The Code of Capital by Katharina Pistor

The Code of Capital by Katharina Pistor

Author:Katharina Pistor
Language: eng
Format: epub
Publisher: Princeton University Press
Published: 2019-02-25T00:00:00+00:00


The Masters’ Legal Origin

Global capital exists and thrives without a global state or a global law. The explanation for this is that law has become 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. In this way, a single domestic system could sustain global capitalism; in practice there are two that dominate it, as mentioned above: English and New York State law. Most of the true masters of the code harken from one of these common law systems, or have received additional legal training there, as reflected in the large number of master students from abroad who are trained at law schools in the United Kingdom and the United States.23 What gives the common law this edge over civil law systems? And, is it the common law itself, the organization of the legal profession in common law systems, or a combination of the two?

There has been a lively debate about the differences between and the pros and cons of the common law and the civil law families for quite some time. Comparative lawyers had long concluded that the difference lies less in the contents of legal rules and more in features broadly labeled as legal culture. Nonetheless economists called for a re-assessment of the virtues of common law versus civil law, a field they called “new comparative economics.”24 They brought statistical tools to the table and coded what they believed were key provisions in corporate and bankruptcy law to demonstrate that the level of shareholder and creditor protection varies among the major legal families in statistically significant ways. The common law comes out on top for shareholders’ rights; on creditor rights, the German civil law family is a close second, but the French civil law system trails on both fronts.25 Critically, these legal differences have been identified as important determinants for financial outcomes: common law systems tend to have bigger and more liquid financial markets than do civil law countries, especially those of the French type.26

These findings have spurred a cottage industry that used these data to test the impact of legal origin (common law vs. civil law) on the size of government, levels of investments, corruption, the pace of law enforcement by the courts, and so forth; but they also gave rise to critical reviews of the quality of the data and questions about the robustness of the findings.27 This is not the place to review this debate, except to say that it has omitted a key variable—the lawyers and their role in the different legal systems. If the argument advanced in this book is correct, that capital is coded in law and that lawyers are the masters of the code, and most master coders originate from one legal system—the common law—then it is time to revisit the legal origin debate.

The English jurist, Simeon E. Baldwin, described the role of lawyers in the common law as follows: “The development of law .



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