The Capital Order: How Economists Invented Austerity and Paved the Way to Fascism

by Clara E. Mattei

A Financial Times Best Book of the Year



"A must-read, with key lessons for the future."—Thomas Piketty



A groundbreaking examination of austerity’s dark intellectual origins. 



For more than a century, governments facing financial crisis have resorted to the economic policies of austerity—cuts to wages, fiscal spending, and public benefits—as a path to solvency. While these policies have been successful in appeasing creditors, they’ve had devastating effects on social and economic welfare in countries all over the world. Today, as austerity remains a favored policy among troubled states, an important question What if solvency was never really the goal? 



In The Capital Order, political economist Clara E. Mattei explores the intellectual origins of austerity to uncover its originating the protection of capital—and indeed capitalism—in times of social upheaval from below. 



Mattei traces modern austerity to its origins in interwar Britain and Italy, revealing how the threat of working-class power in the years after World War I animated a set of top-down economic policies that elevated owners, smothered workers, and imposed a rigid economic hierarchy across their societies. Where these policies “succeeded,” relatively speaking, was in their enrichment of certain parties, including employers and foreign trade interests, who accumulated power and capital at the expense of labor. Here, Mattei argues, is where the true value of austerity can be its insulation of entrenched privilege and its elimination of all alternatives to capitalism. 



Drawing on newly uncovered archival material from Britain and Italy, much of it translated for the first time, The Capital Order offers a damning and essential new account of the rise of austerity—and of modern economics—at the levers of contemporary political power.

Genres: Economics, Politics, History, Nonfiction, Sociology, Theory, Social Science

460 pages, Kindle Edition

First published November 17, 2022

Reviews

[The Conspiracy is Capitalism · Rating 5 out of 5]

Economics of Class War 101:
Liberal-to-Fascist Pipeline…

Preamble:
--With Trump 2024 adding to the spread of reactionary politics in capitalist countries, this was the first book I prioritized.
…The author uses a historical materialist lens to analyze society, which elite liberals (devoted to cosmopolitan capitalism: Necessary Illusions: Thought Control in Democratic Societies) find intolerable (because it clarifies real-world capitalism’s contradictions/class conflict).
...Indeed, elite liberals would rather risk Trump winning than have a moderate like Bernie Sanders open the door to material conditions/economic populism (ex. It's OK to Be Angry About Capitalism). This book dissects the Liberal-to-Fascist pipeline…

Highlights:

--The author’s historical materialist lens reveals the politics (group decision-making: “What is Politics?”) of “economics”, in particular how recessions (and fascism) can be weaponized by liberals to defend capitalism against economic democracy.
…This lens and the writing-style is academic/dense, so I always find it useful to re-organize into a summary (below). The author’s innovation is focusing on the WWI period (whereas we usually focus on WWII period) using Britian (leading capitalist) and Italy (developing capitalist) as case studies:

1) Proto-Austerity: Classical Gold Standard (1870s-1914):
--It would take at least a separate book to unpack this period (esp. the context of British empire’s domestic and foreign colonization; for a big picture, see Capital and Imperialism: Theory, History, and the Present).
--The context for this book is that “austerity” (restrict state spending) can be partially traced to the gold standard, which tried to separate “politics” from “economics” by restricting state spending over concerns of gold outflows (see later).

2) Planned Economy: WWI (1914-1918):
--WWI forced capitalist countries to re-unite “politics” (ex. state planning) with “economics”:
i) Production:
--The prior assumption of relying on free “economics” to fulfill social needs has always failed for the masses (our conception of capitalism’s “middle class” had to wait until post-WWII), but elites could always ignore this and blame the public. However, this time the elites were directly threatened by war.
--High market Demand (for war-time production) was supposed to be signalled through higher prices, where market freedom was supposed to respond with high Supply in the most efficient manner. That’s the convenient, utopic theory, at least.
…In reality, capitalists’ short-term profit-seeking led to a shift for high-profit luxury goods and exports, leaving a crisis of war-time shortages. Ex. the British empire’s crucial shipping industry shifted so much to exports that it didn’t even have enough capacity to import wartime essentials, let alone expand its war capacity. Hilarious.
--The capitalist State had to take control of the economy for (war-time) needs rather than profits, reluctantly proving how much more efficient/effective planning was. Starting with arms/energy/transportation/agriculture, via output quotas/fixed prices/caps on profits, the capitalist State exposed the chain of production beneath market exchange (Supply/Demand). This uncovering was indeed the premise of Marx’s 1867 Capital: A Critique of Political Economy, Volume 1.
--Coordination’s cooperation rather than predatory competition drastically expanded production; the State provided physical/social infrastructure, supplied raw materials, guaranteed credit, etc.
ii) Labour:
--Of course, this was still a capitalist State, so this was all done for war (short-term survival). This exposure of the politics of economics was a long-term threat (public’s political awareness, building imagination for alternatives).
--War-time demand for labour (men becoming soldiers, new factory jobs open to women/minorities) meant more bargaining power for workers (full employment, where unemployment could no longer be used to discipline workers).
--The capitalist State had to respond with military discipline, increased automation, and nationalism (not just to fight the war, but to hide class conflict within nation).
--Several pieces missing from this book: Michael Hudson (Super Imperialism: The Origin and Fundamentals of U.S. World Dominance) considers how the gold standard may limit wars, given the history of capitalist State spending is on wars rather than domestic needs (Debt: The First 5,000 Years). However, we can see in WWI that capitalist states are able to ditch self-imposed limits.
…WWI itself can be traced to capitalism’s imperialist competition, see Lenin’s 1916 Imperialism: The Highest Stage of Capitalism.

3) Threat of Economic Democracy: “Red Years” (1919-1920):
--The book’s focus is on this overlooked period, where 2 groups converged to push the lessons from WWI’s Planned Economy towards Economic Democracy (a dire threat to capitalism):
i) Workers:
--WWI’s planned economy revealed how an economy run by capitalist profits was a political decision benefiting a certain class. Production for use was not just technically plausible, but directly beneficial for the working class.
--Ex. British miners nationalization:
…At the peak of union strikes/direct action (peak workers’ bargaining power riding the post-WWI economic boom), the miners strike forced a state inquiry which openly denounced free market’s lack of coordination/waste/lack of long-term investments, etc.
…However, the state backtracked due to the Treasury economists’ fearmongering over public finances (see later); the end of the economic boom ended workers bargaining power/solidarity, followed by austerity’s recession which directly hurt the coal industry (lack exports). The state retreated from coal production, thus a shift from politics to economic markets.
--Ex. Italian cooperatives:
…Having witness the debacle of capitalist ownership’s short-termism, these enterprises directly displaced capitalist private property (i.e. capitalist ownership of the means of production, separated from the wage workers) through worker ownership/management (Democracy at Work: A Cure for Capitalism).
…The Socialist Party’s control of many municipalities provided the infrastructure by socializing finance/housing/transportation/big agriculture and industrial enterprises, ex. cooperative banks providing credit; public works contracts, etc.
--Ex. British guilds:
…On top of cooperatives challenging capitalist ownership, these guilds also displaced the profit motive. Sectors include building (little fixed infrastructure, thus easy to own means of production)/furnishing/tailoring/agriculture. This also avoids the nationalization struggle mentioned above.
…Targeting the post-WWI housing crisis, building guilds won public contracts thanks to its efficiency: without the overhead of capitalist dividends/profits, these guilds operated on cost-price service. Something to remember for today’s housing crisis:
-Why Can't You Afford a Home?
-Capital City: Gentrification and the Real Estate State
…However, austerity ended state contracts for housing projects.
--Ex. Industrial councils:
…Both Britain and Italy featured revolutionary workers councils which pushed for workers control through councils/committees beyond dependence on the capitalist state (where strikes still led to wage labour contracts), starting with factory occupations (where even police/army started as neutral, key to counter-hegemony and neglected: War is a Racket: The Antiwar Classic by America's Most Decorated Soldier) and building centers for political education (author ties this to Gramsci, etc.).

ii) Reconstructionists:
--The workers movements above were the “outsiders”. The “Reconstructionists” were the “insiders”, the reform-minded state officials who experienced WWI’s planned economy and gained growing ambitions for social welfare leading to social peace: housing/education/healthcare/transportation/social security/care-work, etc.
--For more lessons applied to today, see: A Good War: Mobilizing Canada for the Climate Emergency

…see comments below for rest of this review:
"4) Capitalist Reaction: Austerity/Fascism (1920-Great Depression)"
"5) History’s cycles: WWII"

[Jeffrey · Rating 5 out of 5]

I like how Mattei uses Italy as it transitioned into a fully fascist state, and England which kept its parliament and ‘democracy,’ to show that both countries were successful in implementing austere austerity regimes (and that ultimately present day mainstream economics share the same grammar and logic as the economic regimes implemented in Italy and subsequent fascist regimes).

Austerity is enacted through fiscal, monetary, and industrial policy through a process of disembedding economics from politics (the social) through a re-naturalization process in which the ‘science’ of economics is reasserted as objective scientific truth thereby removing agency from the people upon which this coercive and exploitive economic regime is implemented.

While reading this I was reminded of the famous debate between Albert Einstein and Henri Bergson in 1922 in France, in which Einstein represented the new emergent positivist epistemology promoting universalized truths and Bergson the phenomenological which rejects universalized truths. After WWI labor saw that in fact that there were other ways of running and managing an economy, and that in fact the ‘economy’ is not a static, immutable law, no, in fact the economy is a social creation and as such it can be designed to suit the needs of the people. The citizens of Europe saw the light - we don’t necessarily have to work for the economy, the economy can and should work for us.

Much like what happened with Einstein, a coordinate team of scientist worked tirelessly to discredit any epistemological critique of Einstein’s theories (read the book ‘The Physicist & The Philosopher’ for a detailed account of this coordinated effort), the economists of the day in England and Italy and beyond worked together through meeting in Brussels in 1920 and Genoa in 1922 to devise a plan to reassert the economics as an objective science in which Margert Thatcher would parrot 60 years later as ‘There Is No Alternative.’

Mattei reminds us that indeed there are alternatives, it is a matter for whom the economy works for. However, austerity is used over and over again to thwart the populace when they get any inkling that indeed they do have a say in this thing called the economy. We can see it manifestly right now; in the fall of 2022 with a technocratic ‘independent’ central bank raising interest rates to solve the problem of a ‘tight labor market’ and to fix this issue of the ‘great resignation.’ Ohh yeah and inflation – except what these technocrats forget to tell you in this assetized modern economy, that those who own assets in a modest inflationary environment like ours, see the prices of their assets fall precipitously as those assets are mostly in the form of debts held by the majority of the populace, who will now be paying back those debts with inflated dollars which is effectively a wealth transfer from the elites to the average American. The missing piece today, in America at least, is a labor market dominated by unions, as they would be in a position to demand wages increase in tandem. However it is important to note that the last 18-months saw the largest increase in labor union participation in the United States in over 40 years – better raise interest rates faster and put an end to that…

At the end of the day this naturalization of the economy robs humanity of the freedom to make choices that are meaningful to their nation, community, family, and themselves. The naturalized economy is a theory of cowardice, in which the present and the future is artificially delimited in order to serve a very narrow set of insecure actors. The courageous meet the present and future with a lucid understanding that creativity and collaboration are the only absolutes.

[Randall Wallace · Rating 4 out of 5]

Looking around yourself you can see the Austerity Effect: Governments that need money making cuts to services for the common person of that country - like in Greece and Bolivia. The theory is that we will be saved somehow by the greedy private sector and its existing wealth. You are not supposed to reflect on the fact that during Eisenhower’s presidency, the richest paid a whopping 91% in taxes while as of 2021 they pay only 37%. This book shows that austerity is not simply something neoliberals thought up in the 1970’s, but can be easily traced back to the end of WWI, when it emerged as capitalism’s protector from citizen’s wanting a fair share of economic rights after the shit-fest of WWI which was shown to be fought mostly to save US financiers who had invested too deeply with the allies before the war, and therefore were financiers who couldn’t economically risk the allies losing the war. After WWI, capitalist hierarchies wanted insulation from the threat of social change. Increased fairness for the voiceless? – bah, humbug. The fantasy is that austerity will reduce debt or boost economic growth, but historically, austerity hasn’t done that.

For capitalism to boost economic growth, the social relation of capital would have to be uniform across the board. Austerity’s job is as bulwark defending capitalism while silencing calls for “alternative forms of social organization.” Gotta quash messy public outcry and worker strikes under the guise of “economic discipline.” To the naked eye, austerity looks like budget cuts and calls for public moderation – we’ll eat seven courses while the rest of you can split a Snickers. Think of austerity as “an anti-democratic reaction to bottom-up change – a political weapon against one’s people. It’s an easy way to get your working classes to stand in the back of the line. After WWI, elites needed to exclude the general public from economic decision-making in order to seamlessly return the “incensed public” to the back of the line. Their “petty” concerns become “vulgar”. The logic was that the rich saved and invested which made the nation grow therefore the upper classes needed even more wealth to further help growth; “protect creditors and increase the size of their savings.” The public obviously wouldn’t dig this without heavily spun and financed PR and so “austerity requires experts willing to speak its virtues.” The same for US foreign policy; the public won’t buy its insane demands either unless Washington boldly lies to the American people through $$$ PR firms like Hill & Knowlton (PR firm Hill & Knowlton for a price made up the story of hundreds of babies pulled from incubators by Iraqi soldiers to die on the floor in 1990 and got the daughter of the Kuwaiti ambassador to lie about it on TV so US taxpayers could uncritically eat up the story and shout yes! Invade Iraq!)

This book is about how austerity in the 1920’s was terrible for the common citizens of Britain and Fascist Italy and required the “taming of men”, labor renouncing its rights, and the bending of the working class to the will of the ruling class. All hail the rentier economy appropriating a surplus value (profits) through rents and interest. Jesus may have saved, but Moses invested. Austerity = Class Control - WWI had introduced whiffs of socialism and the working-class palate had to be quickly cleared by snobby Brits and Italian fascists who thought they were facing “the largest crisis in the history in the history of capitalism.”

During WWI, capitalism had been shocked in Britain because ships were being made for the highest bidder and how would Britain make ships for itself if most ship sales were for abroad? British capitalism had shown itself to be about luxury goods and exports. Profiteering freedom did not lead to increased supplies for the government. This soon was labeled as “wasteful” or “anti-social”. By 1918, the Ministry of Food sold 4/5 of all civilian food. The government stepping in to help civilians would naturally lead to common aspirations for a better life after the war. Private property itself during the war, had had to take a back seat to both national interest and people’s needs. “Nationalization seemed like a permanent path forward.” Britain had switched to “a draconian order of work regulation” and greater union membership and developed worker assemblies. In six years, unionization had doubled with 40% of the working classes in unions. 1919 was Britain biggest year for strikes, it was also a huge year for strikes in Italy. By 1920, British manual workers had seen a 178% increase in wages from before the war.

In Italy the work force became militarized, the age limit went up and women entered the work force. Overtime work became compulsory. These interventions in both countries were deemed necessary “to promote the necessary capital accumulation to win the war” at the expense of free-market capitalism. Right after the war all this led to both governments being still responsible to popular pressure and demands for change. “War had meant welfare.” State intervention by both governments were both unprecedented and very impressive. In 1919, British nationalization projects favored the working classes, especially the transportation, coal, and health sectors. 1919 to 1920 became known as the red years, where capitalism appeared crumbling.

During WWI, social welfare was needed to create social cohesion, but after the war naturally greedy capitalists wanted to slap it silly. In Italy after the war, a fascist regime began in 1922 introducing fascist austerity, which operated as a defense mechanism against revolutionary fervor and continued welfare capitalism. Three kinds of austerity became the main weapons of the guardians of capitalism: fiscal, monetary and industrial. This involved more unemployment to reduce worker’s wages, budget cuts and a rise in interest rates so money was harder to come by. Elites had to depoliticize economic decisions removing them from “democratic scrutiny” in order to just benefit the capitalist class.

Two meetings were instrumental in setting up this new austere world where labor is taught to “bend over” for capitalism: Brussels in 1920 and Genoa in 1922. These create the blueprint for austerity: usurping people’s agency by enforcing on the people sacrifice, hard work and reduced consumption. Elites clearly wanted to quash people’s expectations for social emancipation following WWI. The Brussels meeting involved 39 nations, the one in Genoa had a diplomatic impact. The perceived story had to be changed: the problem was no longer nations committing to a stupid and expensive war, it was now citizens foolishly wanting to live above their means. The common man had to expect less from his government; think of it as a precursor of the later Big Business attack on FDR’s New Deal. Thanks to fascism in Italy, when “consensus failed, coercion was the substitute.” With public opinion squelched, the people robbed of economic agency, the social safety net was removed. This transferred resources and capital from the working classes to the savings-investment classes. Rentiers and creditors were the big winners. Such coercion required central banks which were free from political pressures to think about actually caring for the people.

Intentionally shifting cash from the many to the few: such a noble goal. The theory was that only wealthy classes save and invest, and that capital accumulation for its own sake was to be assumed to be in the national interest. Between 1920 and 1930, Austerity cut British union membership in half. By then, monetary deflation had subjugated British workers. You can call austerity repression, or de-democratization of the economy, or depoliticization of economic matters (killing public criticism of economic matters). Or call it a “lever of power for a society’s upper crust.” Italian austerity was basically British austerity backed by the threat of violence. Mussolini seizes power in 1922; for him austerity required fascism, and fascism solidified his rule. By 1925, Mussolini is a total dictator. Italian veteran’s pensions disappeared, and state expenditures were cut by one third. “Privatizations were everywhere.”

Italy couldn’t isolate itself because it wasn’t self-sufficient and so Britain sent coal and wool to Italy, and Italy sent silk and motorcars to Britain. Italy needed iron, coal, fertilizers and textiles. Mussolini first goal was settling the Italian war debt because the US and Britain had no interest in cancelling it. Once the debt was settled, Chase Bank gave Italy a $100 million loan to stabilize the lira. Forcing the Italian workers to sacrifice was Italy’s price for joining the international capitalist order. A “bloody dictatorship” was deemed a small price to pay, because foreign investors only looked at Italian economic performance.

Austerity rears its ugly head when “capitalism is under political threat.” Note that it doesn’t stabilize economies but instead stabilizes “class relations”. Austerity maintains class. Austerity always involves losers and winners; the vast majority become the losers while a tiny fraction become the winners. British douche-bag Margaret Thatcher said workers were “idle, deceitful, and inferior” and so focused on an austere message of “personal responsibility” – not hers (who could be personally responsible for that dated hairstyle?), but the workers.

Austerity you clearly see in Indonesia under the Suharto dictatorship (1967 to 1998) and Pinochet’s dictatorship in Chile (1973-1990) where the Chicago Boys get free reign and then Chile’s poverty rate flies up from 20% to 44%. And you see it big time in Russia under Yeltsin after the USSR dissolves. To the applause of US economists, Yeltsin killed more than 500 people by attacking Russian Parliament and becoming dictator (funny how not ONE liberal today calling Putin a dictator would call Yeltsin back then a dictator – no doubt because he was so clearly a US puppet). Thanks to the US then, Russian unemployment soared – “in just seven years half the Russian population became destitute.” An economic miracle! How dare Putin try to reverse the US controlled Yeltsin privatization years on behalf of the Russian people? Funny how Americans historically are carefully taught to hate any sovereign leader strong and secure enough to put their own people’s needs first, before the needs of US bankers and corporations.

Anyway, as you can see, economic austerity has been a century-long project so don’t see it as just something begun by asshole neoliberals in the 70’s. Austerity’s first job is to shut down any alternatives to capitalism. As in the Wizard of Oz, austerity’s job is to make sure the people never dwell on the obvious wizard behind the curtain manipulating the whole thing. What a great book, now I finally have an accurate historical context for austerity. Thanks, Clara! Kudos.

[Simon Mee · Rating 3 out of 5]

Contrary to what the proponents of austerity would have us think, however, the socioeconomic system we live in is not inevitable, nor is it to be grudgingly accepted as the only way forward.

The Capital Order is a very smart book, not because it uses big words, but because it takes very complicated ideas and distils them into phrases that I can parrot as my own original thinking. It sets out the conceptional framework of austerity in a manner contrary to what we are publicly told. It is a welcome shot against the shibboleth of central bank “independence”. I really want to like it. And to a large extent, I do.

…but.

I like it

Mainly austerity serves to quash public outcry and work strikes - not, as it is often advertised, to spontaneously improve a country's economic indicators by practicing greater economic discipline.

The Capital Order is about two case studies: Britain and Italy from 1919 to the mid 1920s:

- Government interventions during World War I controlled or even overrode the “capitalist system” to ensure victory.

- Postwar, elements of the working class tried to extend these interventions for their own benefit, even perhaps aiming to completely abolish said capitalist system.

- However, the political and financial elites, via various measures described as “austerity”, (which included moral judgements on consumption and “depoliticising” monetary policy) reasserted control.

For Mattei, austerity is class warfare carried out by fiscal, monetary and industrial policies/tools to ensure that the owners of capital maintain dominance over the working class. The way to judge the “success” of austerity is not whether the country is better off as a whole, but whether the class with the tools of power ends up better off vis-a-vis those without. The case studies contain lessons about the purpose and effects of austerity that can be applied to other countries at different times.

The above is a very (and I do mean very) rough summary of The Capital Order. There are pages upon pages of interesting quotes to be deployed at will the next time your local central bank says your spending is the cause of inflation:

Still today, mainstream economists provide these distinctions by talking about the differences in the propensities to save (or to consume), and if we look closely, these propensities are tacitly associated with class differences, The implication is that lower incomes are due to the unthrifty habits of individuals, as opposed to the subordinate positions of workers under capitalist social relations of production.

My undergraduate economics and finance degree is not enough to critique the economic theory, other than that Mattei describes austerity measures in a way that leads to an awkward conflict between currency revaluation and export recovery. Mattei refers to cutting production costs via industrial measures to improve exports, but this differs from the experience of France up to 1926 with its devaluation of the franc and export-led growth. However, Mattei generally makes her case and backs it up to an extent that I hope there is further literature on the subject, whether supporting or contradicting her points – I feel like the debate over austerity is one the global economy should have.

This is a really smart book.

But

Viewed through a lens of capitalist crisis, the financial conferences of Brussels and Genoa are neither irrelevant nor unsuccessful, as some have characterized them. They actually represent a landmark moment within the history of capitalism: the emergence of austerity in its modern form, as a global technocratic project.

The Capital Order reads like a puffed up PHD thesis. The structure of each chapter having an introduction, discussion, then conclusion, is nice in a textbook sense but robs it of its flow and punch.

There are also issues with the thesis itself.

The subtitle of How Economists Invented Austerity and Paved the Way to Fascism is an editor’s imagination run wild. Of the two case studies, Italy was already fascist and needed none of austerity’s help to become more fascist, whereas England’s foray with fascism came in the 1930s, and is unmentioned in the narrative. Fascism is a much more complicated beast than class warfare (and Mattei admits this!). Elements of austerity could give rise to fascism, but the examples Mattei uses in the last chapter can just as much be characterised as the “Chicago School” (a term she uses), “the Washington Consensus” or “Global North versus the Global South”. What element of class warfare is really involved when the International Monetary Fund imposes government spending conditions on its loans? Mattei’s argues that her class analysis of austerity transcends other studies, but really it rests on two countries and a sloppy last chapter that makes mistakes, such as misstating the total casualties from Yeltsin’s siege of the Russia Parliament as deaths.


The points in Capital Order do have broader application. However, two countries and a footnote telling you to do your own research is inadequate evidence that conferences in Brussels and Geneva in the early 1920s forms part of a conspiracy for the worldwide exploitation of workers. I also find it weird that The Capital Order barely acknowledges the existence of Versailles reparations and American lending on the European market. There were so many interesting things going on the early 1920s (the Washington Naval Treaties putting a lid on rearmament at a key time!) that pass unmentioned, whereas we delve far too deeply into (quite dull) Italian writings on austerity.

Contrary to what the proponents of austerity would have us think, however, the socioeconomic system we live in is not inevitable, nor is it to be grudgingly accepted as the only way forward.

Mattei’s 1920s study provides an interesting framework to view the austerity policies following the 2008 Great Recession, but it is incomplete. The Capital Order overstretches the facts it has to hand.

But... ...it really is a very smart book. I may be too harsh on its broader point, and I recommend others read it and form their own views. Austerity is an idea that will come again and again, so we should intellectually arm ourselves against it.

[Luis · Rating 5 out of 5]

On the political economy of austerity

I have to admit that I was a bit skeptical about the thesis of the book about the role of austerity as a mechanism to enforce class discipline among workers. But the author provides compelling evidence that, at least during the 1920's that was the main goal being pursued by the policy makers in England and Italy. And she builds upon those cases to provide a political economy analysis of austerity , which is of a very different kind than the traditional analysis of austerity as a tool among others at the disposal of policy makers to stabilize output and inflation. Written with clarity and with tons of references, I highly recommend it.

[Philip · Rating 3 out of 5]

"The Capital Order" is a very thoughtful critic of, essentially, capitalism - or specifically, one aspect/tactic of capitalism, austerity. Mattei argues that austerity policies are class-warfare designed to keep the little people down. She also argues that they "paved the way to fascism."

While this is a history book contrasting austerity measures and their effects in Italy and the UNited Kingdom post WWI - where Italy developed OG fascism and the U.K. didn't - Mattei argues a modern cause. It is very difficult here, I think, to separate the historic book from the modern day author and her more general argument/message.

For that reason, I may come back to this review when I have some more time. Because, the author uses the growth and development of fascism in Italy as an argument against capitalism in general, and I think it's a bad faith argument. More importantly, by writing a history book she avoids having to provide a viable option - and more, more importantly, side-steps nuanced compromises between run-away capitalism and (as an example) socialism.

Nonetheless, the book itself is a good read and truly thought provoking.
- As a history, it's fascinating, but with the caveat that Mattei sprinkles in a lot of questionable motivations on behalf of capitalist forces and a few too many "indisputable"s and "unquestionable"s - even when I personally agree with her argument, I could generally come up with more than one disputing or questioning argument.
- As a more general argument, it's even more interesting - but as I mentioned, incomplete.
- As a criticism, it's brilliant. Mattei hits nail after nail on the proverbial head.

Now, if only she would provide a viable option - or, even, any option.

Flaws aside, a highly recommended read. At least for those who see capitalism and modern economic thought as indisputable... ;P

[Sascha Döring · Rating 5 out of 5]

An utterly insightful analysis of austerity as a means of class warfare from above. Mattei shows how austerity was invented at a time when labour militancy threatened the order of capital and how it has shaped the capitalist world to the present day.

[Jan Hendricks · Rating 5 out of 5]

In her book ‘The Capital Order’, Clara Mattei traces the intellectual origins and rationales of austerity back to the beginning of the 20th Century in interwar Britain and Italy. She describes how during the First World War British and Italian governments heavily intervened in their respective economies to promote capital accumulation and win the war, thereby effectively politicising the economic sphere. According to Mattei, this broke with the previously dominant capitalist dogma that treats the political and the economic as separate entities and market forces and private property as natural phenomena.

This, in turn, gave rise to worker agitation and intensified class struggles, leading to wage increases and changes in workplace organisation, ultimately threatening the capitalist order as a whole. Faced with factory occupations and grassroots factory councils that openly advocated and pursued a change in the relations of production, the ‘anti-socialist bloc’ of liberals, nationalists, and conservatives launched a counter-attack. As Mattei points out, this counterattack in the form of austerity was, in turn, disseminated and implemented via a technocratic regime in the United Kingdom and via a fascist dictatorship in Italy.

Drawing, among other things, on archival material from the Bank of Italy, the Bank of England, and the British National Archives, Mattei sheds light on how economists were instrumental in this process by developing models, policies, and narratives that still feature prominently in the discipline, as well as broader public discourse, to this day. In doing so, she deals, in an unprecedented manner, a sweeping blow to liberalism, central bank technocracy, as well as the economics discipline as a whole (including Keynesianism) and argues that austerity, rather than constituting ‘bad’ economic policy, has to be viewed as a toolbox to maintain the capitalist order whenever capitalism is in crisis.

A brilliantly written book that tells a fascinating story and manages to weave archival findings into a coherent narrative. I thoroughly enjoyed reading it!

[Vitor · Rating 5 out of 5]

Is this a good summary? I tried to boil down Mattei's points, so please let me know what you think:

- Claims
1. Austerity is not the product of neoliberal version of captalism, but a political choice made in World War 1 by the State, as the main employer, to supress labour in order to win the war.

2. Since then, austerity has been inseparably about policy and theory working in tandem.

(a) Policy involves fiscal, monetary and industrial policies:
(i) fiscal policy, via budget cuts and regressive taxation
(ii) monetary policy, via interest rate hikes
(iii) industrial policy, via permanent attack on organized labor, to secure fundamentally wage flexibility and wage repression.

(b) Theory has roots in the 1920s, a time when marginalism became popular among economic experts, who started to advise governments in light of academic theory (when neoclassic economic thinking started to prevail). The theorical frameworks of austerity became mainstream, deemed apolitical, unbiased, classless, and not only prevented alternative systems of social relations to the capital order but also inadvertently caused a deeply classist system: one that legitimizes the priorities of a saving/investing class while suppressing labour class. E.g. worker supression is done through either:
(i) policy (e.g. illegal strikes and wage curtailing during Mussolini), or
(ii) creating economic downturn (e.g. monetary deflation with budget cuts slow down economy, creating unemployment, which then kills the bargaining power of workers, subjecting them cohersively to the capital order and channeling political power from majority to minority).

3. Austerity is rarely successful at the stated goal of stabilizing economies (fundamentally: to cut inflation and promote economic growth and debt repayment), but it does secure the preservation of a specific class relation based on capital accumulation.

- Conclusion
Thus, austerity paved the way to the rise of fascist leaders by cohersing the working class into dramatic human condition, while the concentration of political power into the hands of a minority facilitates shifting the blame to enemies elsewhere.

[Davia Finch · Rating 5 out of 5]

Everyone should read this book.

[M · Rating 5 out of 5]

Na conclusão deste livro lê-se:

Este livro descreveu um conjunto de padrões económicos influentes omnipresentes em todo o mundo e que moldam as nossas vidas quotidianas. Todavia, ao contrário do que os proponentes da austeridade gostariam que pensássemos, o sistema socioeconómico em que vivemos não é inevitável (...). A austeridade é um projeto que nasce da necessidade de preservar as relações de classe capitalistas de dominação. É o resultado de uma ação coletiva que visa excluir quaisquer alternativas ao capitalismo. Pode, por conseguinte, ser subvertida através de uma contra-ação coletiva. O estudo da sua lógica e finalidade é um primeiro passo nessa direção.

Neste livro, a aurora explica, precisamente, a lógica e a finalidade da austeridade. Fazendo um estudo comparativo da Grã-Bretanha e da Itália no período do pós-guerra - após uma enorme interferência do Estado para o esforço de guerra que veio mostrar a estreita relação entre economia e política -, a autora mostra a austeridade como mecanismo capitalista que visa disciplinar os trabalhadores, manter e naturalizar as relações de exploração capitalista, promovendo a transferência de recursos da maioria (trabalhadores) para uma minoria económica.

Todo este estudo baseia-se em textos, discursos e legislação da época analisada, contudo, muitas das palavras citadas parecem ser retiradas de um discurso recente de um qualquer dirigente europeu. É incrível como, apesar de tão óbvio, ainda existem tantos deslumbrados pela ideia do mercado livre e pela falácia da meritocracia. Ler este livro na altura em que vivemos atualmente é como ler as parangonas de um jornal do futuro próximo. Estaremos sempre condenados a repetir os erros do passado?

[Nicole Finch · Rating 4 out of 5]

I got 100 pages in and realized it was just too detailed for me and I'm not a grad student anymore and I don't have to read this extensively if I don't want to. Bless Clara E. Mattei for including a conclusion section at the end of each chapter, because I was able to read all the conclusions and understand the argument.

Mattei has done extensive, meticulous primary-source research, and she absolutely backs up her argument with evidence. What's the argument? That economic austerity measures are not some apolitical acts of God that can't be avoided, but rather deeply anti-democratic methods to perpetuate capitalism and maintain strict class hierarchy. Comparing the UK to Italy after World War One is a brilliant way to make the case, so as to not to let Anglophone countries off the hook with, "Well, sure Mussolini was bad, but it's fine when the Good Guys do it."

A NOTE ON FORMAT: Good Lord, the endnotes in this book were the worst of all worlds. First of all, the endnotes included both citations and expansions/asides, instead of having the expansions and asides as more easily-accessible footnotes in the print version, as is often the case with nonfiction books. Secondly, the expansions and asides were completely ignored in the audiobook, which leaves a whole segment of the audience without access to that information.

[Harry Fox · Rating 4 out of 5]

I both really enjoyed this book and was educated immensely by it. Further, I finish it totally convinced of its thesis that austerity is a tool for maintaining class/capital order, rather than stabilising economies.

Mattei writes excellently, and despite my non-existent understanding of classical (pure?) economics, she made everything in the book totally understandable by using clear examples and regularly rephrasing difficult parts of the ideas so that they could be comprehended in different ways.

My only reserve in giving this book 5 stars is that I would have really liked it to be a bit longer and to cover the relationship between austerity and fascism in more detail, particularly in how austerity engenders fascism, rather than just how fascism supports austerity. I think Mattei touched on this, but it didn't come through for me as much as I would have liked. In the world we inhabit in 2024, as we see far-right movements take off once again in West Europe and the USA, its really important to see how the austerity project of the last 20 years is leading to the rise of fascism, and I think Mattei would have been in a perfect position to discuss this.

[Jay Atlink · Rating 1 out of 5]

Not sure if the author is outright lying or just misunderstands macroeconomics entirely. Also the author's definitions of both austerity and fascism seem intentionally misleading. Only in a system of free enterprise could individuals have the freedom to experiment with the concrete alternative ownership systems that the author mentions (e.g. guilds, cooperatives, etc.), whereas in collectivist (forced) economic systems these experiments are impossible. Nonetheless, after repeating experiments with different forms of capital ownership, it turned out that most workers never wanted to have both their wages and investments tied up in the same employer and the risks that come with that, as is the case with a more cooperative system.

The focus on capital ownership structure of *capital in general*, the value of labor, and a focus on social spending & tax progressivity, detracts from the real struggle of the lower and middle classes. When people have options, they have negotiating power. The lower and middle classes are held back by monopolistic behavior and a collusion of state & enterprise. Capital is not a natural monopoly, and there is no reason it shouldn't be within everyone's reach. The real issues with our current economic system are the monopoly of land, the oligopoly of credit, and regulatory capture. There are solutions to these issues which the author likely knows about, but purposely omits to instead advocate for a radical and harmful agenda.

[Lorién Gómez · Rating 5 out of 5]

De los mejores libros que he leído últimamente. Un libro que te hace entender el verdadero significado de las políticas de austeridad como políticas de ofensiva capitalista, y también ayuda a desmontar muchos mitos en torno al fascismo clásico. Se viene reseña.

[Bernardo Candal · Rating 5 out of 5]

Uma aula da senhora Clara Mattei. De onde viemos e para onde vamos com a austeridade: seja na "democracia" liberal ou no fascismo, a vida das maiorias vira o inferno. Ou derrotamos liberais e fascistas ou não sobra pedra sobre pedra

[ELK · Rating 4 out of 5]

Economic democracy -- what a concept!

[Érdna · Rating 5 out of 5]

O B R I G A T Ó R I O!

[Simon · Rating 4 out of 5]

4,5

[Tim Muter · Rating 5 out of 5]

Starts off a bit boring, but has a lot of wonderful insights to offer.

[Zollie · Rating 5 out of 5]

kinda repetitive but written a lot more entertaining than most economics texts

[Chris Green · Rating 4 out of 5]

This is a book written by an academic who is a native of Italy working at the New School for Social Research in New York City. To judge by the text, she is sympathetic to socialist ideals.

The book’s primary focus is on Britain and Italy during World War I and especially the half decade following. The war severely disrupted the traditional classical liberal economic order in the western world. During the war, governments took over large parts of national economies, granting concessions to a combustible working class stirred up by inflation, corporate profiteering, long work hours, consumer shortages, and other severe hardships. The war stimulated socialist sentiment among many British and Italian workers. Unprecedented strike waves racked the economies of both countries. The apparent efficiency of a command economy demonstrated to many people during the war that there were potential alternatives to the classical liberal economic order. The Russian Revolution of 1917 provided further inspiration. There was widespread expectation of future economic policy being oriented around extensive statist economic policies to benefit the working class — more than a few people hoped for outright overthrow of the capitalist system. In parts of Italy during 1919–21, workers took over factories and began running them democratically. All this scared the daylights out of Italy’s business elite, and they increasingly turned to supporting the Fascist Party as a rallying point for anti-leftist forces.

Meanwhile in the UK, there was also serious working-class ferment although not as revolutionary as in Italy. Politicians felt the need to appear to be getting with the radical spirit of the times. Prime Minister Lloyd George spoke of reconstructing post-war British society as a “nation fit for heroes” — implying returning World War I veterans would benefit from a rapidly expanded welfare state. Winston Churchill expressed support for nationalizing British railroads. There was widespread talk of nationalizing the coal mines and putting them under at least partial worker control. The British government began subsidizing housing guild co-ops.

Large sections of British and Italian elites were horrified. They saw power slipping from the masters of society into the hands of the masses. In the immediate years after World War I, more and more of a percentage of the national income of the two countries was shifting from corporate profits toward worker wages.
Using primary sources such as documents from government archives and private correspondence, the author shows how key elite idealogues — primarily civil servants and academic economists — in both countries constructed what are today known as austerity policies to beat back the democratic upsurge and restore the old social and economic hierarchies. These policies implemented by governing politicians in the UK after 1920 and in Italy after the fascist seizure of power in 1922 involved the earliest form of shock therapy. Severe cuts were made to government social programs and interest rates were raised to deliberately crash the economy. As a result, many workers became unemployed, making them desperate for any income and not too anxious to displease any employer who could provide it. Making workers passive and obedient through unemployment induced by austerity policies was a key goal for British and Italian elites.

British and Italian elites were particularly concerned about curbing the inflation that raged during and after World War I: unless interest rates were raised to fight it, the result would be unrest among workers — who demanded wage increases — and less profits for businessmen. A loose monetary policy in a country’s banking system would scare off international securities investors. International investors wanted to see what they conceived to be a sound climate for business before pouring money into countries like Britian and Italy. They didn’t want the government hogging a country’s money supply by taxing the rich for spending on welfare programs. They wanted as much money as possible freed up for private enterprise and government finances prioritizing the payment of bond debt instead of social welfare.

In Italy, the fascist takeover of October 1922 was supported by the country’s economic elites, its leading classical liberal thinkers and international bankers. Mussolini’s government disciplined Italian workers not only by economic deflation — through unemployment caused by tightening fiscal and monetary policies — but through direct repression of the labor movement. In Britain, during the recession of the early 1920’s, state repression of labor was not needed. Crashing the economy through raised interest rates and slashed government budgets was sufficient to seriously weaken the labor movement. In Italy and Britain workers were tamed; corporate profits in both countries significantly increased while the share of national income going to wages declined.

The author describes the academic economists and civil servants constructing these policies as perfectly sincere. They were doing their part to uphold the classical liberal economic tradition, which they thought was the natural order of everything. They believed it was entirely proper for governments to construct fiscal, industrial, and monetary policy in the interests of corporate elites and international bankers. They believed the latter two were the ones who, because of their intelligence and financial thrift, had risen to the top of the economic hierarchy. Their industry and ingenuity were the only source for a country’s economic stability and jobs.

Revolutionary socialists in Italy and elsewhere (as they do now) argued that workers should democratically run a country’s economy — after all they were the ones who produced a country’s wealth. Predictably academic economists and other elite idealogues thought this was insanity. It wasn’t workers collectively who produced a country’s wealth but the intelligence and good judgement of the corporate owners and managers who directed those workers’ on-the-job tasks. Elite idealogues also justified putting a lid on the growth of workers’ wages by the thought that workers would not save but profligately spend extra income and thereby cause inflation.

Fascist Italy began to move more toward a command economy three years into its regime as it consolidated itself and began to eliminate the last vestiges of opposition in 1925. The author stresses that the underlying principle of this statist turn was the same as that of the more market-oriented policies of 1922–25: to enhance the power of Italy’s ruling class. Similarly, she notes that John Maynard Keynes maintained the same fundamental principle as he evolved from supporting British austerity in the early 1920’s to becoming a champion of government spending. In both cases, Keynes wanted to maintain the stability of the capitalist system but championed different policies for that purpose he thought suitable at different times. Keynes believed government spending in the depression racked world economy of the 1930’s would elevate demand for capitalist goods and services, stave off economic collapse and the threat of revolutionary socialism.

The author writes in the formal style of an academic paper: for example, she frequently repeats the central points of her thesis throughout the text. The book includes some economic concepts such as that of the Gold Standard, a topic that I have not always been able to completely wrap my head around. I do not always find books on economic history congenial —however this particular book makes for fairly engaging reading.

[Donovan Glasgow · Rating 5 out of 5]

Marxist political economy at its best. Mattei shows austerity and fascism to be two sides of the same coin: a reaction to revolutionary workers movements that threaten capital relations. The extreme repression hidden in mainstream economics — be it austerity, neoliberalism, or Keynesian economics — is made clear through Mattei’s analysis. I was struck by the many passages of liberal economists in Italy and Britain cheerleading Mussolini for his “strong” economic policies. The capital order isn’t a natural phenomenon. It needs extraordinary violence to sustain it, be it from the barrel of the gun in Italy or from the decisions of unelected technocrats in Britain and the world over.

[TENN2ARIZ · Rating 4 out of 5]

This book is a well-researched study of the history of austerity economic policies in post-World War I and how such policies led to fascism. Unfortunately, such policies are with us today, as right-wing politicians continue to provide economic "freedom" to the moneyed class while denying political freedom to working people. It is chilling and it is on-going.

[Jarno Mehtiö · Rating 4 out of 5]

Bongasin twitteristä ja löysin Scribdistä, joten päätin lukea kahden Hayekia käsittelevän välissä. Pysyy maailma balanssissa. Kirja väite on, että 20-luvun Austerity eli talouskuripolitiikka oli tietoinen valinta, jossa haluttiin murskata nousevan työväen uudet tavat järjestää työ sekä työväen tavoite laajentaa hallintoa.

Talouskuria ei harrasteta kirjan mukaan ole ensisijaisesti talouden suojelemiseksi toimi vaan ennen kaikkea kapitalismin puolustamiseksi. Sillä halutaan suojella (ennen sotaa) vallinneita tuotanto-olosuhteita. Kirjoittaja tuo selkeästi ilmi, että esim. työnarvoteoria tai vaikkapa tuotannon järjestäminen sen mukaan, mitä ihmiset tarvitsevat, olisi tälle ihan toimiva vaihtoehto. Sitä ei sitten enää problematisoida, miten tällaisessa taloudessa määritellään tarpeet, priorisoinnit, välitetään tietoa sekä minkä perusteella resursseja jaetaan osuvasti. Ensimmäisessä maailmansodassa (ja sotataloudessa yleisemminkin) priorisoinnin ja tavoitteen määrittely on helppoa: sodan voittaminen. Mikä valitaan rauhan aikana keskusjohdosta selkeäksi, muut alistavaksi ja pitkän tähtäimen prioriteetiksi?

Maailmansodan aikana valtion rooli toiminnassa korostui, samalla kun työläisten vaikutusvalta kasvoi. Tämä haastoi aiemman käsityksen talouden itsenäisyydestä. Nähtiin, että olisi olemassa muitakin tapoja toimia kuin laissez faire. Valtio pystyi ostamaan, myymään, säätämään, pakottamaan yms. Tämä avasi keskustelun siitä, että taloudellinen valta on myös poliittista valtaa.

Talouteen voidaan vaikuttaa politiikalla. Uudenlaista toimintamallia ajoivat kirjan mukaan kaksi ryhmää: työläiset ja valistuneet virkamiehet (nämä olivat niitä kirjan parempia virkamiehiä, erotuksena talouskurin kannattajista. Toiset olivat valistuneita, solidaarisia, tasa-arvoa kannattavia ja toiset itsekkäitä, riistäviä ja liikaa valtaa hamuavia).

Kun talous oli politisoitu, alkoivat nämä poliittiset vaatimukset kohdistua yrityksiin ja valtioon. Yrityksiltä vaadittiin toimia, mutta myös valtiota vaadittiin puuttumaan vahvemmin. Näistä toimijoista kirjassa siis käsitellään sekä UK:n että Italian toimijoita.

Miksi sitten tämä muutos ei onnistunut? Kirjoittajan mukaan talouskuri murskasi tämän. Se ajoi tarkoituksella talouden taantumaan, mikä pakotti työväen luopumaan vaatimuksistaan, jotta sen työpaikat säilyivät edes jotenkin. Ja näin talous oli taas depolitisoitu, tuotantosuhteet alistettu markkinavoimille, talouden päätökset eristetty politiikasta ja talousteoria nostettu objektiiviseksi ja neutraaliksi.

Talouskurissa halutaan ennen kaikkea vahvistaa jo olemassa olevaa varallisuutta ja siinä priorisoidaan yksityistä sektoria. Tämän johdosta erilaiset työväen valitukset, toiveet, lakot ja muut toimet ollaan valmiita murskaamaan. Kirjoittaja näkee täten talouskurin olevan antidemokraattinen vastaisku alhaalta nouseville uudistuksille.

Joku kysyisi ketkä ovat ne tai nämä, jotka tätä ajavat talouskuria ja alistamista. Kirjan mukaan ne tai nämä ovat sekä virkamiehiä että taloustieteilijöitä, jotka eivät kannata työväestön ajatuksia vaan ajavat omia tavoitteitaan.

Kirjassa ei pohdita, mitkä olivat ne keinot ja vaihtoehdot sodan jälkeen valtiolle toimia toisin. 20-luvulla ei Keynes ollut edes itse muotoillut moisia ajatuksia, joista olisi kaivettu rahat toisin toimimiseen, kun muut maat eivät vastaavia uudistuksia halunneet. Talouskasvun nähtiin olevan kiinni investoinneista, ja investointeihin rahat tulivat yritysten voitoista sekä säästämisestä ja vaihtosuhteen plussasta. Mikäli ei olisi säästöjä, ei olisi investointeja. Joten työläisten tuli tuhlata vähemmän ja tuottaa enemmän. Tämä on kirjoittajan mukaan alistava vaatimus. Samoin väärin oli näkemys, ettei valtion tule kerätä liikaa rahoja, koska tämä raha olisi pois yksityiseltä sektorilta, joka osasi talouskurin kannattajien mukaan investoida rahat valtiota paremmin.

Kirjoittajan huomio, että sodan jälkeen vaadittiin vakaata valuuttaa, tasapainoista budjettia ja itsenäistä keskuspankkia oli isku vasten sodan aikana toimivaksi todistettua toimintaa. Voi toki kysyä, että eikö sodan jälkeen ole normaalia haaveilla pääsemisestä takaisin sotaa edeltäneeseen tapaan toimia, etenkin kun vaaditut uudistukset olivat täysin poikkeuksellisia ja niistä ei ollut muuta kokemusta kuin sodan aikaiset ja nikottelevasti toimiva Neuvostoliitto. Kirjassa ei myöskään pohdita, millä rahalla vaaditut uudistukset olisi tehty. Sekä Italia että UK tarvitsivat rahaa sodan jälkeen. Rahaa tuli lainamarkkinoilta, joissa arvostettiin tiukkaa taloudenpitoa ja (yllättäen) lainojen takaisinmaksua. Millä tavalla toisin toimimalla maat olisivat siis voineet rahoittaa
uudistuksensa? Setelirahoituksella?

Kirjan tärkein pointti on, että talouskuri on aina luokkapohjaista. Neutraalisti esitetty talouspolitiikka on tietoinen, poliittinen valinta. Talouskuri nousee esiin aina, kun olemassa olevaa luokkapohjaa kyseenalaistetaan. Mutta tämä ei ole luonnonlaki. Talouskuri voidaan haastaa ja uusi malli löytää. Harmillisesti tätä mallia, toimivia haastamisen keinoja yksittäisen maan kohdalla ei käsitellä tarkkaan. Muistelen, että Kreikka aikanaan äänesti tukipakettia ja sen ehtoja eli talouskuria vastaan Syrizan noustessa valtaan. En sitten tiedä, miksi maa ei noudattanut äänestystulosta vaan hallitus kuultuaan lainottajiaan muutti mielensä ja hyväksyi ehdot.

[Elizabeth Burton]

It wasn’t for lack of quality I quit early. This is a history of fiscal austerity, and I have other books I want to get to covering topics I’m more interested in at the moment. For those who enjoy learning how the sausage was made, I happily recommend this one.

[Jason Xia · Rating 5 out of 5]

Mattei is slick with the writing, almost as slick as the british and italian governments robbing the working class

[Mayank Bawari · Rating 5 out of 5]

Cycle of destitution courtesy of Austerity

[Marks54 · Rating 4 out of 5]

The is a book by an Associate Professor of Economics at the New School of Social Research. The focus is on the origins of modern programs of economic austerity that have been commonly employed in attempts to bring national economies out of various economic and financial crises by means of reducing debt financing, raising taxes, raising interest rates, and pursuing balanced budgeting to avoid deficit spending and fight inflation to the extent possible. Professor Mattei focuses on the initiation of these programs in Britain and Italy in the period immediately following the end of WW1. The story of how the programs developed where and when they did is fascinating and well told. Austerity measures have been used extensively since the early 1920s, most recently in the US in the early 1980s to fight inflation (via Paul Volcker) up through 1987. More recently, austerity measures were strongly invoked in they EU to address the European debt crisis following 2008, especially concerning the so-called PIIGS countries (Portugal, Ireland,Italy, Greece, and Spain). So the story is widely applicable after the time of Mussolini.

There is only one little problem. Austerity does not seem to work. It is certainly plausible and “logical” but in terms of results, not very effective at all. The “smart money” appears to have figured this out. Notice how little one hears about the evils of huge government deficits these days. What? National budgeting is not like family budgeting? I am shocked, shocked!

… so why is this book worth reading? That was not initially clear and I had to think about it.

Let’s begin with WW1. This was a long and very expensive wars that brought suffering to all the European powers involved. (The US not as much but that is a different story.). So the major combatants overspent and overtaxed to pay for the war and all ended the war broke and highly indebted (again the US is different.). The war imposed huge burdens on the general public and when it was over, the general public wanted to be made whole again. The owners of capital were also stressed and burdened by the war and wanted to get back to business when it ended. The account of how the needs for wartime financing affected the various nations is consistent with a traditional Marxist analysis, and indeed this was the time of the Russian Revolution, and of fears of revolution in Germany and Austria, among other places.

But what would that mean? Would the general public go back to their old jobs and their prior pay levels and just carry on? But the international economy was busted and besides, the government had displayed how easily it could change economic and social arrangements during the war. This included experiments in things like factory councils and government ownership of the means of production. So why did the workers need to go back? Why couldn’t newer wartime arrangements be continued and expanded? The owners of capital - the rich upper class people - saw matters differently and did not want to give up control of their assets. They did not view wartime changes as positively as the workers viewed them.

So the war provided a huge shock and the question for policy became - does normality became reestablished in terms of traditional capitalism, like it was before, or does some new and more democratic social system get established? The problem of course is that there are lots more workers and common people than there are owners, so if left to democracy, then the owners lose - except if they manage to get a friendly government in power that will enforce acceptable economic and social relations. Cue more social control and cue Mussolini and the fascists.

So austerity was packaged as a technically sophisticated apolitical approach but in practice it provided an ideology that reinforced traditional values and facilitated the transfer of resources to the capitalists for further investment. So austerity is billed as a program developed on a “scientific” basis by experts but which in practice is thoroughly political and even manipulative.

The story is consistent with how accounts of these times. I appreciate Professor Mattiei’s critical stance towards economics. And the book sheds light on that odd period after 1918 when the war was supposedly over but really was not.

This is a worthwhile read.

[Jonna Higgins-Freese · Rating 5 out of 5]

p. 3: "In his famous book Austerity: The History of a Dangerous Idea, the political scientist Mark Blyth shows that although austerity has not 'worked' in the sense of achieving its stated goals across history 9e.g., reducing debt or boosting economic growth), it has nonetheless been employed by governmnets over and over again . . . if we view austerity in this book's terms, as a response not just to economic crises (e.g., contraction of output and heightened inflation), but to crises of capitalism -- we can begin to see method in the madness: austerity is a vital bulwark in defense of the capitalist system."

"Austerity's primary utility over the last century has been to silence [calls for alternative forms of social organization] and to foreclose alternatives to capitalism. Mostly austerity serves to quash public outcry and worker strikes" (3-4).

"As governments collectivized key industries [during WWII] -- munitions, mines, shipping, and railways -- they also employed workers and regulated the cost and supply of labor. State interventionism not only allowed the Allies to win the war; it also made clear that wage relations and the privatization of production -- far from being 'natural' were political choices of a class-minded society" (6).

"Austerity as a twentieth-century phenomenon materialized as a state-led, technocratic project in a moment of unprecedented political enfranchisement of citizens (who had gained the right to vote for the first time) and mounting demands for economic democracy. In this way, austerity must be understood from what it is and remains: an anti-democratic reaction to threats of bottom-up social change (7)

3 forms of austerity - fiscal, monetary, and industrial "worked in unison to exert a downward pressure on wages" (8)

The academic field of "pure economics" "successfully established the field as the politically neutral' science of policies and individual behavior. By dissociating the economic process from the political one - i.e., by presenting economic theory and conceptualizing markets as free from social relations of domination - pure economics restored an illusion of consent within capitalist systems, allowing these relations of domination to masquerade instead as economic rationality." (11)

"the story of austerity is also an origin story for the rapid ascent and awesome political power of modern economics. It is true today, but was not after World War I, that capitalism is the only show in town: mainstream economic theory flourishes because our societies rely almost entirely on the coercion of people who have no alternative but to sell their labor power to the propertied few in order to survive. (As the economist Branko Milanovic notes in his 2019 book Capitalism, Alone, "the fact that the entire globe now operates according to the same economic principles is without historical precedent.) Rather than acknowledging and studying the odd homogeneity of this reality, mainstream economics works to conceal it." (12)

"the strucutral vfiolence of macroeconomic policy could do the same as the physical violence of Fascist militias" (also in 1923, Labour MP decried those working full time who had recourse to the Poor Law.) (16-17).

In US, defeat of the worker "so thorough and striking" tha tth emedian American male worker in 2019 actually earned less in real terms than what he did in 1973 (19).

"Against its promise to stabilizethe world economy, the austerity project of the 1920s was a spectacular failure: its reduction of aggregate demand - an effect its designers intended to introduce - is cited by many as a cause of the Great Depression that began in 1929 and was only really resolved with the economic stimulus of, ironically, antoher World War" (288)