This post is part of a series on Yochai Benkler’s recent article, Structure and Legitimation in Capitalism. Read the rest of the posts here.
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Yochai Benkler has developed a political theory of capitalism—something that the LPE community has struggled to offer, even as many scholars affiliated with it (me included) are students of capitalism and the role of law in it. He correctly observes that without a systematic understanding of capitalism and its dynamics over time, we cannot attempt to transform it.
In his account of law in capitalism, law is an important site of power struggles between different social classes. It institutionalizes and entrenches asymmetric social relations, in part by sanctioning exchange as the dominant form of socioeconomic relations under capitalist conditions. Law also legitimates these social relations through the profession of the lawyer—attorneys and judges, in particular—whose changing argumentative strategies reflect both their elite status and the changing dominant discourse in society. The role of the legal profession to law’s legitimization function is critical, because in Benkler’s theory law is not outcome determinative per se, but is instead part of an ongoing social struggle, which involves the interpretation and application of law mediated by legal professionals with a mindset that is shaped by their environment.
There is not much to disagree with in this broad picture, save for one possible exception: The theory gives surprisingly short shrift to the state itself. This lacuna is striking, in part, because of the central importance assigned to the state in the social-democratic project of transformation and change that Benkler puts forward. The state is the assumed agent of change for the institutional reforms that he and others envision. These include, inter alia, the decommodification of the people’s basic needs or capabilities, reparations, universal pre-school, tax credits for child and dependent care, the transformation of labor law, and the vigorous enforcement of antitrust. These are democratic projects that require top-down legal change even though they also depend on social change, including a “public culture” and an “ideological reconstruction” that is aimed at “actively counteracting racism and status-subordination.”
Tragically, the potential of public culture and ideological reconstruction to overcome racial, gender and other social divides was arguably never as great as just prior to the backlash in society, politics, and the law that we are currently experiencing. This is consistent with a theory of capitalism that views the law as critical for the configuration of social relations and vice versa. But how do we explain the fact that after decades of social and political struggle, accompanied by substantial legal and institutional change, the gains that had been made were so swiftly de-legitimized and de-institutionalized? How much hope can we put into a call to action that seeks to replicate what has been done before and is now being rolled back? Finally, what do we make of the fact that prior to the backlash massive social transformation has been possible within a capitalist system that tends to stratify and subordinate rather than unify and equalize?
Let me start with this final question, which can be restated as a puzzle: How is it possible that capitalism, as a system that has commodified exchange relations in business as well as in social life, has nonetheless co-existed with legally institutionalized societal change based on values and ideas that are diametrically opposite to it and the institutions that sustain it?
One answer could be that this is not a puzzle at all, but instead simply reflects a series of wins and losses in an endless political struggle. Another is to say that the social values that made institutional change possible date back to an earlier era (say, the New Deal era or the Civil Rights Movement of the 1960s), which were superseded by neoliberalism and the relentless forces of financial capitalism. Unfortunately, this rules out any possibility for truly transformative change. Instead, we are condemned to forever repeat the ebbs and flows of power struggles and the remaking of institutions by the respective winners. Given how law is institutionalized in capitalist systems, we should also not be surprised that capital is winning more often than losing.
But suppose that the progressive side was given another chance to change the institutional configurations of capitalism. Would we be confident that by adopting reforms similar to those implemented in the past—perhaps amplified by the expansive use of tax credits to substitute for social welfare—we could free ourselves from the clutches of capitalism? Do the social democratic reforms that are currently being proposed amount cumulatively to true transformative change, such that it would make rolling back these gains significantly more difficult?
I fear not. I favor every one of these reforms and would happily participate in the struggle to implement them. But I don’t think that these institutional changes would last longer than similar reforms have in the past—in other words, they will not be transformative. The reason is that they can be too easily undermined institutionally and, in this way, lose their legitimacy and thereby their staying power.
In recent decades, capitalists have largely succeeded in de-legitimizing existing institutions. A critical part of these efforts has involved altering the state itself—undermining its capacity to act and rendering it too weak to carry out social democratic reform even with a favorable government in place. Cutting back resources by lowering taxes is a powerful weapon, because it kills two birds with one stone: it undermines trust in state-funded programs in the eyes of their beneficiaries and also creates a political constituency—those paying fewer taxes—who will vigorously fight against efforts to reverse these policies and use the tax savings to do so. Another de-legitimation strategy that capitalists have adopted is to escape the reach of the law by outsourcing production, sheltering profits in tax havens, or opting into foreign law. These strategies undermine any sense of legal justice for those who depend on the law and cannot easily escape its reach. As a result, progressives and their legal reforms are outed as hypocrites who promise more than they can keep.
This is why, as I have argued in The Law of Capitalism and How to Transform It, transformative change must start with private law, as it is the body of law that empowers holders of capital to build their wealth and wield power over others. No doubt, constitutional and other public law can also be interpreted and used in ways that undermine the status and wellbeing of the many. Yet efforts to contest such abuses will bear little fruit, as long as the one percent have at their disposal a perfectly legal and legitimate tool kit in private law to create wealth and power to use against their opposition, including the state itself. In other words, we need to begin with a reset of private law that aligns its normative foundations with democratic values enshrined in constitutional law.
For social democratic reform strategies, the state is the key actor for institutionalizing legal change. But this requires a state that has retained sufficient autonomy from the prevailing economic order. In fact, the state has capitulated to a core dogma of capitalism, namely that all resources, including its own, shall be allocated by market forces not political deliberation. It depends on cheap credit to fund its own expenditures and to fuel economic growth, which has become the sole standard to measure political success. It follows that for democratic socialism to succeed, the state itself must be reconfigured; if this is impossible in the short term, the best alternative might be to change the law from within. Given its malleability, private law is particularly well suited for such an exercise.
If private actors can demonstrate the viability of alternative structures that reflect values like equality and dignity, justice and reciprocity, this may be the greatest challenge yet to the mantra that there is no alternative to capitalism. Benkler is right that transformative change must come through law; but when it cannot come from above, perhaps it will come from below.
