How Economists Invented Austerity and Paved the Way to Fascism: A Critical History of Economic Theory and Policy

This podcast episode, featuring Clara Mate, Assistant Professor of Economics at the New School for Social Research, delves into a critical re-problematization of austerity. Mate argues that austerity is far more than just fiscal measures; it constitutes an \"austerity Trinity\" encompassing fiscal, monetary, and industrial policies, with a significant focus on the permanent attack on organized labor, wage flexibility, and repression. Crucially, she posits that austerity is not merely policy but an amalgamation of policy and theory, deeply successful due to the powerful theoretical backing it receives. Furthermore, Mate challenges the common perception that austerity is a product of the neoliberal era, tracing its origins back to the period immediately following the Great War (post-1918), suggesting it is a fundamental and enduring feature of capitalism, rather than an exception.\n\nThe core argument of Mate's work is that austerity's persistence cannot be understood as a matter of irrationality or mistaken economic theory, as many Keynesians suggest. Instead, she contends that austerity's deeper logic lies not in stabilizing economies or achieving stated goals like economic growth and debt repayment (which it often fails to do), but in preserving the \"capital order.\" This capital order is defined as a specific social relation of production and class relation—the private property of the means of production and wage relations—which requires stabilization to ensure capital accumulation and the preservation of the socio-economic system. Austerity, therefore, is presented as a political project designed to prevent the collapse of capitalism as a classist system and to foreclose alternatives.\n\nThe historical analysis reveals that after WWI, capitalism's foundational pillars were shaken by state intervention in the economy and widespread calls for economic democracy, worker sovereignty, and the abolition of the profit motive. In response to this crisis and the fear among the bourgeoisie of systemic collapse, austerity was born as a reaction. This period saw the rise of technocracy, where economic experts, guided by the emerging marginalist framework and neoclassical economics, were called upon to advise states. These theories, by expelling class conflict and emphasizing individual entrepreneurs over workers, provided an ostensibly apolitical justification for highly classist economic policies.\n\nUltimately, Mate argues that austerity functions as a dual mechanism: constructing consensus for the capitalist order by incentivizing a \"saving investing elite\" as the economic engine, and coercing the majority through policies that materially disempower workers. This involves a direct and indirect shifting of resources and political power from the majority to the minority. Direct methods include making strikes illegal and curtailing wages, while indirect methods involve monetary deflation and budget cuts that slow the economy, create unemployment, and thus weaken workers' bargaining power. By understanding this origin story, Mate suggests, we can better comprehend the explicit class conflict inherent in austerity's logic, which remains more nuanced and hidden in contemporary society." "concepts": [ "Austerity Trinity

it is at this point that you see how economic theory understood as a framework that expels class conflict expels the worker as the source of value and instead tells us that the economy is made up of individuals it's no longer the worker who counts but it's the entrepreneur who is the driver of the economic machine it's there that this economic theory that seems so apolitical is actually justifying the most classist set of economic policies of all

austerity has been so widely successful in shaping our societies and how we think about our society it has been fundamentally undetectable it is so normalized that we rarely Call It by name

austerity is actually not just policy it's more it's actually the amalgamation of policy and theory and austerity is in fact very successful because it has a powerful set of theory backing it

austerity was really never about the end goal of curtailing inflation and balanced budgets these were means to a greater end which is that of preserving the capital order

What is the capital order is the idea that capital is not merely a commodity so money invested to make more money but it's actually presupposes a specific social relation of production a specific class relation that requires stabilization

capitalism was not a natural given it was a specific classist political choice in which the state was directly visibly intervening to coerce the workers into greater exploitation in order to win the war

austerity is born as a tool of reaction to prevent the collapse of capitalism as a classist social economic system so austerity is really a political project that was extremely successful in preventing foreclosing alternatives to capitalism

technocracy meaning the rule of economic experts in advising governments but more than this technocracy as an epistemic stance by which experts can come up with theories that are above classes that are neutral objective without any sort of bias and thus the expert as the guide to the solution and to the prosperity of all

monetary deflation together with budget cuts have also the indirect effect that very important direct effect of slowing down the economy creating higher unemployment which of course kills the bargaining power of the workers and thus subordinates them in a coercive way into accepting the capital order