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Capitalization and its Legal Friends

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  • Wansleben Leon

    (Max Planck Institute for the Study of Societies, Koln, Germany)

Abstract

Katharina Pistor’s argument in The Code of Capital about the constitutive role of legal practice for the creation and distribution of wealth requires contextualization; her claims about the stand-alone role of law in determining the political economy of global capitalism are exaggerated. My first intervention concerns the concept of capital. Capital evidently is not just a legal code, but also constitutes a financial accounting entity that emerges from processes of investment, which are embedded in (economic, social, political) structures that are facilitative of unequal distributions of rewards and risks. Legal coding should be considered as part of such ‘capitalization’ and as becoming more critical in the contemporary economy, in which capitalization increasingly happens through financial engineering and through capturing rents from ‘intangible capital’. Secondly, we can only understand the distributional implications of legal coding if we recognize a) the importance of rent-seeking in secularly stagnating economies and b) the particular class configurations in what Milanovic, B. (2019). Capitalism, alone. Cambridge, MA: Harvard University Press calls ‘liberal meritocratic capitalism’. The consolidation of a capital-rich and hard-working upper class in such a capitalist formation (the extreme case being United States) not just indicates a close alliance or overlap between holders of wealth and the professions (fund managers, legal advisers etc.) that serve them. It also indicates that social class structures – the paths of socialization they reproduce; their in-built social sorting mechanisms; their close association with ideologies of legitimate privilege – play a key role in reproducing economic distributional outcomes.

Suggested Citation

  • Wansleben Leon, 2021. "Capitalization and its Legal Friends," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 11(1), pages 53-64, March.
    • Handle: RePEc:bpj:aelcon:v:11:y:2021:i:1:p:53-64:n:2
    DOI: 10.1515/ael-2020-0063
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    References listed on IDEAS

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    1. Levy, Jonathan, 2017. "Capital as Process and the History of Capitalism," Business History Review, Cambridge University Press, vol. 91(3), pages 483-510, October.
    2. Herman Mark Schwartz, 2019. "American hegemony: intellectual property rights, dollar centrality, and infrastructural power," Review of International Political Economy, Taylor & Francis Journals, vol. 26(3), pages 490-519, May.
    3. Eve Chiapello, 2007. "Accounting and the birth of the notion of capitalism," Post-Print hal-00466515, HAL.
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    More about this item

    Keywords

    capitalism; inequality; legal codes; rent-seeking;
    All these keywords.

    JEL classification:

    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • K10 - Law and Economics - - Basic Areas of Law - - - General (Constitutional Law)

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