The capital order has an essentially relational, and thus political, nature. Far from being a self-sustaining given, it is a choice that requires constant life support. A pseudo-moral principle and economic policy known as austerity has been perfected over time as a means to safeguard capitalism and weaken the possibility that any alternative economic system might emerge. Austerity consists of a set of economic policies implemented by governmental institutions that cut across party lines. Often, it is paradoxically the self-styled left that leverages austerity.

Much economic research has established that austerity has almost never worked as promised, neither stimulating growth nor reducing debt. So why does it continue to be the preferred course of action for governments? We cannot simply attribute its structural presence to the stupidity or corruption of those in government. The true measure of austerity’s effectiveness is its ability to impose and reinforce a class structure, the very order that underpins economic growth. In this sense, austerity has never been an irrational calculation.

If you ask most experts for a definition of austerity, they will say it is economic policies that involve cutting public spending and raising taxes. Here lies the first trap: economists like to measure the aggregate, the sum total, the whole. These experts talk about the US, the French, and the Brazilian economies as cohesive national entities. But this view overlooks how public money is spent differently across economic classes. If we examine the aggregate spending of the American state, we won’t see any trace of austerity. In fact, the state is spending heavily, especially to secure shareholder profit with public handouts to private entities in the military-industrial complex, prison management, and financial sectors. For example, the Biden administration’s “Bidenomics” had the state take on debt to de-risk and effectively subsidize asset managers investing in the green transition and spend over $22 billion in military aid to Israel between 2023 and 2024, guaranteeing business for more than fifty multinational companies involved in the genocide in Gaza. Total public spending is not falling. Fiscal austerity is not simply about whether the state is spending, but rather about where the state is spending or, better yet, for whom.

In 2022, the official rate of child poverty more than doubled in the US, with 5.2 million more children living in poverty. This followed a congressional decision to end emergency COVID-19 relief support with cuts in the child tax credit, food subsidies, and unemployment insurance. If the American state, like most states worldwide, increases military spending or rescues banks and supports private businesses, while simultaneously cutting welfare spending, it is structurally transferring resources from the majority of citizens who live off their wages to the 1 percent who live on gains from capital ownership, such as dividends, rents, and interest. Austerity is not about spending less but about spending in favor of the economic and financial elite and to the detriment of the majority of the population. We struggle to afford basic medical treatment, find secure affordable housing, and send our children to adequately funded schools. Though social expenditures are slashed, for the capitalist class the message that “there’s no money” doesn’t apply. The American state bought nearly $50 billion in arms from Lockheed Martin in 2023 alone. In fact, Lockheed Martin and BlackRock overflow with our tax money. Meanwhile, European countries sacrifice social spending on the altar of their new NATO defense spending target of five percent of GDP.

These austerity maneuvers are not merely technical decisions; they are profoundly political choices. Austerity achieves a crucial goal: it increases workers’ dependence on the market. As the state dismantles health care, education, social housing, transportation, and public services, we must worry about having money in our pockets to meet our basic needs. If we want to secure a good education for our children, adequate medical treatment, a roof to live under, and the right to transportation, we are increasingly tied to the need to have sufficient money, which most of us can obtain in only one way: by selling our capacity to work in exchange for a wage. If we barely have the energy to make it to the end of the month, how can we find the strength to participate in any collective initiative toward alternative economic structures or even just protect our rights?

The same principle applies to the other side of the fiscal austerity coin, state revenues: it is not about whether the state increases taxes, but about whom it increases taxes for. Today, most governments enact regressive tax reforms, cutting taxes for those with capital income (and providing generous tax loopholes) while increasing taxes for those with labor income, who have little room for evasion given that they are taxed directly from their paychecks. In the US, people who earn income from wages are taxed disproportionately more than those who earn income through capital gains—most of which, of course, are earned by the rich.

In 2019, the top 1 percent of households accounted for 75 percent of all capital gains in the US, and the top 0.1 percent earned nearly half of all capital gains income, a trend that has only intensified in the last few years. Moreover, while sales taxes, excise taxes (on fuel), and taxes on alcohol—which we all pay equally regardless of income—are growing in most American states, taxes on the top income brackets are declining (from 92 percent in 1953 to 37 percent in 2023) as are federal corporate taxes (from 35 percent to 21 percent in 2017).

Thus, we get bizarre scenarios where, in a corporation like the Walt Disney Company, a custodian would have to work two thousand years to make as much as the CEO does in one year, and shareholders pay far less in taxes than the workers who generate the corporation’s surplus. Walt Disney is certainly not a uniquely rotten apple; such gross inequalities are found throughout the economy. In 2018, corporations that paid zero dollars in federal income tax included all the big names: IBM, Starbucks, Netflix, Delta, Chevron, GM, and Amazon. In 2020, Nike, HP, and FedEx were granted the same exemption. Another glaring example is the elimination of the inheritance tax. In the United States, for example, thanks to the mechanism of an annuity trust, multimillionaires can pass on their wealth to the next generations tax-free.

In the US, as elsewhere, cuts in investors’ taxes are marketed with the message that these measures will incentivize those who run our economy to invest and increase jobs. But historical evidence speaks clearly: these corporate giveaways benefit only the superrich. For example, thanks to the Trump tax cut of 2017, AT&T gained a tax windfall of $21 billion, yet eliminated 23,328 jobs in the two years following.

You may find these scenarios paradoxical or even a reflection of the failure of our economic policies. I don’t blame you. What I want to stress, however, is that these results are not a failure for the logic of our economic system. The result of regressive taxation is the same as that of cuts to social spending: the confiscation of the working peoples’ resources increases their economic vulnerability, their precariousness, and dependence on the market. These are definitely problems for us but not for the system, because securing market dependence means securing the foundations of the capital order.

We can dismiss the common trope by which austerity policies are conceived as a zero-sum game between the state and the market. Austerity capitalism does not mean less state intervention; it means a state that constantly plays an active role in fortifying the market by expropriating resources from the many to favor the few.

Fiscal austerity, such as defunding social services and cutting taxes on the rich, is often implemented alongside monetary policies, particularly by increasing interest rates, which swells the incomes of capital owners—those same individuals whom the state chooses not to tax but instead borrows from, paying them interest.

Interest rate hikes, thanks to monetary austerity, are good news for creditors but bad news for families who depend on loans for their daily survival and who will find themselves paying higher mortgages and amassing more credit card debt. Working families are not just hit as consumers; they are hit harder as workers. First, the higher cost of money increases government borrowing expenses for social services, which will therefore be cut. Second, monetary austerity directly impacts the labor market. The high cost of money, in fact, slows down the economy: as employers reduce spending, fewer job opportunities and higher unemployment undermine the bargaining power of workers. Monetary austerity determined the US Federal Reserve’s agenda in 2022 and 2023 and cost American workers 1.2 million job openings between May 2023 and May 2024 alone.

The wave of monetary austerity that broke in 2022 was preceded by more than a decade of low interest rates. This did not enrich workers. As Janet Yellen reminded us, “Interest rates can be low only when workers are weak.” Easy money and forms of quantitative easing that immediately secured the assets of large corporations were politically compatible with the capital order because of previous waves of austerity. At the end of the 1970s, when workers’ organizations were strong, Fed Chairman Paul Volcker began raising interest rates, which would peak at 20 percent in the early 1980s. These decisions caused an economic recession in the US and many parts of the world, with American unemployment rising to 10 percent, breaking the back of workers at a moment of historical mobilization for higher wages and anti-capitalist alternatives. If you, as a worker, fear losing your job and, with it, the ability to pay for medical care, you become more controllable. If job opportunities are scarce, wages decrease. The risk of spiraling an economy into a recession is a short-term cost for capital accumulation: securing workers’ subordination and a healthy rate of exploitation come first.

Industrial austerity shows up in the direct intervention of the state in the labor market, through privatizing, dismantling labor rights, and weakening unions. As the state transfers industries to private companies, it makes the labor market precarious and weakens workers.

This is the austerity trinity of fiscal, monetary, and industrial pressures. They have little to do with technicalities like balancing the budget and much to do with maintaining a society of few winners and many losers, increasingly isolated and trapped in material conditions that prevent them from carving out time and space to imagine a different social model.

The economic institutions in charge, from countries’ central banks and treasuries to the International Monetary Fund, serve the primary purpose of “stabilizing” our economy. A close reading of history shows that to achieve such stabilization, labor relations must be shaped against workers so that they have no alternative but to accept a subordinate role in the production process. The toolbox of macroeconomic management—social expenditure cuts, regressive taxation, interest rate hikes, privatization—is based on the sacrifice of working people. Again, this goal takes precedence over all others, even at the cost of a temporary economic recession or greater debt. Indeed, it is easy to unmask the political priorities at stake when considering, for example, the cost to American citizens of not taxing the rich. According to the US Treasury, taxing capital gains at death instead of allowing them to be passed on untaxed would raise over $400 billion for the country over the next decade, almost exclusively from the wealthiest 1 percent. In 2023 the federal government spent less than a third of this amount on nutrition assistance programs, including food stamps. The systematic defunding of the Internal Revenue Service is another emblematic case in point. The firing of public employees under the pretext of depleting state coffers has ironically cost an estimated $7.5 trillion in over a decade, nearly 4.5 times the 2023 fiscal year deficit. Austerity capitalism is expensive.

Trump’s “One Big Beautiful Bill,” enacted July 4, 2025, captures the violent arithmetic of austerity: Over the next decade, historic cuts to the social safety net will bankroll a staggering expansion of military and border-control spending. Nearly $200 billion stripped from food assistance—likely pushing more than two million poor Americans toward hunger—will now finance detention centers, border surveillance, and next-generation military tech, securing profits for private shareholders. More than $500 billion carved out of Medicaid will deprive millions of health care coverage, even as those earning over $1 million a year enjoy a collective $114 billion tax break in 2027 alone. And far from reducing the national deficit, the bill is projected to swell it by more than $4 trillion in a decade—making it, in the words of the Democratic House Budget Committee, “one of the most expensive laws in American history.” Once again, austerity is not about taming debt; it is about deepening market dependence and tightening the grip of the capital order.

It’s time to stop buying into the idea that, within a capitalist society, it makes sense to discuss economic policies according to the criterion of “right” and “wrong” for an elusive common good. Our economic machinery is structured not to meet the needs of ordinary people but to increase the rents and profits of the few capital holders. Economic policies cater to these priorities. What critics point to as “problems” of the system—poverty, inequality, and unemployment—are actually its precise “solutions.”

Austerity isn’t something abstract: we experience it every day. Even if we can’t define it, we actually know it very well. It has a disruptive impact on our lives and determines their quality: what we eat, where we live, the air we breathe. In the UK, a country that has punished its citizens with social spending cuts since 2009, following the government’s intervention to enrich those same bankers whose risky bets had brought misery to the majority, the average life expectancy has decreased. In the United States, tormented by structural austerity, life expectancy is lower than that of any other Western country, and wealthy male citizens have a life expectancy that is fifteen years higher than the poorest.

The vital role of austerity becomes glaringly apparent when the economic system enters a crisis. True crises of capitalism, far more than mere slowdowns in economic growth, are moments when the majority questions the pillars of our economy: private ownership of the means of production and wage labor. In the aftermath of the Great War, significant portions of the population in countries such as Britain and Italy were embracing concrete institutional transformations. What halted the transition toward greater economic democracy was an expert-driven campaign to code austerity as an objective resolution to the crisis of capitalism.

History reveals that austerity is not merely an aberration of the neoliberal turn in the 1970s, as is often believed. Rather, it is a structural component of our economic system. While governments tend to pass austerity policies to counter worker protests during times of labor upheaval, it remains a fixed rule of all governments within a capitalist system.

A History of Coercion

We see the coercive nature of fiscal, monetary, and industrial austerity at the beginning of the twentieth century, after World War I, alongside the rise of fascism, and in today’s policies.

Investigating what happened a century ago, when austerity emerged to discipline workers across Europe, allows us to dig deeper into its current logic and dismantle those misunderstandings that silence dissent and resistance. The narrative that follows—resulting from extensive archival research—is crucial for exposing the “false opposition” between political parties of different colors that confront each other in public debate.

The Great War from 1914 to 1918 triggered arguably the most severe crisis capitalism has ever experienced. Extraordinary economic challenges posed by war mobilization pushed governments to intervene in a way that shook the pillars of capitalism. As soon as hopes for a swift resolution of the armed conflict vanished, governments found themselves facing an industrial war. Increasing production became essential for military victory, and the home front took on a decisive strategic importance. The challenge was daunting: how to boost production to have enough raw materials, weapons, arsenals, technology, and food to win against the enemy while much of the working population was fighting at the front. In the case of Great Britain, almost six million men were enlisted in the army, accounting for more than a third of the available male workforce.

The governing elites entered the war firmly believing in the power of what eighteenth-century Scottish economist Adam Smith called the “invisible hand”: private business and the law of supply and demand were enough to guarantee the most efficient production results. But the elites’ faith was soon tested. The increase in demand for war necessities raised prices but not productivity. While society suffered from food shortages and inflation, private business channeled resources into more profitable sectors, such as luxury goods and exports.

The case of the British naval sector illustrates a general pattern. As the War Cabinet reported to Parliament, “If shipping failed, we could neither continue in the war nor maintain our population.” Soon, the conflict between public needs and private interests plainly surfaced: selling British ships abroad was extremely profitable. By February 1917, private shipowners had sold ships to rival nations at such a rate that there were not even enough vessels to import the essential goods for a nation at war. As Sir Leo George Chiozza Money, the parliamentary secretary to the British Ministry of Shipping, wrote, it was only when the state found itself “on the edge of the abyss” that it abandoned the notion of “doctrinaire individualism.”

Faced with a choice between victory or defeat, the governments of the warring countries introduced unprecedented economic practices. The words of Edward M. H. Lloyd, a civil servant in the British War Ministry, summarized this shift: “National organization and centralized control were found to be more effective than high prices and laissez-faire in stimulating supply.” Comprehensive state intervention was underway. As early as 1915, the Italian economist Riccardo Bachi wrote, “The State, as a war entrepreneur, has become the center, the pivot, the engine of the entire economy.”

The political scope of these upheavals was terrifying. Paradoxically, to promote capital accumulation, the state intervened with maneuvers so extraordinary that they overturned the social consensus on which the system rested: the idea that it was a spontaneous, untouchable, and natural order. At that critical juncture, the state opened economic analysis to political discussion. Policies cementing private ownership of the means of production and wage relations were now debatable.

The British and Italian governments, among those of other nations, took control of industrial and agricultural production. Both endowed themselves with broad powers, including the requisition of goods and lands; they also set limits on private profits. While wartime collectivism opened the bureaucrats’ imagination to forms of nationalization, the states’ interventions to regulate the labor market had even more politically disruptive consequences. In those years, workers experienced firsthand the impact of state initiatives aimed at dismantling their bargaining power.

World War I shifted the power relations between capital and labor. Just as wartime production was increasing, conscription and voluntary enlistment depleted the reserve army of labor. If this were left to the dynamics of competition to attract workers, capitalists would have had to bid up wages to levels that were incompatible with “national goals” of intensified capital accumulation. At that point, the state had to intervene. Increasing productivity primarily meant disciplining the workers.

The Italian government went so far as to militarize the workforce. This meant that when a firm was declared “auxiliary,” all personnel, from senior technicians to laborers, including women, the elderly, and children, fell under military jurisdiction. This gave rise to the phenomenon of “factory barracks,” as labor leader Bruno Buozzi called them. Indeed, workers were officially equated with soldiers: they had to submit to mandatory work and adhere to a strict work regimen enforced by the military. Any unauthorized absence was considered insubordination, obstructionism, and sabotage and severely punished. By the end of the war, 50 percent of Italian workers had faced sanctions.

The state’s role as disciplinarian altered the specific characteristics of capitalism as a socioeconomic system. Instead of bosses, it was now governments implementing the harshest techniques to increase the rate of exploitation. They prevented workers from accepting better-paid jobs, kept wages low, and extended the working day by making overtime mandatory. The Italian government froze wages at prewar levels and even suspended the prohibition on night work for women and children in most cases. All these processes made capitalist exploitation—once impersonal—overtly political, exposing it to public scrutiny and resistance. The state thus triggered an unexpected and potentially fatal crisis for the economic system it was paradoxically trying to protect.

The crisis of capitalism stemmed from the actions of men and women who firmly believed in a different world and personally dedicated themselves to realizing it. The war had demonstrated that production relations were not set in stone and could therefore be changed, not only to favor capital—as the capitalist state had done—but also to build a more humane society that centered on the satisfaction and well-being of those who had been indispensable during the conflict. No matter how much the capitalist class tried to deny it, there would have been no military victory without the workers who were exploited in the factories and massacred on the front lines. The most creative political thinkers of the period immediately following World War I were able to build workers’ awareness and then propose ideas of profound social transformation. Powerful economic systems could be invented, revised, and transformed by people. There was nothing natural or immutable about the economic system they had grown up in. Capitalist oppression could be overthrown through struggle.

It is difficult to do justice to the enormous wealth of social experiments that were realized in the immediate postwar period, such as in Italy during the so-called Red Biennium. Scholars have preferred to spill ink on the following decade, beginning with the crisis of 1929, when workers had already lost their bargaining power and democratic alternatives to capitalism had faded. But between 1918 and 1920, workers were politically stronger than ever before.

These battles were fought in the very heart of capitalism, in Western European countries. The popular imagination in the West was undoubtedly ignited by the radical changes in Eastern Europe, from Russia to Hungary, where workers had succeeded in toppling ancient authoritarian and semifeudal regimes. The writings of the Italian politician Pietro Nenni convey the sense of excitement:

The fall of the Hohenzollern in Germany, the dissolution of the Habsburg empire and the flight of its last emperor, the Spartacist movements in Berlin, the Bolshevik revolution in Hungary, the Soviet in Bavaria … fired the imaginations and inspired the hope that the old world was on the point of crumbling and that humanity was on the verge of a new era of a new social order.

This “new social order” took on multiple faces, from reformists to the more radicals.

Let’s start with the “reconstructionists,” composed of an enlightened elite of bureaucrats, public intellectuals, and union representatives who, in their effort to use the redistributive power of the state to save capitalism, inadvertently undermined its foundations.

Reconstructionists launched a significant attack on economic orthodoxy, which had controlled and defined the political decisions of states for more than a century. For the Italian politician Michele Pietravalle, the time had come to revise “material and moral values, and even to rethink, shake, break, knock down constitutions and institutions that once appeared as fundamental and sacred.” The war, British journalist John Hammond wrote in 1918, “had emancipated and widened our imaginations” since it “removed the word ‘impossible’ from the language of politics” and “destroyed the superstition of the iron law which has checked and hampered all our hopes.”

Reconstructionists held that political and social issues came before economic priorities. They argued that monetary resources would be sufficient to achieve the political objectives of the state, regardless of their cost. In Great Britain, Minister of Transport Eric Geddes voiced a popular view in his report to the cabinet on February 25, 1919: “You must be prepared to spend money on after-the-war problems as you did on during-the-war problems. That [money] must be found and added to our debt if necessary.” Minister for Reconstruction Christopher Addison, who campaigned for the adoption of urgent social reforms, was in agreement: “It would be no defense to say that vital proposals were not enacted for want of money. Nobody will believe it.”

These were not just words; governments implemented mandatory health insurance, unemployment insurance, and the right to primary education. In Britain, for example, the Ministry of Reconstruction, which many Italian reformists looked to as a model, established visionary committees. The women’s subcommittee for housing, composed entirely of women, proposed experiments in “community living.” It created gardens, playgrounds, and social centers, believing that “full attention should be given to the organisation of the resources available for social and intellectual development.” A section of the report, titled “Communal Holiday Homes,” confronted “the difficulty experienced by working women in obtaining a real rest and holiday.” The plan envisaged “(1) Houses in which mothers could, without anxiety, leave their young children … [and] (2) Large houses in seaside or country places to which groups of working people might go for a holiday.”

The Adult Education Committee in Britain manifested the spirit of the time, following an ideal still to be realized: “Adult education is a permanent national necessity, an inseparable aspect of citizenship, and therefore should be both universal and lifelong.” It advocated for education that was “systematic,” “continuous,” and “social” as a “duty of the community,” which would satisfy workers’ “appetite for knowledge,” and overcome “work without thought.”

During the same years, the Turin-based magazine L’Ordine nuovo (The new order), founded in May 1919 by young political leaders and intellectuals Antonio Gramsci and Palmiro Togliatti and their comrades, found its lifeblood in the city’s workers’ councils and carried its ideas to their revolutionary consequences. Mobilizations during the Red Biennium sought to establish democratic control of production.

The “strikomania” that spread across Italy and Great Britain in 1919 drove an unusually large number of workers to put down tools and to fight for fewer working hours and higher wages. As an official British communiqué explained, workers were “no longer prepared to acquiesce in a system in which their labour is bought and sold as a commodity in the labour market,” and demanded to be treated “not as ‘hands’ or part of the factory equipment” but “as human beings with a right to use their abilities by hand and brain in the service not of the few but of the whole community.”

In Italy, the desire for popular self-governance spread rapidly through factories and the countryside. While industrial workers in northern Italy fought for control over the means of production, more than three hundred thousand agricultural workers staged a fifty-day strike across vast areas of Piedmont and Lombardy, holding many citywide assemblies. These workers occupied land and collectively managed agriculture through self-governed institutions, including councils to deliberate on production, employment offices to coordinate labor, and production cooperatives to supply fertilizers and machinery. They often succeeded in gaining state recognition for these institutions. Similar successes were realized by workers in the manufacturing sector. The primary goals of the Red Biennium were to abolish the exploitative wage relationship in favor of horizontal participation in production and to abolish production for profit in favor of production for need.

Factory councils became popular in Scotland’s Clydeside region and reached their peak in Italy in the summer of 1920 with the occupation of factories. During this time, workers managed production autonomously for over a month. Italian Prime Minister Giovanni Giolitti had to admit the impossibility of the state intervening in defense of private capital due to the extreme deployment of forces that such a task would have required.

Similarly, the directors of the main banks, for example Banca Commerciale, were forced to assure the metalworkers’ union that they would remain neutral, asking for leniency in case of a revolutionary outcome. Even Benito Mussolini, leader of the movement Fasci Italiani di Combattimento (Italian Fasci of Combat, later to become a party), took care to communicate his solidarity with the occupiers, while Fiat owner Giovanni Agnelli, in 1920, during the days of the factory occupation, officially proposed to transform the entire company into a cooperative.

Particularly inspiring is the way political-cultural projects provided lifeblood to the movement in those years. The weekly L’Ordine nuovo was a hub of political reflection that contributed to the deep conviction that no true social revolution is possible without a revolution in the way we understand society. Gramsci named this mutually reinforcing connection between theory and collective action “praxis.” As a young philosophy student, he had experienced the power of human activity to transform reality and produce history during his participation in the workers’ councils of Turin. The intellectual insights gained from his political engagement became the guiding intuition of his famous Prison Notebooks, written during the years of his detention by the fascist regime.

Until the Red Biennium, knowledge had been filtered from the top down to ensure passive consent to the current system. However, Gramsci and his comrades now understood that emancipatory knowledge had to emerge from collective organizing in the workplace and could thus support action from the bottom up. They learned this at the factory councils, which were born as informal committees representing workers during the Great War. These councils became the institutional basis for a new liberating force. They were true schools for the people and signaled the end of the separation between economics and politics. Decisions regarding production were reappropriated by the workers, who realized that making collective economic choices required experimenting with novel constitutional structures capable of ensuring genuine democratic participation. Unlike our current political systems, where elected officials often exercise unchecked discretion and align with powerful interests, the representatives within the various levels of the councils were subject to recall by their base, rotated every six months, and required “to announce frequent referenda in their departments on social and technical questions and hold frequent assemblies.” As “absolutely original institutions” of the proletariat, the councils functioned as nuclei of a new state—one in which people were not alienated from political life but actively engaged in it on a daily basis. The democratic organization of economic decision-making built novel skills and prepared workers for a new society.

Merging politics into our understanding of economics is how we create real democracy. It requires recognizing how a worker can have conscious agency as a creator of value. While today capitalism and traditional economic models render us powerless by treating us as interchangeable pieces in a production process we do not control, what L’Ordine nuovo emphasized was the collective strength of workers as indispensable to society.

The affirmation of workers’ agency as self-governing producers, the union of economics and politics, and the meshing of theory and practice were steps toward emancipation. However, as Gramsci observed, either popular organizations manage to go beyond capitalist relations or the ruling class will find a way to reimpose its dominance.

Beginning in 1922, Mussolini’s fascist regime imposed austerity policies that enabled the restoration of old power relations. It implemented fiscal austerity by systematically dismantling the popular postwar gains, severely cutting welfare spending, and abolishing inheritance and super-profit taxes, while simultaneously increasing taxes on workers. Monetary and industrial austerity followed: the fascist government raised interest rates and banned unions and strikes, using legal force to suppress wages and consolidate control. To establish these policies, Il Duce astutely surrounded himself with economists who reestablished the barrier between the economic and the political that workers had dared to break.

This counteroffensive based on austerity policies still affects our lives today. The first international economics conferences in Brussels (1920) and Genoa (1922) were hotbeds for developing an antiworker project that was both intelligent and ruthless. The experts in economics and finance gathered to forge the code of austerity and deceive the public into believing that any alternative to the capital order was impossible. At a time when wartime collectivism had challenged the efficiency of the market in mediating production and distribution, these economists had to stand firm and unite in defending its idealization. Just when class conflict seemed to reach a point of no return, they denied its very existence by reverting to “classless” economic models that quietly subordinated workers. They did not mince words. Citizens who expected a reward for their war-time sacrifices had to think again: the “prize” of reconstruction would not be democratic control of industry or a new and advanced welfare system but, as the British investment banker R. H. Brand put it, the “hard truth” of “labour and suffering.”

Austerity had a precise purpose: to defend capitalism from its enemies. And it responded to an iron logic: to attribute economic problems—debt and inflation—to those enemies. The motto coined in Brussels and Genoa, “Work more, consume less,” pointed its accusing finger at the workers. What the experts gathered at the two conferences knew for sure was that the logic of capitalism would not recover without forceful political intervention by the state, which would weaken the workers by transferring resources from the many to the few. Here lies the quintessential achievement of macroeconomics as it has long been practiced, modifying and disciplining citizens’ behavior through fiscal and monetary policy.

The economists of the time certainly did not view themselves as agents of repression. Rather, they considered austerity reforms as products of an objective reality, which could not be questioned. The state and its representatives implemented a powerful strategy that took on two faces—consent and coercion—and was carried out across Europe.

Economics professors played a pivotal role during the early years of Mussolini’s government. In the 1920s, a strong alliance formed among some leading academics. Two were openly fascist and two were liberals. They believed the workers’ social alternatives were leading the nation toward moral and economic decline and so perfected the weapon of austerity against them. Professor Maffeo Pantaleoni snarked:

Thanks to Bolshevism, the modesty in the standard of living that characterized Italians has vanished. It has disappeared in both the working class and the peasantry. It is disgusting to witness the masses of workers that are drunk in all our cities. The notable increase of wages was not accompanied by greater civilization.

These cruel words came from the pen of someone who is still remembered as one of the most important economists of all time and is a founding father of the economic theory that is still dominant today, the “neoclassical paradigm.” Pantaleoni’s Principles of Pure Economics, translated into English in 1898, represented a methodological turning point for economic studies, training generations of students. His international fame secured him a seat at the Brussels conference of 1920. A committed member of the Fascist Party and a senator since 1923, Pantaleoni worked strenuously in the role of first technical adviser to his student Alberto De’ Stefani, who in 1922 became the minister of finance and treasury of the fascist government. A professor of economics with tenures in Padua, Venice, and Rome, De’ Stefani was elected among the first deputies of the Fascist Party as early as 1921. After becoming finance minister, he called to his side Professor Umberto Ricci, whom Mussolini had recruited to serve his government. Unlike his two colleagues, Ricci was not a fascist but a true liberal who aligned with the fourth member of the austerity squad, Professor Luigi Einaudi, in believing that Mussolini was the right man at the right time to put an end to the absurd demands of the workers. To understand Einaudi’s support of fascist economic policy, it is enough to read one of his numerous articles in The Economist, for which he was a correspondent:

When the worst happened, in September last, and the occupation of factories by armed workers and the institution of Soviets in factories seemed to point to an imminent Communist revolution in Italy, and the government declared its impotence to use the armed force for the enforcement of the law, a sudden revolution took place. Youths of the middle class, returned men and officers, in indignation grouped themselves into “fasci.” … The communists are everywhere defeated. This renewed feeling of hope in the future of our country is not the least important cause of the better tone in foreign exchanges.

The four distinguished academics saw fascism as a turning point driven by a “set of politicians: young, energetic, full of vigor and patriotism.” On October 28, 1922, Einaudi wrote:

The important question is, what is the economic platform of the new party? Signor Mussolini, the chief, is not an economist. Passionate and full of vigor, he is able to commit his party to headlong plunges into unknown seas. For the moment, he has uttered at Naples only one economic sentence: “Italy needs at the helm a man capable of saying no to all requests of new expenditure.” So far, so good. … Public opinion was seriously and gravely warned of the necessity of putting an end to the increase in public expenditure, and of reducing even useful expenses. Will the new Party have the will and the power to redress the awkward financial situation of the State?

In the Corriere della sera just a few days earlier, Einaudi had praised the economic program of the National Fascist Party, presented by De’ Stefani at the Naples congress that same month: “We ardently desire a party, and be it the Fascist one if the others can’t do better, who can use the appropriate means to reach the objective of the spiritual and economic grandeur of our homeland [patria].”

“Grandeur of our homeland” really means capitalist accumulation, to which everything had to be sacrificed. As the economic programs developed, the ideological differences between the two fascist professors and the two liberals disappeared, blended into a tacitly shared coercive design. Once in office, in January 1922, De’ Stefani wrote to his “illustrious friend” Einaudi extolling their unity of purpose:

When my young and bold comrades ask me how to develop a Fascist mentality, also in the technical field of social, economic and financial problems, I direct them to the works of four great Italian Fascists, who are non-militant and without a party card: Vilfredo Pareto, Maffeo Pantaleoni, Umberto Ricci and “last but not the least” Luigi Einaudi, whom I plead my comrades to forgive if he propagandizes for Fascism on the columns of the Corriere della sera.

The fascist mindset was perfectly aligned with that of the capitalist economists. They quickly understood that the regime would set the conditions to bring their ideal economic models to fruition, ultimately supporting the construction of an all but impregnable capitalist society.

Pure Economics

One must consider both the neoclassical economists’ theoretical writings and newspaper contributions to fully understand the coherence of the austerity project. The professors’ public commentary unveils the classism that imbues their economic essays, which technical language otherwise masks. The urgency to discipline workers was, in fact, dictated by a scientific calculation. In turn, the scientific aura helped vindicate austerity policies.

The new theoretical paradigm of “pure economics” was not yet dominant, especially in Italy, where the economic tradition was historical rather than mathematical. De’ Stefani and Ricci hailed Pantaleoni as “an Archangel with a flaming sword” who was fighting against all other schools of economic thought to spread a “theoretical part of economic science, a nucleus of doctrines, that are independent of opinions, as well as of ethical, political and religious predilections. Something akin to physics and mathematics … an exact science definable as ‘pure economics.’”

The success of this mental straitjacket depended on its ability to appear impartial, which guaranteed the economist undisputed authority. He deserved to be equated with a scientist capable of dispensing objective and incontrovertible truths. As Ricci explained, “The socialist and the protectionist are to the economist as the astrologer is to the astronomer, the alchemist to the chemist, the charlatan to the doctor.” These economists meticulously endeavored to garner unanimous consensus for austerity and to consecrate economists as an exclusive circle holding positive knowledge about all economic phenomena.

De’ Stefani described his excitement when, stumbling upon Pantaleoni’s Principii and Pareto’s Cours d’économie in a bookstore, he discovered pure economics:

I was seduced by those analyses in which utility and harm, pleasure and pain, and the more complex facts of the economic order were conducted through calculus formulae and described through graphical representations. … Equilibria became points of intersection of curve systems and numbers solving systems of equations. The soul was soothed by these formal truths.

As the rigor of arithmetic soothed the economist, quantitative methods bolstered his claims to objectivity. If numbers do not lie, neither can pure economics, which is entirely built on mathematical models.

The insistence on objectivity was so relentless that it even manifested in the change of the discipline’s name, from political economy to pure economics. This purity derived from a savvy focus on a narrow range of elements: the economist dealt only with individual decisions of hypothetical rational beings, from which unassailable theorems could be deduced. Many economists do not even discuss human beings but a caricature of them, Homo economicus—the rational agent driven by self-interest—and his decisions aimed at maximizing utility. At the same time, this “purity” sweeps away all historical institutions of the real economic world, forbidding questions about what should and shouldn’t be private property and how class relations need to be addressed. Most important, pure economics presumes eternal capitalism by avoiding the use of the term altogether. By elevating economics to a pseudoscientific discipline, the experts carried out a forced and methodical separation of the economic sphere of society from the political one. One might think that this separation would make economics a mere intellectual exercise. Ironically, it was this very separation that justified coercive intervention into society’s behavior.

These experts felt a strong urge to shape people’s lives in order to comply with their transcendent discoveries. Ricci believed theoretical constructions should “be deemed not merely a luxury of the intellect, but necessary to explain and predict events, and essential to tame men.”

Blessed with unbiased knowledge, the pure economist has a moral duty to show citizens where they have gone wrong and correct them. Here lies the key to understanding technocracy, which etymologically means “power of the expert.”

After the war, however, the opposition to the experts’ vision was evident. Ricci was aware that if the “contemplation” of the “divine science” was “the privilege of the few,” it was also true that this science “does not always appear beautiful, true and good to the profane public.” Hence his regret: “By proclaiming the principle of universal taxation, the shutting down of redundant employees and of useless public works, the economist surely does not make friends.”

The profound political ambitions of these supposedly apolitical economists become evident when they discuss the “authentic essence” of the world. In 1920, in the pages of Corriere della sera, Einaudi led a polemic against Marxist ideas circulating in Italy: “Why should a capitalist profit only because the machine is his? Why shall he live without doing anything? Is it not obvious that his profit comes from the exploitation of someone else’s labour?” he asked sarcastically, and continued: “This is the celebrated and vulgar sophism of Karl Marx’s Capital. But it is enough to ask: how much would be produced if the savers did not produce capital? The answer: nothing. Without capital, labour produces zero.”

De’ Stefani offered an analogous explanation to his students: “Capitalism is the phenomenon of a class that lives on the specific productivity of capital, it depends on the right of property and heredity, not on a subtraction at the expense of the workers.” It was, he specified, “a result of savings and conservation, useful actually to the very working classes.”

While Gramsci and the revolutionary workers used lived economic knowledge to expose the reality of capitalism as a system based on exploitation, the pure economists defended models that depicted a reality in which capital, not labor, was the engine of the economic machine. Capital was understood not as a social relationship but as a commodity generated by the savings of those who deserved to be at the top of the pyramid.

The pure economists went even further. According to their impartial science, social hierarchies were not only natural but also just, because a person’s class was a result of individual choices. The theoretical assumption is that in a society governed by the market, anyone capable of maintaining virtuous economic behavior can succeed. This is the fairy tale of meritocracy.

Ricci believed that economic success couldn’t be achieved by everyone, not because of the inherent injustice of the economic system but because of the small number of virtuous citizens in society. The capacity to save was a talent reserved for only a few. Ricci wrote, “Amongst the tools with which man can elevate himself in the scale of civilization, individual abstinence is both the most effective and least widespread.”

Pantaleoni drew on the lexicon of evolutionary science to define the virtue of entrepreneurs, speaking of their capacity to preserve the species through behavior that centers on rational self-interest: “[They] realise almost perfectly the type of the homo economicus, and who therefore know, and take advantage, of every opportunity that presents itself of earning a profit.”

If the few deserve the position of economic privilege they occupy, everyone else should thank them for the collective “prosperity” they create. Far from being the outcome of unpaid labor, capital as described in the models of pure economists is the result of individuals’ capacity to save and invest, on which the well-being of everyone else depends. It was therefore advantageous for all, and beneficial for the workers themselves, that “the direction of the labour of the masses” would rest once again “in the hands of the men of talent and personality whom selection makes into entrepreneurs.”

This worldview seduces many of us daily, to the point where we respect those at the top of the pyramid and feel at least somewhat annoyed by those who fail to succeed—including our own children. As Pantaleoni remarked: “The classes with lower incomes are significantly deficient in comparison to others, so much so that this deficiency is the cause of their lower income, and not that the lower income is the cause of the deficiency.”

Injustice lay in the disorder that economics professors saw in society after World War I, where the unworthy had gained too much and had the audacity to demand more. Whether it was their classism fueling economic theory or vice versa doesn’t matter. What does is that the two aspects reinforced each other, creating a sense of repugnance toward the “lazy,” which grew into the disgust that many today display toward those who receive welfare and other state subsidies. Even many poor workers agree with these economists’ thesis.

In the summer of 2021, I handed out flyers in the markets of working-class neighborhoods in Turin, Italy, to help a local independent party, and I often talked with passersby. Many were indignant about the economy, but they did not direct their anger toward the top 1 percent of the population, who paid insignificant taxes, or the Italian billionaires, whose numbers had tripled in the past ten years. Instead, they directed their anger toward the “cheaters,” who benefited from the meager basic income of 400 euros (about $470) a month. Note that 46 percent of these cheaters actually worked but did not make enough to survive; they fell into the growing category of the working poor. In 2023, Giorgia Meloni’s government took advantage of the dominant narrative and eliminated the subsidy: 250,000 Italian families were notified via text of the reform that would relapse them below the poverty line. Popular reaction to such a war against the poor was almost nonexistent.

A hundred years ago, this toxic narrative had not yet had a persuasive effect on people, so the four economists had to use every means to educate the undisciplined workers, persistently promoting the values of sacrifice, frugality, and self-control. Einaudi devoted himself assiduously to these themes: “If the newspapers preached abstinence and penitence to the newly rich, the peasants, and the workers, they would be performing a morally worthy and socially useful task.”

Most experts today have not changed their rhetoric much. In a 1999 paper for the International Monetary Fund, Harvard economist Alberto Alesina targeted public sector employees, accusing them of creating a “culture of dependency,” whereby residents in southern Italy “aspire to work in the public sector to take advantage of insurance benefits and the certainty of a permanent job.” Privatization instead is necessary to prepare workers to “face the market.”

In 2010, Alesina and his colleague Silvia Ardagna, chief European economist at Barclays, offered the same exact playbook as their fascist predecessors. They proposed supply-side reforms to deal with the European financial crisis, emphasizing the close link between fiscal austerity and industrial austerity as a way to discipline workers and increase investments. Cuts in social programs lead to reductions in public jobs and public wages, putting increased pressure on workers in the private sphere. In both cases, “the wage demanded by unions for private sector workers decreases, increasing profits, investments, and competitiveness.” Later, Alesina suggested that for the good of all, policies of “wage moderation,” “the cancellation of the Christmas related extra-payments,” and raising the retirement age are desirable. Alesina’s bitter comment foreshadowed vituperative policy debate in the runup to at least one election: “If the French think that they can keep retiring at 60, they’re kidding themselves.”

Deregulation of the labor market exposes workers to strong economic coercion and is among the primary causes of underpaid work in Italy. However, economists speak for the violent truth of our economy: worker insecurity is not a problem but an important competitive asset. People’s well-being is certainly not a variable in the logic of capital. The economists’ formula works: more precariousness means more disciplined workers and thus better conditions for capital accumulation.

Economic vulnerability and hardship fuel the rise of popular consent for xenophobic nationalist governments from Javier Milei in Argentina to Narendra Modi in India. These governments are the tangible expressions of the “success of austerity”: its relentless application over decades has economically battered the majority, weakening people’s ability to resist. Our material conditions leave little room for participating in class organizations or envisioning alternative futures. Instead, we fall prey to the narratives that stifle our collective ability to challenge the class hierarchies that oppress us. We blame those at the bottom of the social ladder. Immigrants who take our jobs and slackers living off benefits are the scapegoats of the moment.

The history of Nazi Germany is a case in point. Indeed, more than a decade of punishing austerity policies imposed by Germany’s liberal governments—under pressure to meet the austerity mandates of the League of Nations—had the effect of crippling working-class movements in Germany, thereby opening the door for the far right to seize control and blame social problems on Jewish people and other minorities. If Mussolini gained support through his promise to eradicate economic democracy and dismantle organized labor, especially via austerity, Hitler’s militarized and genocidal version of the austerity regime—repressing wages and labor rights to favor accumulation in the arms industry—was itself a direct consequence of the “success” of previous austerity.

Thus the full power of austerity emerges: it is functional to its own design. Austerity foments popular consensus for fascist-leaning governments that perpetuate further austerity policies. In a move reminiscent of Mussolini’s policies a century ago—when he spearheaded one of the earliest large-scale privatization efforts in capitalist history—the Milei government, in just ten months, successfully privatized key sectors, including energy, water, sewage management, and railways. The Argentine state opened profitable pockets for private investors but condemned its people to higher utility bills, lower-quality service, and lower accountability. To look closer to home: In Pennsylvania, privatized water companies charged 84 percent more than public ones. In New Jersey, people on private systems pay 79 percent more.

When working-class people lose, our economic system wins. The austerity trinity supports capital, attracting wealthy investors through subsidies and state incentives, negligible taxes, low wages for workers, and minimal labor protections. Austerity ensures the best possible conditions for profits to skyrocket. In a burst of sincerity that is often lacking in mainstream economics, renowned investor Warren Buffett once said: “There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.”

The absence of dissenting voices makes this seem indisputable. But we can dispute the ways our economic predicaments are approached. Let’s start with unemployment and inflation.