The Hidden Script of Capitalism

Despite the hegemonic ideology of neoliberalism – featuring the hallucination of a deregulated market – in reality, capitalism still depends on the state and rafts of legal statutes regulating capitalism. Without state, there is no capitalism. For example, it is the state that issues money – the ultimate exchange object.

Worse for the ideologues of the free market, the state also regulates commercial transactions by providing a legal framework. There are, at least, two further commercial statutes that are imperative for capitalism: property and copyright laws.

The first enables property and wealth to exit while the second protects good and services from being copied. Both are inextricably linked to capitalism and without a legally secured property, there would be no capitalism.

Similarly, if anyone can copy any product and sell it, capitalism would end very shortly. In other words, without legal statutes – the invisible scripts that run in the background of capitalism – there would be no capitalism.

In a way, law almost creates capitalism and wealth. Yet, legal statutes also create – and ideologically justify – one of the inextricable consequences of capitalism: inequality. Yet, the growing levels of inequality do threaten the social fabric of democratic-parliamentarian systems – and inevitably, of capitalism’s.

Interestingly, even the most astute observers of capitalism tend to treat the legal statutes that have underpinned capitalism ever since its inception, as a minor or even as an irrelevant ornament. In sharp contrast to that, legal statutes are the obligatory codes of capitalism.

For example, all computers need a code. Computer programs need, for example, Kathleen Booth’s alphabet code that runs in the background – unseen by the user. In the same way, the legal statute runs in the background of capitalism. In short, without a code, a computer is useless. Without a legal code, capitalism is useless.

Of course, the ideologues of neoliberalism love to assert that it is an individual’s special skills, hard work, and – naturally – it is the personal sacrifices that the rich have that justify their ever-increasing wealth. This justification also extends to their parents, grandparents and so on. And it is for this reason that they have the wealth they hold today.

In the belief system of neoliberalism, it is the individuals’ factors that have contributed to their fortunes. In reality however, without legal statutes, nearly all of their wealth would have been short-lived or never existed at all. Accumulating financial riches over a long period demands regulated means of fortification to safeguard their booty.

In capitalism, only legal statutes backed by the state’s coercive powers – police, criminal law, courts, prisons, the army, etc. – can offer this. Despite the deregulation ideology of neoliberalism, capitalism and the wealthy depend on the state and legal statutes.

Of course, under capitalism’s legal statutes, some are more equal than others. Perhaps, this is the raison d’être of legal statutes in capitalism. This has a long history.

Today’s understanding and use of the common law of property, for example, was originally invented and enforced for and by the ruling classes. It came at a time when the bulk of their capital was still locked in land. Just as French philosopher Rousseau once said,

The first man who, having enclosed a piece of ground, bethought himself of saying, “This is mine”, and found people simple enough to believe him, was the real founder of civil society … how many crimes, wars and murders, from how many horrors and misfortunes … came from that.

It is imperative to realize that it is NOT the property itself – but capitalism’s legal statutes that protects the owner of wealth. It also protects the rich and corporations from the uncertain headwinds of capitalism’s business cycles.

It assures the rich, corporations, and capitalism that there is wealth longevity – that their wealth is safe, particularly in the long run. Simultaneously, legal statutes set up, solidify sustained inequality, and ideologically justify inequality.

As for the ideological justification of capitalism and inequality, legality issues a powerful vindication against anyone challenging wealth, inequality, and capitalism. For the catch-cry: but it’s legal remains a powerful calling card.

Meanwhile, the extraordinary rise of global trade, commerce, and finance would have never been feasible without legal statutes. In a way, it certifies capitalism.

Of course, realizing the imperative of the power of legal statutes to enable, certify, and ideologically legitimize capitalism has very important repercussions on our understanding of not just the history of capitalism but its political economy. Capitalism and its code should not be seen as separated or independent of each other.

For a long time, wealthy elites have also liked to claim freedom of contract as an essential freedom. What they like to – rather conveniently – neglect is the fact that these freedoms are guaranteed by the state’s legal statutes.

While the basics of the legal statutes that make capitalism function are – more or less – the same in every country, there are, nevertheless, different local jurisdictions offering slight variations of a theme, as German philosopher Adorno would say.

This somewhat decentralized characteristic of legal statutes that is, nevertheless, used to code global capitalism offers two key advantages for the global corporate elite:

1) For one, global finance, globalization, and earth-spanning capitalism can blossom without the need for one single global state and one single global law.

2) This arrangement allows regime-picking, i.e. the corporate elite and the rich can pick and choose those countries with local rules that best suit their or their clients’ interests. This creates a particular neat form of global corruption – otherwise known as tax havens.

All too often, the entire setup has also been ideologically framed via Adam Smith’s invisible hand. This rather doctrinaire framing of the delights of capitalism has a long history. It is not just a feature of 19th century capitalism but has continued deep into the age of present day financial-global capitalism – previously known as imperialism. Even before imperialism, the wonders of the legal statutes of exploitation already worked its magic.

For example, at the time when slavery was legal – it was legal but it was always immoral, inhuman, and dehumanizing – slaves were not just owned. The legal statutes offered provisions that slaves could be used as collaterals to secure loans, for example.

With 50 million slaves globally in existence today, we should never be tempted to think that slavery is a thing of the past.

Whether with or without slaves, capitalism owes its wealth-creating capacity to “its” legal statutes. Even better, the ability of the legal statute of corporate capitalism can buffer corporate assets from its direct creditors and even secure it against workers. It secures it even against a corporation’s own shareholders – the actual owners of a corporation.

This handy setup has allowed corporations to become the most enduring swindles (the corporation as a natural person) of corporate capitalism with all its pathological consequences.

In other words, all modern economies are constructed around a complex legal network of legal statutes that are – always! – backed by coercive state powers. The fruitful interface between capitalism and the state is absolutely essential for the global ascent of capitalism.

Even today, the state and its legal and policing powers remain indispensable to capitalism. Worse, the more diverse corporate assets and wealth become and the more uneven their distribution shifts, the greater the demand for powerful law enforcement that protects capitalism and the rich.

This hidden motive is the reason why the state and capitalism are inextricably linked. This mutual dependency in times of monopoly capitalism is used to be known as state monopoly capitalism.

This inevitable mutual capitalism-state dependency shows that – despite the ideology of deregulation – the state is not (in fact cannot be) neutral. Worse, those with an interest in wealth, assets, corporations, and the wealthy as such will nearly always be given priority by legal statutes.

Camouflaged by today’s ideology – as broadcasted by corporate media – many remain unaware that property rights are not given facts. They are not even God-given. Instead, they are acquired rights often granted by the state to secure wealth, corporations, and capitalism. Meanwhile, economists like to think of the corporate organization – the corporation – as a legal fiction.

We have been made to accept treating corporations as legal persons that can buy and sell things even though corporations are anything but a legal person. Yet, the legal statute of capitalism makes this possible. It is even made to sound plausible, and, once ideologically legitimized, appears to be normal.

It is the normality of a pathology. Madness becomes normalized. The madness of capitalism prevails as enshrined in its legal codes and statutes.

Thomas Klikauer is the author of German Conspiracy Fantasies.