"The Order of Capital" | The Fairy Tale of the Austerity Crisis

Germany in 2025: 500 new super-rich individuals, 3,900 in total, owning a third of all wealth in the country, while the real wages of most citizens lag behind inflation. The political response to declining consumption and the export crisis follows the familiar pattern of debates about cuts in social security benefits and social spending, while the wealth of the richest ten percent remains unaffected.

All of this could pave the way for an AfD-led government in 2029. Clara E. Mattei has provided a disturbingly clear answer to the question of how austerity measures and the rise of right-wing forces are connected. Her book "The Order of Capital," originally published in 2022, clearly shows "how economists invented austerity and paved the way for fascism."

Capitalism at its end

Mattei now presents, in German translation, a meticulously researched genealogy of austerity ideology – and a warning of its political consequences. The Italian economist debunks a myth that has shaped economic policy for a century: that government austerity is the only option in times of crisis. Austerity does not serve economic rationality, but rather the protection of capitalist power relations. The cuts to social services – from education and unemployment benefits to infrastructure – follow a pattern that can be traced from Italy in the 1920s to Greece during the 2010 financial crisis. The consequences are poverty and unemployment for the many, while the wealth of the wealthy increases.

Mattei's thesis on this connection leads back to the origins of austerity ideology after the First World War. At that time, not only the economy fell into crisis, but capitalism itself began to falter. In Great Britain and Italy, workers were able to gain the crucial insight that the system was changeable. The state-run war economy had proven this: While pre-war capitalism still acted as a natural laissez-faire state, state intervention in production demonstrated the malleability of economic conditions.

The humanitarian and economic catastrophe of the World War and the resulting poverty were no longer perceived as an inevitable fate, but rather as the consequences of capitalist organization. The end of capitalism seemed closer than ever. Real wages reached historic highs in both countries in 1921/22, demands for the socialization of industries grew increasingly louder, and the working class demonstrated through strikes that they could reverse the balance of power.

Austerity as counter-revolution

In this explosive atmosphere—which Mattei brings to life through journalistic sources from a wide range of political spectrums, not least the weekly newspaper "L'Ordine Nuovo," founded by Antonio Gramsci, among others—austerity did not emerge by chance. It coincided with the largest workers' protests in the history of Great Britain and Italy and was invented as a political counter-instrument precisely because of these strikes.

The ruling classes' response was as elegant as it was cynical: they used austerity as a political tool. But it wasn't politicians or governments alone who were responsible for this—it was the economists who invented austerity. Based on archival material from the Banca d'Italia, the De' Stefani Archive, the Bank of England, and the Churchill Archives Center, Mattei meticulously reconstructs how economists like Ralph Hawtrey and Luigi Einaudi portrayed austerity as a necessity without alternatives.

The real aim of austerity was to discipline the working class and stabilize class relations.

The picture that emerges from the sources is sobering: the actual goal of austerity was to discipline the working class and stabilize class relations under the guise of scientific rationality. Economic issues were to be "depoliticized" and treated without ideology—a fallacy, because behind the supposedly objective economic reason lay the ideology of capital.

Mattei impressively demonstrates the stereotype of the working class that prevailed in the minds of these economists: general laziness and personal responsibility for the economic misery due to unproductive work. These narratives sound frighteningly familiar—they are reminiscent of discourses about Greece in the 2010s or of today's debates about citizens' income recipients in Germany.

The true face of austerity is ruthlessly revealed in historical sources: It was neither about fighting inflation nor stabilizing budgets, but about securing profits by restricting domestic consumption and systematically suppressing wages. This was intended to enable cheap exports and quick profits. Unemployment was repeatedly described in the documents as a "necessary evil" – an instrument that disciplined workers to accept any wage and effectively prevented resistance.

Where capital reigns

Mattei's comparison between democratic Britain and Mussolini's Italy is particularly illuminating. Anyone wondering how these two political systems, so different in the 1920s, could be comparable will be surprised by the similarities and mutual inspiration. Both pursued the same austerity policies—just with different means.

The fundamental difference was simply the implementation: While Great Britain reduced austerity to internal measures through reforms, cuts, and restrictions on the right to strike for unions, Mussolini's fascist policies were able to enforce austerity measures with direct, authoritarian intervention. Austerity, according to Mattei, works in any political system as long as capitalism determines the social order.

This insight gains further relevance when viewed in the present. What national governments enforced back then is now being undertaken by supranational institutions such as the International Monetary Fund or the European Central Bank. The role of depoliticizing the economy is evident in these forms of impersonal rule, which dictate to states, through debt rules, what their deficits may be in order to maintain their creditworthiness. This means privatizing state infrastructure to reduce social spending and maintaining low wages in order to increase profit margins, at least in the short term. Mattei therefore aptly defines market freedom as "freedom from the demands of the working class" in order to comply with the order of capital.

The winners of this policy are more obvious today than ever. During the coronavirus pandemic, billionaires around the world increased their wealth by 54 percent, while millions of people feared for their existence and were simultaneously urged to save. A perfidious system that systematically exploits crises for redistribution from the bottom to the top—and in doing so, drives the accumulation of wealth among the wealthy.

Certainly, Mattei's historical analysis may at times seem narrow-minded, considering that the economic situation alone did not play a role in Mussolini's rise to power or the current European shift to the right. But her core thesis remains compelling: As long as the "order of capital" determines social life, every economic crisis leads to the same supposed solution—austerity at the expense of the weaker majority.

Man-made constraints

Mattei's book represents an outstanding scholarly study and simultaneously serves as a powerful political warning about what so-called austerity actually means: unemployment, poverty, low wages, and, last but not least, the authoritarian threat to democratic structures. It is a well-founded, timely provocation, reminding us that behind the "objective" language of economics lie tangible ideologies.

Mattei's warning is reminiscent of Max Horkheimer's 1939 dictum: "Anyone who doesn't want to talk about capitalism should also keep quiet about fascism." At a time when right-wing movements are on the rise across Europe and austerity policies are being praised as the only alternative, this historical lesson is disturbingly relevant. The insight that austerity policies are a political decision with disastrous consequences helps to counter this. Mattei's meticulous reconstruction of their origins shows: the seemingly inevitable is man-made—and thus also changeable.

Clara E. Mattei: The Order of Capital: How Economists Invented Austerity and Paved the Way for Fascism. Brumaire, 586 pp., paperback, €22.