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The Role of Law in Capitalism


Yochai Benkler (@YBenkler) is the Berkman Professor of Entrepreneurial Legal Studies at Harvard Law School and the faculty director of the Program on Law and Political Economy at Harvard Law School.

We should judge whether we need a theory, and what theory we need, by whether it is more or less useful and for what purposes, rather than by whether it is right or wrong in any abstract sense. An explanation of how the economy and society works would be particularly useful if it could explain how a range of different legal changes interacted with the basic dynamics of society to shape inequality, or distribute power, at a given historical conjuncture. It would be useful if it allowed us to see how different efforts of diverse scholars in the network fit, or did not fit, together as part of a comprehensive programmatic agenda. It would also be useful if it allowed us to assess the relative potential effects of different programmatic proposals, such as whether a commitment to cradle-to-grave care coverage, implemented through unionized public employees or other unionized workers, is more or less transformative than other meritorious programs, say, student debt forgiveness or reform of labor law. A framework of this sort would allow us not merely to press for the politically feasible or pursue reforms that have the most enthusiastic popular support, but to identify those programs that, if passed, would be the most transformative.

I am working on a book that uses the long arc of the global history of capitalism to try to develop such a theory, or explanatory framework. In response to the recent debates over LPE and theory, I thought it would be useful to make available an article-length and chapter-length version of the argument, at least as it applies to law. In this post, I offer a thumbnail sketch of that framework. My hope is that such a theory can meet Ntina Tzouvala’s call for materialist legal institutional analysis while avoiding falling prey to Sanjukta Paul’s warning against “totalizing economic or social theory,” but whether I have succeeded I leave for readers to judge.


LPE reflects broad theoretical pluralism at this stage in its intellectual lifetime. Nonetheless, Angela Harris and Jay Varellas capture in their introduction to the JLPE what is probably a broad consensus: “law is central to the creation and maintenance of structural inequalities in the state and the market,” and “class power is inextricably connected to the development of racial and gender hierarchies, as well as to other systems of unequal power and privilege.” While the movement emerged self-consciously as a reaction to neoliberalism, I argue that these core claims go to the very birth of liberal legality and to the origins of both the dynamism of capitalism and its particular patterns of inequality—along class lines in general and through hyper-exploitation of racialized and gendered class relations in particular.

First, a definition of the subject of study. Market society, or “capitalism,” is a social system in which (a) most people live in households that depend on commodity exchange in markets to satisfy their basic needs and wants; (b) most organizers of production depend on commodity exchange in markets for access to labor, material and knowledge resources, and credit or finance to deal with time and uncertainty; and (c) the political military formations depend primarily on taxing market activity or selling public debt as commodity exchange in markets to satisfy their fiscal needs. What defines a society as a “market society,” rather than a society that has markets, is the conjunction of more-or-less universal market dependence for subsistence, production, and protection. The first element forces most households to have at least some members who engage in wage labor. The second element is what drives all organizers of production—smallholders, capitalists, the managerial class—both to continuously engage in innovation (giving capitalism its historically-unique growth dynamics) and to continuously seek out, create, and exploit power asymmetries to extract rents. The third element aligns the interests of the social formations that wield violence considered legitimate in the society to those of the profit-reaping classes—the rentiers, capitalists, and professional and managerial class (PMC).

The very dynamism of capitalism, its breathtaking capacity to continuously convert more of nature into the satisfaction of seemingly never-ending human wants and desires (which it continuously expands), depends on the effort to create quasi-rents, extend their duration, and leverage their present existence into continuous renewal. So goes the dominant theory of innovation in economics, Schumpeterian “creative destruction.” Schumpeter explicitly underscored that Marx was the only classical economist who understood this. What Schumpeter did not include in his theory but Veblen did, is that businesses are agnostic as to whether they get their quasi-rents from innovation, indeed from anything we could plausibly call “efficiency,” or from what he called “business sabotage,” that is, the diverse ways in which businesses can develop power—over other businesses, workers, or consumers.

What this Schumpeterian-Veblenian theory missed, which W.E.B. Du Bois and the Trinidadian school (C.L.R James, Eric Williams, Oliver Cox) understood, is that racialization, racialized colonization and enslavement, and in contemporary terms, racialized class relations and racialized global unequal trade, have always been a critical pathway for power-seeking. In parallel work, historians of women in the industrial revolution, reaching back to Ivy Pinchbeck’s work in 1930, showed that gendered work and hyper-exploitation were foundational to power seeking in capitalism from its earliest days, while feminist economist Nancy Folbre’s work has long explored how social relations of reproduction play a critical role in the structure of capitalism, while capitalism, in turn, structures power relations within the patriarchal family. Later on, Minsky reinforced Schumpeter’s insight by explaining why it was that, in the presence of true uncertainty, as opposed to calculable risk (that is, in the real world), only firms that can show reasonable prospects of creating and extracting rents can obtain investments.

Power seeking—pursuing the capacity to impose transactions and prices one wants on counterparties to produce a steady flow of rents—is the animating spirit of capitalism. It manifests as organized struggle over institutions, ideology, and technology. Among institutions, law has played a large role as a terrain of struggle over the institutionalization of market dependence for subsistence, production, and protection, and over the structure of patterns and terms of coordinated collective action. By structuring access to natural resources for purposes of subsistence and market-oriented production, access to knowledge of how to convert nature into the satisfaction of human needs and wants, and access to means of payment and credit, as well as the forms of coordination and cooperation in labor and investment processes, law structured social relations of production, creating a distinct combination of freedom and coercion, opportunity and imperative, that has been the driving dynamic of capitalism. Law also differentially constrained access to labor roles, training, and credit along lines of gender and race, in ways that leveraged these dimensions of atavistic status subordination as dimensions of hyper-exploitation, creating racialized and gendered class relations that stabilized or intensified status subordination, now under a veil of formal juridical equality. To substantiate this general theoretical picture, I provide examples of these dynamics in the industrial revolution, the second industrial divide, and neoliberalism.

Throughout the past three centuries, law developed these structures through a series of power struggles, combining political and street struggles with struggles within the profession among competing conceptions. Through these it sought not only to structure asymmetric power in social relations of production along dimensions of class, gender, and race, but also to legitimate its institutional resolution: to cause the majority of the population to acquiesce in these resolutions. Repeatedly, in all this battles, academics and judges harnessed legal theory and transposed the broader emerging ideological trends of the professional and managerial class to legitimate and contest the newly emerging, often more exploitative relations.

In the article I lay out in greater detail the dynamics of capitalism, and a sociological theory of the legal profession as a social formation within the professional and managerial class, reproduced by education, habituation, and acculturation, because it resolved conflicts among the political military classes, populist revolutionary forces, and the emerging profit-reaping classes. In market society, law and the legal profession continue to provide this balancing mechanism, structuring the asymmetries of power in social relations of production, usually in favor of the profit-reaping classes, to the extent feasible in the specific historical moment, given the inherited political settlement and changing material conditions, while preventing meaningful democratization of governance of the economy.

For each period, I provide a brief overview of the core material and social dynamics that characterized the particular regime in capitalism. I show how capitalists and firms during early industrialization and neoliberal deindustrialization leveraged asymmetric roles, alternatives, and socialized expectations in market and reproduction work to harness women workers as a latent reserve army of labor to fill newly exploitative roles that men, with better alternatives and different expectations, refused to enter. For the Gilded Age, I cover the role of property, contract, criminal, and credit law in forcing formerly enslaved workers in the south into the system of debt-peonage; and look at how a range of other laws produced the particularly exploitative structure of American industrial capitalism in the Midwest and northeast. With respect to neoliberalism, I describe how the interactions among racialized criminal enforcement and suppression of social welfare, minimum wages, employment law, immigration law, and financial deregulation squeezed the bottom of the income distribution and reproduced a racialized underclass after the Second Reconstruction. I then show how labor law, trade law, deregulation, antitrust, and retirement and health insurance law combined to force the stagnation of wages for the middle classes. Finally, I explain how financial deregulation, corporate law, and other areas of law interacted to underwrite the escape of the 1%. In each period, I show how judges and scholars produced legitimating rationales and narratives for the new, mostly more extractive social relations of production; usually in conflict with opponents who produced counter-analyses.


What does this broad theoretical framework and history imply for current political practice? I think that the explanatory framework I offer allows us to see how diverse commitments and proposals offered by scholars and activists in and around LPE form a programmatic whole that responds to the dynamics outlined here. These include, first, active opposition to subordination along dimensions of race, gender, and immigration as a precondition to any effective transformation of market society. A second core pillar of any transformative program must emphasize partial decommodification of basic needs and goods if we are to escape the imperative of the market. Beyond these, I argue for the mutually supporting roles of strengthening labor; expanding and deepening public provisioning and management of the economy, counteracted by means of broader popular accountability; and, bolstering cooperative production and other non-market production in at least parts of the economy. Scholarship in the LPE network has provided programmatic implementation of each of these pillars of transformative law and politics, and in the longer publication, I highlight that work.

Those who have little time can get most of the argument from the condensed edited volume chapter. It offers a brief summary of the theory, and describes how the dynamics played out in the gilded age and neoliberalism. The article version offers a more fully worked out theoretical framework, adds the Parliamentary Enclosures as a case study of the interaction between capitalism and gender subordination in the proleterianization of women and children as the primary labor force of the industrial revolution, and provides a lot more detail about the role of law in the rise of neoliberalism as a structure for wealth extraction, primarily by the PMC, and about how judges and scholars combined formalism, nostalgia, and formalist realism into novel legal frames designed to claim the mantel of both realism and conservatism, while legitimating a reactionary program to overturn the laws and precedents of the New Deal and the Civil Rights and Women’s Movements.