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Richard Wolff

March 20, 2023

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In this week’s Economic Update, Prof. Wolff interviews Prof. Clara Mattei on her new book "Capital Order: How Economists Invented Austerity and Paved the Way to Fascism."

Transcript has been edited for clarity

Welcome friends to another edition of Economic Update, a weekly program devoted to the economic dimensions of our lives and those of our children. I'm your host Richard Wolff. Today's program is special in a number of ways. We are experimenting with our format and our structure. And bear with us as we experiment in order to find the best possible programs to bring you. I am very proud, in that spirit, to bring to our microphone and cameras that we have a very special guest. Her name is Clara Mattei, she's a faculty member in the economics department there. And she recently published her first book. It's called Capital Order: How Economists Invented Austerity and Paved the Way to Fascism. Mattei's book shows how austerity economics paved in the past tense and may also pave in the present tense the way to fascism. And she's currently working on another book that reassesses the so-called golden age of capitalism from 1945 to 1975 and it's governing Keynesian economics through the lens of her analysis of austerity.

RW: So first of all Professor Mattei - Clara, if I may - welcome to our program. Your work is extraordinarily important and I wanted to share it with my audience.

CM: It's the greatest pleasure to be here. I'm an enormous fan of this program, I listen to it weekly. And so it could not be a bigger honor to have worked on this book and share it, be able to share it with you.

RW: Thank you, that's very kind. Let's jump right into this. First of all, I think I need to be sure that everybody understands what the word austerity means. And it's central to your work. So tell us briefly how you understand what that term represents, especially because it's a bit more commonly used in Europe, for example, than in the United States. So I think it's especially important to know how you understand it.

CM: It's crucial to define austerity, because the bold claim of my work is that we live under austerity capitalism. Which is much more important to understand how the society works, rather than just focus on new liberal capitalism. So this is why austerity really needs to be defined. Also because it's a word that is rarely used and when it is used is usually used in a very de-politicized way just to point at some cuts in government expenditure in general. So the reality is that austerity deserves re-politicization. And what I mean by that is to avoid just discussing austerity as this technical tool to manage the economy, by which we focus on whether it is actually capable of boosting economic growth and solving the budgetary and the inflationary issues. We need to rethink austerity as something more than just cuts in government expenditure in general and see it as the trinity, so the capital order... My work really looks at austerity as a trinity that is backed by powerful economic theory.

So let's focus on the trinity for a moment. Why a trinity? Well, because austerity is first fiscal austerity. But fiscal austerity, again, cannot be looked at the aggregate where the state... if the state spends or not. But what's relevant is where the state spends. And what you see is that it's all about cutting social expenditure, cutting on the benefits for the people; unemployment, housing, education, health, so forth and spending money on other factors. And today, more timely than ever, as you well know from the show, on war expenditures. This is those shifted resources from the majority to the minority who profits. And this fiscal austerity is not just about where the state spends but also how the state takes in its revenue.

And what you see here is that austerity is about regressive taxation, meaning that it's about the fact that the majority pay more of their fair share in terms of how much they get taxed while the minority is taxed ever less. And this is very important, especially in a society like the United States, for example, in which there has been constant cuts in the higher income brackets. So that while during 18 hours time we had 91 percent now actually it is down to 37% as of 2021. And we know that also it's about reduction in capital gain taxes and reduction in corporate taxes, while we increase consumption taxes. That, of course, hit all of us alike. So this is big school austerity: regressive taxation and cuts in social expenditures.

Then we have monetary austerity, again something that we are familiar with right now. Which is all about increasing interest rates. Again, a policy that protects and incentivizes the moneyed few; those who, for example, now can invest in treasury bonds and make a great deal of money from it, while the majority of us have to pay more in terms of credits. We borrow to get to the end of the month. And especially we will, as we will talk about in a little bit, potentially lose our jobs. Because we know that increases in interest rates have an effect on the labor market. And this is not by accident but the capital order actually theorizes that the whole purpose of austerity is indeed to repress wages, to keep workers in check.

So the second element of the trinity is combined with the third element of the trinity, which is industrial austerity. And industrial austerity can be understood as a variety of state policies, such as privatizations, so selling off to private capitalists the majority of state-run industries, attacks on labor unions and all forms of deregulation of the labor market, which makes labor more and more precarious. So it is this austerity trinity that allows us to see how really austerity is a very intelligent political mechanism to make sure that the majority of us have to accept the condition of low paid wage workers in precarious conditions while the minority gains benefits from all of our resources.

RW: Yeah, it strikes me also, and I'd be interested in your reaction, that when capitalism has its recurring crashes - downturns, recessions, whatever you call them - that these mechanisms, explained as technical adjustments to be made, are actually hiding a mechanism to put the burden of the economic crash on the mass of people to save the top 10 percent from basically having to suffer until we get to the next upswing. And then and only then will the mass of people have a chance. Let me push you:
tell us how you see the link to fascism. You know, the word fascism, the anxiety about fascism has become more explicit, particularly in the United States, but elsewhere as well in the last few years. Since austerity was a big reaction to the downturn in 2008 and 9, are we watching a kind of slow motion process whereby the post-2008 austerity is moving us toward fascism? Is that, in some sense, what you're arguing?

CM: We could definitely explore that direction of the argument. But let's say that the historical analysis I give I think points to a direction that is usually not discussed. What the capital order describes is the fact that the emergence of austerity happened in a moment of extreme contestation of the capital order, a moment in which the majority of the workers, of the people in the hub of Western capitalism at the time... so Britain and Italy after the First World War were really demanding a different future, were really rethinking the very foundation of how we organize production and distribution through councils, through cooperatives, through calls of economic democracy that would fundamentally overcome wage relations and private property of the means of production altogether.

And what you see is that thus austerity becomes visible as a tool of reaction to these calls for economic democracy and ultimately how it still functions today, to foreclose alternatives to capitalism. So in this setting fascism is very interesting. Because you see that if you look at what Mussolini - the founding father of fascism - was doing in the 1920s and what his fellow colleagues were doing in Britain - the cradle of liberal capitalism - in the same years, what you notice is actually that these comfortable binaries that contemporaries tend to use, by which, of course, there's liberal capitalist democracy on the one side and then we have these fascist exceptions, which are clearly the opposite of liberalism, that emerge historically... Well, this idea that we're talking about polar opposites - ideological, institutional worlds - crumbles if we focus on austerity.

And what you actually see is that fascism in Italy strengthened its rule, became legitimate as an authoritarian government thanks to its capacity to implement austerity. Because this was allowing fascism to look good in the eyes of the liberals, both within Italy and the international liberal elite - people like Montagu Norman at the Bank of England, J.P. Morgan-Chase, all the financial world in Britain and the United States in that moment was applauding Mussolini. Because Mussolini was the most efficient student of austerity being able to apply privatizations, massive privatization, cuts in wages by decree, cuts in social expenditures, layoffs of public employees, dear money, all of the austerity trinity package. So I think this is what's interesting, that the story that the capital order tells is a story that has us wonder how distant is supposed liberal capitalism that we pride ourselves with, with respect to these fascist tendencies. Because actually what you see is it's a matter of priority. So austerity is advanced and advocated for by all of the economic experts, our mainstream colleagues as, you know, the necessary tool to achieve economic growth and balanced budgets, and to tame inflation.

But really what you see if you adopt a class analysis lens is that what matters here is something much deeper and something much more essential to preserve the very foundation of the possibility to even have capitalism in place. Which is the fact that people cannot try to overcome wage relations, people need to accept their conditions of precarious labor power to be sold on the market. And this is something that is more important than anything. And that also shows how fascism is all about that. Fascism has been about repressing wages. And this has also happened in liberal democracies.

RW: Wonderful Clara. This is really very, very helpful. We've come to the end of the first half of today's program. Stay with us, we'll be right back.

Before we move on I want to remind everyone that Economic Update is produced by Democracy at Work, a small donor-funded non-profit media organization celebrating 10 years of producing critical system analysis and visions of a more equitable and democratic world through a variety of media, like the long-form lecture series I host called Global Capitalism, designed to help others understand current economic events and trends so they can explain the impact and effects capitalism creates across the globe to others. Global Capitalism is available on our website democracyatwork.info. There you can also learn more about everything we produce, sign up for our mailing list, follow us on social media and support the work we do. Please stay with us, we will be right back

Welcome back friends to the second half of today's interview with Professor Clara Mattei. I want to continue right where we left off. One of your central points had to do with fascism's ability to stave off revolution, to stave off the mentality that says if a capitalism works this badly maybe we should change our system. I want to ask you how do you account for working classes having accepted in some sense, having tolerated, and I don't want to put words in your mouth, but why has this worked as well to keep capitalism going as we've seen it? Or are there exceptions? Are there times/places you could point us to where working classes were not taken in by all of this?

CM: It's really interesting because austerity is actually advocated for across party lines. And the biggest advocates of austerity have also been supposed labor representatives. So the Labor Party in Britain is a very good case of how austerity has been internalized by representatives of the labor movement themselves. And we have to remind ourselves that in Italy, for example, Enrico Berlinguer, who was actually the head of the Communist Party in the late 70s, was the one to reintroduce austerity in a very harsh way, in a moment in which the wage share had gone up and workers were again demanding a breakaway from capitalism.

So the question you pose, which is very pertinent, is how is it that somehow austerity has been so successful in becoming kind of a flag that is held by even those you wouldn't expect. And this is where I think we need to bring into the picture... There's so many elements, so I'm just going to point out the elements that I've investigated more, of course, because it's such a complex question. One element that I think needs to be kept in mind is that austerity is about consensus-building for the system. And that economists, economic experts have played an enormous role in assuring the loss of agency from the people. And so it is - potentially it's because of my professional bias - but I do think that it's very important to point out the political role that economists have played in giving us a way of thinking about the world that fundamentally disempowers us.

So to give you an example in the period I was looking at it was the moment in which - so the early 20th century - the so-called neoclassical framework - what people still study today when they're taking an economics course - was being diffused and refined. And guess what? This new classical framework is all about refusing the revolutionary elements that were ingrained in the Marxian economic theory that was actually quite popular at the end of the 1800s. So you expelled the labor theory of value, which means that you take out the worker from the economic machine and say "no, it's not thanks to the worker that value is being produced, it's actually thanks to the savior investor, to the virtuous individuals who are capable of abstaining and by doing their business they do the good of the whole." So you go against and you eliminate class antagonism from the view of the world. And moreover you put at the center stage no more the worker but the savior investor.

So you see that this creates this false emancipatory framework [which] is actually the most classist of all. Because it tells you 'well, if you haven't made it to the top it's because you don't deserve it.' So I think this is something that, you know, it's in the models, now assumed in the models. But it trickled down and it's diffused at all levels of society, to the point that we know very well that people in poverty now are ashamed of being poor and think it's their own fault. While we very well know that it's because workers are poor given the high level of exploitation, especially right now in the United States. So this element of consensus-building needs to be fully explored and the role and responsibility of our colleagues needs to be put on the table.

And then, of course, there's the element of coercion. I mean, you know, people can contest. And there have been moments. I mean I think even today we are in a moment in which people are trying to really, like, look beyond the trap. But this trap is powerful. It traps us for real in the sense that deflation, as we are seeing it today in the United States, is not by accident. And you know this very well, because you've discussed this thoroughly in your shows, how increasing interest rates has the purposeful objective of cooling down the labor market. Which means increasing the unemployment rate and getting people to be weaker and thus disempowering people once more. So I think to understand why people have accepted austerity we really need to think thoroughly the mechanisms that protect our consensus and ultimately, like, tie our hands also very much materially speaking. Once we lose our jobs we become more market-dependent. Because now you need to pay for school, pay for health care and creates this precarious nature that kills away and takes away the time we would need to actually organize and experiment with a different world.

RW: Yes, it has proven very difficult for the left in general to get a hearing for, to get a chance to really lay out this alternative. In a way that's what I see as the power of your book, in the sense that you're teaching those who are economists or who think like economists teach the rest of the population that there really is a completely different way of organizing the same material to come to radically different conclusions. All right, let me let me push you into an area you may not have gone yet. But you've done the work, so we need to hear your views about this. Would you advise any particular strategies? In other words, does your analysis suggest where the labor movement or socialist or communist political parties or social movements, where they need to go? What they perhaps need to do differently to be more successful contesting this way the system keeps going? So it can't keep using this almost technological 'we're just managing' and to expose it for the very one-sided system support that it is? In other words how do we how do we learn the lessons of your research?

CM: How do we? Yes. And this is, I think, important. And it's the reason - the very reason - why I wrote this book. It's a well-researched book coming from the archive, maybe 10 years almost at the archives. But it's clearly a book that does not hide its militant objective in a way. And I think the whole point here is that the first strategy is to really denaturalize our system and realize that austerity capitalism is the outcome of collective action to foreclose alternatives to capitalism. And thus it can be subverted through collective counteraction. So this already - taking history seriously and seeing how our system is actively constructed and how the capital order's constantly protected by the elite - I think, has an empowering message in telling us 'well then, there we can construct a different world.'

And the first step to break away and construct a different world, I think, is to really understand who the enemies are. And in this sense all of your enemies. So this is why I think one of the learnings for the book, from the book, that can be useful for activists and people out there, who are interested in changing the world, is to realize that, again, let's focus on the fact that austerity capitalism is not very far away from what even the supposed capitalist alternative - meaning Keynesianism - is all about. Right, so we have the austerity experts who are right now calling for harsh deflation, together with of course cuts in the social expenditures in favor always of the few creditors, investors. But ultimately if you look at the framework that the Keynesian economists are proposing we're not that far away, especially in the need to prioritize economic necessities. So, for example, stabilizing money right now to the detriment of political/social necessities.

So I think this is the first big learning is that if we look at the history of austerity and the history of capitalism we really realize that we need to think outside of the box and think about the fact that the Keynesian alternative presupposes austerity to begin with. Because it's an alternative that wants to stabilize wage relations, just by a different means.

But fundamentally when capitalism's existence is in trouble, when people are actually leaving their jobs - the great resignation, this anti-work movement - then it's threatening for the bourgeoisie, also for the Keynesian bourgeoisie. And this is why Keynes himself in the 1920s is a protagonist of my book. And I show how Keynes himself had one priority, way before getting critical of his austerity colleagues. He said "no, no, we need to preserve the capital order. So let's make sure that experts keep decision-making in their own hands. And then we can discuss, you know, some form of social redistribution." But this happens only after workers have lost their bargaining power with the Great Depression and everything that we know. So I think this is an important element to start, get us thinking.

And then, of course, last thing I would like to say is that inspiration for the past can help us also open up imagination for the future. L'Ordine Nuovo movement, headed by Gramsci, Togliatti, the workers councils that were growing in 1919 had some ideas of debunking not just bourgeois institutions but bourgeois worldviews, that were extremely empowering, with the idea of horizontal relations in the production process. Which are things that I think if we look at with, like, fresh eyes we can really learn from and associate with a lot of the movements that are still happening right now throughout the globe.

RW: Yeah, you know, you remind me of something a good teacher of mine once said - was a young woman and she said she's always been struck that in modern economics labor is understood as negative, as we call it a disutility. That somehow we are supposed to assume that getting together with other people to produce goods and services is horrible, unpleasant, a drag, something we would never do unless we were compensated by an object we can buy in a store. She said that was the greatest insult to human beings she could think of and completely crazy. Because the whole point of life might be to make work the joy, the relationship-building opportunity of a person's lifetime, given that you're an adult, you're five days a week there. In a way, tell me if you agree, you're also telling us to rethink the very logic that this is a technical problem we're supposed to forget; that what capitalists are about is maximizing their profit and the government policies they support and accept are governed by that principle.

CM: Absolutely, absolutely. The fact that we are reduced to passive consumers and that in the economic models the only option the worker really has is to shift/switch from one job to another and, you know, decide whether it's better to labor or to have time for leisure really shows us the limit of - the anthropological limits... I mean the limits that these concepts have and how they actually have a performative effect, in the sense that, ultimately, I think it does reduce our existence to an existence that is alienating, non-fulfilling.

But I'm really certain that we are in a historical moment in which there are plenty of opportunities to shake ourselves up. And the younger generation that I teach at the New School really makes me proud and excited. Because I really do see that given what they see around them - the level of criticism, the level of not just buying into even, you know, the fake progressive rhetoric that tells us that it's enough to increase the wages so that we can buy an extra technology app or, like, another device that we want... Really, I think we are in an age in which people are getting a sense that we can think bigger. And in a way that is more thought-provoking.

RW: Professor Clara Mattei I think with teachers like you it'll be an easier shot than if we didn't. And I'm really happy to have you as a colleague. And I hope that my audience understands this is a book you ought to take a look at. And as always I look forward to speaking with you again next week.

Transcript by Brendan Tait

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About our guest: Clara E. Mattei is a faculty member at the Economics Department of The New School for Social Research, and was a 2018-2019 member of the School of Social Sciences at the Institute for Advanced Studies.Her research contributes to the history of capitalism, exploring the critical relation between economic ideas and technocratic policy making. She recently published her first book titled Capital Order: How Economists Invented Austerity and Paved the Way to Fascism (University of Chicago Press, November 2022)  It investigates the origins of austerity after the WWI crisis to understand its logic as a tool of reaction against any alternatives to capitalism.

The book has received widespread media attention. Amongst many, it was in the Financial Times as a Best Economics Books of the Year, it was reviewed in The Guardian, Nature Magazine, The New Statesman, Jacobin etc. it was also extensively praised and cited by public intellectuals such as Noam Chomksy, Thomas Piketty and Yanis Varoufakis.

She is currently working on a book project which critically reassesses the Golden Age of Capitalism (1945-1975) and its Keynesianism through the lens of austerity capitalism.

Links:

• Website: www.claramattei.com
• Twitter: @claraemattei
• The Chicago website has the recent reviews: https://press.uchicago.edu/ucp/books/book/chicago/C/bo181707138.html#anchor-review

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