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Laws of Capitalism

Quick Tour of Laws of Capitalism

  • Katharina Pistor breaks down the history, process, institutions, and participants involved in the legal coding of capital.
  • She shows us how private actors have harnessed social resources to accumulate wealth, generating not only economic inequality, but inequality in law.
    • Enabling them to opt out of jurisdictions, restrict governmental policy, and erode democracy.
  • The laws of capitalism have elevated the interests of the few above that of the many, but we can rewrite the code and restore balance to society.

Coding Land & Ideas

  • how the law selectively "codes" certain assets, endowing them with the capacity to protect and produce private wealth
    • how land became legally coded as property during the enclosure movement in England
    • attempts to code traditional indigenous land use rights in Belize.
  • explains how even ideas, which are not natural property, can be made an entire new class of property according to the law
    • institutionalization of copyright and patent law
    • coding intellectual property; eg. patent human genes

Coding Debt

How & why law codes debt

  • how the law has accompanied the evolution of negotiable debt instruments, from the
    • simple IOU, to
    • bills of exchange in Medieval Genoa, to
    • securitized assets in the modern day and on to derivatives
  • examines the securitization of mortgage debt in the modern United States in the lead-up to the financial crisis of 2008
  • the legal code has been essential in the transformation of humble IOUs
    • into elaborate financial contracts, and
    • the creation of an entire finance industry

Lawyers, Firms & Corporate Entities

Corporations to create wealth 1600s+

  • how the law has accompanied the evolution of private business enterprises,
    • from their early roots as simple partnership agreements of temporary duration,
    • to colonial joint-stock companies in the 1600's with state charters granting them the legal status of corporations (or legal persons),
    • and the eventual introduction of general incorporation statutes in the 1800's simplifying the creation of corporations.

Corporations to create wealth today

  • by the 1900's the law enabled the corporation to become the dominant form of business organization under capitalism
  • case study of Lehman Brothers: how its organization as a holding company allowed shareholders to profit, while leaving debt-strapped subsidiaries to flounder.
    • Lehman harnessed the corporate structure created by law to build a house of cards.

The Tool Kit

  • the four essential attributes of capital:
    • priority,
    • durability,
    • universality, and
    • convertibility.
  • these ensure that an asset generates wealth for its owner, i.e. becomes capital

How to legally code assets as capital?

  • through the legal institutions constructing certain bodies of law:
    • property law,
    • collateral law,
    • trust law,
    • corporate law,
    • bankruptcy law and
    • contract law.
  • private owners of capital can harness the centralized means of coercion (like litigating in State courts) to make their rights effective
  • property rights can also be pursued in a more decentralized fashion, with parties picking the law and the forum.
  • legal claims are pursued at various venues, but also where law is constructed
  • law is not always handed down from above, but often emerges from below, sometimes outside the courts
  • law and legal institutions are not static, but evolve and expand by an incremental process, usually driven by interested parties.
  • it need not be by legislation - they can change the meaning of a law by renegotiating its interpretation and application.

The Codemaster

Private lawyers in coding capital

  • Private Attorneys are the masters of the code
  • Despite the fact that the State and juridical precedent establishes the law, it is private attorneys who find the flaws, loopholes, or inaccuracies in the legal code
  • history of private lawyers in Prussia, France, and the American legal system
  • private lawyers shape and mold the legal code over time
  • vast amounts of wealth accumulates in private law firms today
    • e.g. relationship between the UK’s Magic Circle of Firms and Russian Oligarchs.

A Code for the Globe

How law codes international capital?

  • Laws are national, but international capital transcends borders.
  • the domestic law of two hegemons:
    • the United Kingdom and
    • the United States
  • have become the default legal systems used internationally
  • globalization has been made possible by using these two dominant jurisdictions to code a global system for trans-national commerce, finance and corporations

Trans-national laws of capitalism

  • individual countries may have ceded too much for international capital
  • bilateral investment treaties lead to tension between democratic sovereignty and globalization
  • desirable domestic regulations and protections sought by the democratic process can be hampered by the threat of expensive lawsuits from foreign investors
  • freedom of capital movement across borders brings along an alien legal jurisdiction, imposing restrictions on local governments, elevating the private rights of capital above the public interest, and eroding democracy

Transforming the Code of Capital

how the code of capital is used?

  • the legal system is a social resource, but it has been harnessed by private actors to create and accumulate immense private wealth.
  • This has not only produced economic inequality today, but also inequality before the law.
  • Private actors can opt out of jurisdictions, restrict the policy space of governments, and erode democracy.
  • we can rewrite the code to make it fairer.
    • it can be an incremental process
    • including rolling back some of the privileges and exemptions acquired by capital over the years,
    • setting out jurisdictional boundaries to ensure that the same rules apply to everyone.
    • rules can also be adjusted to ensure those who benefit internalize their costs

conscientious citizens of democracies

  • the burden need not always fall on the government
    • tools and institutions can be created to allow private actors to monitor capital more effectively
  • the legal code can be changed to make the law fairer and
  • allow governments to regain some policy space,
    • to address the needs and implement the protections desired by the people through the democratic process
    • however, sovereignty of operations is a pre-requisite to allow the government of your jurisdiction to be able to act.

Any corporation can choose its bylaws!

...shows how 12 CEOs ... uniquely rejected narrow yardsticks of shareholder value by leading companies to larger models of prosperity and justice... This select group of mavericks and iconoclasts — which includes The Body Shop’s Anita Roddick, Patagonia’s Yvon Chouinard, Vanguard’s John Bogle and Busboys and Poets’ Andy Shallal —give us, Nader writes, “a sense of what might have been and what still could be if business were rigorously framed as a process that was not only about making money and selling things but improving our social and natural world.

You can be a rebellious CEO!

  • Given the urgency of climate change and increasing wealth ineqalities:
    • there is no need to wait for the laws of capitalism to be revised.
  • We will look at considerations for starting a corporation in Sweden
    • specifically at legal codes favouring PhD students in Sweden
  • Sweden is ideal for innovation
    • Sweden ranks 2nd among the 133 economies featured in the Global Innovation Index 2024
    • The land of unicorns: How did Sweden end up with the second largest concentration of billion dollar companies per capita in the world? Professor Robin Teigland explains how a small country nestled away in the Nordics developed its magic touch.

  • Minimal Exercise: WATCH Laws of Capitalism Playlist [140 minutes] *

    The laws of capitalism have elevated the interests of the few above that of the many, but we can rewrite the code and restore balance to society. In this series, Professor Katharina Pistor (Columbia Law School) breaks down the history, process, institutions, and participants involved in the legal coding of capital. She shows us how private actors have harnessed social resources to accumulate wealth, generating not only economic inequality, but inequality in law. Enabling them to opt out of jurisdictions, restrict governmental policy, and erode democracy. Learn more at http://lawsofcapitalism.org/

  • Optional Deeper Dives:

    • READ The Code of Capital: How the Law Creates Wealth and Inequality, Katharina Pistor, Princeton University Press, 2019, ISBN: 9780691178974.
      • Chapters: Empire of Law, Coding Land, Coding Legal Persons, Minting Debt, Enclosing Nature's Code, A Code for the Globe, The Masters of the Code, A New Code?, Capital Rules by Law.
    • READ The Law of Capitalism and How To Transform It, Katharina Pistor, coming in September 2025. *

      A fascinating study of the legal underpinnings of capitalism, why the system must be transformed, and what we can do about it. While capitalism has been conventionally described as an economic system, it is actually a deeply entrenched legal regime. Law provides the material for coding simple objects, promises and ideas as capital assets. It also provides the means for avoiding legal constraints that societies have frequently imposed on capitalism. Often lauded for creating levels of wealth unprecedented in human history, capitalism is also largely responsible for the two greatest problems now confronting humanity: the erosion of social and political cohesion that undermines democratic self-governance on the one hand, and the threats that emanate from climate change on the other. By exploring the ways that Western legal systems empower individuals to advance their interests against society with the help of the law, Katharina Pistor reveals how capitalism is an unsustainable system designed to foster inequity. She offers ideas for rethinking how the transformation of the law and the economy can help us create a more just system—before it’s too late.