3.3 The Simplicity of Coöperation

The most important point is that it is extremely easy to design coöperationist arrangements. It is as easy as rewriting the laws of incorporation. The fact is, designing coöperation—just like designing capital—uses the basic toolkit of the lawyer, a toolkit that has been used and mastered for centuries. It is as easy as using a hammer or screwdriver. It is basic plumbing for the lawyer.

Katharina Pistor explains this well in her book, The Code of Capital—in the context of capital, of course. The same applies to coöperation. But let’s use the case of capital here.

In The Code of Capital, Pistor demonstrates how lawyers, deploying the conventional classic tools of legal practice and relying on the enforcement powers of the state, turn ordinary assets into capital.

As noted earlier, Pistor defines “capital” as an asset with advantageous properties for its owner: The advantageous properties render the asset more valuable because it has a competitive advantage over other assets. It may be protected from taxation; it may have priority claims as against other credit holders; it may survive an economic downturn by contrast to other assets or even less well coded capital.

Historically, the class of assets that could be coded as capital—transformed into capital by lawyers—has changed over time. Whereas before it included primarily landed property and immovable goods, over time it has come to include ideas and know-how (intellectual property, trademarks, and patents) as well as digital assets such as computer code.

But the notion of an asset is very simple and consists of anything that can be owned.

And the methods of coding capital are simple and basic as well, as Katharina Pistor demonstrates. They include the basic building blocks of the law school curriculum – contract law, property law, corporations, trusts and bankruptcy. These are all classical tools of the law, even if they can be used in innovative ways to create unheard of capital forms, such as the complex derivatives and mortgage-backed securities that were responsible for the 2007 recession.

What turns assets into capital is the combination of legal code and state enforcement. This has two elements, then: law and government. Regarding the law, Pistor could not be clearer that it is lawyers who convert assets into capital, through simple legal processes and transformations. She is talking about the “legal coding of capital.” As she emphasizes, “observers treat law as a side show when in fact it is the very cloth from which capital is cut.”²³⁵ At the same time, she is equally clear about the centrality of the state. Without the state’s protection and enforcement of the legal code, it could not operate. As she writes, “accumulating wealth over long stretches of time requires additional fortification that only a code backed by the coercive powers of the state can offer.”²³⁶

Together, lawyers and the state can provide and enforce “the code of capital” that serves to give the capital holder an advantage over others. Together they provide “the legal privileging of some assets, which gives their holders a comparative advantage in accumulating wealth over others.”²³⁷ “In short, capital is inextricably linked to law and state power.”²³⁸

But the most important point of Pistor’s work is to show how simple the plumbing is: first, we are dealing with very basic assets. The class of assets are common and straightforward. They include land, debt, knowledge, and firms or institutions; the list grew, in time, to include intellectual property and digital assets like code itself.²³⁹ As Pistor writes, “ordinary assets are just that—a plot of land, a promise to be paid in the future, the pooled resources from friends and family to set up a new business, or individual skills and know-how.”²⁴⁰ Second, the tools of the trade, those of the attorney, are also basic. They are the core elements of private law, most of which are taught in the first year of law school: contract law, property law, as well as second-year courses in corporations, trusts and estates, bankruptcy law, and secured transactions. Third, the transformation of assets into capital is a simple enhancement that gives some assets merely “a comparative advantage over others.”²⁴¹ Those advantages are also simple and can be reduced to four mainly: priority, or the idea that the capital owner has a higher claim to an asset than others; durability, which means that the ownership extends in time; universality, which means that it extends spatially; and convertibility, which means the capability to convert the asset into liquid money.²⁴² As Pistor writes, “Law is code; it turns a simple asset into a capital asset by bestowing the attributes of priority, durability, universality, and convertibility on it.”²⁴³ Fourth and finally, the entire scheme rests on two very basic instincts or practices common throughout history:

For centuries, private attorneys have molded and adapted these legal modules to a changing roster of assets and have thereby enhanced their clients’ wealth. And states have supported the coding of capital by offering their coercive law powers to enforce the legal rights that have been bestowed on capital.²⁴⁴

Pistor brilliantly lays this out in her book, The Code of Capital. Others as well spell out this essential, intimate, but basic link between legal practice and government enforcement. Surprisingly, some of the German Ordoliberals did as well—as Foucault details in The Birth of Biopolitics. This is, in fact, precisely the “singularity” that Foucault associates with the German Ordoliberals: the recognition of the central role of legal regulation in structuring the market society—or what Foucault writes, “the redefinition of the juridical institution and of the necessary rules of right in a society regulated on the basis of and in terms of the competitive market economy: the problem then, broadly speaking, of law.”²⁴⁵

In a fascinating passage discussing the Walter Lippmann colloquium held in France in August 1938, Foucault cites the organizer, Louis Rougier, who places basic legal regulation at the core of market society—anticipating perhaps “the code of capital.” Rougier was more of a liberal than an ordo-neoliberal, but his language and ideas tracked theirs, to an extent. Rougier says:

The liberal regime is not just the result of a spontaneous natural order as the many authors of the Natural codes declared in the eighteenth century; it is also the result of a legal order that presupposes juridical intervention by the state. Economic life takes place [in fact] within a juridical framework which fixes the regime of property, contracts, patents, bankruptcy, the status of professional associations and commercial societies, the currency, and banking, none of which are given by nature, like the laws of economic equilibrium, but are contingent creations of legislation.²⁴⁶

This is a striking passage that corresponds pretty well to the views of the Ordoliberals (though they would subsume the notion of natural order entirely within that of legal order²⁴⁷) and prefigures the argument about the legal foundations of capital. Rougier goes on to say:

Being liberal is not like the ‘Manchester’ attitude, allowing vehicles to circulate in any direction, according to whim, with the consequence of endless congestion and accidents; and it is not that of the ‘planners,’ fixing the hours of use and routes to be followed for every vehicle: it means imposing a Highway Code, while accepting that at a time of faster means of transport this code will not necessarily be the same as in the time of stagecoaches.²⁴⁸

This idea of a “Highway Code” has several important implications for Rougier and for the Ordoliberals that Foucault teases out well in his analysis in The Birth of Biopolitics. First, it entails that the economic and juridical are fully integrated: the relationship between law and economics is not one of superstructure and infrastructure, but of co-constituency. The model is not Marx, but Weber. Second, it calls for economic-institutional historical analyses. Third, and most importantly, it makes possible a conception of “the survival of capitalism.”²⁴⁹

All of this work, especially Pistor’s, makes plain that capital is easily constructed using the basic tools of law, enforced by government.

The code of coöperation is just as simple.

The way to code assets so that they are held in a mutual or credit union, the rules about profit distributions, and the laws of incorporation are the basic building blocks of lawyers.

It is as simple to them as the use of a power drill is to the mechanic.

We know how to incorporate coöperatives and mutuals.

We know how to code coöperation.

The question is one of will, not of knowledge or expertise.