This post concludes a symposium on Katharina Pistor’s The Law of Capitalism and How to Transform It. Read the rest of the posts here.
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Let me start by thanking the LPE Blog for organizing this symposium on my recent book, as well as the four commentators, Ntina Tzouvala, Ioannis Kampourakis, Yochai Benkler, and Kate Jackson, for reading the book and sharing their critiques. Each is powerful in its own right and would deserve a separate response, but this is already the continuation of a debate (see my recent post about Benkler’s theory of law in capitalism) and hopefully the beginning of a longer conversation.
To help guide that endeavor, let me pose and respond to three questions, which I believe capture the core disagreements between my interlocutors and me.
How should we think about the law in relation to the social?
My short answer to this question is that law institutionalizes relations of power, and that, once established, law becomes the focal point of future contestation in social and legal relations. Of course, capital is a social relation, as Marx has suggested and Benkler emphasizes, but it is a special kind of social relation.
In the iconic relation between capital and labor, the two social forces (or classes) do not confront one another directly; rather, their relation is mediated by law, including the ownership of the means of production and labor contracts modelled on old master-servant relations. Capital and labor are both coded in law, which institutionalizes and legitimizes their relation. As the law assumes formal equality of the parties, this exploitation is legal and fully enforceable by the state.
Slavery, bonded labor, master-servant relations, and today’s ghost workers exist not only in the social, but in law, including in legal arbitrage strategies designed to circumvent labor protection laws. Social power relations may well precede their legal configuration, but to ignore the extent to which the law entrenches them is to misunderstand the nature of the system in which we live, where the state more often than not takes the side of capital.
In short, law institutionalizes power relations, but it is not identical with them. Because law abstracts from socially embedded relations, it can also be used in ways that were not intended or anticipated—it can, for instance, be strategically deployed by powerful economic interests to capture the state. As the sociologist Niklas Luhmann noted, a contract can become “an instrument that reliably transforms unprogrammed political power for private purposes.” The crux is that private law creates unprogrammed political power by presuming that the parties whose horizontal relations it governs are free and formally equal.
A common thread that runs through the four critiques is that I am too legalistic, perhaps that I believe that legal change is not only necessary but also sufficient to produce social change, as Tzouvala suggested. This is a misunderstanding, for which, as the author, I take responsibility. In general, law is never sufficient for achieving change, as many failed projects of social engineering demonstrate. Any lasting change must be anchored in widely shared norms, which is why I propose not only a list of institutional changes but also insist on the need for a normative reorientation of private law.
I also agree with Tzouvala that power can be configured differently, and China is a great example. As one Chinese official once put it to me, China uses human resource management rather than legal relations to govern the country—though not always in its relations with outsiders, and it has developed a complex legal system over recent decades. Further, like most late developers, such as the United States in the 19th century, China has often violated patents and copyrights in order to catch up, but it will most likely find law useful to protect its own gains in the future.
How do we understand the relation between public and private power in contemporary capitalism?
In a simple model of political economy, public and private power occupy separate domains, and the state, as the locus of public power, retains sufficient autonomy from private economic power to tax, regulate, and meet the needs and wants of the people at large. This is the model required for a social democratic project of renewal or transformation that Benkler advocates. Unfortunately, I don’t think that it depicts the world we live in.
States have always been imbricated with capital, even during the trente glorieuse—the thirty years from 1945 to 1975. The international coordination that was critical for maintaining the new world order quickly eroded as each country sought to promote its own industries. Half a century later, most democracies live by the dictate of “the market,” imposing austerity on their people while the rich get richer and democracy dies. Even the powerful central banks have lost their grip, as hedge funds now control short-term interest rates, a key monetary policy tool, according to recent research.
To the extent any elected government—from municipalities to a supranational union—retains sufficient autonomy to revive the social democratic project, I am all for it. But even if we succeed in these endeavors, we still face a looming challenge: we might simply repeat the process of the past half-century, during which private power dismantled social democracies. As long as private law enjoys the full backing of state power even when it is diametrically opposed to the interests of the democratic polity, such an outcome is almost inevitable. This is why I insist that for lasting change, private law itself must be transformed and normatively reset.
Can legal systems be transformed, and if so, how?
Legal systems are social systems; they are imbricated with power and social relations. Legal change must be transposed into social change to be effective, and social change will not last unless it is institutionalized at least to some degree. Yes, we need social movements, but they will likely fizzle out unless they find ways to institutionalize the advances they make.
The shorter the distance between the law and the social forces that benefit from it, the more powerful law’s impact. This is why private law has been so powerful as a tool kit for coding capital. Legislative change and regulation have a much longer gestation period and are much harder to implement. No wonder that economic actors armed with private law have more often than not outrun public lawmaking and regulation.
To change the direction of private law, two things have to happen: First, the enforcement of private law must be made contingent on its alignment with democratically agreed social objectives; and second, individuals, associations, and collectives must discover the power of private law to build a better system bottom up.
Jackson raises serious doubts as to whether either is possible, pointing to the many veto players in the system. This threat is real, and, admittedly, judges have often been part of the problem, not the solution. Still, the most radical pro-capitalist changes—the contractualization of Delaware law—have recently come from the legislature, against the Chancery Court.
What makes private law attractive is that it already exists, ready for anyone to use. Contra Pashukanis, not all private law coheres with the commodity form of law: organizational law knows not only corporations, but also cooperatives; property is more varied and colorful than the often quoted Blackstonian ideal of absolute dominion suggests; and contracts can be used to protect the interests of the weaker party.
Building social relations bottom up with the help of law is exactly the kind of emancipatory move that Kampourakis senses in the book. “Read in a more materialist light,” he writes, “Pistor’s reconstructive orientation reflects an intuition that is essential to emancipatory politics—that freedom itself requires institutional actualization of social interdependence.”
The challenge is to foster this “institutional actualization” from below while overcoming the barriers that will be raised in defense of existing rights. My suggestion would be to focus our limited resources on three battlefields: Attribution of harm, recognition of rights, and denial of enforceability. If more wrongdoers were held liable, if our rights against the interests of capital were more widely recognized, and if enforcement were denied for claims that fail to recognize the rights of others, such incremental changes could be the trigger for further transformative change.
Will it work? I don’t know, but I remain hopeful. Moreover, in my judgment there is no viable alternative given the compromised autonomy of most states.
