China’s Social Credit Scoring; class systems, socialism, communism and exterminating ‘undesirables’

Welcome to Finance & Fury, the Say What Wednesday Edition, where every week we answer questions from you guys, the listeners! This week’s question comes from Gabriel;

“Hi Louis, I listened to an episode on NPR on the Chinese Social Credit System and thought I’d like to hear your thoughts on it. Is it a dystopian future? or an unavoidable path that started with the loss of privacy on the internet?”

That’s a great question, so today we’ll run through the potential downfall of China, what this is social credit system, why they are doing it, and looking at what the future holds in store as well.

The Social Credit System is a national reputation system being developed by the Chinese government.

1. Announced in 2014 with limited implementation occurring this year
2. The plan is to have this up and running fully by 2020 with the intention to standardise the assessment of citizens’ and businesses’ “credit”.
   • Credit is a combination of economic and social reputation
   • We have ‘credit’ scores based around lending, but this is different.
3. It’s unclear whether the system will be an ‘ecosystem’ of various scores and blacklists run by both government agencies and private companies, or if it will be one unified system.
4. It’s also unclear whether there will be a single system-wide social credit score for each citizen and business.

The system is a form of mass surveillance which uses big data analysis technology and AI

1. There are 200 million CCT cameras watching people day to day. My suspicion is also that every device in China is doing this as well (webcam, phone, TVs, etc.)
2. Equipped with facial recognition, body scanning and geo-tracking to cast a constant gaze over every citizen.
3. Smartphone apps will also be used to collect data and monitor online behaviour on a day-to-day basis.
4. Then, big data from more traditional sources like government records, including educational and medical, state security assessments and financial records, will be fed into individual scores.
5. Mine data that users exchange with websites and derive a full social profile, including location, friends, health records, insurance, private messages, financial position, gaming duration, smart home statistics, preferred newspapers, shopping history, and dating behaviour.
6. The outline focuses on four areas:
   • “Honesty in government affairs”
   • “Commercial integrity”
   • “Societal integrity”
   • “Judicial credibility”

How you will be scored

1. What you do: What you buy, internet browsing, littering, not obeying rules, even things like jaywalking
   • Financial behaviour will be an important measure for the national social credit score (defaulting on debt)
   • Excessive online gaming even reduces one’s score.
2. What you say: If you say something negative. For example, a reporter got charged with speech crime.
3. What others do: Friends and family affect your score.

The outcomes depending on your score:

1. For Individuals – “Citizen scores”
   • A Good Score will give you access to VIP treatment at hotels and airports, cheap loans and a fast track to the best universities and jobs.
   • A Bad Score will get you locked out of society – banned from travel and visas, banned from renting or buying a home, or barred from getting loans, bank account/credit cards, freeze assets or bar employment.
     • Currently 22m people are already on the ‘blacklist’
     • 9m people are already banned from domestic flights and train transport
   • For Businesses – This is meant to serve as a market regulation mechanism – a self-enforcing regulatory regime
     • Companies will comply with government policies and regulations
     • Scores can be lowered by disgruntled employees, customers or clients
     • Good credit scores will see companies enjoy benefits such as good credit conditions, lower tax rates, and more investment opportunities
     • Bad credit scores will potentially face unfavourable conditions for new loans, higher tax rates, investment restrictions, and lower chances to participate in publicly-funded projects. Being a socialist state where almost everything is ‘publicly funded’ and state owned, if you get a low score, you’ll be barred from basically all funding

What is the whole point of this?

1. President Xi said, “we will be rich and democratic, cultural, harmonious and beautiful”
2. It is presented as a means to perfect the “socialist market economy” as well as strengthening and innovating societal governance – sounds beautiful, yes?
   • John McCarthy (Founder of AI) who was raised as a Communist said, “The difference between a contemporary liberal and a socialist is that to a liberal the most beautiful word in the English Language is ‘forbidden’, whereas to a socialist the most beautiful word is ‘compulsory’
3. This indicates that the Chinese government views it both as a means to remove freedoms and to:
   • Regulate the economy at a business level
   • As a tool of governance to steer the behaviour of citizens
   • This constitute a new way of controlling both the behaviour of individuals and of businesses – compulsory compliance. If you don’t toe the line your life can change completely.
4. Socialist market economy(SME) is an economic system and model of economic development employed in the People’s Republic of China.
   • Based on the predominance of public ownership and state-owned enterprises within a market economy – Chinese economic reforms initiated in 1978 integrated China into the global market economy, the socialist market economy represents a “primary stage” of developing socialism.

How will this help?

1. The claim: Under market economy, businesses acquire the products and services they need through trade, with trust and cooperation among individuals and businesses being the basis of successful trading.
2. China – market economy that lacks sufficient legal guarantees to ensure market integrity
   • Laws and punishments seem relatively weak, because at times the cost of abiding by a law is higher than violating it
   • Nature of Communist economies: Corruption and the black market is sometimes the most efficient method of getting things done
   • Lack of credibility can obstruct economic and social development
   • For these reasons Alibaba listed on NYSE rather than Shanghai Stock Exchange
   • Why don’t we need this? In Australia we have contracts and enforcement of the law, and a more transparent market.
   • So why doesn’t China just have better legal enforcement?
     • This goes against their “One rule for me and one rule for thee” mentality.
     • Laws have to be public whereas ‘rules’ can be private and easily adjusted to achieve a purpose
   • You’ve seen it on platforms like Twitter, Youtube, etc. where the ‘guidelines’ keep changing and are applied when it suits them.

Who controls the rules?

1. This is the real issue: What’s considered undesirable one group is considered desirable by another group.
   • You’ve seen journalists put on the black list for reporting of corruption
   • Once you are in the lower class, there it little you can do to get out

Let’s get back to Gabriel’s question: Is it a dystopian future? Or, an unavoidable path that started with the loss of privacy on the internet?

One man’s Utopia is another man’s Dystopia

1. For Government and those in power it is a utopia. For the people being ruled over it’s closer to a dystopia.
2. A dystopian society is a community or society that is undesirable or frightening. Basically, it’s translated as “not-a-good place”. It draws a stark contrast between the privileges of the ruling class and the dreary existence of the working classes.
3. Democracy/Capitalism/free markets are different.
   • Everyone has the legal right to the same opportunities, until you break the law, then you go to prison.
   • Wealth is often framed in a capitalist society as a ‘social class’ qualification
     • This is done by the Socialists as they see everything in class. This is a projection.
     • In most cases wealth in a capitalist society is merit based – it’s a voluntary exchange (of money/goods)
   • Technology
     • I think technology is being used with nefarious intent (whilst this might sound a little crazy, hear me out, there is a lot of precedence that I am basing this off)
     • Technology is being used as a system of sorting out class, helping to determine who should be removed from society.
     • In the early 1900s – The Eugenics movement, spread significantly by liberals in universities, was aimed at improving the quality of humans.
       • This is at the core of a lot of socialist societies – population control.
       • Capitalists grow wealth – Socialists redistribute it.

However, the populations tend to grow, SO the socialists need population control to continue scraping by as there is little new wealth created.

1. Separate people into classes and ensure that the ‘undesirables’ cant breed through forced sterilisation
2. Used as a sorting tool within society. It is a class system similar to days of feudalism where selection was based around ‘desirability’

The next step – What to do with low scorers?

1. Sterilisation
   • China already has a history with this whereby in 1983 China sterilized over 20 million people against their will. And, it’s still occurring today with thousands of people every year.
2. Re-education
   • Imprisonment in camps (there are many being built at this very moment)
   • Estimated that 1m Muslims have been forced into these facilities already
3. It all starts with categorising the population. This is the purpose of central planning, each person is simply a cog in the machine, a brick in the wall.

The only difference between Nazis and Communists was that Nazis saw non-Arians as resources to be used or exterminated, while Communists saw everyone as resources to be used (or exterminated).

Is this something that we need to worry about?

1. China is not alone in this, but have gone the furthest
2. Venezuela is coming out with something along the same lines through a payment card soon. China actually helped them to develop this.
3. Russia is also working on a “digital profile” by 2025, with every achievement in a person’s life set to be recorded in a database
4. UK – using data from a citizen’s credit score, phone usage, rent payment, etc. to filter job applications, determine access to social services
5. Germany – data from the universal credit rating system, Schufa, geolocation and health records to determine access to credit and health insurance
6. Australia – My Health Records – this is a backdoor for the Police, Centrelink, Medicare, Insurance companies or the Australian Tax Office to access your information.

History repeats itself

1. What has happened before allows the ability to see trends for the future. Will these things lead to lower growth, lower productivity? When people have no free will or property ownership, the system eventually crumbles.
2. Listener Matthew has asked to go into more historical topics like the ones on Russia and Communism
   • I’ll do one series looking at the history of China – it’s not the first time China has done something like this
     • All policies have unintended consequences, like the ‘One Child Policy’ which has caused current issues with gender gap and age gap
     • Pension spending rapidly rising, from 100bn yan in 2014, to 350bn in 2016.
   • Remember – The only power the Government has is that what we give it, but once they have it, it is hard to get it back
     • Politics is important – you can ignore politics but it won’t ignore you. Unfortunately, this has a massive effect on wealth/freedom.
     • Paying attention to this stuff is very important.

“Socialism is submission of the masochistic masses to the will of the sadistic elites.” – A.E. Samaan

Tune in next Friday – I will start with a bit of history, and then talk about a bit of a blueprint for and the warning signs of a socialist system taking over.