Katharina Pistor’s The Code of Capital: How the Law Creates Wealth and Inequality
| Published date | 01 April 2021 |
| Date | 01 April 2021 |
| Author | Katharina Pistor,Sol Picciotto,Iagê Z Miola,Anna Chadwick,Marco Goldoni |
| DOI | 10.1177/0964663920966488 |
| Subject Matter | Dialogue and Debate |
Dialogue and Debate
Katharina Pistor’s The
Code of Capital: How the
Law Creates Wealth and
Inequality
The Editorial Board of Social & Legal Studies is pleased to present this Dialogue &
Debate which features Katharina Pistor’s fascinating new book, The Code of Capital.
1
We thank our contributors – Marco Go ldoni, Iagˆe Miola, Anna Chadwick, and Sol
Picciotto – for their insightful engagements with the book. We also wish to express our
particular gratitude to Katharin a Pistor for agreeing to contribute a rejoin der to the
Dialogue & Debate, and for her support of the initiative.
On the Constitutive Performativity
of the Law of Capital
Marco Goldoni
University of Glasgow, Scotland
There is something truly insightful about TheCodeofCapital. This is not only because
throughout it the analysis is underpinned by the observation that the vast majority of
accounts of the birth and development of capital(ism) have been oblivious – or at best
superficially aware – of its legal fabric. Either the law has been reduced to an instru-
ment for pursuing economic ends, as it happens in many instances within the Law &
Economics movement, or it has been described as an epiphenomenon overdetermined
by economic rationality according to many materialist explanations. Instead, Pistor’s
account illuminates how law literally makes capital. In order to prove this startling
claim, Pistor’s first move is to disentangle the concept of capital from those concep-
tions that represent it either as the dialectic (riddled by contradictions) between factors
Corresponding author:
Katharina Pistor, Columbia Law School in the City of New York, USA.
Email: kpisto@law.columbia.edu
Social & Legal Studies
2021, Vol. 30(2) 291–326
ªThe Author(s) 2020
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DOI: 10.1177/0964663920966488
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of production on one hand, and the idea that capital is a process of progressive com-
modification of everything human and non-human, on the other hand. It should be
quickly added that she does not deny that commodification actually happens in the
creation of capital (and law is obviously involved in that). The problem is that com-
modification is far from sufficient to explain how capital produces wealth. In other
words, capital cannot be defined only on the basis of the formation and circulation of
commodities. There is a quid to it that the process of commodification cannot account
for. Capital is not only wealth extracted from social relations and maintained through
competitive markets. There has to be another ingredient to be added to the mix for
bringing capital to life. And this ingredient is provided by the operations of law. For
these reasons, from a methodological perspective, we are invited ‘to shift the attention
from class identity and class struggle to the question of who has acce ss to and control
over the legal code and its masters: the landed elites; the long-distance traders and
merchant banks; the shareholders of corporations that own production facilities or
simply hold assets behind a corporate veil’ (Pistor, 2019: 8). Instead, the suggesti on
is to look at how law encodes capital by putting some assets on ‘legal steroids’ (Pistor,
2019: 11). This is an interesting starting point, as it allows Pistor to avoid the thorny
and ambiguous language of value and to focus on a more clearly defined field iden-
tified by formal legal operations. An object (it seems any object) is potentially an asset
that can be transformed into a source of wealth by a process of legal coding. Hence, law
operates as the ‘magic’ factor in transforming assets into wealth. Accordingly, to grasp
how capital is generated it is necessary to understand this legal technique of transfor-
mation through assemblage.
As is examined in several chapters of the book, this is a technique offered b y a
specific body of professionals who, through the mastery of a technical language, bestow
four legal attributes on an asset and, in this way, bootstrap wealth into existence. Pistor
distils the most fundamental legal components of capital and explains the nature of their
peculiar function. The identification of th ese four attributes and their application to
different case studies is one of the most important achievements of this book. The legal
coding assembles these attributes with a view to obtaining a number of effects on assets.
These attributes are mostly managed by what traditionally have been private law mod-
ules: property law, contract law, trust, intellectual property, the law of securities and
bankruptcy law, though the shadow of the State always looms large behind this set of
legal categories. Still, given the creativity of law, there is nothing exhaustive in the list of
private law tools for the making of capital.
Looking at the four attributes illuminates important aspects of capital. The first
two attributes are priority and universality. Priority applies to the hierarchy of
claims over an asset. It shows two essential aspects of capital: first, the fact that
it is fundamentally a relation of credit/debt, and, secondly, that the privilege and
priority of some creditor over others is its essential component. Universality makes
sure that these claims will be valid erga omnes. Universality shows another crucial
feature of capital: it cannot materialize if there is no third party to ensure that
priority claims can be enforced against everyone else. To avoid any misunderstand-
ing: the notion of the third here does not define the legal nature of an institution. It
rather ensures that what is already a legal institution becomes also part of the code
292 Social & Legal Studies 30(2)
of capital. However, priority and universality by themselves are not enough to
generate capital. While priority and universality would be sufficient to commodify
goods, for Pistor, they do not yet engender capitalism in its full modality. The other
two legal attributes of durability and convertibility have to be inserted in the picture.
The former ensures that priority is protected over time from too many creditors,
while the latter gives access to legal tender, ensuring a link with an asset (state
currency) whose nominal value is not subject to fluctuation.
One of the most original theses of the book is that the history of capitalism is one
constant deployment of these four attributes in different combinations. Such an approach
provides a powerful angle of observation to Pistor, as she can basically reconstruct the
development of modern capitalism according to this interpretative scheme. The deep
legal structure of capital is therefore the same throughout its various stages, and this is
more fundamental than, for example, changes in the modes and relations of production.
In a nutshell, capital is legally characterized by the entrenchment of privileges (Pistor
calls it the ‘feudal calculus’).
Nonetheless,Pistor is also clear in statingthat there are differencesbetween capital as it
is shaped in themiddle ages, in the industrialage and in the time of financialisation. At this
level, an interesting argument can be inferred fromthe numerous case studies analyzed in
the book. Although Pistor does not mention it explicitly, two aspects explain why certain
assets acquire or lose value in different epochs. The first one is that the coding of certain
assets makepossible the emergence of new formsof wealth. A classic case is therise of the
corporation over land ownership as the main source of value. The second aspect is that
each epoch of capitalism can be seen as the outcomeof a differentmix of the four modules.
For example, ‘for financial assets, convertibility is more importantthan durability, indeed,
it is an effective substitute’ (Pistor, 2019: 15).Other epochs have seen a different amalga-
mation of these four modules and this has also changed the understanding of the private
law institutionsemployed for obtaining the right mix. The pointforcefully made by Pistor
is that different formsof capitalism might have been relatedto various and changing types
of social relations, but the qualifying element has always been the mix of the four legal
attributes.It is no surprise, then, that legal expertise is a major protagonistof this story. It is
the lawyers of the merchants or the big law firms of financial capital that gave capital its
form. They are the true masters of the code.
This reconstruction of the law of capital relies heavily on a certain conception of
the legal order and its institutions. While Pistor has provided a healthy and valuable
array of arguments for appreciating the importance of law in creating capital, it
seems that a lot of work – perhaps, too much – is demanded of law. Two aspects of
this demanding conception shall be outlined in what follows. The first maintains that
the law is a constitutive and rather malleable instrument. Law as code comes across
as a performative which can transform any asset into wealth by virtue of its own
performance. The activity and expertise of lawyers are crucial for the performativity
of law. One can spot remarkable parallels here with the work of the late Yan
Thomas, historian of Roman law. Thomas noted that Roman law marks the auton-
omization of the legal order and of its specific performance: putting social relations
into form through legal description. His intuition is that law is not the instrument in
the hands of a previously constituted and naturalized owner (a classic representation
Goldoni 293
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