The Making of Modern Austerity: Insights from Clara Mattei’s “The Capital Order” and its Contributions to Global History
By Julie Birke
The preeminent place of capitalism as a subject of history can be traced far back in time. Ninety years ago, Karl Polanyi first made a history of capitalism in his book The Great Transformation. He contended to a rupture in the first half of the nineteenth century, when the economy gradually became disconnected from other areas of society such as democracy, the family and rural communities. The advent of the self-regulating market, in his eyes, meant that the capitalist world economy eliminated progressively all barriers against capitalism, even those necessary to its functioning and reproduction. The separation of economics and politics seemed to him to be an essential component of the holistic system in which capitalism can survive, but that also generated intense class conflicts locally and fueled instability in empires and financial markets internationally. Today, the themes raised by Polanyi nearly a century ago are particularly echoed in the study of neoliberal capitalism. Here, the debate for global historians focusing on neoliberalism’s origins, tools and theoretical grounds has been oriented to better understand the long-term tendencies of capitalism. Recent scholarship points in this direction, among it, Clara Mattei’s The Capital Order. How Economists Invented Austerity and Paved the Way to Fascism.
Neoliberalism has previously been studied through the lens of decolonisation, with Quinn Slobodian’s Globalists. The End of Empire and the Birth of Neoliberalism, which demonstrated how the world capitalist economy was threatened to its core by the collapse of the Habsburg empire and the consecutive birth of new nation-states in Central and Eastern Europe. His investigation also addresses how the Geneva school of liberal economists worked to encase capitalism in an international legal order (states, laws, etc.) after the First World War (WWI) to maintain the endangered division between politics and economics.
Building on the notion of neoliberalism as a response to the destabilization of the global capitalist order following the collapse of empire, austerity emerges as a parallel instrument designed to enforce economic stability through the preservation of fiscal order. Often associated with neoliberalism, austerity is commonly assumed to have become a tool by modern governments and international financial institutions to implement neoliberalist economic policies of fiscal discipline and promote international free trade. Historiography on the subject envisages it as the origin of the 1930s-crisis, as Mark Blyth does in Austerity: The History of a Dangerous Idea. Blyth sees austerity as a political problem of distribution that has been compulsively used by key economic actors – governments and banks – to answer the successive economic crises in the twentieth century, despite not succeeding in reducing public debt and supporting growth, but increasing it in ratio to national GDP.

Clara Mattei’s book The Capital Order. How Economists Invented Austerity and Paved the Way to Fascism offers an important contribution to our understanding of austerity policies and the debate on the origins of neoliberalism by putting class challenges at the heart of her argumentation and linking it to monetary and financial policies of the 1920s. Its unifying theme is that capitalism is an economic system that rests on a certain socio-political order, which is far from being natural, and requires certain instruments to ensure its preservation – hence the capital order. By comparatively analysing the economic policies of interwar liberal Britain and fascist Italy, the book shows how austerity worked as a set of fiscal, monetary and industrial mechanisms, with the common goal for economists in those countries to reimpose capitalist relations of production where they were gravely endangered. Mattei seeks to show that politicians and economists who collaborated at international financial conferences were engaged in the production of an “apolitical” knowledge of the economy and planted the seeds of a new, and better protected, global capitalist market. To that end, she engages their ideology in a stimulating way by deploying a Marxist interpretation of austerity politics.
This essay will demonstrate how Mattei revives and updates the class interpretation of neoliberalism and to what extent it makes a compelling contribution to the field of global history. It will first outline the key arguments of this monograph, before analysing how she conceives the capital order as a global class system.
Austerity, Capitalism and Democracy
Tracing the origins of austerity back to the early 1920s, at a time of unprecedented social unrests and political mobilization by the working class, Mattei argues that austerity’s main objective was the depoliticisation of the economy in order to “foreclose alternatives to capitalism”[1] in times when it is threatened to its core. Those policies worked as a means to reassess the theoretical divide between the realm of polity and the realm of economy, by rehabilitating the law of supply and demand and evicting the state as an economic actor. It also meant deploying the notion of economic objectivity, by advocating for economic self-responsibility through savings while promoting economists’ omniscience. Finally, the economy had to come under the control of institutions, which were not subjected to democratic approbation in order to safeguard the capital order. This allowed for the “replacement of the concept of exploitation as the basis of profits with an idea of market freedom.”[2]
This divide had simultaneously disappeared with war-time collectivisation against the pre-war governmental laissez-faire policies and free-market liberalism. The direct intervention of states in their economy, through the subordination of private economy and control of wages, exposed the political nature of capitalism and placed the centrality of labour at the origin of wealth production. As a major consequence, the theoretical-material boundary no longer appeared as self-evident and workers expressed their desire for economic democracy. In both Britain and Italy, unionisation and strikes peaked in 1919–1920[3], blocking the economy with the hope of utilising state power to “bring social production under democratic control”[4], since its possibility was made apparent during the war with nationalization and governmental control of wages. As workers’ political parties and unions gained a central stage in politics, Mattei contends that elections allowed for a shift of power towards labour. Workers acted in parallel for a “re-politicization of private property and wage relations”[5] through the experimentation of alternative relations of production aiming at overcoming capitalism. In Italy, radical discontents found powerful expression in the experimentation of a new theory of goods and knowledge production by a weekly newspaper from Turin, L’Ordine Nuovo, essentially bottom-up and horizontal, that conceived political freedom as tied-up with economic freedom.
In this explosive context, Mattei maintains that austerity was a counteroffensive to the crisis generated by those threats, a conscious effort of capitalists to restore pre-war capitalism based on the gold standard and to discipline the labour force. Spurred on by an “economic technocracy”[6] composed of British and Italian academics, economists, and politicians advising or working in monetary institutions, austerity worked as a tool to shift the accumulated wealth from the working majority to a saver-investor minority.[7] Their cooperation, based on a rich correspondence unveiled by Mattei, culminated at the International Financial Conferences of Brussels (1920) and Genoa (1922), with the goal to safeguard the private ownership of means of production behind the motive of rebalancing public debts. This “class of [economic] experts”[8] combined a persuasive discourse to build general consensus with coercive measures on the working class when they failed to convince the general public about the necessity of reducing public and private expenses. Economists attributed to themselves the role of enlightening the masses about the truth concerning the situation of state finances and encouraging saving-investing behaviors from the individual, presenting austerity as being apolitical – transcending class interests – and backed up with scientific knowledge.
Based on this theoretical background, austerity justifies the delegation of economic decision-making from democracy to independent technocratic institutions, such as central banks, effectively depoliticising the economy. This depoliticisation is further enforced by the imposition of scarcity. During the interwar period, deflation ensured control over the working classes by diminishing the perspective of profits and investments, further leading to a rise of unemployment. The state countered public budget cuts with taxation that discourages consumption, reducing inflation by lowering demand and shifting wealth from labour to capital (fiscal austerity). This led to higher unemployment, which diminished union activity and suppressed class conflicts, allowing industries to lower wages and increase international competitiveness (industrial austerity). Workers were consequently retrograded to a precarious situation in which their economic power, and ability for resistance, was further decreased. As a final step to lock up capital relations, the restoration of the gold standard[9] at the conference of Brussels “enshrined austerity as a permanent policy” by maintaining a constant pool of unemployment that both weakened labour forces and secured profitable investments in the long term.
A Global Capital Order
In The Capital Order, Clara Mattei provides a comprehensive analysis of how austerity, as a policy rooted in neoclassical ideology, is a theory of political economy influenced by global interactions, including transnational class conflicts, exchange of ideas, and international competition. By highlighting these connections, Mattei demonstrates how austerity served not only to preserve the capitalist order domestically but also to reinforce and perpetuate global economic hierarchies. By placing austerity within the context of global capitalism, Mattei’s book challenges us to reconsider the international roots and impacts of economic policies that continue to shape the world today.
A theory of political economy
Austerity is not merely a set of ad hoc policies, but a deliberate, structured approach designed to reinforce the capital order by managing both class relations and international hierarchies. Mattei conceives the capital order as a meta-structure where austerity mechanisms work in two territorialities: the world-system, and the national class state[10]. In this frame, Mattei pictures the dominant class composed of capitalists, who control the market, and of technocrats, who control the political realm by possessing the monopole of reason, or “knowledge”[11]. The remaining class is the working class, which exists within nation-states, but shares the same position transnationally in opposition to the dominant class. This theory rests on a division between the political and economic spheres, where technocrats manage economic governance in a way that reinforces capital’s dominance, while constraining democratic interventions. Here, the state is an essential actor because of its capacity to reimpose the divide between the polity and the economy by guaranteeing this order with laws.
In order to reestablish the domination of capital over labour, technocrats needed to make austerity accepted as the “natural” state of an economy damaged by war collectivisation and inflation. In his book Currency and Credit, Hawtrey’s theory of the “great credit machine” assumed inflation as the expression of unvirtuous consumer behaviours on part of the state and workers, whose inability to self-correct had the potential to destroy capitalism, thus, so that abstinence had to be enforced. It found a particular echo among economists like Keynes, Blackett, and Niemeyer but also served to support the British Bank’s deflation in 1920. In Rome, a group of economists led by Maffeo Pantaleoni advocated for a “pure” theory of economy, inspired by the Platonic form of social inquiry, where the entrepreneur had the virtuous rational behaviour of saving and investing. The concept of exploitation is eliminated here, as “labour is defined as a complementary commodity”[12] that must be coerced, seeing the arrival of fascism in power as preferable to democratic process to implement austerity policies. Austerity policies thus appear as a projection of class power[13], as a “global technocratic project”[14] aimed at restoring the divide between the economy and the polity.
A tool to re-instate the international capital order
The imposition of austerity reflects the transnational character of capitalist crisis management. Mattei demonstrates how Italian factory committees and militant groups that occupied industries in 1920 in Turin were directly inspired by the nation-wide Shop Steward Movement that originated during the war in Clydeside, Britain. Those committees explicitly opposed the pillars of capital accumulation and its enablers, the state and capitalists, by occupying factories and coordinating strikes to “embrace the drive for total proletarian power”[15]. It is in this context that L’Ordine Nuovo became the place of exchange of news and ideas between the revolutionary movements across Europe and produced an institutional and “methodological breakthrough [for a] ‘new order’”[16]. Its creators, among them Antonio Gramsci, envisaged a complete break from market dependence by stressing the contrived naturalisation of capitalism and consequent “sense of powerlessness”[17] of workers as being the production of labor’s dependence on capital. In their view, the latter should be overcome by the common integration of knowledge and practice in the relations of production, which would in return allow for the recognition of the central agency of workers as being producers. Factory committees became the place where economic freedom was concretely experimented and the politicization of production was made possible by the emancipatory knowledge about the finitude of capitalism.
Opposite to this agitation were the interests of capitalists, whose profits were gravely endangered by inflation and strikes. The capitalist counteroffensive thus created austerity policies to inoculate capitalism from demands of economic democracy and discipline the labour force. Key actors in the global advocacy of austerity policies were what Mattei refers to as “technocrats”, who secured capital accumulation based on extraction of money from the working class. Their apparent political neutrality was regarded as the foundation of their legitimacy to decide for the good of all. In fact, their primary objective was to “expand austerity beyond national borders”[18] to ensure the continued existence of capitalism. Their approach served to reimpose market logic over political decision-making, ensuring that labour’s share of wealth remains subordinate to capital both nationally and internationally. To this end, the British government found the opportunity to secure Anglo-Saxon investments in the Italian economy in the support of the Fascist Italian government and its coercive methods of the working class. In return, Mattei demonstrates that the fascist government continuously implemented austerity policies to remain competitive on an international level. These technocrats also engaged in active militantism internationally, made possible by their positions as advisors for several foreign governments or members of the financial committee of the League of Nations. Mattei provides evidence that the respective economic austere agendas of the British Treasury and the Bank of England from 1918 to 1920 preceded the Brussels and Genoa conferences. Two controllers of finances of the British Treasury, Sir Basil Blackett and Sir Otto Niemeyer, further succeeded, as financial advisors for several countries in South America or British colonies, to create independent central banks.
The perpetuation of austerity: a long term tendency of the capital order
Austerity functions as a mechanism that perpetuates itself across time and space by systematically reinforcing capital accumulation at the expense of labour. Mattei’s analysis underscores that austerity aims to reduce the wage share, ensuring profits remain concentrated within capital. To measure the portion of national GDP that goes to labour or to capital is to look at the variation of the wage share versus the one of the profit share: the constant re-securitization of capital happens by maintaining the profit share in increase and above the wage share, the latter’s ever slowing long-term variation leading to its stagnation – one that we experience today in Western economies, in the health care sector particularly. In Mattei’s view, inflation is not the falsification of the real value of goods but reflects the consequent increase of the value of labour through the rise of wages, in other words, the enrichment of workers. By that, Mattei rejects any existence of a class compromise based on the promises of redistribution of wealth in exchange of the subordination of labour to capital[19], arguing that the de-politicization of the economy is what makes it look widely accepted, when it was in fact austerity that worked as a “shock treatment” to conceal alternatives to capitalism.
The structural division inherent to modern capitalist societies is thus embodied by independent central banks, which maintain a clear separation between economic and political spheres; this division illustrates how ensuring domestic class peace is crucial to upholding the broader international economic order. In the wider context of the decreasing power of Europe in the world since WWI, the implementation of austerity appears even more clearly as a tool for local social stabilization in times of global uncertainty and instability. Mattei also identifies the austerity politics of the 1970s as being built on experiences of capitalist crisis management during the interwar period, recycling financial and industrial austerity in Western European economic policy in response to the economic crisis[20]. It worked to tame once again social upheavals, in the Britain of Margaret Thatcher especially, and put the burden of deindustrialisation and inflation on the working class. Its codification into neoliberalist thinking from the 1970s resulted in the Treaty of Maastricht (1992), and further allowed the establishment of austerity principles as the economic constitution of the European Union. The continuities between earlier forms of austerity and neoliberalism show that austerity is not a natural state of the economy, but a recurring structural trend within capitalism. It is part of how capitalist states have historically managed crises, safeguarded markets, and protected the interests of capital, often at the expense of social welfare. This longer history underscores that austerity is not just a neoliberal phenomenon but a deeper feature of how capitalist economies have been governed in the twentieth century.
Limits and omissions
Mattei’s approach prioritises class challenges and is effective in showing the long-term tendencies of capitalism. As aforementioned, a key argument to the book’s hypothesis is that economists played a prominent role in building a theoretical framework to legitimise austerity policies. The paradigm they reintroduce is, however, not new in the aftermath of WWI but was present in the laissez-faire approach of liberal-colonial capitalism[21] and in using austerity on several occasions during the nineteenth century[22]. The idea of self-responsibilisation of the individual and the decrease of social expenditures appeared in the works of avant-garde economists like the Austrian economist Schumpeter, who highlighted the importance of the entrepreneur in his book Theorie der wirtschaftlichen Entwicklung. Therefore, one cannot claim that the post-war neoclassical schools “invented austerity”; the causal relationship between austerity and fascism, too, looks less conspicuous.
Furthermore, the characterisation of the “liberal international establishment”[23] could have been more precisely defined. Mattei primarily refers to this establishment as being Anglo-Saxon, but only relates to Great Britain directly, while the USA remains in the background, as we understand, by their assumed presence to those two International Financial Conferences. If there is no doubt that Britain surpassed Italy in terms of diplomatic and economic power, the argument that it benefited from exporting austerity politics to the Italian economy would require more solid economic data. The role of empire, too, would merit further discussion, beyond stating that austerity led to a reduction of services in colonies[24]. The framework of the study remains largely limited to Europe and the Western world more generally.
Through the lens of austerity, Mattei offers overall a transnational perspective on how economic policies implemented in the context of the late 1910s and 1920s were not just national responses to economic crises but integral components of a broader global economic order. Her account of austerity politics should be considered as a framework through which research could investigate further the entanglements between capitalism and colonialism, the environment (scarcity of resources), gender, and more.
Notes
[1] Clara E. Mattei, The Capital Order: How Economists Invented Austerity and Paved the Way to Fascism (Chicago: University of Chicago Press, 2022), 130.
[2] Ibid., 131.
[3] Ibid., 279.
[4] Ibid., 81.
[5] Ibid., 54.
[6] Ibid., 202.
[7] Ibid., 8.
[8] Ibid., 99.
[9] The gold standard is a monetary system on which countries peg the value of their currency according to how much fixed amount of gold they have in their banks. It was introduced in the Western world in the second part of the nineteenth century to determine exchange rates and allow for the international movement of capitals. Maintaining strict gold parity is hard and requires constant efforts to adjust the national currency’s value by deflating the economy. It aims to erase any added value to the costs of production (inflation) to attract capital.
[10] Jacques Bidet, Le marxisme face à l’histoire (Paris: Presses Universitaires de France, 2013), 6.
[11] Ibid., 6.
[12] Clara E. Mattei, The Capital Order: How Economists Invented Austerity and Paved the Way to Fascism (Chicago: University of Chicago Press, 2022), 234.
[13] Nicholas Toloudis, “Political Science and The Capital Order: A Review Essay,” Political Science Quarterly 138, no. 1 (2023): 10.
[14] Clara E. Mattei, The Capital Order: How Economists Invented Austerity and Paved the Way to Fascism (Chicago: University of Chicago Press, 2022), 158.
[15] Ibid., 101.
[16] Ibid.,110.
[17] Ibid., 108.
[18] Clara E. Mattei, The Capital Order: How Economists Invented Austerity and Paved the Way to Fascism (Chicago: University of Chicago Press, 2022),247.
[19] Nicholas Toloudis, “Political Science and The Capital Order: A Review Essay,” Political Science Quarterly 138, no. 1 (2023): 4.
[20] Clara E. Mattei, The Capital Order: How Economists Invented Austerity and Paved the Way to Fascism (Chicago: University of Chicago Press, 2022), 290.
[21] Nancy Fraser, Cannibal Capitalism (London: Verso, 2022), 125.
[22] Gianpaolo Conte, “The Capital Order: How Economists Invented Austerity and Paved the Way to Fascism,” Journal of European Economic History 52, no. 2 (2023): 2.
[23] Clara E. Mattei, The Capital Order: How Economists Invented Austerity and Paved the Way to Fascism (Chicago: University of Chicago Press, 2022), 132.
[24] Ibid., 186.
References
Bidet, Jacques. Le marxisme face à l’histoire. Paris: Presses Universitaires de France, 2013.
Blyth, Mark. Austerity: The History of a Dangerous Idea. Oxford: Oxford University Press, 2013.
Catalon, Jean-Christophe. “Une histoire de l’austérité, ou comment préserver l’ordre du capital à tout prix.” Alternatives Économiques, September 15, 2023.
Conte, Gianpaolo. “The Capital Order: How Economists Invented Austerity and Paved the Way to Fascism.” Journal of European Economic History 52, no. 2 (2023): 1-2.
Fraser, Nancy. Cannibal Capitalism: How Our System Is Devouring Democracy, Care, and the Planet. New York: Verso Books, 2023.
Hawtrey, Ralph George. Currency and Credit. London: Longmans, Green and Co., 1919.
Maier, Charles S. “The Invention of Austerity.” Issue Three, April 19, 2023.
Mattei, Clara. The Capital Order: How Economists Invented Austerity and Paved the Way to Fascism. Chicago: University of Chicago Press, 2022.
––––––. “The Capital Order and Economic Austerity: How Austerity Coerces.” Public Books, November 17, 2022.
Mattei, Clara, and Aditya Singh. “The Political Rationale to Engineering a Recession: Monetary Austerity and Class Wars.” Monetary Policy Institute Blog, July 13, 2022.
Polanyi, Karl. The Great Transformation: The Political and Economic Origins of Our Time. New York: Farrar & Rinehart, 1944.
Schumpeter, Joseph A. Theorie der wirtschaftlichen Entwicklung. Leipzig: Duncker & Humblot, 1911.
Slobodian, Quinn. Globalists: The End of Empire and the Birth of Neoliberalism. Cambridge, MA: Harvard University Press, 2018.
Toloudis, Nicholas. “Political Science and The Capital Order: A Review Essay.” Political Science Quarterly 138, no. 1 (2023): 1–17.
About the Author
Julie Birke is a masters student in Global History at the Freie Universität zu Berlin. Her research interests include global history of capitalism, history of the 20th century, urban environmental history, postcolonial histories, with a regional focus on Europe and East Asia.
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Citation: Julie Birke, The Making of Modern Austerity: Insights from Clara Mattei’s The Capital Order and its Contributions to Global History, in: TRAFO – Blog for Transregional Research, 03.04.2025, https://trafo.hypotheses.org/56348
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Forum Transregionale Studien (April 3, 2025). The Making of Modern Austerity: Insights from Clara Mattei’s “The Capital Order” and its Contributions to Global History. TRAFO – Blog for Transregional Research. Retrieved April 21, 2025 from https://doi.org/10.58079/13ofk