This post is part of 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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At a time when few legal academics can claim the mantle of the public intellectual, Katharina Pistor’s work has transcended the narrow confines of law journals and course syllabi. This speaks in part to her virtues as a writer. It is not easy to write accessibly about law and finance, especially when one possesses Pistor’s breadth and depth of knowledge. Yet her latest book, much like The Code of Capital, succeeds in appealing to a broad audience while holding on to the complexities of its object of study. Another reason behind these books’ success is Pistor’s ability to craft and deliver a compelling punchline: the idea that capitalism is a legal phenomenon all the way down. In particular, Pistor has argued that core institutions of private law—contract, property, collateral, trust, corporate, and bankruptcy law—transform ordinary assets into capital. Here, she expands her analysis, explaining how private law not merely creates capital, but enables private actors to evade the constraints imposed by regulation. Private law, according to this picture, forms the backbone of modern capitalism, and it is thus, she argues, where efforts to transform capitalism must begin.
Among progressive legal scholars, Pistor is far from alone in identifying the private law as a culprit for our social ills. Proponents of legal realism, Critical Legal Studies, and, more recently, Law and Political Economy have questioned the liberal dogma that private law is the benign domain of autonomous individual action and freedom, instead emphasising its role in buttressing inequality and domination. The Marxist legal tradition that draws from Pashukanis takes this argument further by positing that private law, and in particular, contract law, is the conceptual matrix for all capitalist law. What is distinctive about Pistor’s work is her effort to revisit and popularise legal institutionalism—the idea that it is law itself that constitutes the economic and social order. One can believe, after all, that progressives can and should put more intellectual and political effort into reforming property, tort, and contract, without believing that capitalism is essentially the creature of private law, as Pistor does. This is not simply an intellectual quarrel: if capitalism is a legal regime above all else, legal reform is not only necessary but sufficient in order to achieve democratic self-governance, ecological sustainability, and equality. I am sceptical both about this theoretical proposition and about its political implications. In this short contribution, I will put some pressure on Pistor’s legal institutionalist assumptions, and I will do so using some of the intellectual tools that come with being a professional international lawyer.
This may seem like a strange choice: international law, as some in these quarters have argued, seems to be in terminal decline as an ideology and as a technique of governing global capitalism. Nevertheless, international law’s idiosyncratic character as a decentralised legal system offers a useful starting point for theorising about the nature of law and its relationship to political economy. The absence of centralised lawmaking and juridical authorities in the international realm enables its practitioners to ask questions such as, “What makes X’s legal claims authoritative statements of international law and Z’s legal claims less authoritative or outright irrelevant?” This absence thus makes it easier to inquire into what ideological, material, or personal factors contribute to the stabilisation of only some actors’ legal claims as law. This is, in part, because we cannot fall back on the familiar yet intellectually and politically dissatisfying answer that “X is law because the Supreme Court says so.” To return to Pistor’s work, a sensibility cultivated by a decentralised legal system would force us to ask: why should anyone treat the legal claims of, say, US financial capital as law? Or, in a less normative register: what factors persuaded or compelled courts, regulatory agencies, other factions of capital (say, industrial capital), and ordinary people to treat the legal claims of US finance as law?
Thinking about Pistor’s legal institutionalism from the vantage point of international law also forces us to ask the reverse question: under what ideological and material conditions does the authoritativeness and effectiveness of some actors’ legal claims break down? What ideological and material factors lead to the destabilisation of relatively stabilised legal arguments and institutional forms? Pistor seems to consider ‘failed states’ as the only contexts where such destabilisations occur. However, one need not look to 1990s Somalia to find examples of a legal order losing its authority and effectiveness: the World Trade Organization, which once stood at the centre of globalised neoliberal capitalism, is today in profound crisis. Its Appellate Body lies in ruins, and informal ‘trade deals’ between President Trump and other capitalist powers proliferate as methods of regulating international trade. A legal order that once appeared to be as constitutive of political economic relations as any has been reduced to a semi-functioning diplomatic forum, and rules that were once treated as articles of faith are now disregarded so systematically as to be functionally defunct.
Only by bracketing these questions is Pistor able to insist that capitalism is an irreducibly legal phenomenon. This bold version of legal institutionalism ends up reifying both law and political economy: the fundamental plurality of legal claims and institutional forms is erased and so is the question of which ideological and material factors lead some legal arguments and institutions to prevail over others in particular historical conjunctures. One need not adopt the historical materialist answer to this question, which prioritises social relationships of production and reproduction, to nevertheless accept that the inability of legal institutionalism to even raise this question in its own terms is a major weakness of Pistor’s theoretical framework.
This blind spot is sustained by Pistor’s highly idiosyncratic construction of other explanatory frameworks. For example, Pistor engages with and ultimately dismisses a version of historical materialism that would baffle almost everyone who works within this tradition today. In this telling, historical materialism is something akin to an emphasis on the physicality of things, be it physical control over a piece of land or the materiality of machinery. It is this peculiar understanding of materialism that leads Pistor to reject it as an explanatory framework and instead proclaim that “it is not land as nature or machines as engineering achievements but the right to a plot of land or to the innovation that created the blueprint for the machine that vests the rightful owner with the ability to capture the pecuniary value.” As stated, this seems to draw a false dichotomy. None of these—physical control over land, the material properties of the means of production, or legal claims—alone ground capitalists’ power over labour, nature, and society as a whole.
Take, for example, intellectual property rights that Pistor (and others) often cite as typical examples of the constitutive role of law in global political economy. For Pistor, intellectual property rights not only allow their holders to extract sizeable rents, but they are also the only thing standing in the way of others who want to enjoy or, more relevantly, economically exploit a particular idea or body of knowledge. This argument has also gained popularity amongst some heterodox political economists, such as Herman Mark Schwartz, who maintain that global value chains operate as franchises with firms that control IP at their apex. There is no question that IP has contributed to the capture of immense rents by certain factions of capital (such as Big Tech or pharmaceuticals). It is also beyond doubt that IP has prevented other actors’ access to particular bodies of knowledge, often contributing to immense human suffering, as was the case during the AIDS and COVID-19 pandemics. Yet these observations do not entail—nor is it the case—that legal claims drawing from IP law fully determine access to and economic exploitation of knowledge.
Indeed, it was the belief that owning intellectual property rights subject to astronomical valuations was the same thing as actually controlling and profiting from innovation—a belief held by the US state and capital alike—that allowed China to rise from a hub of low-added value manufacturing to a technological behemoth in the span of a single generation. Over the course of three decades, the historically unique concentration of skilled labour and engineers in coastal China, coupled with the Chinese state’s lax enforcement of foreign property rights and its unique combination of industrial policy and relentless competition, allowed (but also forced) some Chinese capitalists to access and exploit knowledge that was nominally withheld from them as a matter of domestic and international IP law. Law was certainly one factor that made the economic exploitation of knowledge easier for some actors and harder for others but, ultimately, it did not determine who could extract pecuniary gains from knowledge. Rather, the ability of Chinese capitalists to command immense pools of labour, the Chinese workforce’s high literacy rates, the development of huge pools of tacit knowledge through geographically-concentrated large-scale production, and the selective deployment and withholding of state and private violence, along with law, determined Chinese capitalists’ ability to take advantage of existing knowledge and innovate in ways that undermined the control of US capital over large parts of global markets. Pistor’s claims about capitalism’s legal essence cannot account for this world-historic shift, nor, more broadly, for any power shift that contravenes existing legal arrangements.
None of this is to say that intellectual property law (or other areas of private law) is irrelevant to the construction of capitalism, or that it should not be the focus of critique, advocacy, and reform. Rather, this brief engagement with Pistor’s intellectual contributions seeks to lay the groundwork for a materialist theory of law. This latter view, I believe, has important practical, ethical, and intellectual ramifications.
Practically, it means that while legal advocacy and reform are an essential part of any progressive movement, they cannot exhaust the horizon of either policy work or, more importantly, of political action. On an ethical level, it requires a dedication to the legal struggles of one’s time and place without the comforting conviction that these legal struggles will determine political and economic outcomes. And on an intellectual level, it turns law into a question, a proper object of inquiry, rather than an answer: it asks what the distinct role of law in capitalist societies is, and avoids the Eurocentric trap of treating US or Western law as synonymous with capitalist law writ large; it inquires into the ideological and material preconditions that lead to the legalisation of certain aspects of economic activity and the deformalisation of others; it registers the fact that many actors speak the language of law in the service of diverging economic goals, while also asking what material and ideological factors make only some legal claims appear correct and others preposterous.
