The Social Credit System as a New Regulatory Approach: From ‘Code-Based’ to ‘Market-Based’ Regulation
In 2014, China’s State Council issued a notice for the establishment of a nation-wide Social Credit System (SCS) by 2020. Thus far, 43 municipalities have been experimenting with a local implementation of the SCS – each with their own distinctive characteristics. Despite the different approaches adopted by different municipalities, the common denominator is that all pilots are designed to promote trustworthy behaviour by creating incentives to comply with social norms and economic obligations. Traditional institutions and social structures have been unable to catch up with the rapid pace of China’s economic development over the past years. This led to the establishment of an advanced market economy, characterised by an underdeveloped institutional and social framework – with local markets filled with counterfeited goods, scams and fraudulent activities, as individuals are becoming more individualistic and self-serving. As a result, the level of interpersonal trust in China has radically dropped, creating widespread discontent among citizens. The SCS is an attempt by the government to restore trust in people and society, by leveraging digital tools in order to govern society better and more effectively.
By collecting data about individual
activities, online and offline, China relies on big data analytics to profile
citizens into specific categories, depending on their attributes and past
actions. Every municipal pilot has identified a series of desirable or
undesirable actions, each associated with a particular payoff structure (either
positive or negative). Desirable actions are rewarded with a high social credit
score, resulting in a particular privilege or compensation, whereas undesired
actions are punished, via blacklists or lower social score, resulting in a loss
of privileges or economic sanctions. As such, the SCS can be regarded as an
alternative form of regulation, which is not driven by law, but rather by a set
of incentivisation mechanisms powered by market dynamics and social norms.
In 1999, Harvard professor Lawrence
Lessig identified four different forces that can be used to regulate
individuals: law, social norms, markets, and architecture (i.e., technical
infrastructure or code). Lessig underlined the fact that we cannot focus solely
on legal rules to understand the forces that govern or influence individual
behaviours; we must take instead a more systematic approach that properly
accounts for the relative influence of each of these different levers. Against
this background, the SCS presents a shift away from the law towards a new
approach to regulation, which essentially consists of code (responsible for
collecting data and translating it into a social score) combined with market
dynamics (i.e., a series of economic incentives or disincentives to act in a
particular manner) and social norms (as a result of status, privileges, and
social pressure to increase one’s social score).
On the Democratic Legitimacy of the SCS
To what extent does the SCS comply
with the fundamental principles of democratic legal systems and human rights
First, because it operates
independently of (or as a complement to) the legal system, the SCS can cover
activities that are generally left outside of the legal scope. As argued by van’t Klooster,
the SCS can promote behaviours that are not mandatory, but nonetheless
desirable, while condemning activities that are not illegal per se and yet considered potentially
harmful. For instance, in China, some of the SCS pilots are designed to punish
citizens by reducing their credit score not only as a result of legal offences
and misdemeanours, but also in response to lawful activities such as purchasing
too much junk food or video games – which are not forbidden by law.
Similarly, with regard to the incentivisation mechanisms, while it would be
difficult to legally require citizens to perform certain types of activities
(such as buying
Chinese products or visiting elders more frequently), the SCS incentivises
them in this direction by rewarding citizens with a higher score.
As opposed to traditional legal rules, the SCS provides greater granularity on the types of behaviours that can be incentivised or disincentivised, ‘occupying the empty room for manoeuvring that the law is incapable to occupy,’ as Romele has shown. By stipulating different types of rewards or punishments on activities that are not strictly speaking regulated under the law, the SCS operates where the law is unable to intervene – introducing a new type of normativity, based on metrics, quantification and statistical analysis that has progressively infiltrated the legal and political system, rewarding or condemning individual behaviours independently of whether they are legal or illegal, or even right or wrong. The SCS, as underlined by Dumbrava, thus ‘unwarrantedly transgresses the boundary between legality and morality.’
Second, because it does not rely on existing laws and regulation, the SCS is also not subject to the same type of constraints as the legal system. Traditionally, in most Western or democratic societies, any legal system is subject to a series of substantive and procedural constraints, including the need for generality, publicity and predictability of rules, as well as the requirements of equitable judgement, due process, separation of powers, or the respect of private property and individual liberty. Hence, China’s SCS stands in contrast with the democratic concept of the rule of law – geared towards the separation of law and politics – and rather implements a rule by law (Tamanaha 2004) – whereby law is used as a tool to command and discipline people, as it is generally done in authoritarian regimes. True, the SCS may theoretically comply with the rule of law. Yet, as highlighted by Ford, its current implementation in the various regions of China is more likely to run contrary to the basic premises of the rule of law and may even violate fundamental human rights values.
One important issue with these systems is that citizens can be punished multiple times for the same wrong, because a lower social score could impact many different facets of their lives. For instance, individuals with lower social credit scores might simultaneously lose the privilege to obtain a visa, purchase property and secure a mortgage or a loan; they might be prevented from buying tickets for high-speed trains or air travel, booking hotel rooms, or even from enrolling their children in a good private school – all at the same time. This aspect is often presented as a feature of the SCS, with the oft-touted slogan that ‘whoever violates the rules somewhere shall be restricted everywhere.’ Yet, this aspect goes counter to one of the basic principles of the rule of law, according to which no individual should be punished twice for the same offence.
Moreover, because the consequences of an individual’s social credit score are automatically defined and directly enforceable within the information system of the relevant authorities (e.g., the public administration, but also private actors like banks, transportation companies, or schools) with whom that individual interacts, the rules enshrined in the SCS are directly applicable without the need for any third party enforcement authority. And because there is no specific procedure for appeals, individuals who believe to have been unfairly punished or wrongly blacklisted by the system are left with little to no recourse. This runs counter to several rule-of-law principles, including ‘separation of power’, ‘due process’ and ‘presumption of innocence’ – all designed to limit potential abuses of power by one governing authority over its citizens.
On the Efficiency of the SCS
With the stated purpose of instilling
societal trust, by incentivising citizens to act virtuously while penalising
them for socially undesirable behaviour, the SCS is perhaps one of the most
ambitious attempts by a government at producing ideal citizens. To what extent
can the SCS fulfil these underlying objectives, and what is the overall
efficiency of the system?
One reason why the SCS may be deemed
to produce better citizens than a capitalist market economy is that, as shown
Klooster, markets often fail to
properly reward good citizens who work all their lives diligently and follow
the rules; but rather reward those who accumulate scarce resources and use
these resources to accumulate more capital. The market system is geared towards
productive and allocative efficiency and does not optimise towards morality or
values. The SCS is thus presented as a better alternative to the market economy
because it rewards citizens based on their social and political behaviours.
Yet, to the extent that it is
possible to accumulate social credit, it is difficult to force people to always
act virtuously (as Reijers
puts it) provided that they have a sufficiently high credit score that they can
afford acting in a harmful manner. Hence, while the SCS might require some
people to act virtuously in some cases, it does not necessarily ‘make’ them
virtuous. On the contrary, one could fairly argue that the SCS might introduce
a new type of transactionality in the realm of social and political activities
– whereby an individual may feel legitimised to act wrongly, provided that he
or she has performed a sufficient number of good deeds in the past, so as to
discount for the lower score.
Moreover, in addition to encourage or
discourage specific behaviours by means of economic incentives, the SCS also
relies on social pressure to regulate individual behaviour. In China, there
have been rumours that some of the SCS pilots have implemented a system whereby
people may see their social credit score drop by the mere fact of interacting
with the wrong person, online or offline (According to the Observer, ‘you score will also get damaged by consorting
with the wrong friends on social media or being associated in real life with
people who have been convicted of financial crimes.’).
This is likely to lead to an outright marginalisation of all those who do not
act according to the ‘social canon’. The reverse is also possible. While some
implementations of the SCS have been using individuals’ social network
activities as a way of potentially reducing their score, other implementations
– such as Alibaba’s Zhima (Sesame) Credit – have been designed
to increase the social credit score of people interacting with other high-scored
individuals. These systems bring the risk of replicating the capitalistic
dynamics of the market economy, whereby people who accumulate social credit
could leverage it to obtain even more social credit. This could pave the way
for the establishment of a new society of ‘elites’ – in which a small number of
high-ranked rule-abiding individuals would only interact with other high-ranked
Another interesting point relates to how the SCS might ultimately legitimise a national surveillance system. In order to properly function, any SCS will require the collection of a vast amount of information about citizens, which might raise important privacy concerns. Yet, most Chinese citizens are actually drawn to the SCS because it allows them to show to the government (and others) that they are ‘good citizens’, in addition to the economic or non-economic privileges they can gain (Adam Minter, writing for Bloomberg, stated that in a 2018 survey 80% of respondents either somewhat or strongly approve the credit system – although it is admittedly difficult to gather the true sentiments of Chinese individuals). Because of these benefits, people are keen to participate to the SCS – often without questioning the source or legitimacy of the rules it enshrines – and thus willingly disclose information about their daily activities to private or governmental actors even if that comes at the expense of privacy. Even people who might be reluctant to give up their privacy are left with little to no choice. Indeed, individuals who try to mask their activities in order to protect their privacy will ultimately be at a disadvantage, since they will not be rewarded for being good citizens. Perhaps most importantly, the mere fact of not disclosing information, rather than being regarded as a legitimate choice motivated by a desire to preserve one’s privacy, could instead qualify as an indicator that a person is, in fact, not a good citizen. The metrics results thus inverted: ‘I’m a good citizen, because I have a good credit score’ has replaced the previous ‘I have a good credit score, because I am a good citizen’.
Finally, as described by Reijers, the SCS does not contribute to creating more virtuous citizens, because it does not allow them to choose to act virtuously, but rather prescribes them how to do so (According to the writings of Aristotle, a virtuous person acts without being influenced by the pursuit of ambition, money, or reputation). This leads to a rationalisation and actual objectivization of what it means to be a good citizen. People no longer need to exercise their own judgement as to how to act; they just need to follow the rules stipulated for them – thereby preventing them from distinguishing themselves in the public sphere (Arendt 1958). As a result, people no longer have the opportunity to think for themselves about what is right or wrong. Rather than taking the risk of acting in a way that the SCS will consider to be an undesirable action, they can simply delegate part of their morality to the system.
On the Terror of Metrics
An additional problem relates to the
difference between laws and metrics. Laws are general rules that
stipulate what shall or shall not be done. Given the inherent
ambiguity and flexibility of natural language, laws need to be appreciated by a
judge in light of specific facts before they can be applied to the particular
case at hand. Instead, the SCS relies on a set of strict and specific rules
(i.e., codified metrics) that can be automatically processed by a machine.
Because they do not account for specific facts, metrics are mostly concerned
with the ends – independently of the means used to achieve these ends.
With no opportunity for human
appreciation, the SCS merely codifies rules into a particular set of metrics,
with no account for the underlying values that motivated the establishment of
these rules. Citizens’ most rational behaviour would, therefore, be to focus
only on improving the metrics, rather than acting in line with what these
metrics were originally intended to be an indicator of. While it might be true
that – as famously said by Peter Drucker – ’what you cannot measure, you cannot
improve’, one should also not forget that the mere establishment of a
particular metrics-based system might introduce a significant bias in
behaviour, so that ‘only what you can measure will improve’. Citizens might
thus be tempted to only engage in activities that will boost their social
credit, regardless of the virtue or morality of these actions. If the metrics
are poorly defined, individuals might even be rewarded for doing something
immoral (e.g., lying to their peers—an action currently bearing no punishment
in terms of social scoring) to improve their chances of being selected for
community services or other rewarded activity. Ultimately, because the system
can only account for a limited amount of information, and the data fed into the
system is necessarily incomplete, the SCS might generate unfair outcomes by
lack of contextual information on the why
and the how of a citizen’s
individual behaviour. As any metrics-based system, the ends will always justify
de Filippi, Primavera: The Social Credit System as a New Regulatory Approach: From ‘Code-Based’ to ‘Market-Based’ Regulation, VerfBlog, 2019/6/24, https://verfassungsblog.de/the-social-credit-system-as-a-new-regulatory-approach-from-code-based-to-market-based-regulation/, DOI: 10.17176/20190708-143445-0.