Capitalisn’t: How Inequality Distorts the Law

Episode Transcript

Katharina Pistor: 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 over others.

Bethany McLean: Welcome to the podcast, Columbia law professor, Katharina Pistor, an author of the new book, The Law of Capitalism and How to Transform It. For our listeners, you differentiate between private law and public law. Can you start by explaining what you mean by those concepts?

Katharina: 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.

Luigi Zingales: In your book, you define capitalists as a, and I quote, "legal regime that enables the appropriation of collective resources, including the law itself, for private gain." Can you please explain this idea to our readers? To our listeners, sorry. Can you explain this idea to our listeners? [laughs]

Katharina: I'm happy to. 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, et cetera. Capital, in my mind, does not exist without the legal coding.

That also then, I think, 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. 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.

I think one could also, however, use the law for very different purposes. 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. You can't just do whatever you want when you manage other people's assets. You're bound by certain principles. What I'm essentially saying is we want to have-- we should probably extend these principles of reciprocity and respect for others beyond the narrow realm of fiduciary duties, for example.

Bethany: When you say the capitalists have done this, I want to break down a little bit what that means. Was this intentional? If it was intentional, who intended it? Did states intend it? Did original capitalists intend it? Is this a system, like a Nietzschean will to power where the capitalist will to profit just becomes, if that makes sense?

Katharina: I think 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, been 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. Then you try to develop the legal arguments to defend this typically with a good lawyer on your side. 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. Lawyers are always part of it. They are also part of the rent seekers, some people would call them.

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. When they recognize new codings of capital, or allow strategic litigation to go forward, they basically vindicate what private practice has done. They also, 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. 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.

Luigi: What I understand is that your complaint is not about the fact that private law applies between me and Bethany because, by and large, we are people with the same bargaining power, the same position, the same information, everything you say. Where we need a difference is when we deal with large corporations, because large corporations are almost like small private governments. We will need a third branch of law.

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. In a sense, we need a new branch of law for the interaction between normal consumers and corporations. Maybe the private law as it is is fine between corporations themselves because they are 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.

Katharina: 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, to get out of contracts if they are unfair within a period of time, et cetera. 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.

Even if 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 the way in which private law has always been under all considerations. 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 to work for the advantage of those who know how best to use it. Basically, I want to give it a new type of normative foundation that is better also aligned with our ideas of democratic self-governance, et cetera.

Luigi: In various jurisdictions, I don't know the US one so well, there are forms of protection. For example, certain issues are inalienable precisely to avoid people taking advantage. It's not impossible or unprecedented for private law to introduce this element of rebalancing. What are you saying more than just we need more rebalancing?

Katharina: I think we really need to reset private law is what I'm trying to argue. It's 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 all contracts in principle should be fair and that courts sometimes adjust and adapt to a contract if it's not entirely fair. US courts have refused to do so. I think the US is an outlier in many of these areas, but it's also very important because American law has been transplanted or has been made portable to be used also in many transnational transactions. Its reach goes well beyond the United States.

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 offer boilerplate contracts with all kinds of clauses that you simply sign.

If you want to complain, sue me. It takes years for a class action to get together. It has to be certified. 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. If you look at the dynamics of how the legal system operates, just having some counterclaims is just not enough if you still allow the other side to use the law in such a powerful manner.

Luigi: Let's go back to private law between private individuals. You're saying you want to reset it. Help me out. Suppose that I am renting an apartment that Bethany owns. Who is the weak contracting party here? Who should be protected? What are the principles that you insert? It says in the current system is basically free contract. 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.

Katharina: Of course, a lawyer would always say it depends. 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 and you don't own any others. I think every person should have a roof over his or her head. 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. If you decide that you want to own houses and rent out property for that, then you also have certain obligations vis-a-vis the other side, that you don't rip them off.

Bethany: I was going to approach the question, I guess, a little bit differently, which is I've been thinking about, as you talked 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 he said would be reduced to comparative impotence without it. 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?

Katharina: Three things. First, the big corporations, their origins go back to colonial empires. The English East Indian Company, the Dutch East Indian Company, other colonial companies were already limited liability companies were granted these privileges by royal charter or by the estates in order to empower them to be active in colonies. Very often, colonial corporations were the first governors in the colonies. Those who ran them for commercial purposes typically also enjoyed already a limited liability. 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 give 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, if FT had an article today, that big oil companies are stopping their repurchase programs 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 the shield in place, especially when you use it intentionally to make a lot of money before oil 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.

Bethany: 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 US at least, where the government is increasingly assertive. Are there episodes, are there 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?

Katharina: I think there have been periods of time where a corporation certainly were even, could be reigned in and were reigned in more than they are today on multiple fronts. 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.

On the global level, it's a product of the last 20 years or so of jurisprudence. In the US, this was thought 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. We have globalized this principle. You pick and choose the corporate law that best suits management or the shareholders, not necessarily workers or any of the other constituencies.

This portability, as part of our globalization effort of course, has made it much harder for domestic jurisdictions to reign in the power of corporations. They still can use public law, but capital is quite mobile and can also get around many of these other legal constraints. I think that's one of the reasons why it has become even harder to control what they do.

Luigi: Now, the premise 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 code 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. To what extent in your book you are proposing to introduce a new civil code to the United States or some statute that limits the discretion of judges to go too much in one direction? For example, just to a recent event, to after they convict Google for monopoly, say, oh, there is nothing we can do about it.

Katharina: I think the common law has 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 very much in the hands of capitalists. It's also much more malleable in many ways than the civil law system which polices the boundary between property and contracts more carefully. It's a much more rigid system, the civil law system. The common law is more fluid.

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. The beauty of a precedent is if you get one on your side, actually you can change a lot of things. One case that I discuss in the book, it's 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.

Basically, parents are liable for the damages that their kids commit to others as a general principle. 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. 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 Martijn Hesselink, who's a civil law lawyer teaching at the EUI in Florence. 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. This could be done both in civil law and common law jurisdictions.

Luigi: 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 minority view, imposing the majority. What is your view here?

Katharina: 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. 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. There's a lot of things that you can actually do proactively with the private law that is not necessarily just defending yourself.

However, when you conflict with larger corporations, then it's a matter of defense. Here, I think very often it ends up with litigation. 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. You can do this in a bottom-up fashion. 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 court, 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. I think it is very unlikely right now to enact this in other ways. 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 direct democracy more or open democracy, as Landemore 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.

Luigi: 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. It reflects the time where they were written. The American constitution does not. When you're talking about constitutionalizing private law, which constitution are you referring to?

Katharina: 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. It 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. What I mean in particular, and that's why I would also include the US constitution, at least in its version, 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.

If you think a constitution's 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 over others. Individual rights can be a powerful defense against overreach by the state, et cetera, but it should not be able to block anything that a collective does to self-govern, whether it's environmental governance or others.

If you think, for example, about 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, and we can sue states for millions of dollars if there was inequitable and unfair dealing. Those principles have been 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'm basically saying, this is if we do want to have collective governance and equitable and fair dealing, then we have to also rein in private power.

Bethany: Some of what you're talking about in terms of human decency strikes me as a moral argument. 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. 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 sit outside the system and serve as a tempering to the system as it is? Does that make sense?

Katharina: Yes. I would say this is not just a natural process that we strip the law of its moral grounding and its normative basis. 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. There was an intellectual backing of the idea that what we want to achieve with the law is basically a positive cost-benefit analysis and maybe Kaldor-Hicks type of efficiency, but not necessarily a normative grounding.

I think what we've seen as a result is that we play again 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 realized 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.

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 really yield if they lose a court case. If you lose, if somebody throws-- you're not throwing a tantrum every time. That's part of how the law operates. If you take away the normative grounding, I think we lose a lot of that.

If we want to maintain a system where most people comply with the law most of the time in a way that is 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 not only helps the capitalist, if you want, but it's actually fair to others as well who can mount a defense against being stripped of their own rights.

Bethany: 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. If part of a path forward involves the law being different, then that involves lawyers perhaps acting differently too. 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?

Katharina: I agree, lawyers are enormously powerful. You can also see this in the fees that they're charging and the rights they want to get nowadays. They're not only transactional engineers, they are actually creating a lot of value. One of the problems, of course, I face when talking to my students is that I'm 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. That's one thing you can do. You can choose to take certain cases and not to 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 production of whatever kind. 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 an antidote to the amount of money that is there. Then, of course, there are 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. There are firms, there are NGOs. You don't make $200,000 when you get out of law school, but you make a living with it. These choices should be there as well.

For me, it's very often to show them that there are strategies that they could pursue because many are stuck also by way of their education thinking that's just the way it is, this is the way the law is. What I'm trying to say is that it's not the way that the law has to be or should be, and there are ways to get around it.

Luigi: 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, last year, I think we interviewed David Enrich, who is the author of the book Servants of the Damned, where a lot of cases are exposed in which lawyers were harassing victims in the interest of the clients.

In his speech, Travis Laster, who is the vice chancellor of the Delaware Court of Chancery, 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 lied to the court and, by the way, got away with it. 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.

Katharina: I don't disagree with this, for sure. We have had internal debates, as you could imagine, after some of the big firms basically kowtowed 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.

I think that the law school administration probably feels in the bind because these are the employers of our students. Many of our students were at Columbia Law School in New York. Many of our students go to big law. We also get a lot of donations from them. This is the machine of which we are all a part. I certainly am. I realize that. I still think nonetheless that a law school should make very clear that we are standing for the rule of law, principles of fairness, et cetera, and be more selective also from whom we take money. The students also have Excel spreadsheets, which basically say which law firms have caved in to Trump and which not, so they can better make their choices as to where they want to apply for their future jobs.

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Luigi: 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 calm down and you say that, fine, but she seems to say that this is true everywhere. 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.

Bethany: Where do you think she said that? Where do you think she said that we don't trust democracy?

Luigi: In response to my-

Bethany: Which response?

Luigi: -point, because when she said that 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. 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, because there are costs and benefits, then common law can be altered by judges.

If you have a system in which you are depending the judge to be on your side, that's not a system because he's your side, who he's representing. In today's world, I'm actually a bit horrified of the way judges are appointed because they're becoming more and more political. Do you really trust these political judges to do what she has in mind? Not so sure.

Bethany: I understand that. I found the concept of her work and the gist of it revelatory because I actually do think she makes a really provocative argument. 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 this 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 has, tell me if you agree with this, but 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 in the background as a movement without accountability, and how much do you want it to be explicit?

I think that's a little bit what you're getting at, is the explicit nature of accountability. It seems to me that her answer to your question is, it 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. Maybe we want it to be more explicit. Does that make sense?

Luigi: Yes, very much so. You said many important things. Let me try to disentangle. 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 head and say the central bank should be accountable to Parliament. She's not willing to do that, and I'm sympathetic because recently our Congress has not been the best in the world.

However, I think you need to take a position, say, I want this accountable to Congress, as long as Congress is not full of campaign donation, whatever. 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, because that, to me, is anti-democratic.

Bethany: 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. 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. Sometimes what I wonder about is when a government is, perhaps it's too extreme to say today, it's running amuck, but can then private corporate power be a countervailing force in a way that we want it to be?

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's better for all of us than having it simply be government power running amuck.

Luigi: I completely understand. Let's distinguish because, again, you say a lot of things once after the other. I need to--

Bethany: Maybe I had too much caffeine this morning. [laughter] I don't know. Not enough food. [laughs]

Luigi: You definitely had too much. I find actually her work different than the traditional literature on basically lobbying and influence of political power on the law. Somebody said that a typical lobbyist said that once the law is passed, we're only at half-time. Because there is all the lobbying before and at the time the law is approved. 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 of half-time. In that sense, it's useful because even in a world in which there is no legislative power, the large corporation could be very, very influential. Now, of course, we live in a world in which now they have both, so that's really problematic. On your view of private business as a defender of democracy, I'm a little bit more skeptical. 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?

Bethany: I think we're hoping one emerges from our current time, right? At least I am. No, I don't know. 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 J.P. Morgan 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.

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. 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. 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. I guess I'm just being idealistic.

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 interest. There.

Luigi: You're right. First of all, your argument resembles an argument I heard from actually monarchist. [laughter] Monarchist said that we want a monarch because the monarch has the long-term interest of the population at heart, and it only prosper if the country prospered, and so on, so forth. Which, there is some element of truth. Unfortunately, in Italy, we have more than our fair share of shortsighted kings, so I don't think that is very powerful.

Maybe I'm too cynical, but I view the fact that it's almost impossible for a very large company to walk 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, whatever you want to be. Fiat was embedded with Mussolini. ThyssenKrupp in Germany was involved with Hitler. 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 then spent another $30 million, I think, to promote the movie. Meta just decided to drop $65 million into super PACs to boost tech-friendly state candidates.

Bethany: I know. I was thinking, when you were mentioning Fiat and Mussolini, that big tech and Donald Trump, you could have said that as well. Speaking of which, have you seen the Melania documentary?

Luigi: 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. 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're of the left, they say it's too nice. In reality, it's perfectly done. 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 by-product of the underbelly of American capitalism. You cannot say this is a foreign entity, we have nothing to do with it. No. This is what we have been cultivating for years, and that's the product.

Bethany: I will watch it. I guess how I would wrap up and summarize this is that I think her work is really interesting in this 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 background ways, and in these subterranean ways, and can you even have systems not work in subterranean ways? Because in a quickly evolving world, you can't write every detail of how things are going to work.

I think this overarching idea that all these systems function together in really interesting ways and convoluted ways is really important. In other words, you can't talk about capitalism without talking about democracy and without talking about the political system in which capitalism operates. You can't talk about capitalism without talking about the law and the legal system in which it operates. Our conversation is becoming bigger and bigger over time rather than smaller. Was that still an overly caffeinated [laughs] string of words?

Luigi: No. I think that you're absolutely right. What I want to resist a bit is that when you get bigger and bigger, first of all, you get desperate, and then you say nothing can be changed. It's also almost like an excuse, nothing-

Bethany: I suppose.

Luigi: -can be changed. I think that I love to analyze the entire picture, but I also want to decompose of what we can do in each single part to make the problem less severe. It's going to be perfect now, but perfect is the enemy of the good, so let's try at least to get it better. I don't understand, honestly, why she rejected my idea. Now, of course, I'm a little bit defensive of that idea.

Bethany: How could anybody ever? [laughs]

Luigi: 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. We have that body of law. We simply don't use those tools between individuals and corporations, because historically, corporations actually did not even exist, and when they started, they were at the grocery, at the corner, and it wasn't so important.

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. Now, even international law is used for that. A lot of the treaties, as she was mentioning, I think, at the end, is some of these treaties give power of corporation to sue governments. These are really the other way around because it makes the corporation even more powerful than government, let alone individuals.

The power of, of course, a digital platform also made it even more extreme. 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 '30s, Kiessling was a legal scholar that was the first one to say, wait a minute, when I sign one of those typified contracts, I'm not in a normal bargaining position, the one that is between you and me, Bethany. 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.

Bethany: I tried to get 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. 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 served as a restraint on capitalism of sorts, a moral break. 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? Can you compensate for that lack through a different legal system or different rules?

Luigi: I think you can. Maybe not perfectly, but you can. I'll give you even the analogy. 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 my quality, blah, blah. The social norms, if not more, but the social norms that were supporting the economy before broke down. That's why we invented regulation to keep track of it. The FDA is a product of the mass production of food and medicine. We need to invent a new form of, call it regulation, a new form of legislation to deal with the fact that I think most decisions now are made in a completely amoral way because the moral pressure is fading away.

Bethany: Yes.