THE CAPITAL ORDER: How economists invented AUSTERITY and paved the way to FASCISM by Clara E. Mattei (2022)
Back in the 17th and 18th centuries, physicians had a universal remedy for serious illness. It was to bleed the patients until they improved.
Mainstream economists have a similar prescription for national economic woes. It is called “austerity.” The elements are holding down wages, letting prices rise, cutting public spending (except on the military and police) and raising taxes (except on the rich).
Austerity contributes as much to economic health as bleeding to biological health. That is to say, austerity has, so far as I know, an unbroken record of failure in promoting economic recovery. So why hasn’t the economics profession abandoned austerity, as the medical profession abandoned bleeding?
That is because the purpose of austerity is not what its proponents say it is.
Clara E. Mattei, an economist herself, wrote this book to expose austerity’s overlooked, though not hidden, agenda.
She did it in an original way, by looking at the imposition of economic austerity in the immediate aftermath of World War One in two countries, Britain and Italy.
Among the victorious allies, these two countries were at opposite extremes.
Britain was the center of a vast empire comprising nearly a quarter of the world’s population and land era. It was Europe’s leading industrial and financial power. It was the birthplace of Adam Smith and free-market economic liberalism. And it was known for being politically stable.
Italy, in comparison, was poor, powerless and backward. Revolutionary parties were strong and had a good chance of coming to power.
The Great War, as people then called it, upset a lot of people’s assumptions about how economies worked.
Governments found the law of supply and demand worked too slowly for effective war mobilization. Central planning with price controls worked much better.
People began to think similar policies might achieve the goals of peace. Some of them acted on their high hopes.
In the years immediately following the war, Britain seemed on the verge of radical change, and Italy on the verge of revolution.
Change was prevented by taking economic policy out of the hands of voters and into the hands of supposed economic experts. In Britain, this was done by legal means. In Italy, it required a violent coup by Mussolini’s Fascists.
But the actual economic policies followed by the two countries were similar. Mattei pointed out how Mussolini was praised by Britain’s leading mainstream economists.
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