The Code of Capital: How the Law Creates Wealth and Inequality

This well-written and deeply researched book should be essential reading for anyone with a serious interest in the intersection of law and economics and in understanding, in the words of the subtitle, how the law creates wealth and inequality. The term “law and economics” has come to mean to economists and conservative-leaning jurists the subordination of law to economics and its “natural” laws of supply and demand. Providing a robust antidote to this type of economics-centric thinking, this book by a legal academic makes clear that the “code of capital” owes its power to law that is backed and enforced by the state. The ability to create, preserve and pass on wealth is dependent on how the law governs contracts, property, trusts and corporations, and how it treats debtors and creditors (including in bankruptcy). Not surprisingly, even in democratic societies, these laws systematically privilege capital over labor, shareholders over other stakeholders, and creditors over debtors. While the focus is on the current globalized world of securitized debt, transnational investments, intellectual property, and even cryptocurrency, much of the analysis usefully entails looking back at how these areas of law evolved from feudal times through the Industrial Revolution and to the present, in which legal norms continue to privilege the rich and powerful. Moreover, while the role of legislators and courts is not neglected, the analysis emphasizes how for the most part the applicable law developed at the hands of skilled private lawyers serving their merchant/corporate clients one transaction or investment at a time, and how increasingly disputes are increasingly resolved through private settlements and arbitration walled off from public scrutiny.Thus, a key take-away is: “Law that is backed by the threat of coercive enforcement increases the likelihood that the commitments that private parties made to one another and the privileges they obtained will be recognized and enforced without regard to pre-existing social ties or competing norms and that these legal claims will even be respected by strangers. As long as the threat of coercive law enforcement is sufficiently credible, voluntary compliance can be achieved without mobilizing it in every case.” The threat of coercive law enforcement and incentives to obey the rules diminish, however, in a globalized commercial world: “The legal protections capital enjoys are arguably the mother of all subsidies. Rising inequality is the logical conclusion of a legal order that systematically privileges some holders’ assets, but not others. This is the case especially in a globalized world, in which intervention on the side of the less advantaged can be so easily punished by capital taking to the exit.”Last year’s We the Corporations by Adam Winkler provided a masterful legal history on how corporations won important constitutional battles for their own “civil rights” in the Supreme Court over the past 200 years. This book is equally ambitious in addressing how the rest of our common law regime has been shaped by corporate lawyers to advance the interests of corporations and their owners. Together, they go a long way in explaining their dominance in law, society and, inevitably, politics.

The basic argument in The Code of Capital is that almost everything that we call wealth is ultimately a human construction based in law and subject to review and change. What is the point of endlessly arguing about the ineffable logic of economics if that logic largely emerges from the fabric of law? No doubt social evolution has resulted in a set of laws that sort of "works" in the historical sense. But it is quite a reach to assume that the laws as they now stand represent some kind of unchangeable efficient pinnacle of mechanism for resource distribution for all time. Much more likely those laws are merely another political landscape upon which the endless struggle between the powerful and the rest plays out. And as such, they are changeable - and with that change, outcomes will be different. Moreover, this discussion is morally necessary because it is ultimately the power of the state - as the representative of the people - which is being used to enforce the claims of wealth among its citizens.Pistor - who is a legal scholar from Columbia - explores with convincing and detailed example after example how the body of law has been manipulated to direct outcomes - usually with the interests of the wealthy and powerful in mind.The reason this book is so important and timely today is that as inequality and precarity soars, society debates platitudes based in elementary junk economics, the US Supreme Court is championing originalism in law, there are the real technocrats in law and finance who continue to weaponize the playing field while the pointless arguments continue. You really don't have to worry about the answers if you can get people asking the wrong questions. And so Pistor is simply saying that we should be clear eyed about what wealth really is.

This is a book of just a sort and focus I've long been waiting for. It gets right to the crux of the nuts and bolts of wealth and power, the maps and charters, if you will, lifting these layers to a deep level which digs beyond the PR myths and justifications offered by the rich and powerful, for their station in life. The roots of power and control can be obscured by various opaque concepts and documents, and it is all laid bare here, concept by concept, piece by piece. I appreciate her digging through some history and delivering some takes I hadn't seen or imagined yet. We must travel back some to see what congealed into our present system. The author explores the different paths and ways of life that were shunted aside, along the way, whose ideas might yet be useful for us, in the search for a future political economy, land use, and planetary footprint that is survivable and good.Some other books here which touch on similar themes, but from different angles, include Property by Raymond Frey (going back into great thinkers on property's underlying concepts), and White Shoe, by Jon Oller (on the elite lawyer-history side). I found both of those excellent in their own ways, and reviewed them here.Once this book gets past the basics, about an hour or so in, so;me things show up I appreciate, I have not seen much of elsewhere (in audio),for example:- A neat map of the financial and corporate structure of latter-day Lehman Brothers, and a sketch of some of its post-bankruptcy experiences (especially rare in the literature). This is a shell game and sleight-of-hand at its best!- A deeper dive into the parts and operators of a pretty typical collateralized mortgage structure, pre-2008, and its place in mortgage finance (going beyond the simplicities that popular books have stuck with), and- A journey back into the origins of financial instruments, since about the 1450s, and the evolution of innovations in that area. From that, the listener can follow the bread crumbs right to where we are.These are relatively unusual things to find at a good price in any form. Each, for me, is worth the price of admission here. A few areas get mildly flat and repetitive, but I overall I like this one a lot.Another book that may be of interest is a favorite (just read my second time through), The End of Alchemy by Mervyn King. This overlaps with this book, by showing the conjuring act certain powerful private entities are allowed to do, to generate and aim streams of credit and wealth (so, power), and how these entities also enjoy public backstops if things go wrong.

Der Untertitel lautet: "How the Law Creates Wealth and Inequality". Die Autorin, Rechts-Professorin in New York, zeigt die Entwicklung vom englischen Common Law, das im 16. Jahrhundert zur Übernahme der gemeinschaftlich genutzten Ländereien durch die Lords führte, zum weltweit durchgesetzten privaten Recht der Konzerne. Die Philosophie der Engländer besagte, dass demjenigen Recht zu geben sei, der den größten finanziellen (und damit staatlichen) Nutzen aus einem Gut ("asset") herausholt. Der rechtliche Code, der diesen Rechtsanspruch realisiert, wird mit den Begriffen Priorität, Durabilität, Universalität, Convertibilität erklärt. Bezogen auf Wertpapiere ("assets") bedeutet das Bevorzugung des Eigentümers gegenüber Gläubigern, rechtlich dauerhafte Existenz, weltweite Gültigkeit und das Privileg, den zunächst virtuellen Marktwert jederzeit in eine Staatswährung umtauschen zu können. Der letzte Punkt macht aus finanzwirtschaftlichen Spekulationsgewinnen Reichtum und Wirtschaftsmacht. Gegenüber wirtschaftswissenschaftlichen Erklärungen macht die Autorin geltend, dass durch die leistungsfähigen Rechtsabteilungen der Konzerne betriebene privatrechtliche Codifizierung entscheidend sei für die Konzentration des Reichtums in wenigen Händen. Militärische Gewalt und Sanktions-Androhungen der USA bringen Staaten dazu, gegenüber diesen Entwicklungen ihre Souveränitätsansprüche zurückzustellen. Ein kluges, lesenswertes Werk.

I believe this book helps the General public to understand the lost legal modules for coding Capital and its impact in society as a whole.

Interesting, but imo not practical enough.

This crucial book is clearly written to clarify for a popular audience the all-important, all-governing current legal-institutional relations that support the growth of socio-economic inequality. Pistor explains how the Anglo Common Law works by enabling private law (private law firms representing the globe's 'incumbent' rich) to develop ('innovate') a complex bulwark of property and bankruptcy law apart from societies, states, and even judiciaries (not known for any democratic bias). With the assistance of the impressionable, comprador liberal-conservative political establishment first in the UK & US and second around the world, this Common Law-supported kingdom of private law has effectively reduced the democratic state to little more than a violent enforcer of that private law, as it maldistributes rights and obligations to the augmentation of socio-economic inequality and tyranny. Anglo civil law is distinguished--and so useful to powerful interests--as the legal code of a people with boundary issues, as Stoicist Svend Brinkmann might say. Not only does Pistor's clarification help the reader better understand the fundamental functioning of Anglo-American law, it also suggests structural and political points of change.For example, by now, most law governing property around the world has never seen the light of a society's court system--It has never been subjected to any socially-rational justification and deliberation. It is simply privately manufactured, and operates as a credible threat ("But it's the law."), to channel wealth and enforce privilege and profound subordination in everyday relations. Were the majority of people--those who carry the risk and costs, who are legally obligated to deliver over the assets and work to the owners, but who do not accrue power--to somehow cohere and push back in the streets and on states, Pistor suggests, private-law's house of cards could tumble.Upon further reflection, Pistor's sketch of capitalism's naked emperor points to the cyborg technology of policing and surveillance stitching the whole global accumulation and dispossession network together, on the back of climate and environmental crisis.The book is written to educate a popular audience, explaining law in analogy to computer coding, where society is a computer-user cyborg that keeps getting more inequality and tyranny out of the code. Sometimes the book's concerns are those of lawyers, the coders. For example, Pistor explores whether encrypted blockchain systems can replace lawyers to produce contracts. No, they're too inflexible for a world that includes intrinsic, environmental, random, and agential forms of change. More likely is the unholy cyborg merger of blockchain systems and lawyers to create contracts.

I really enjoyed reading this book. It's basically about how the law creates markets and what consequences this has. Much of the book is concerned with how different things are turned into assets/capital through different legal processes