Implementing Social Credit Scores in America
Every day, Zhou Aini goes out and records the activities she sees people doing in public: littering, drinking, returning a lost wallet to a circulation desk, etc. She’s not a busybody or a nosy retiree. She has been hired as an Information Collector by her town’s government, and she makes official records of everything she sees. Eventually, her reports will be considered as part of the social credit score calculation process for the inhabitants of her village. This score is a number which could determine whether Zhou Aini’s neighbors can buy a high speed train ticket or what the interest rate on a loan might be.
Social credit score systems across China use multiple approaches to gather information. Reports tell of low tech-versions, such as the one from Zhou Aini’s village, to technologically-integrated versions, like the one in Shenzhen, which uses facial recognition software to identify jaywalkers and shows their faces on displays around the city in order to shame them publicly. Point systems of evaluation differ considerably. In Suining County, one might be scored from a range of A to D, and in Rongcheng residents start with one thousand points and their scores fluctuate in accordance with recorded behavior.
Omnipresent in reports about the social credit system are “the blacklists.” If one’s score drops below a certain threshold, government agencies and even some companies, such as Alibaba and JD.com, will have access to that information, and are able to react accordingly within their jurisdiction. Residents can be placed on a blacklist for failing to pay fines and debts, or disobeying court orders, and that can have a ripple effect reaching friends and family as well. In Vice’s video featuring Zhou Aini, one man’s score was negatively impacted after his friend defaulted on a loan that he had co-signed for. As another example, a student from Zhejiang Province was denied admission to a university in Beijing because his father had been blacklisted for defaulting on a loan.
For the American observer, this flies in the face of self-determination. After all, why should the actions of one’s parents and friends have a bearing on one’s opportunities in life? Implementing social credit on an individual level requires high amounts of surveillance and data collection, and many Americans strongly oppose more government meddling than is strictly necessary. Such a system has no place in the U.S. for individual citizens, and in many cases the negative effects of actions punishable through Social Credit are limited to a handful of people. The irresponsible actions of companies, however, have the potential to cause harm on a large scale. So, what if a similar policy was applied to American businesses? Companies that act carelessly or with conscious disregard for the public good could be officially named and shamed until they remedy their error. A policy like the Chinese system of social credit could serve to mitigate the power imbalance between businesses, workers, and the government if implemented in the U.S.
Large businesses run wild in America, and profit is king. The U.S. has a long history of companies growing fat by sowing dishonesty and disregarding laws and common decency. “The Great American Streetcar Scandal” of the ‘30s and ‘40s, for example, saw companies like General Motors, Phillips Petroleum, and Standard Oil of California secretly buying ownership of streetcar companies across the United States. Once in control, these companies completely disassembled the light-rail infrastructure, wiping out systems of public transit that haven’t been replaced to this day. The people who depended on that infrastructure were either left out in the cold or involuntarily roped into car culture, increasing business for car companies and associated industries. More recently, Coca Cola was exposed for indirectly funding scientific research that claimed adequate exercise was more important to weight maintenance than a proper diet. Independent studies have found this to be untrue.
When companies explicitly break the law, they are often prosecuted and issued some punishment. However, those punishments are often either laughably lenient, or do little to remedy the harm done by the company. The companies that dismantled the streetcar networks? They were fined $1 each for violation of antitrust laws, and no one was charged with rebuilding the trolley systems. As for Coca Cola, there seems to have been no official repercussions after their misinformation campaign came to light, except for a few articles and radio broadcasts spreading awareness of the issue.
A system of social credit for businesses, let’s call it Good Business Credit (GBC), could offer a solution to the streetcar or Coca Cola problem. Perhaps lawmakers were too afraid to squeeze a big business like General Motors for the full value of the harm they had done to society, or perhaps too much manpower would be needed to extract those fines in full. With some sort of GBC system, the lenient punishments would stand, but the companies would take a large hit to their score. If they eventually dropped below a certain threshold, they could be punished by getting fewer tax breaks or being put behind companies in good standing for any processes that need government input, such as mergers or Environmental Impact Assessments.
After such punishment, how could companies remove these impediments and bring their scores back to a serviceable threshold? Here are two proposals: the company must either fully repair the problem that it has caused, if possible, or it must fully fund a third party effort to do so. The third party could be a non-profit organization or a government agency. In the Coca Cola example, though the company did not technically commit an illegal act, it is clear that its actions were against the health interests of the general public. Thus, in order to raise their GBC score, Coca Cola would have to take some action to support what has been found by publicly funded research to be inductive to good health. For example, the company could donate to an organization like Purple Asparagus, which teaches school children about the importance of eating fruits and vegetables and exposes its audience to new ways of preparing and enjoying healthy foods. Should Coca Cola wish to handle the problem itself, it might run a public information campaign to try and dispel the falsities spread as a result of the research it funded.
What about companies that behave well? Rewards for a high GBC score could include access to lower rates on loans, preference when securing contracts with governments and government agencies, or even tax breaks. Examples of companies whose activities create positive externalities are TerraCycle and Invenergy. TerraCycle is a company based in New Jersey whose primary function is recycling materials that are marked as recyclable, but often end up in the trash (like packaging for corn chips and cereal). Invenergy is an Illinois-based power company that owns, develops, and operates wind, solar, and natural gas energy facilities in the US and Europe. These companies could also benefit from a leg up. Some of Invenergy’s strides towards increasing access to renewable energy in the US have met significant blowback from government bodies in conservative areas, leading to restricted opportunity for the company. Recently, its proposal for what would have been the largest wind farm in the US was killed due to a reduction in federal tax credits for renewable energy producers, among other factors. Receiving a tax break for a high GBC score could give another source of flexibility for companies like Invenergy.
TerraCycle’s latest project, LOOP, looks at eliminating (or greatly reducing) waste from mainstream retail products, like deodorant and ice cream. The company is creating reusable containers to package these products. The containers will be sent back in by consumers, then sanitized and refilled by the manufacturers. So, while TerraCycle would get a GBC boost from starting this waste and pollution-reduction project, the companies that collaborate with them, such as Unilever and Procter & Gamble, would also get a boost from participating.
Though a GBC program could help ensure that businesses stay on the side of positive contributions to society, it could also be overly burdensome to small businesses. To counter this burden, GBC rankings could be applied only to companies that earn over a certain revenue threshold. This would allow “Mom & Pop” shops to continue with business as usual, without devoting extra time and resources to keeping track of their GBC score. Unfortunately, it also means that they are excluded from the benefits that come with a good score. One way to include small businesses would be for local governments to devise small-scale versions of the GBC program, in the spirit of federalism.
A GBC-like program probably would not be popular with the majority of businesses in the U.S. Profit maximization is the goal for many businesses, even when that pursuit of revenue can cause collateral damage. Citizens and a large number of government representatives also pushback against calls for regulation. Further, the creation of an agency to track scores and implement penalties and rewards runs counter to the small-government and low-tax policies of the current administration. So, even though a system of GBC could mitigate the negative externalities of business deregulation it would likely not be met with enthusiasm.
Jendayi Jones is a Contributing Writer for the Gate. The image featured in this article is licensed under the Creative Commons 3.0. It’s author is SSDpenguin and no changes were made. Here is a link to the license and here is a link to the original photo.
