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Pleased to announce that my review essay of @KatharinaPistor Code of Capital, "Modern legal practice as the engine of inequality," has now be accepted for publication at @DevandChg. Accepted version is here: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3556415 1/
First I summarize her argument: (i) aggressively taking advantage of state subsidies is built into the very DNA of how assets are formed, so state protections benefit creditors and owners, while their value to employees, people who have been harmed, and suppliers is minimized. 2/
(ii) process is supercharged by (a) recent changes that hv effect of creating a right to choose the law governing corporations and financial assets, leading to dominance of English and New York law, and 3/
supercharged by (b) strategies to prod the malleability of the common law into the directions that are favorable to asset owners (e.g. by making sure that judges don't get a chance to make adverse rulings on very dubious legal interpretations) 4/
@KatharinaPistor gives some astounding examples of the degree to which judges cede legal judgment to the lawyers who work for the asset owners. 5/
I give a call out to Kenneth Kettering whose history of "too big to fail" assets https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1012937 includes repos, standby LOCs (that support comm'l paper mkts) and securitization, all of which exist in current form due to this very aggressive approach to the law. 6/
@KatharinaPistor demos that in our modern legal system property rights represent a right to “private coding” of capital, or creative use of law to design assets that create vast profits for owners at expense of everyone else & thus to control distribution of wealth in society 7/
I applaud @KatharinaPistor's breadth of vision and her extraordinary skill as a guide through the complex paths that traverse the forest of the modern legal code. I also critique her grand narrative that this manipulation of the law is deeply encoded in capitalism itself and 8/
that state bailouts of private sector entities have been fundamental to capitalism historically. 19th century British finance was carefully structured to make the private sector bear its own losses. 9/
And British success was built on deliberate design carefully thought out (i) by jurists who didn't think twice about striking down private sector practices that could cause long-term problems and (ii) by legislators 10/
who, for example in 1845, deliberately made those derivatives contracts that did not function as insurance against a real economic risk unenforceable in court. Similarly American dominance post WWII was built on carefully structured statutory reform of the financial system. 11/
I conclude that Anglo American capitalism was founded by jurists & legislators who took responsibility for both investigating current commercial practice & carefully shaping common & statutory law into a coherent system and 12/
that @KatharinaPistor demos that modern jurists & legislators have been doing the opposite of what is needed in order to sustain a capitalist system. Capitalism requires jurists & legislators to take responsibility for the design of a sensible legal structure. 13/13
