Published by EH.Net (November 2023).

Clara E. Mattei. The Capital Order: How Economists Invented Austerity and Paved the Way to Fascism. Chicago: The University of Chicago Press, 2022. 480 pp. $30 (hardcover), ISBN 978-0226818399.

Reviewed for EH.Net by Max Harris, Senior Fellow, The Wharton Initiative on Financial Policy and Regulation.


Clara Mattei’s book, The Capital Order: How Economists Invented Austerity and Paved the Way to Fascism, is provocative. That much is evident from the title. Economists, Austerity, Fascism: quite the combination. Mattei, an economist at the New School for Social Research, argues that “austerity was a means for economists in power to reimpose capital order where it had been lost” after the First World War. According to Mattei, the aim of austerity is to ensure capital’s survival, to favor the minority at the expense of the majority. By focusing on interwar Britain and Italy—the former a liberal democracy, the latter authoritarian—she seeks to show both the universality of austerity and its power to transcend conventional political differences, as well as the role of technocratic elites in its implementation.

Mattei marshals an impressive array of British and Italian sources to trace the profound disruptions to the economic order during the First World War. Total war upended traditional economic policies. Government budgets bulged as never before. The gold standard was abandoned, prices administered, trade controlled. Mattei argues that this unprecedented shift in management vividly demonstrated—most notably to workers—that the old way of organizing economic relations was not the only way. Their blindfolds removed, workers in Britain and Italy began revolutionary agitation to control the means of production and upend the capitalist order. This “struggle for workers’ control,” Mattei writes, “peaked in 1919-1920 with the objective of self-government to secure the emancipation of the majority.”

According to Mattei, the powers that be viewed this revolutionary moment as unacceptable and connivingly set on “austerity” as the means to muzzle workers and return to the prewar order. “Austerity as we know it today,” Mattei writes, “emerged after World War I as a method for preventing capitalism’s collapse: economists in political positions used policy levers to make all classes of society more invested in private, capitalist production.” By returning to the gold standard and shrinking the budget deficit, policymakers slowed economic growth, thereby “enforc[ing] a public acceptance of repressive conditions in economic production.” Economists contributed to this policy program by justifying these choices as natural, as well as insulating the decision-making process in technocratic institutions, such as independent central banks. As for the connection with fascism, Mattei argues that Mussolini garnered support—domestically and internationally—by imposing austerity.

The argument, then, is that governments sought to impose order by making economic life more insecure through austere policies, thus forcing workers to accept things as they were to get by (though it is not clear why more precarity would necessarily weaken rather than energize worker unrest.) It is true that, in the aftermath of such a devastating war, with chaos rampant and the Russian revolution top of mind, policymakers sought to “return to normalcy,” as the slogan went in the United States. Mattei views this urge as a conspiracy of capital, intent on breaking labor’s back. She argues her case with verve. However, in interpreting events and policies exclusively through this class lens, Mattei discounts the problems facing policymakers. They were working in the midst of a grave economic crisis: debt was at all-time highs, inflation was on the rise, society was at a breaking point. Unless one believes that none of this matters, that debt either already was or did not need to be sustainable and inflation could continue apace, there was a need to sober up from the wartime high. Some policies went too far in their restrictiveness—for instance, Britain’s return to the gold standard at the prewar parity—but retrenchment was necessary to avoid collapse. Precisely what Mattei would have had officials do remains unclear. It is interesting in this regard that “Weimar” and “hyperinflation” never appear in the book.

Also problematic is Mattei’s definition of austerity. Under her framework, it appears that any policy that does not goose the economy is austere. For instance, she writes, “Monetary austerity… entails a curtailment of credit in the economy, and it primarily coincides with a rise in interest rates.” Is the lesson then that any time a central bank hikes interest rates, it is engaged in a policy to subvert the masses? Apparently so, for Mattei notes that “austerity’s ‘inflation-targeted’ policies might be better described as ‘rate-of-exploitation-targeted.’” Of course, this view of monetary policy—and economic policy more broadly—is a very particular view, one that seems to conclude elevated inflation is not an issue or perhaps is decidedly good, and in either case is disconnected from the realities of policymaking.

In summary, Mattei is a skilled writer, and this book is certainly a conversation starter. Though not all will agree with the method of analysis or conclusions, the book is thought provoking and shines light on a critical moment in economic history.


Max Harris is a senior fellow at the Wharton Initiative on Financial Policy and Regulation and author of Monetary War and Peace: London, Washington, Paris, and the Tripartite Agreement of 1936.

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