Code of Capital – Quinn Slobodian -W.Mattli,K.Pistor,S.Zuboff

The Code of Capital: How the Law Creates Wealth and Inequality

Three new books paint a chilling portrait of darkness in Wall Street, the law, and technology. But the apocalyptic metaphors obscure the real problem, hindering how we fight back. review of Walter Mattli, Katharina Pistor and Shoshana Zuboff by QUINN SLOBODIAN

…” …Mapping such a future requires being clear-eyed about the tools at hand. The third book under review is invaluable for its (near) break with the constraints imposed by the binary of darkness and light. While orders of magnitude more understated than Zuboff’s, Katharina Pistor’s The Code of Capital is also an urgent tract. The difference, in her telling, is that the law doesn’t always ride a white horse. It comes as often to perpetuate injustice as redress it.

One of the misleading visions of the last thirty years of globalization is the clip-art image of a gridded globe, streaked by laser beams of information and money. Beyond the proliferation of obstacles to mobility repressed by this image, it also gives the false sense of capital existing mostly in low earth orbit beyond the reach of territorial nation-states—an extraterrestrial “market people” beaming from one spot to the next. Some critics of the present order reinforce this image by speaking of a world where the market has become “disembedded” from society and states, cut free of institutional constraints to chase profits and transmit them back into the bank accounts of the “few not the many.”

Capital is global not because it exists in the ether, but because, when properly legally framed, it is portable.

But while the outcome might be accurate, Pistor makes clear that the description is faulty. Assets—and wealth itself—do not exist outside the law and the state. The concentration of wealth and its evasion of state attempts at its capture through taxation also do not happen by escaping law or the state, but through the law and the state—through projects of legal “encoding,” to use Pistor’s dominant metaphor.

The protagonists of Pistor’s narrative include the trust, which is used to put assets an arm’s length from their original owner (originally to family members, but now, increasingly, to financial intermediaries); the partitioning of asset pools within corporations, which allows them (as in Mattli) to take on extra risk and avoid shareholder governance; and the Investor State Dispute Settlement mechanism, which allows foreign investors to sue states for lost profits.

She shows that capital is global not because it exists in the ether, but because, when properly legally framed, it is portable: “it is possible to code assets in the modules of one legal system and still have them respected and enforced by courts and regulators of another country.” Far from a sub-galactic global space of flows, she shows that assets are almost all drawn up according to the templates of two relatively small places—New York State and Great Britain.

Corporations may be able to choose their own “birthplace,” but that birthplace must still be on the planet. The place where the asset comes to earth points to the place where it can (at least hypothetically) be challenged. Pistor introduces us to new sites and conventions created to offer protection for capital mobility and insulation from democratic states, places with their own acronyms, where PRIME Finance (Panel of Recognized International market Experts in finance) protects PRIMA (the Place of Relevant Intermediary Approach convention).

The quicksilver quality of assets can be a strength but also a weakness. While Zuboff presents human behavior as the novel “fourth fictional commodity” now being enclosed after Karl Polanyi’s land, labor, and money, Pistor points out that immaterial or intangible property have long presented a challenge to capitalists eager to turn a song, a swoosh, a swipe, or a string of formula into private property. Pistor reminds us that Google not only seeks to elude the law, but also use it. Its algorithm, PageRank—which is “best described as a filing system”—was patented and exclusively licensed, and it practices aggressive uses of trade secrecy law and non-compete clauses.

While Zuboff uses metaphors of darkness to describe tech capitalism, Pistor uses a metaphor from tech to describe capitalism’s laws. A terrain of struggle populated by “modules” and “coding” holds neither the liberatory promise of eruption into the benevolently regulated space beyond the East Germany of our own digital abjection nor the royal road back to the financial agora of the mid-century stock exchange. Instead it is a workaday exploration of strategies necessary to redefine what property is in the first place.

This struggle does not happen on level ground. The capacity to engage in legal combat is entirely conditioned by access to resources—the teams of lawyers that can be deployed. The volume of these resources themselves is an expression of the accumulation of the concentrations of wealth created in the last couple of centuries, making path dependency a powerful force to be reckoned with.

Draining the darkness would only bring to light something we already knew was there.

Here, Pistor’s example of Belize is instructive. In 2007, Mayan people, with the help of a team of historians, lawyers, anthropologists, won a supreme court case establishing the collective property right of indigenous people to their own land. But their victory was short-lived. The government soon trampled on its own court’s ruling to allow mining by private corporations. The example is either hopeful or fatalistic, depending on your disposition, but it remains a valuable case study in how property claims are made and unmade. As Pistor points out, there are few claims more powerful at present than that something is “legal” and that it is “property.” Yet, as her book shows, neither of these claims are universal and both dissolve on exposure to history. Her metaphors allow us to see how, by ceding democratic control of law, we’ve “depoliticized critical questions of self-governance,” preserving mobility for some and blocking it for others.

It also reminds us that the idea of a wild, ungoverned space of data and finance depicted by Zuboff and Mattli are false. The wealth drawn from both the digital darkness and the dark pools of Wall Street exists only by virtue of the law’s encasement. Draining the darkness would only bring to light something we already knew was there. What we face is less a long night awaiting the arrival of light and more a war of movement along long-established trench lines. Suns rise by themselves; recoding takes work.

The Age of Surveillance Capitalism: The Fight for a Human Future at the New Frontier of Power
Shoshana Zuboff
PublicAffairs, $38.00 (cloth)

Darkness by Design: The Hidden Power in Global Capital Markets
Walter Mattli
Princeton University Press, $29.95 (cloth)

The Code of Capital: How the Law Creates Wealth and Inequality
Katharina Pistor
Princeton University Press, $29.95 (cloth)