Corporate social credit scores reflect China and risk the Republic

When the United States entered into serious trade relations with China in the late 1980s and early 1990s, policymakers speculated that a capitalist market in China would evolve into a representative, democratic, and western style.

As China holds its 20th Communist Party Congress this week, where Xi Jinping is set to be granted an unprecedented third term and named “president for life,” Americans can only regret the naivety of leaders who allowed and reinforced the rise of the communist regime which is now an existential threat worldwide.

But as we lament the naivety of George HW Bush, Bill Clinton and the 106th Congress, Americans should take heed too. For we have not only failed to “convert” China from communist authoritarianism to the ways of a democratic society, as we had hoped, but we have also made our own society more authoritarian in a way that mimics certain from China.

A silence from the private sector

John Locke, the 17th century philosopher who so influenced the Founders, wrote in “A Letter Concerning Tolerance”: “The tolerance of those who differ from others is so pleasing…to the true reason of mankind, that it seems monstrous for men to be blind enough not to see the necessity and advantage of it in such a clear light.

As Locke wrote about religious tolerance between different sects, his notions were so embraced by the Founding Fathers that they became the basis for James Madison’s derivation of the First Amendment which prohibits Congress from restricting free speech or freedom of press.

Today, however, the tolerance of speech is in danger. And it’s the private sector companies that are limiting speech in ways that Congress can’t — and in ways that the founders probably never envisioned.

As I reported earlier this month, privately held PayPal maintains a policy that allows the company to charge $2,500 from accounts of users who promote “hate, violence, race or other forms of discriminatory intolerance”. Your account may be closed if you “provide false, inaccurate or misleading information”. Decisions as to whether you meet these thresholds are, of course, solely made by PayPal.

Earlier this year Mike Lindell, the ‘My Pillow Guy’, had bank accounts he maintained with Minnesota Bank & Trust terminated after the bank described him as a ‘reputational risk’. The bank apparently found Lindell’s lingering doubts about the integrity of the 2020 election to be something of a threat to it.

Lauren Witzke, a US Senate candidate in Delaware and a self-proclaimed “Christian nationalist” who opposes the LGBTQ movement, has been denied access to her account at Wells Fargo. She claims to have done business with Wells Fargo for years, but banking services were only denied when she became a candidate and had a platform to espouse her views.

These “blackballings” of opposing rhetoric from financial institutions all seem to go against conservative groups. Left-wing groups like Antifa and Black Lives Matter do not appear to have been sanctioned by financial institutions, even though they have been accused of engaging in violence. ActionNetwork, a turnkey social and contributory platform for all sorts of “progressive” causes, large and small, allows contributions via credit cards.

A virus launched in 2013

It all seems to have started with “Operation Choke Point,” a covert regulatory policy launched by the Obama administration in 2013 that was supposed to target money laundering, but also arms and ammunition dealers and self-determined called “payday lenders” (who give out loans that must be repaid on the next payday). Documents uncovered in a lawsuit showed that some Obama administration regulators abhor such ventures, despite them being legal.

Dennis Shaul, CEO of the Community Financial Services Association of America, wrote an article for The American Banker in which he described regulators’ animosity toward the industry, which he said they tried to obscure when he appeared; then he wrote:

“A dangerous precedent has been set here. If government regulators under one administration can target companies they personally disapprove of, any subsequent administration can do the same. Personal bias cannot be the norm in regulation, and the government should never ignore due process or regulatory procedures to stifle legitimate business. »

Fortunately, the Justice Department shut down Operation Choke Point in the early months of the Trump administration.

But that doesn’t seem to have ended the communist-style social credit scheme imposed by financial institutions. Some banks continue to impose barriers to financial services based on their own subjective views on legal business and controversial opinions, even though they are no longer under the yoke of government regulation. Most of them are encouraged by ESG-conscious private equity managers and public employee pension funds.

Last month, for example, the attorneys general of California and New York wrote to the three major credit card companies asking them to establish a merchant category code for gun retailers and ammunition. Public employee pension funds were quick to join the initiative, citing alleged “regulatory, reputational and litigation risks that could harm long-term shareholder value” at credit card issuers. One can easily imagine how, if the banks acquiesce to this request, they could well be asked to “unbank” controversial political movements, political parties and religious institutions.

Financial services companies are utilities and common carriers

No one should be unbanked or frozen from their credit accounts because they support controversial political views or engage in legal activities that unelected bank leaders or regulators abhor. It is an extrajudicial sanction that undermines the very nature of First Amendment guarantees and the sensibility of a democratic society. While obscenity, defamation, fraud, incitement, genuine threats, and speech that is an integral part of already criminal behavior are clearly illegal, other speech, even heinous offensive speech and “speech of hatred”, are legally protected, as long as they do not constitute incitement. And if Congress wishes to pass a constitutional amendment to change that and make certain speeches illegal, as is the case in some countries in Europe and Canada, there is a process for that. But Congress, which regulates the banks, should not allow the process to be circumvented by bureaucrats and bankers.

Harry Truman, the outspoken Missouri Democrat who became an unwitting president, once said of measures to curb dissent (in his day, the threat of the Red Scare):

“Once a government is committed to silencing the voice of opposition, it has only one path to follow, and that is the path of increasingly repressive measures, until that it becomes a source of terror for all its citizens and creates a country where everyone lives in fear.

The next Congress should establish a national financial services bill of rights to limit the power of banks and regulators to deny credit, close accounts or impose the types of fines provided by PayPal. This is clearly a role more suited to a court, with guarantees of due process and appeal, than to bureaucrats and businessmen.

Evelyn Beatrice Hall, an English writer who wrote a biography of Voltaire, summed up the philosopher’s view of speech by attributing this quote to him: “I disapprove of what you say, but I will defend your right to the death. to say it.

In a nation as deeply divided as ours, where outliers tend to get the most attention and speeches we abhor are commonplace, it’s important that we remember Voltaire’s quote. And Truman’s. And respect both.

If we don’t, we could ultimately sacrifice the republic.

The opinions expressed in this article are the opinions of the author and do not necessarily reflect the opinions of The Epoch Times.


JG Collins is Managing Director of Stuyvesant Square Consultancy, a strategy consulting, market research and advisory firm in New York. His writings on economics, business, politics and public policy have appeared in Forbes, the New York Post, Crain’s New York Business, The Hill, The American Conservative and other publications.

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