The Code of Capital
Pistor’s book shows how the law, in various ways, has been tweaked to favor the biggest businessmen and often leaves everone else holding the bag. Poeple in general do not think of the law and the courts as enemies, but there are good reasons why they should.
Contracts and property rights support free markets, but capitalism requires more – the legal privileging of some assets, which gives their holders a comparative advantage in accumulating wealth over others. Not all assets are equal; the ones with superior legal coding tend to be “more equal” than others.
Not the asset itself, but its legal coding, protects the asset holder from the headwinds of ordinary business cycles and gives his wealth longevity, therefore setting the stage for sustained inequality. Fortunes can be made or lost by altering an asset’s legal coding.
Today’s entrepreneurs no longer need to seek redress at home, and the fate of their wealth is no longer tied to the communities they have left behind. Instead, they can choose among many legal systems whichever one they prefer, and can enjoy its benefits even without physically moving themselves.
(All citations from Pistor.)
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