How Inequality Distorts the Law - ft. Katharina Pistor

So if you think a constitution is actually the framework within which we constrain power, power of the state in particular, but I would also say we have to extend this to private power, then we also have to think about how does actually the private law fit in if we want to give priority or at least a very important role in the world for collective self-governance, not only for individual rights or for others. I'm Bethany McLean. Did you ever have a moment of doubt about capitalism and whether greed's a good idea? And I'm Lucia Zingales. We have socialism for the very rich, rugged individualism for the poor. And this is Capital Isn't, a podcast about what is working in capitalism. First of all, tell me, is there some society you know that doesn't run on greed? And most importantly, what isn't? We ought to do better by the people that get left behind. I don't think we should have killed the capital system in the process. So when we talk about the market, we usually picture people buying and selling. But there's a hidden layer of software of sorts running in the background, a legal code that determines who gets rich, who stays poor, and who gets to skip the rules entirely. We've spent years on this show talking about how industries capture the government. But what if the problem is deeper? What if the very laws of properties and contract, the private law we use every day, have been hacked by, let's say, the 1%. This is the provocative thesis of Columbia law professor Katerina Pistor. In her work, she argues that the code of capitalism hasn't just been written for the wealthy. It's been weaponized to protect them from the rest of us. She said that when you sign a contract or buy a stock, you aren't just making a deal. You're entering a system where the rules are designed to favor the person with the most expensive lawyer. From ghost courts that prevent you from suing big tech companies to legal loopholes that let billionaires hide wealth across borders. Pistor claims that the legal system is making choices about who wins and who loses every day. But the problem is, it pretends that it isn't. It pretends that it's a completely fair and impartial system. And the way in which it's rigged is hidden from sight. They've turned the law into a private club where the entus fee is a $1,000 an hour attorney. Pistor calls it the code of capital, and she argues that the solution isn't just new regulation or a different tax bracket. It's a total democratization of the law itself. This idea, not so novel for our listeners, what is novel is her remedies. Pistor claims that private law, property, contract, corporate, and bankruptcy law, affects who gets rich and who doesn't, just pretends to be neutral. She wants those choices brought back into democratic debate. She asks for a realignment of private law and its normative foundations with principle of constitutional democracy, in short, the democratization of private law. But which constitution? The U.S. one or the German one? We'd better ask her. Welcome to the podcast, Columbia Law Professor Katerina Pistor. You differentiate between private law and public law. Can you start by explaining what you mean by those concepts? Yes. Public law is basically the relationship that is in legal terms between the state and its citizens. It's the constitution, regulation, administrative law, criminal law. It's all part of public law. Private law is property rights and contracts and collateral law and business organization law, basically law that private actors can use to organize their own relations with one another in the world. So, in your book, you define capitalism as a, and I quote, legal regime that enables the appropriation of collective resources, including the law itself, for private gain. So in my previous book, The Code of Capital, I have shown that capital exists only because you combine certain types of assets, a piece of land or a promise to future pay, or an idea with the right legal coding. You use property rights so that you can actually monetize the value of land. Otherwise, you can use it, but you can't really sell it. You use intellectual property rights to turn ideas into monetizable assets. You use other legal features, corporate law to create legal persons that can accumulate capital, etc. So capital, in my mind, does not exist without the legal coding. And that also then extends to the system of capitalism, which operates because many people can use the legal coding and rely on the enforceability of the law and can invoke litigation and law enforcement against others to build their own private power base. So to some extent, I'm just simply saying, let's just strip away what capitalism and the capitalists have done with our legal system. They've used something that was originally created for a piece of land or a cow or a plow and converted this into something that is usable for financial assets. And I think one could also, however, use the law for very different purposes. And there are many aspects in existing private law, too, that allows you to organize, let's say, co-ops or to use private law to impose obligations on others, like in fiduciary duties that we have in corporate law. So you can't just do whatever you want when you manage other people's assets. You're bound by certain principles. And what I'm essentially saying is we want to have – we should probably extend these principles of reciprocity and respect for others beyond the narrowing arm of fiduciary duties, for example. So when you say the capitalists have done this, I want to break down a little bit what that means. Was this intentional? And if it was intentional, who intended it? Did states intend it? Did original capitalists intend it? Or is this a system of sort of like a Nietzschean will to power, where the capitalist will to profit just sort of becomes? So I think it's, you know, it's not a grand design. Basically, I think the techniques that were originally developed when we enclosed the land and created individualized property rights for some owners over others that allowed them to exclude others and to reap the profits from the land for themselves and nobody else. The same techniques have over time being employed to code other assets as capital. The same thing over and over. You basically enclose some assets where ownership rights are not entirely clear. The commons, intellectual property rights, our data. Then you claim that they're yours. And then you try to develop the legal arguments to defend this, typically with a good lawyer on your side. So in England, you had the country lawyers that did the conveyance of land, which became a completely complex thing that nobody else understood but them, right? So lawyers are always part of it. They are also part of the, you know, rent seekers, you know, some people would call them. And the state is implicated as well. It's not that the state is outside of that. It's implicated, of course, through its judiciary because they do enforce these rights. So when they recognize new codings of capital, new or allow strategic litigation to go forward, they basically vindicate what private practice has done. And they're also, you know, when some of the practices will be challenged by others who might suffer from that, then it very much depends on how they come out on either side. So I think through this decentralized process of trial and error, but also having the right resources, to hire the right lawyers, and to push the next frontier of asset enclosure, that's how capitalism has evolved over time. What I understand is that your complaint is not about the fact that private law applies between me and Bettany, because by and large, we are people with the same bargaining power, the same position, the same formation, everything's said. Where we need a difference is when we deal with large corporations, because large corporations are almost like small private governments. So we will need a third branch of law as we have, the public law is different from private because we're dealing with a entity that has enormously more power than we have. And so we need to be protected against them. And so in a sense, we need a new branch of law for the interaction between normal consumers and corporation, but maybe the private law as it is, is fine between corporation themselves because they more or less equally powerful. But when it comes to a consumer or workers with a corporation, the asymmetry is so large that we need a quasi-public law. Yeah, it could be either quasi-public law. The European Union has done something along those lines because it regulates, for example, consumer protection much more so than what is done here in the United States and has been, I think, quite successful in doing this. So, you know, to get out of contracts if they're unfair within a period of time, et cetera, et cetera. I think I'm trying to go a step further and basically say that even in the relationship between the two of you, I would say that we should have principles of fairness and reciprocity built into this. I have to respect the others. I can't just take advantage of others. And even if you are, you know, we are not a big corporation, you can also as an individual be quite ruthless in the use of private law, which is not necessarily, you know, the way in which private law has always been under all considerations. So I'm basically trying to rescue private law from its having been turned into a black ladder device that has been stripped of its normative foundations and has been used primarily sort of to work for the advantage of those who know how best to use it. But basically I want to give it a new type of normative foundation that is better also aligned with our ideas of democratic self-governance and et cetera. But, you know, in various jurisdictions, I don't know the U.S. window so well, there are forms of protection. For example, certain issues are inalienable precisely to avoid people taking advantage. So it's not impossible or unprecedented for private law to introduce this element of rebalancing. So what are you saying more than just we need more rebalancing? So I think we really need to reset private laws is what I'm trying to argue because I think some of these provisions do exist, like the principle of fairness, which in some jurisdictions, although not in the United States, has been interpreted to make sure that contracts in principle, all contracts in principle should be fair and that courts sometimes adjust and adapt a contract if it's not entirely fair. U.S. courts have refused to do so. So I think the U.S. is kind of an outlier in many of these areas, but it's also very important because American law has been transplanted or has been used, has been made portable to be used also in many transnational transactions. So its reach goes well beyond the United States. But going back to what I'm trying to say is I think a private law that fosters the ability to use what ultimately is a social resource, the legal system, to advance very aggressively private goals. Yes, sometimes if you go to court and you complain and you actually have standing in a court of law and you can afford your lawyers, you might be able to do something against that with the law. But built into the private law is also this first mover advantage. It's basically playing catch me if you can. I do what I do. I sort of offer boilerplate contracts with all kinds of clauses that you simply sign. And if you want to complain, sue me, you know, sue me. And it takes years for a class action to get together. It has to be certified. And then if I fear that the judge might actually issue a precedent that goes against my business practice, I simply settle with no implications for the law. The law stays the same and I just pay a few hundred million dollars to get out of the claim. So if you look at the dynamics of how the legal system operates, just having some counterclaims is just not enough, right? If you still allow the other side to use the law in such a powerful manner. So let's go back to private law between private individuals. So you saying you want to reset it So help me out Suppose that I am renting an apartment that Bethany owns Who is the weak contracting party here Who should be protected And what are the principles that you insert In the current system, it's basically free contracts. So, we can write more or less any contract we want in this context. Do you want to limit this? Guide me what you want to do. Yeah, I think, you know, and always, of course, you know, a lawyer would always say it depends. So if you have five homes and you also rent now a little seaside apartment from Bethany, I think things are slightly different than if this is your primary home. So I think every person should have a roof over his or her head. And that might mean that we have to limit the contractual freedom of homeowners to rent at the price they want or to throw you out whenever they wish. Or leave the apartment in the state that it's in rather than doing the repairs that is needed. So I think if you decide that you want to own houses and grant out property for that, then you also have certain obligations vis-a-vis the other side that you don't rip them off. I've been thinking about the invention of the Limited Liability Corporation. I was thinking back to that famous quote. I think it was Nicholas Butler when he was the president of Columbia, who back in 1911 maybe declared the Limited Liability Corporation as the greatest single discovery of modern times, that it surpassed even steam and electricity. which she said would be reduced to comparative impotence without it. And I was wondering as we talked how you think about a limited liability corporation. Should that not exist, essentially? Should nobody have limited liability? Is it a powerful thing and a tool for good, or is it a dangerous thing, or is it both? So, three things. First, the big corporations, their origins go back to colonial empires, right? The English East Indian Company, the Dutch East Indian Company, other colonial companies were already limited liability companies, were granted these kind of privileges by royal charter or by the estates in order to empower them to be active in colonies. And very often, colonial corporations were the first governors in the colonies. And those who ran them for commercial purposes typically also enjoyed already limited liability. So that's the first point. Let's think about the history. Second point, in the 19th century or so, when we were relying mostly on capital intensive production and wanted to broaden the capital base by making it possible for individuals to invest in corporations, not only put their savings under the mattress, I think it made a lot of sense to keep the small investors limited liability because otherwise they would have taken risks that they shouldn't have to fathom. On the other hand, today, when we see, for example, that if FT had an article today, that big oil companies are stopping their repurchase programs, right? Because they are fearing that their budgets will come under stress as our oil prices further decline. For years and years, they have been paying out enormous sums to investors who knew very well that they were investing in the most polluting companies on the planet. And they are shielded from any liability that these companies impose on others by limited liability. I think we should rethink whether we want to keep this shield in place, especially when you use it intentionally to make a lot of money before all prices tank at the expense of others. And you're just protecting yourself behind a limited liability shield that had been enacted originally for very different types of purposes. It looked for a lot of time like corporations were using the law and becoming more and more powerful. We're now living in a time in the U.S. at least where the government is increasingly assertive. assertive. There are times throughout history where the ability of corporations or private actors to use the law has actually worked to blunt government power in a way that has been helpful to people, or has this always been a one-sided movement over time in which this has worked against the interests of people? So I think there have been periods of time where corporations certainly could be reigned in and were reigned in more than they are today on multiple fronts. And one of the points, of course, is for corporations is that, first of all, you can pick and choose the corporate law by which you wish to be governed as a corporation. You don't need a visa for that. You don't need an entry permit or anything. You basically incorporate in Delaware or in another jurisdiction of your choice, and you will still be recognized as a corporation elsewhere. That's, on a global level, it's a product of the last 20 years or so of jurisprudence. In the US, this was fought out within the United States, within the federal system in the 19th century, that a company incorporated in New Jersey or in Delaware could do business elsewhere. But we have globalized this principle. So you pick and choose the corporate law that best suits management or the shareholders, not necessarily workers or any of the other constituencies. And this portability, this part of our globalization effort, of course, has made it much harder for domestic jurisdictions to rein in the power of corporations. They still can use public law, right? But capital is quite mobile and can also get around many of these other legal constraints. And so I think that's one of the reasons why it has become even harder to control what they do. Now, the problems you outline are present probably in any type of legal system, particularly maybe the judges going too much in one direction or push, but they are really emphasized in a common law system where a lot of discretion is left to the courts. After all, the reason why Napoleon introduced the civil court was precisely to impose the revolutionary ideas to some courts that were Ancien Regime courts, and they were very reluctant to apply the new ideas. So to what extent in your book you're proposing kind of to introduce a new civil code to the United States or some statue that limits the discretion of judges to go too much in one direction? For example, just to at least an event, to after they convict Google for monopoly, say, oh, there's nothing we can do about it. Yeah. So I think, you know, the common law has, you know, advantages and disadvantages. I think that common law, because it's relatively decentralized and can be used by strategic actors to try to also overturn rules or change the rules, not only to win a single game, has worked, I think, very much in the hands of capitalists. And I think it's also much more malleable in many ways than the civil law system, which polices the boundary between property and contracts more carefully. So it's a much more rigid system, the civil law system. The common law is more fluid. But it does give, however, also if you think about a reset of the system or a change, it also gives you the tools to change it without having to go through legislative change, which in the current political moment is really difficult to do. So the beauty of a precedent is if you get one on your side, you can change a lot of things. And one case that I discuss in the book is actually not only a single case, but a line of case law that the UK Supreme Court initiated, where it holds major oil companies or multinational corporations liable for torts committed by its subsidiaries, not under standard, piercing the veil doctrines, which are very difficult to meet in the law, but under duty of care principles. So basically, parents are liable for the damages that the kids commit to others as a general principle. And so, you know, that's something you get from a UK Supreme Court and probably more likely from it than you would get necessarily from a civil law judge. So I don't want to draw the line too rigidly between the two. One thing I propose in the book, however, and I'm taking basically the hint from Martin Hesseling, who's a civil law lawyer teaching at the EUI in Florence. And he has suggested to build something like a soft code, not a hard code, not a legislative piece, but to have a just private law code, which basically tells judges what the fundamental normative principles are of a just private law to give them something to use as they judge cases. And this could be done both in civil law and common law jurisdictions. In the book, you talk about democratizing private law. But then you're saying, oh, but by the way, parliament doesn't work. And I prefer the lawyers to create this soft code and try to impose it, which seems very much an elitist, a minority view imposed on the majority. So what is your view here? So I do have to say that at the current political moment, especially in the United States, but also in other jurisdictions, suggests that we will not get major legislative programs passed. We won't. So one thing that I want to do is basically encourage people, you and I, and associations and co-ops, whoever wants to do it, to use the private law and to organize their own lives and their business companies, their contracts and property rights in a way that is conducive to them. So there's a lot of things that you can actually do proactively with a private law that is not necessarily just defending yourself. However, when you conflict with larger corporations, then it's a matter of defense. And here, I think, you know, very often it ends up with litigation. And then the question is, who calls the shot for litigation? You can have powerful lawyers, you can have better lawyers, but you can also have them on the other side. And so you can do this in a bottom-up fashion. And we actually, in general, in the common law system, think that judges can make law and that they should make law based on broad principles that have been with us for quite some time. So it's not only the legislature. When I talk about this soft code of just private law code, I'm not saying that I'm going to sit down and write it. It could be you can imagine processes by which you get other people involved in sort of stipulating these norms and then giving them to the judges. But I think it is very unlikely right now to enact this in other ways. And if we want to get some kind of consensus about what the normative principles are on which we want to run our societies, I think a bottom-up process of kind of direct democracy more or open democracy, as London more calls it, is something is needed rather than relying only on our representatives who are, I would argue, very much in the pockets of the other side. Look at the lobbying, look at the amount of party financing they need. I don't think they will do the job. So the Italian constitution recognizes and protects its private property, but also it disciplines it in order to ensure its social function and make it accessible to all. My understanding is that the German constitution has a similar statement, reflects the time where they were written. The American constitution does not. So when you're talking about constitutionalizing private law, which constitution are you referring to? Well, it's a good, it's a fair point. I do have in mind, of course, ideas which say from the get-go that property rights is part of a broader system and should also serve the public in general terms. Although I think the realization of these principles, even in Germany for sure, I know less about Italy, has declined in legal practice. So what I mean in particular, and that's why I would also include the U.S. Constitution, at least in its version of the late 19th century after most of the amendments had passed, is that these constitutions are for collective self-governance, not only for individuals to take the law into their own hands and dominate others and tell them what to do. So if you think a constitution is actually the framework within which we constrain power, power of the state in particular, but I would also say we have to extend this to private power, then we also have to think about how does actually the private law fit in if we want to give priority or at least a very important role in the world for collective self-governance, not only for individual rights or for others. So individual rights can be a powerful defense against overreach by the state, etc., but it should not be able to block anything that a collective does to self-govern, whether it's environmental governance or others. So if you think, for example, of the international investment treaties and the state investor dispute settlement mechanisms, the extent to which private actors can hold states accountable to their property rights and to being treated with fairness, equitable and just, right? We can sue states for millions of dollars if there was an inequitable and unfair dealing. Those principles are being used to stop many states from doing for their citizens what is best for their citizens for the profit of the other side, which invokes these big normative principles mind you What I basically saying is if we do want to have collective governance and equitable and fair dealing then we have to also rein in private power Some of what you talking about in terms of human decency strikes me as a moral argument And I wonder if over time, as the world has become bigger and more complicated, we've lost some of the moral grounding that used to temper the law or used to make it unnecessary for that to be put into the law. And can you replace that moral grounding with legal language? In other words, as you talk about concepts like human decency and fairness, how do you enshrine those into the law if that's not the way people innately operate for some basic reason of human decency and morality that used to kind of sit outside the system and serve as a tempering to the system as it is? Yes. You know, this is not just a natural process that we strip the law of its moral grounding and its normative basis. You know, people wrote long articles and entire books that the only thing that really matters was efficiency or social welfare at that level, and that this was more important than justice. So there was an intellectual backing of sort of the idea that what we want to achieve with the law is basically, you know, a positive cost-benefit analysis and maybe Calder Hicks type of efficiency, but not necessarily a normative grounding. And I think what we've seen as a result is that we kind of play a game with the law, which in the end works the way it works only, as long as people still have some kind of willingness to believe in the authority of the law. Drop that, and the power of the law declines rapidly. If people really realize the extent to which this is just an instrument to suppress some or dominate others, I think many more people would be unlikely to be compliant with the law. So I think we're paying a huge price by thinking that we can actually do without a normative grounding. It works still because most people are kind of willing, if in doubt, to yield if they lose a court case, right? If you lose, if somebody throws you, you're not throwing a tantrum every time, right? So you have to, that's part of how the law operates. But if you take away the normative grounding, I think we'll lose a lot of that. And so I think if we want to maintain a system where most people comply with the law most of the time in a way that is sort of conducive to social well-being, I think we also have to think about how to reward them with that, saying it's actually fair. It's fair to you. It's not only fair, it not only helps the capitalists if you want, but it's actually fair to others as well who can mount a defense against being stripped of their own rights. So obviously, one way of interpreting your work is that the law is way more powerful than most people realize, which also means that lawyers are way more powerful than most people realize. So if part of a path forward involves the law being different, then that involves lawyers perhaps acting differently too. So what do you tell your students and how do you think lawyers should be different to shape the kind of world that you would rather see. No, I agree. Lawyers are enormously powerful. And you can also see this in the kind of fees that they're charging and the rights they want to get nowadays. It's not only, they're not only transactional engineers, they are actually creating a lot of value. So one of the problems, of course, I face when talking to my students is that I have part of a machine that extracts $85,000 per year from students to study the law, which basically implies that many of them have little choice but to code capital for a number of years before they can get out of it. One of the things I tell them is that typically you still have choice. We all know this. When you advise a client on a particular transaction, what you can or cannot do, it's ultimately for the client to decide, but you can also offer alternative strategies. And so that's one thing you can do. You can choose to take certain cases and not take other cases. There was a time when no law firm would touch a tobacco company anymore. There should be a time when no lawyer touches an oil company anymore to defend the brown assets against regulation of pollution of whatever kind. And there are ways in which you can internally in law firms create a consensus about what are those things that you don't touch. I think pro bono is nice, but it's not really a counter. It's not really an antidote to the amount of money that is there. And then of course, there are many, many young people, especially nowadays, who see climate change and have been through a very volatile life already. They grew up during COVID and they're seeing what's going on politically and in climate. And they want to find different paths. And there are firms, right? There are NGOs. You don't make $200,000 when you get out of law school, but you make a living with it. And so these choices should be there as well. For me, it's then very often to show them that there are true strategies that they could pursue, because many are stuck also by way of their education and thinking that's just the way it is. This is the way the law is. And what I'm trying to say is that it's not the way that the law has to be or should be, and their ways to get around it. I think that the Ethic Court of Lawyers said that the lawyer should use the law's procedure only for legitimate purposes and not to harass or intimidate others. However, in this podcast a few last year, I think we interviewed David Enrich, who is the author of the book, Servants of the Dam, where a lot of cases are exposed in which lawyers were harassing victims in the interest of the clients. And in a speech, Travis Luster, who is the Vice Chancellor of the Delaware Court of transfer, so not a radical person, but gave a speech about the ethic of lawyers enumerating a number of cases of lawyers of prominent law firms that lie to the court. And by the way, got away with it. So maybe Columbia Law School should do a process that they should kick out for the alarm, the lawyers that lie, or some ethic level of the alarm, the association that penalize the lawyers that step out because without this social pressure, I don't see a solution. Yeah, no, I don't disagree with this for sure. We have had internal debates, as you could imagine, after some of the big firms basically coutoed to Trump, basically, and said that they would give him $100 million or more for his pet projects in pro bono, which of course also creates internal conflicts of interest so that there are other projects that they can't do, among them Paul Weiss and others. The law school administration probably feels in a bind because these are the employers of our students. And many of our students wear Columbia Law School in New York. Many of our students go to big law. We also get a lot of donations from them. So this is the machine, right, of which we are all a part. I certainly am. I realize that. But I still think nonetheless that a law school should make very clear that we are, you know, sort of standing for the rule of law, principles of fairness, et cetera, and be more selective also. from whom we take money. The rest, the students will do, but the students also have Excel spreadsheets, which basically say which law firms have caved into Trump and which not, so they can better make their choices as to where they want to apply for their future jobs. If you're enjoying the discussions Luigi and I are having on this show, there's another University of Chicago podcast network show you should also check out. It's called Big Brains. Big Brains brings you the stories behind the pivotal breakthroughs that are reshaping our world. Change how you see the world and keep up with the latest academic thinking with Big Brains, part of the University of Chicago Podcast Network. I think that I learned a lot from the conversation with her. However, I was a bit taken back by this tension between this idea of democratization, but then I don't trust democracy. Now, I'm fine with saying this democracy is not working and it's not democracy. If you come down and you say that, fine. But she seems to say that this is true everywhere. So then my fear is we are democratic, but we don't trust the people to vote. And so we decide ourselves what are the right thing. That's my natural reaction to that. Where do you think she said that? Where do you think she said that we don't trust democracy? To my point, because when she said she wants to, rather than propose a new system or propose this, she wants to introduce a soft law that is designed by lawyers, the very same lawyers that, by the way, are bought by the corporation. And when I was, I think, giving her a soft ball of saying, look, common law at the end of the day is more captured by big business because big business is more able to bring legal suit, is more able to sway the judges, all the things that differentiate between common law and civil law. She came back and said, no, no, no, because there are costs and benefits and common law can be altered by judges. but if you have a system in which you are depending the judge to be on your side, that's not a system, okay? Because he's your side, who's representing. So in today's world, I'm actually a bit horrified of the way judges are appointed because they're becoming more and more political. And so do you really trust these political judges to do what she has in mind? Yeah. Not so sure. Yeah, I understand that. So I thought I found her work, the concept of her work and the gist of it revelatory because I actually do think she makes a really provocative argument. And we really don't think about how often the law is a tool of capitalism or the law is a tool of the way our society is structured. You tend to think of the laws as thing that runs in parallel to capitalism or to our economic system, not this code at the very core of it. one of the tensions you're getting at almost to me is relevant to our conversation with Sir Paul Tucker about the Fed and about accountability. How much do you want change to be or mechanisms that affect all of us to be happening kind of in the background as a movement without accountability, and how much do you want it to be explicit? And I think that's a little bit what you're getting at. And so it seems to me that her answer to your question evades accountability in some ways, And it's the same system. It's part and parcel then of the same system that enabled this to happen where nobody said this is the way we want it to be. It just slowly evolved over time. And maybe we want it to be more explicit. You said two many important things. Let me try to disentangle. So the first one, now, I agree. I think your parallel with Tucker is perfect with a big difference. I think that Paul, or I should say Sir Paul, is willing to go to the end and say the central bank should be accountable to parliament. But she's not willing to do that. And I'm sympathetic because recently our Congress has not been kind of the best in the world. However, I think you need to take a position to say, I want this accountable to Congress as long as Congress is not full of campaign donation, whatever. But you need to take a position that somebody else can alter your decision, not to say that basically a group of lawyers will decide what is the moral norm and impose on everybody else. That, to me, is anti-democratic. Yes. It raises another point, which is something I've been struggling with ever since reading your work about 14th century Italy and the dangers of the government and private business being aligned with each other. And so part of the story she tells, or the way she writes, I think assumes that the government and corporations are of a piece with each other. And I think sometimes what I wonder about is when a government is, perhaps it's too extreme to say today, it's running amok, but can then private corporate power be a countervailing force in a way that we want it to be? And is it always clear that governments are working in people's interest and private power in the form of corporations are working against people's interest? Or has it actually been maybe at some points in history where private corporate power can actually hold governments to account in a way that we want our system to work that way Does that make sense Or in a way in which that better for all of us than having it simply be government power running amok No I completely understand But let distinguish because, again, you say a lot of things once after the other. I need to... Maybe I had too much caffeine this morning. I don't know. Not enough food. You definitely had too much. No, I find actually her work different than the traditional literature on basically lobbying and influence of political power on the law. Somebody said, a typical lobbyist said that once the law is passed, we're only at halftime. There is all the lobbying before and at the time the law is approved. But then there is a phase between the law is approved, how the law is implemented, and most importantly, how it's litigated and how the judges are going to opine on that. Her book is basically only focused on the second half time. And in that sense, it's useful because even in a world in which there is no legislative power, large corporations can be very, very influential. Now, of course, we live in a world in which now they have both. So that's really problematic. But now, on your view of private business as a defender of democracy, I'm a little bit more skeptical. And let me ask, let me start with a question. What is your leading example? If I were to point out where business, particularly large business, stood up to any dictatorial power or any autocrat, can you give me an example? Well, I think we're hoping one emerges from our current time, right? At least I am. No, I don't know, but that was something that I wanted to explore, which is, has it ever been and could it ever be? Because the functioning of a lot of large corporations in the end, their ability to do well for themselves does depend on the well-being of society, on the well-being of all of us. In other words, for a lot of large corporations today, whether it's a bank like JPMorgan Chase or a consumer company like Procter & Gamble, if we lose our ability to spend and our ability to function as people, they lose their ability to sell their products. And so our well-beings are tied together in a way that the well-being of those in power in the government, I think throughout history, doesn't necessarily have to have anything to do with the well-being of the rest of society, the economic well-being of the rest of society. So I want to believe, I guess, that private money-making interests, at least some of them are more aligned with the well-being of society than we might believe. But I'm not sure, A, that most corporations are long-term enough in their thinking for that to really be true, nor can I give you an example then of when that would have been true in time. So I guess I'm just being idealistic. But my overall point is that I always worry about too much. I worry about private power and about corporate power, but I worry about too much well-intent and power being ascribed to government too, because I think over human history, certainly governments have done a great deal of damage and caused a great deal of loss of human life, probably more so than big corporate interests. So there. No, no, you're right. First of all, your argument resembles an argument I heard from actually Monarchist. Monarchists said we want a monarch because the monarch has the long-term interest of the population at heart and only prosper if the country prospered and so on and so forth which you know there is some element of truth but unfortunately in Italy we have both in our fair share of short-sighted kings so I don't think that is very powerful but maybe I'm too cynical but I view the fact that it's almost impossible for a very large company to work against the state, because it's too much involved with the state to not being easily blackmailable. Inevitably, every big business will be in the pocket of the local autocrat dictator or whatever you want to be. Fiat was embedded with Solini. ThyssenKrupp in Germany was involved with Hitler. You go down Basically, let me just give you two news that I'm sure will give you full of happiness. Number one, Amazon paid $40 million to Melania Trump for the right to carry. And they spent another 30, I think, to promote the movie. And Meta just decided to drop $65 million into super PACs to boost tech-friendly state candidates. Now, I know. But speaking of which, have you seen the Melania documentary? No, and I refuse to see it. I actually did watch The Apprentice, which is a fantastic movie. If you have not seen it, you have to see it. Okay. It's really a beautiful movie. Basically, nobody likes it because if they're from the right, they say it's too critical. If you have the left, they say it's too nice. In reality, it's perfectly done. And actually, to be honest, the real reason why it goes under the skin of most people is because Donald Trump is not presented as an alien coming from space, but as a byproduct of the underbelly of American capitalism. And so you cannot say this is a foreign entity with nothing to do with it. No, no. This is what we have been cultivating for years. And that's the product. Okay. I will watch it. So I guess how I would wrap up and summarize this is that I think her work is really interesting in this sort of ongoing conversation we're having about how all of these systems work together in ways that are intentional and unintentional. And do we want them to work in intentional and transparent and accountable ways? Or do we like the fact that they work in these subterranean ways? And can you even have systems not work in subterranean ways? Because you can't, in a quickly evolving world, you can't write every detail of how things are going to work. But I think this overarching idea that all these systems function together in really interesting ways and convoluted ways. In other words, you can't talk about capitalism without talking about democracy and without talking about the political system in which capitalism operates. And you can't talk about capitalism without talking about the law and the legal system in which it operates. And so I think our conversation is becoming bigger and bigger over time rather than smaller. Was that still an overly caffeinated string of words? No, I think that you're absolutely right. And what I want to resist a bit is that, you know, when you get bigger and bigger, first of all, you get desperate. And then you say nothing can be changed. And it's kind of also almost like an excuse, nothing can be changed. And I love to analyze the entire picture, but I also want to decompose on what we can do in each single part to make the problem less severe. It's going to be perfect now, but the perfect is the enemy of the good. So let's try at least to get it better. And I don't understand, honestly, why she rejected my idea. Now, of course, I'm a little bit... How could anybody ever? Of the idea of creating a new body of law for interaction with large companies. Because we do have a lot of legal experience of protecting individuals against an overly powerful entity that is called the government, right? So we have that body of law. we simply don't use those tools between individuals and corporation, because historically, corporation actually did not even exist. And when they started, they were at the grocery at the corner. It wasn't like so important. And what she doesn't say in the book, which to me should be chapter one of the book, is whatever you want to think of this system in 1970, the problem has become disproportionately larger. Why? Because globalization has really skyrocketed the possibility of playing all the tricks she describes. And now even international law is used to that. A lot of the treaties, as she was mentioning, I think at the end, that some of these treaties give power of cooperation to sue governments. So these are really sort of the other way around because it makes the corporation even more powerful than government, let alone individuals. The power of, of course, digital platform also made it even more extreme. So if there was a need for somebody to protect the little guys against the large corporations, which is something that was discovered in America, I think in the 30th, Kessling was a legal scholar that was the first one to say, wait a minute, when I sign one of those TP5 contracts, I'm not in a normal bargaining position that is between you and me, Bethany. And so they started to introduce this idea, but this idea should now go on steroid because all our life is driven by terms of contracts that no human being is able to read. Yeah. Yeah. Well, I tried to get at a part of this in the question I asked her about the moral code, because I think at the risk of going back to this idea that this conversation about capitalism encompasses a lot of things, it also does encompass this unwritten moral code. And I think part of the conversation is whether or not the law or any kind of system can actually compensate for a world in which the direct one-to-one moral code is less and less. In other words, you needed less of these rigid frameworks when people operated in a system where they might have to see the person who they'd screwed at their local country club or on the street in their town. It just served as a restraint on capitalism of sorts, a moral break. And in a world where that's going to be less and less by virtue of more complexity, more globalization, well, maybe more people, can you compensate for that lack through a different legal system or different rules? I think you can. Maybe not perfectly, but you can. And I give you even the analogy. So when we started mass production, for example, of food, the normal trust relationship that was between you and your butcher broke down because you were buying food at a distance, you didn't know the quality. And so the social norms, if not more, but the social norms that were supporting the economy before broke down. And that's why we invented regulation to keep track of it, right? And so the FDA is a product of the mass production of food and medicine. And so we need to invent a new form of, call it regulation, a new form of legislation to deal with the fact that most decisions now are made in a completely amoral way because the moral pressure is fading away. Yeah. Capitalism is a podcast from the University of Chicago Podcast Network and the Stiegler Center in collaboration with the Chicago Booth Review. 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