On Socializing the Constitution of Economic Coordination

On Socializing the Constitution of Economic Coordination

This post is part of our symposium on socialist constitutionalism.

Sanjukta Paul–

Professor Forbath’s essay, drawing from his research into the Weimar Constitution, urges us to reconsider what we mean both by socialism and by constitutionalism. He recovers and makes vivid a socialist vision that is neither about (simply or necessarily) “nationalizing” industry nor only about redistributing the material benefits of economic activity, but about creating participatory structures of decision-making across both the “public” and “private” spheres that empower workers and others who are currently largely excluded from it: in short, robust economic democracy. The essay also hints toward a broader sense of “constitutionalism,” encompassing not only the drafting and interpretation of public constitutions, but also the re-constitution of putatively private or semi-private associations like business corporations and labor unions. These two reorientations are connected by one of the grounding LPE principles: that law constitutes markets. Centering the constitutive power of law destabilizes the usual public/private distinction and enables a vision of socialism that incorporates transformative reforms to “private” entities—and that has room for localism and decentralization, where appropriate.

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The Constitutional Role of Economic Coordination Rights

This post is part of our series on the political economy of labor & the constitution. You can find all of our posts on this topic here.

Sanjukta Paul –

Arizona Teachers Go On Strike And March To State Capitol

(via Jacobin)

There’s a common notion that pervades legal and policy debate—including among fairly liberal Democrats—that collective bargaining mechanisms, and even public coordination of markets through minimum wages and working conditions, distort market outcomes and are therefore inefficient (though they may be justified by countervailing considerations). This position immediately sets up a kind of presumption against labor coordination or public coordination of markets to benefit workers, a presumption analytically and normatively supported by Law and Economics.

Too often, progressive and even left responses have been limited to asserting that considerations other than efficiency should be balanced with efficiency concerns—we should balance fairness, or humanitarian concerns, with efficiency for example; or worker voice, living wages, and so forth are indeed efficient because they correct market failures. Some critiques rely heavily on the idea that labor is different from other commodities, which can imply that we can understand everything else as a potential commodity.

While these approaches often have merit, the Law & Political Economy orientation should attend to deeper critiques of L&E emanating from fields such as economic sociology and heterodox microeconomics. These critiques call into question the coherence of basic theoretical assumptions that are indispensable to L&E’s prescriptions about what is efficient in the first place. For example, many economists now challenge the idea that prices are determined according to orthodox microeconomic assumptions, and that these “market prices” in turn maximize welfare by allocating resources in an optimal manner; a number of sociologists, meanwhile, emphasize the indispensable role of social coordination in markets.

Also, Law & Political Economy itself can pose a powerful internal challenge to L&E, by reviving and updating the old legal realist insight that all markets are legally constructed, and by applying that insight in the weeds of particular areas of law that today have been all but given up to L&E. Relatedly, the Legal Realist move of displaying, in detail, the historical contingency of certain rules of law takes on especial importance in the context of an analytic framework like L&E, which assumes certain market rules that are given by law, but also often ignores legal contingencies and treats law as derivative of independent economic principles.

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Labor Relationships & and the Legal Vision of 1L Contracts

Sanjukta Paul—

Contracts is more than an area of law; it is a key piece of the vision we lawyers bring to many other areas of law. The 1L Contracts course supplies a foundation-stone of the “pre-analytic vision” with which lawyers will eventually think about many other things, including labor relationships. Labor regulation as such is addressed only in the optional upper-level curriculum, and it is relatively marginalized even there. As a result, many lawyers, notably in the commercial and business sphere, will bring to their dealings with labor issues the contracts “vision.” That vision ultimately tends to erase the law’s deep involvement in constituting labor relationships. It thus tends to furnish apparent justification for the exercise of power by the already-powerful, in pursuit of private ends rather than the public interest, on the stage created and sustained by law.

The specific pre-analytic vision transmitted by the conventional Contracts curriculum is of atomistic individuals contracting at arms’ length. In this vision, any pre-contracting power differentials, including those power differentials that are created or sustained by law, are rendered invisible. In our historical imagination this vision is symbolized by ‘the Lochner Era,’ which was characterized by the frequent judicial invocation of contract principles to either invalidate or undermine democratic attempts to structure labor relations and markets more generally.

But apart from ignoring, for example, “the background distribution of property rights,” this vision also sits uneasily with the present-time legal constitution of labor relationships. Moreover, perhaps because of its foundation in the pre-analytic vision of contracts, commercial law is generally selective about when it chooses to treat labor contracts as “special” on the one hand, or as instances of a more general type on the other. Continue reading

The Allocation of Economic Coordination Rights

Sanjukta Paul —

The concept of economic competition is central to policymaking deliberation in this country. Yet even as our understanding of that concept evolves to take better account of corporate power, our thinking about competition retains a fundamental blind spot. Simply, the boundaries of the business firm insulate many instances of economic coordination that would be deemed anti-competitive if they were to take place between firms or individual persons. The regulatory discrepancies that flow from this fact tend to entrench existing distributions of advantage, power, and opportunity rather than to balance it.

port pic

Economic life necessarily involves competition and coordination; it always has, although our policy choices about how to allocate coordination rights change. Presently, both antitrust law and our dominant frame for economic policy more generally tend to favor top-down, hierarchical forms of coordination

grounded in ownership rights, while viewing more democratic, horizontal forms of coordination with skepticism. This deep-seated preference, which itself precedes the contemporary concern with promoting competition, can be traced in part to antitrust’s (and the law’s) original preference for protecting property rights over workers’ freedom of association and contract – even as the pre-New Deal courts invoked the freedom of contract in other areas of economic and labor policy.

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