Capital is the defining feature of modern economies, yet many theorists seem to no idea where it actually comes from, or what “it” is. What is it, exactly, that transforms mere wealth into assets and assemblages of physical spaces and machines that algorithmically create more wealth?
In her revealing new book The Code of Capital (2019), Columbia University Law professor Katharina Pistor explains how capital is created behind closed doors in the offices of private attorneys, and why this little-known fact is one of the biggest reasons for the widening wealth gap between the holders of capital and everybody else.
Rather than deploying some lazy occult conception of capital as an objective force, Pistor argues that the law selectively “codes” certain assets, endowing them with the capacity to protect and produce private wealth. With the right legal coding, any object, claim, or idea can be turned into capital—and lawyers and their wealthy masters are the keepers and programmers of this code.
Pistor analyzes and makes clear the linkages between present-day patterns of wealth inequality and market-centric policy shifts from the 1980s – especially economic and legal reforms coinciding with the demise of the Iron Curtain and socialist governments, and the targeting of emerging markets and networks of influence (corruption) and political alliance (corruption).
Pistor demonstrates that to hold ‘capitalism’ accountable, or to intervene on (hack?) the codes of capital, it is necessary to be cognizant of the specificity of capitalist processes, and how “capital” is actually made. A proper ontography of political economics is thus imperative. To do so is to resist simplifications in which capital is a “thing”, or a core feature of social relations between a proletariat and a bourgeoisie:
“More generally, economists and accountants have clung to the notion that capital is a physical input, one of the two factors of production, when in fact capital has never been about a thing, but always about its legal coding; never just about output and input, but always about the ability to monetize expected returns” (p.116).
Below is a podcast from the Rhodes Center featuring Nick Ziegler talking with Pistor about her book, and how law guided by human interests programs economic activity, and generates vast amounts of capital for those who know how to wield it. Enjoy.
Interestingly, those who justify the expansionary imperative of global capital might also be shocked to learn just how much legal coding has been rigged to present the illusion of such necessity through completely arbitrary legal structures and financial instruments.