Understanding Social Credit as Structure and Method With Global Dimension: Comments on Flora Sapio ("The Many Facets of Social Credit)" and Mara Hvistendahl ("Inside China's Vast New Experiment in Social Ranking")

(Pix © Larry Catá Backer 2017)

Western commentators and academics have begun to focus on Chinese Social Credit.  For earlier discussion on this site see, e.g., here, here, here, here, here, here, and here; index here). Social credit systems are an elaborated and dynamic variant of "lists" as law--as the use of administrative discretion (in the case of social credit through algorithm driven discretion) to produce rankings or lists with legal, economic and social consequences (see, e.g., here).  

my focus is on the ideology of rights at the dawn of the age of data governance. My suggestion is that the reconstitution of the individual as the convergence point of data (in the private sector) has now given new form to the principles inherent in our Declaration of Independence, and in the process, appears (again) to open the door to the start of a radical transformation of the constitution of the state and the language of power. It is only a matter of time before the state—together with the non-state sectors through which state power will be privatized—will begin to move aggressively not merely to “see” individuals as collections of data, but to use that data to make judgements about those individuals and choices, and to seek to both discipline and control. (Ruminations 73: On American Independence Day 2017—Collective Rights Individually Performed at the Dawn of the Age of Data)

This post considers the ideological lenses through which the emerging regulatory structures known as "social credit" in China sometimes blinds analysts to the realities of the ubiquity of rankings-rewards based managerial systems all over the globe.  The fact that Chinese efforts to use data and algorithm to manage individual behavior  speaks to a locus of effort, rather than to the existence of a phenomenon that is strictly Chinese or an issue only if such actions are originated or controlled by pr through the public sector. But Americans and Europeans have developed a taste for social credit regulation as well. We just prefer ours privatized--and equally unexamined for its relation to our basic political values. In the West enterprises and markets--governmentalized and serving public interests (e.g., here) have also developed contextually relevant forms of social credit to manage the populations of democratic and developing states.  My brief observations are followed by two excellent essays: (1) Flora Sapio, "The Many Facets of Social Credit" and (2) Mara Hvistendahl, "Inside China's Vast New Experiment in Social Ranking."

The enhanced attention from the West is challenged through what might be seen as a curious approach embedded in the premises through which analysis is undertaken. The underlying (and usually unstated) premises of most analysis goes something like this: (1) the Chinese Party-State apparatus is authoritarian; (2) authoritarian regimes produce lots of new and clever ways to strip individuals of their privacy and dignity; (3) those methods produce new technologies of social control, (4) social control permits the sort of social engineering that is both abhorrent to Western social and political ideals (and at this point some aspect of international law/norms are put forward to underline the point); (5) such social engineering thus produces evidence of the illegitimacy both of the method and of the use of power by the state to those ends; and (6) as a consequence  neither state nor Party can be understood as legitimate in the absence of substantial structural changes to their political principles and operation (along Western lines). 

As arguments in the service of big picture political objectives these premises--especially if deeply embedded in discourse--well serves its purpose and the objectives of those states and societies deeply committed to the protection and spread of the values on which the premises are based. Yet as a basis of dispassionate and rigorous analysis, in a global context, these premises provide a fragile foundation, and one that inevitably but consistently produced a specific politically vectored set of conclusions.  Yet to read Chinese asocial credit tends to exaggerate both its characteristics and "special" or "unique" character. 

First, the move from law and regulation to social control through rankings and interactive reward-punish systems, grounded in algorithms designed to produce specific results is neither new nor unique to China (or for that matter to authoritarian regimes. Second, those with the authority (or power) to decide have long ago determined that this was both a preferred and attainable methods for controlling large populations of individuals even within existing matrices of sociopolitical principles) and that, indeed the structures developed form out of those sociopolitical principles might best serve as the delivery mechanism for this new managerial machinery. Third, the biggest difference between Chinese and Western efforts, and the difference worth substantial exploration within political philosophy, economics, sociology etc.,  is in the source  and connectivity of these efforts; Chinese efforts are tightly managed and controlled by a political authority and exercised through the state apparatus; western efforts are administered through fractured private enterprises, the state to some extent, and subject to the dynamics of the market (and its implications for bargains and free choice).  

These notions run through two very interesting essay on Social Credit.  One is more structural and theoretical, Flora Sapio, "The Many Facets of Social Credit."  The other drives home some of these points through narrative of the lives people live interwoven in the life management fabric that is social credit, Mara Hvistendahl, "Inside China's Vast New Experiment in Social Ranking." Some of both of these follow:

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The Many Facets of Social Credit

Flora Sapio

“Social Credit” is a code-word for the boldest and most ambitious governance reform program launched by China since 1978. Its core components aim at transforming social governance in the ways so excellently described by Professor Stanley Lubman, and Professor Ane Bislev. Beyond its social component, “Social Credit” is already producing significant changes in corporate governance, and corporate social responsibility.

China’s embracing of privatization and globalization has transformed the country into a global powerhouse, but it has brought new stakeholders to the table too. Domestic and transnational corporations, and NGOs participate in governance processes through public-private partnerships, or by contracting the provision of services once offered by the state. Some of these actors can exert a significant leverage on domestic policy processes. The ability to control investment projects impacting the welfare of entire regions may not be the “law” in a formalistic sense, yet it can produce effects as powerful as those of state regulation. Corporations fall within the scope of Chinese state regulation. At the same time, these entities are autonomous. Their choices and actions are dictated by their articles of association,  internal codes of conducts, and policies. Private contracts, and their leverage are the tools through which they regulate their interaction with other market players, and with the Chinese government.

Private contracts and leverage, however, are not the ‘state law’. Domestic and transnational corporations and non-profit entities can in part place themselves outside of the reach of the state law, as long as they remain autonomous actors able to govern themselves and their activities through their internal regulatory systems, and through contracts. Once the exclusive preserve of the Chinese state, governance has become more diversified. Its rules promanate from the body of the state, and from the Party, but also from private contracts, codes of conduct, self-regulation, industry associations, etc.

“Social Credit” weaves together all these different strands of regulation, placing the resulting thread in the hands of the state. The “social credit” system – as conceived and defined by the Chinese state – is “based on the law and regulations, standards, and agreements”.

If even markets need a ‘guiding hand’ - or at least so do citizens in one of the freest markets believe - the question to ask may be whether domestic and foreign corporations and non-profits will be guided by an iron fist, or by a velvet hand. The answer may well be that this is a false dichotomy. Under sectoral social credit systems – many of which are already operational – all corporate actors will be held responsible for:

(a) complying with Chinese law;

(b) Abiding by an entirely new set of “social credit” standards, and by their own internal systems of regulations;

(c) Fulfilling the obligations they chose to enter into by signing contracts.

That corporate entities should observe the law of the country where they are based, that they should act coherently with their own codes of conduct, and honor their contracts are truisms. What is really new in “Social Credit” is a systematic effort to monitor, quantify, measure, and rank corporate behavior. Compliance with state regulation, (or Party regulation in the case of Chinese state-owned MNCs), industry standards, internal regulation, and contracts is monitored and assessed through the use of big data, collected by public, private, and societal stakeholders. This move aligns China to entities as the U.S. and the European Union. There, big data is a key asset for the economy and society, and it already drives policy-making processes.

In China, the ‘invisible hand’ of the market has taken the shape of sectoral indicators and standards. International and domestic technical and quality standards have long been used – in China and abroad - to regulate the most diverse activities of legal entities. Key performance indicators are nothing new either. “Social Credit” brings these and other existing means together, to measure legal entities’ ability to live up to their own committments.

Legal, contract, and social responsibility compliance are rewarded through the enjoyment of preferential policies, which are differentiated by industry sector. Violations of safety standards, environmental legislation and so-called “breaches of trust” – also if perpetrated by suppliers of Western MNCs - are disclosed to the public, and punished with criminal and administrative sanctions of increasing severity. In a move which blurs the distinction between physical and legal persons, senior managers are held personally responsible for “breaches of trust” by corporate entities. Further erasing the border between China and ‘the rest’, the social credit system will soon apply to all legal entities involved in transnational economic cooperation with China.

At a time when the annual discussion on the Guiding Principles on Business and Human Rights (UNGPs) has just ended at the Forum on Business and Human Rights, and the U.N. Draft Guidelines on Human Rights and the Environment (Draft Guidelines) are about to be presented, these developments raise theoretical and empirical questions.

The palette of mechanisms – procedural and substantive, regulatory and remedial – created by international instruments is premised on a set of assumptions privileging the role of national states. National states are seen as the only source of regulation. It is held that legal norms always prevail on social norms, and on private contracts, that the price to be paid for man-made environmental disasters, workplace accidents, etc. should be determined by judicial organs of the state, rather than by alternative resolution mechanisms, or by an algorithm purchased by the state, but created and run by private companies.

Transnational processes of regulation have effectively reversed each one of these assumptions, long before the “Social Credit” system was launched. The novelty of “Social Credit” lies in its acknowledgement of the role non-state actors play in the broader field of domestic and transnational regulation. In this sense, the “Social Credit” system is based on a set of assumptions very close to those which have inspired the UNGPs and relevant OECD Guidelines. It is perhaps not by chance that Chinese industry associations have adopted sustainaibility and due diligence guidelines compatible both with the UNGPs and OECD Guidelines, and with the “Social Credit” system.

In their more theoretical dimension, these facts raise the question of whether existing international instruments should continue to place an overwhelming emphasis – substantive or procedural – on the state as the one and only center of regulation. Should this question be answered in the affirmative, we may witness a sidelining of state-centred transnational regulatory systems by alternative regimes of regulation. The “Social Credit” system is only a specimen of these newer regimes, and in this sense it is by no means unique to China. Neither it is the sidelining of state-centred governance regimes by private regimes.

That the ranking of corporations is performed by a partnership between the Chinese government and eight Chinese private companies – rather than Moody’s, S&P, or Fitch Ratings -  opens up a range of empirical questions. These questions concern the weaknesses and flaws of big data management per se, as distinct from the socio-political contexts where big data management occurs. The same questions are pertinent to the measurement of the reliability, credibility, and trustworthiness of individuals, based on such factors as their income, marital status, and lifestyle, and defined by private rating companies in and outside of China: are we really worth what we earn?

“Social Credit” is just one of the code-words used in Chinese political language. It is useful to refer to a complex governance mechanism.  At the same time, its semantic betrays all the limits of “mere translations” not supported by an adequate de-coding of the meaning carried by words, and by the transposition of such a meaning to a context familiar to us.

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(America invented the three-digit credit score. Now companies in China are taking the idea to the extreme, using big data to track and rank what you do—your purchases, your pastimes, your mistakes.
Photographs by Dan Winters; Illustrations by James Graham)

WIRED (Jan. 2018; Posted 12-14-2017)

Inside China's Vast New Experiment in Social Ranking

Mara Hvistendahl (@marahvistendahl) is a national fellow at New America and a contributing correspondent at Science.

In 2015, when Lazarus Liu moved home to China after studying logistics in the United Kingdom for three years, he quickly noticed that something had changed: Everyone paid for everything with their phones. At McDonald’s, the convenience store, even at mom-and-pop restaurants, his friends in Shanghai used mobile payments. Cash, Liu could see, had been largely replaced by two smartphone apps: Alipay and WeChat Pay. One day, at a vegetable market, he watched a woman his mother’s age pull out her phone to pay for her groceries. He decided to sign up.

To get an Alipay ID, Liu had to enter his cell phone number and scan his national ID card. He did so reflexively. Alipay had built a reputation for reliability, and compared to going to a bank managed with slothlike indifference and zero attention to customer service, signing up for Alipay was almost fun. With just a few clicks he was in. Alipay’s slogan summed up the experience: “Trust makes it simple.”

Alipay turned out to be so convenient that Liu began using it multiple times a day, starting first thing in the morning, when he ordered breakfast through a food delivery app. He realized that he could pay for parking through Alipay’s My Car feature, so he added his driver’s license and license plate numbers, as well as the engine number of his Audi. He started making his car insurance payments with the app. He booked doctors’ appointments there, skipping the chaotic lines for which Chinese hospitals are famous. He added friends in Alipay’s built-in social network. When Liu went on vacation with his fiancée (now his wife) to Thailand, they paid at restaurants and bought trinkets with Alipay. He stored whatever money was left over, which wasn’t much once the vacation and car were paid for, in an Alipay money market account. He could have paid his electricity, gas, and internet bills in Alipay’s City Service section. Like many young Chinese who had become enamored of the mobile payment services offered by Alipay and WeChat, Liu stopped bringing his wallet when he left the house.

If you live in the United States, you are by now accustomed to relinquishing your data to corporations. Credit card companies know when you run up bar tabs or buy sex toys. Facebook knows if you like Tasty cooking videos or Breitbart News. Uber knows where you go and how you behave en route. But Alipay knows all of these things about its users and more. Owned by Ant Financial, an affiliate of the massive Alibaba corporation, Alipay is sometimes called a super app. Its main competitor, WeChat, belongs to the social and gaming giant Tencent. Alipay and WeChat are less like individual apps than entire ecosystems. Whenever Liu opened Alipay on his phone, he saw a neat grid of icons that vaguely resembled the home screen on his Samsung. Some of the icons were themselves full-blown third-party apps. If he wanted to, he could access Airbnb, Uber, or Uber’s Chinese rival Didi, entirely from inside Alipay. It was as if Amazon had swallowed eBay, Apple News, Groupon, American Express, Citibank, and YouTube—and could siphon up data from all of them.

One day a new icon appeared on Liu’s Alipay home screen. It was labeled Zhima Credit (or Sesame Credit). The name, like that of Alipay’s parent company, evoked the story of Ali Baba and the 40 thieves, in which the words open sesame magically unseal a cave full of treasure. When Liu touched the icon, he was greeted by an image of the Earth. “Zhima Credit is the embodiment of personal credit,” the text underneath read. “It uses big data to conduct an objective assessment. The higher the score, the better your credit.” Further down was a button that read, in clean white characters, “Start my credit journey.” He tapped.