tar­ian regime leaves cit­i­zens with lit­tle re­course to chal­lenge the new sys­tem. But con­cerns about China’s credit sys­tem have over­looked how the US sys­tem also di­vides con­sumers along class lines — and has done so for decades. So­cial be­hav­iors may not fac­tor into US credit scores, but the idea that a per­son’s fi­nan­cial his­tory re­flects trust­wor­thi­ness has long in­flu­enced em­ploy­ment de­ci­sions and other fac­tors that af­fect Amer­i­cans’ qual­ity-of-life.

China first an­nounced that it would be de­vis­ing a “so­cial credit score” in 2014. The govern­ment said then that the sys­tem would help en­sure a model so­ci­ety in which “sin­cer­ity and trust­wor­thi­ness be­come con­scious norms of ac­tion among all the peo­ple.” Ac­cord­ing to NPR, the fact that most Chi­nese peo­ple don’t have bank ac­counts or credit his­to­ries likely spurred the govern­ment to cre­ate a credit sys­tem of some sort.

Ev­ery cit­i­zen starts off with a score of 1,000 NPR re­ported the rank­ing as fol­lows: 960 to 1,000 is an A; 850 to 955 points is a B; 840 to 600 is a C; and any score below that is a D, which des­ig­nates the score­holder as “un­trust­wor­thy.”

While the govern­ment hasn’t made the spe­cific method­ol­ogy used to cal­cu­late scores pub­lic, one’s rank­ing can fall for both ma­jor and mi­nor in­frac­tions. Se­ri­ous vi­o­la­tions in­clude drunk-driv­ing, em­bez­zle­ment, and fraud. Much smaller vi­o­la­tions that re­sult in a low­ered score in­clude play­ing too many video games; spread­ing “fake news,” es­pe­cially re­lated to ter­ror­ist at­tacks, or re­fus­ing mil­i­tary ser­vice, will also lower one’s score. Some­times peo­ple are de­clared “dis­hon­est” for com­mit­ting in­frac­tions the govern­ment doesn’t be­lieve they’re truly sorry for.

Chi­nese lawyer Li Xiaolin found him­self in this predica­ment last year, ac­cord­ing to Hu­man Rights Watch: “He tried to use his na­tional iden­tity card to pur­chase a plane ticket. To his sur­prise, the on­line sys­tem re­jected it, say­ing he had been black­listed by China’s top court. Mr. Li checked the court’s web­site: His name was on a list of ‘un­trust­wor­thy’ peo­ple.”

The courts are sup­posed to warn cit­i­zens be­fore they’re added to the black­list, al­low­ing them 10 days to ap­peal the des­ig­na­tion, but Li said he was caught by sur­prise. He was black­listed for los­ing a defama­tion suit that was brought against him; he wrote an apol­ogy let­ter to the court as a means of mak­ing amends, and said he didn’t know that the court re­jected his apol­ogy un­til the travel mishap. Ul­ti­mately, he had to apol­o­gize to the govern­ment again to be re­moved from the travel black­list.

“Chi­nese govern­ment au­thor­i­ties clearly hope to cre­ate a re­al­ity in which bu­reau­cratic pet­ti­ness could sig­nif­i­cantly limit peo­ple’s rights,” ex­plains Hu­man Rights Watch. “As Pres­i­dent Xi Jin­ping’s power grows, and as the sys­tem ap­proaches full im­ple­men­ta­tion, more abuses will come.”

The so­cial credit score has been com­pared to the “Nose­dive” episode of Net­flix’s Black Mir­ror in which every­one re­ceives a so­cial rank­ing de­ter­mined by peers. It has also drawn com­par­isons to the dystopian novel 1984.

For those de­clared “un­trust­wor­thy,” the abil­ity to buy busi­ness­class train tick­ets or to lodge at cer­tain ho­tels can be re­scinded. In some cases, the op­por­tu­nity for their chil­dren to at­tend their pre­ferred high school or col­lege may be taken away, as may em­ploy­ment op­por­tu­ni­ties. (The govern­ment en­cour­ages em­ploy­ers to con­sult the black­list be­fore mak­ing hir­ing de­ci­sions.) Cit­i­zens who be­have in­con­sid­er­ately in pub­lic, like walk­ing their dogs off-leash, can have their dogs con­fis­cated and be re­quired to take an exam to get the pets back.

Al­though “un­trust­wor­thy” peo­ple are pun­ished for bad scores, cit­i­zens who rank the high­est in the new sys­tem can take ad­van­tage of perks like busi­ness dis­counts or book­ing ho­tel rooms with­out de­posits.

“Un­der the sys­tem, the elite will gain ac­cess to bet­ter so­cial priv­i­leges and those who rank closer to the bot­tom will ef­fec­tively be sec­ond­class cit­i­zens,” Newsweek re­ported about the so­cial credit score.

In the United States, the credit bu­reaus don’t down­grade con­sumers for spend­ing on things they deem silly or for be­ing ne­glect­ful pet own­ers. But credit rank­ings in the US are set up in such a way that peo­ple with more re­sources get more fi­nan­cial breaks while peo­ple with fewer re­sources are rou­tinely pun­ished — of­ten in ways that make lit­tle sense.

A per­son may end up with bad credit be­cause he lost his job, but the fact that his credit suf­fered while unemployed could ef­fec­tively pre­vent him from land­ing an­other job. Ac­cord­ing to the US Con­sumer Fi­nan­cial Pro­tec­tion Bureau, it is not il­le­gal for em­ploy­ers to deny an ap­pli­cant a job of­fer based on in­for­ma­tion in his credit re­port.

This makes it that much harder for peo­ple with bad credit to get the gain­ful em­ploy­ment needed to re­pair their scores.

Sin­cer­ity and trust­wor­thi­ness be­come con­scious norms of ac­tion among all the peo­ple

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