Our guest today suggests that law is the cloth from which capitalism is cut. And lawyers are the tailors! From the enclosure movement to the financial crisis, law has been the engine of capital accumulation.
Katharina Pistor is a Professor of Comparative Law at Columbia Law School and the author of the book, The Code of Capital: How the Law Creates Wealth and Inequality, about how capital is created behind closed doors in the offices of private attorneys and why this little-known fact is one of the biggest reasons for the widening wealth gap between the holders of capital and everybody else.
Katharina and Greg discuss the nuanced ways in which legal coding privileges certain groups. Katharina lays out the path of capital developing from land ownership and its metamorphosis into powerful financial instruments. Katharina and Greg analyze the legal frameworks that have contributed to the economic tapestry of today. They conclude with a discussion of the intricacies of global legal systems and their sway over commerce and society.
*unSILOed Podcast is produced by University FM.*
Episode Quotes:
The unseen impacts of legal innovation
36:32: Under our civil procedure rules, not everyone has access to the courts. Not everyone has the justiciable interest. Who does or who does not, who has standing in a court of law, determines already who can bring a case to court. So, there was this wonderful debate in the 1970s about the efficiency of the common law. So, if you litigate and relitigate, the best rules will come about. But even at that time, people pushed back and said, "But this is not randomly selected, which rules will be even litigated." There are other conditions that have to be in place. So, I think if we were able to completely reverse those or change those conditions to make sure that everyone has access to the courts; remember how long women couldn't litigate for their own rights or Black people couldn't litigate for their own rights. And now that has changed, but there's still certain interests that you can't bring. Typically, individual rights have a better chance than collective rights. And so, there are lots of "if we could change all this, you can make your own rules," and there's some umpires that sort of sometimes create a balance between this. Then, I think we would be in a different world, but that's not the world we have.
Is common law taking over the world?
31:47: When I say capital is coded in law, I named the law, and it's actually domestic private law. We don't have a global private law, and we don't have a global state that could enforce it. So the question could be, how can global capitalism exist without that global law? And what I'm basically saying: global capitalism can exist in theory with only one legal system, as long as all other legal systems are willing to respect the rules that are made and enforce them in their own courts. That's what the config of law rules do.
Lawyers and the art of asset coding
11:42 You can see that a lot of private wealth is held in different types of assets over time. And that's actually what fascinated me so much: the same legal institutions were first used to code ownership in rural land for the landlords. The same mechanisms can be used to create complex derivatives today. And the shift from asset to asset is something that the lawyers can maneuver because they know how to code different assets. It also allows, and this is important to recognize: it allows different types of groups to come forward. So it's not necessarily that you have only the aristocracy that wins all the time.
Looking at the cumulative power of capital
08:19: If you look at the cumulative power of capital and the agency that certainly corporations have, or also agents have through their patron rights over others, sometimes you really have the feeling that these are actors in their own rights that actually can exert power over others, in particular over humans, in a way that might not have been anticipated when we created these institutions, but that's the real effect that we feel and experience today.
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unSILOed with Greg LaBlanc