On July 5, 2015, 61 percent of voters in Greece passed a referendum to oppose a bailout plan from the International Monetary Fund and the European Union that was proposed to address Greece's sovereign debt crisis. Eight days later, and in spite of the public referendum, the Greek government signed an agreement anyway, settling on a threeyear bailout loan that limited how the country could spend money on its people: Greece had to impose more pension reductions, increase its consumption taxes, privatize services and industries, and implement a pay cut for the country's public employees. Two years later, the Greek government privatized the country's ten main ports and put many of its islands up for sale.

It is a trope of twentiethand twentyfi rstcentury life that governments faced with fi nancial shortfalls look fi rst to the services they provide their citizens when making cuts. Instances like these are innumerable and span every country in the world. When this happens, they produce highly predictable, uniformly devastating eff ects on societies. Call it the austerity eff ect: the inevitable public suff ering that ensues when nations and states cut public benefi ts in the name of economic solvency and private industry. While austerity policies may not be identifi ed by name, they underscore the most common tropes of contemporary politics: budget cuts (especially in welfare expenditures such as public education, health care, housing, and unemployment benefi ts), regressive taxation, defl ation, privatization, wage repression, and employment deregulation. Taken together, this suite of policies entrenches existing wealth and the primacy of the private sector, both of which tend to be held up as economic keys that will guide nations to better days.

Austerity as we know it today emerged aft er World War I as a method for preventing capitalism’s collapse: economists in political positions used policy levers to make all classes of society more invested in private, capitalist production, even when these changes amounted to profound (if also involuntary) personal sacrifi ces. In the early 1920s, austerity functioned as a powerful counteroff ensive to strikes and other forms of social unrest that exploded on an unprecedented scale aft er the war— a period traditionally, and oddly, overlooked by political and economic scholars who study austerity. Th e timing of austerity’s invention refl ects its animating motivations. Of greater importance than austerity’s purported economic effi cacy was its ability to guard capitalist relations of production during a time of unprecedented social organizing and public agitation from working classes.

But to the extent that we stop perceiving austerity as a sincere toolbox for managing an economy, and when we consider its history through the lens of class, it becomes clear that austerity preserves something foundational to our capitalist society. For capitalism to work in delivering economic growth, the social relation of capital— people selling their labor power for a wage— must be uniform across a society. In other words, economic growth presupposes a certain sociopolitical order, or capital order. Austerity, viewed as a set of fi scal, monetary, and industrial guardrails on an economy, ensures the sanctity of these social relations. Th e structural limitations it imposes on spending and wages ensure that, for the vast majority of those living in a society, “work hard, save hard” is more than just an expression of toughness; it’s the only path to survival.

For most people living in these countries during and aft er the war, whether they feared or hoped for it, the abolition of capitalism loomed as the imminent outcome of the war's devastations and its showcasing of state economic planning. In the words of Willi Gallacher, the British shop steward leader, "the order of industry, which previous to the war seemed destined to last forever, is now tottering in every country of the world."

L'Ordine nuovo, based in the industrial Italian city of Turin and led by Togliatti and his comrade Antonio Gramsci, is crucial to this story because it embodies the most explicit antagonist to capitalist practice and its intellectual justifi cations.

State interventionism not only allowed the Allies to win the war; it also made clear that wage relations and the privatization of production— far from being "natural"— were political choices of a classminded society.

Th e public disgust for early austerity was its crucible: austerity was rendered more antagonistic because it had to overcome— and indeed tame— an incensed public. Aft er World War I, with the gold standard in pieces, the newly enfranchised European “great public” was not simply going to accept austere policies, and the experts knew it. Th us, they devised austerity to conjoin two strategies: consensus and coercion.

European governments and their central banks enforced the “proper” (i.e., classappropriate) behavior on the working classes in order to rescue capital accumulation by the wealthy. Th e three forms of austerity policies— fi scal, monetary, and industrial— worked in unison to exert a downward pressure on wages among the rest of society. Th eir aim was to shift national wealth and resources toward the upper classes, who, the economic experts insisted, were the ones capable of saving and investing.

While regressive taxation imposes thrift on the majority and exempts the saverinvestor minority, budget cuts indirectly do the same: public resources are diverted from the many to the saverinvestor few, in that budget cuts come with the stated priority of paying back the debt that rests in the hands of national or international creditors. Similarly, monetary austerity, meaning monetary revaluation policies (such as an increase in interest rates and reduction in money supply) directly protect creditors and increase the value of their savings. Meanwhile organized labor has its hands tied, since having less money in circulation depresses the economy and diminishes the bargaining power of the working class. Finally, industrial austerity, which takes the form of authoritarian industrial policies (layoff s of public employees, wage reductions, unionand strikebusting, etc.), further protects vertical wage relations between owners and workers, fostering wage repression in favor of the higher profi t of the few.

First, austerity policies cannot be reduced to mere fi scal or monetary policies from central government institutions. Industrial policies, public and private, that create favorable conditions for profi t and discipline workers are central to austerity as well. Indeed, as the book will show, our experts’ fi xation on debt repayment, balanced budgets, foreign exchanges, and infl ation reveals a more fundamental purpose: taming class confl ict, which is essential for the continued reproduction of capitalism.

Technocracy dominates governmental policy making on multiple fronts. One is the historical convention of economists advising people who govern. Th e other is epistemic, a form whereby these economists frame economics— including the economic arguments they themselves posited— as having achieved a standpoint above class interests or partisanship. Economics, economists argue, constitutes valuefree truths about capitalism— natural facts of this world rather than constructed (or at least political) positions.

Th e technocracy that facilitated austerity’s rise in the twentieth century can be attributed to the British economist Ralph G. Hawtrey, who authored the texts and memoranda that would serve as the guidelines for British austerity aft er World War I. As is the nature of technocracy, Hawtrey had help. Working at his side were the charismatic Sir Basil Blackett and Sir Otto Niemeyer, both powerful senior Treasury offi cials who closely advised the chancellor of the exchequer, Britain’s minister in charge of economic and fi nancial policies.

Austerity policies in the spirit of “pure economics” were a disaster for most people living in Britain and Italy in the 1920s. Th us, the book delves into the paradox of a doctrine that pre sents itself as apolitical but has as its central purpose the “taming of men,” as the Italian academic and economist Umberto Ricci crudely put it in 1908. Under a veneer of apolitical science, technocrat economists were undertaking the most political action of all— bending the working classes to the wills and needs of the capital-owning classes for the enrichment of a small minority.

Capitalism's ubiquity today can make criticizing or even observing capitalism seem quaint. Aft er all, we have internalized its teachings to the point that our values and beliefs are largely aligned with those that are functional to capital accumulation. It is all so embedded that today a majority of American workers can live paycheck to paycheck with little to no social insurance and still largely accept that their position is one they deserve; the country's wealthy, meanwhile, benefi t from a seeming national allergy to any form of even mild tax reform that would shift more tax burden to the wealthy. Th e current landscape is quite diff erent from the one technocrats were confronting in 1919, but the two are most certainly connected.

While the Italian economists' antidemocratic views were more explicit— Pantaleoni called democracy "the management of the state and its functions by the most ignorant, the most incapable" (Pantaleoni 1922, 269)— the British technocrats also recognized that, even in Britain, economic institutions required exemption from democratic control in order to proceed optimally. Indeed, the Brussels and Genoa conferences formalized central bank independence as a crucial step to this end. Th e famed British economist Ralph Hawtrey described the advantage of situating a central bank free from "criticism and pressure," noting that the bank could follow the precept "Never explain; never regret; never apologise" (Hawtrey 1925a, 243).

Despite repeated economic crises, economists are still relied upon to devise the solution when a new crisis emerges, and their solutions continue to require that workers absorb the lion's share of hardship through lower wages, longer workdays, and welfare cuts.

Politics, on the other hand, is the domain of states and governments, which means that political contestation may still occur under capitalism— but not in a way that challenges the economic system. For example, popular demands may include introducing a wealth tax or the bolstering of labor rights, but abolishing private wealth and wage labor is out of the question. Th e state therefore remains a neutral actor with respect to the market, and its role rests primarily in safeguarding private property and wage relations through the rule of law.

By the middle of the nineteenth century, with the establishment of the gold standard and the institutionalization of financial orthodoxy that emerged with it, capitalist class relations between owners and workers became more entrenched, and any scenario for redistributive demands in favor of the people was eff ectively blocked. Th e gold standard required states to secure a certain amount of gold in their coffers so as to be able to make good on their promise to convert the currency into gold at a fixed price. Hence, states' priority was to avoid the outflow of gold, a priority that implied tight fi scal and monetary policies. Running a trade surplus was the surest way to build up a country's gold reserves. Conversely, trade defi cits led to an outfl ow of gold, since countries used gold to pay for their imports. Any extra public expenditure, or any easing of credit— the bases for redistributive policies— would result in gold fl ights and were therefore nonstarters. … A tight fi scal budget, on the other hand, could bolster trade surpluses by lowering domestic demand. And higher rates of interest (which promised higher returns on capital while deterring imports as they slowed the domestic economy) would draw gold bullion back into the country. Hence, the imperative of fi scal and monetary rigor was normalized.

During the war, the state demolished its former boundaries of action. Faced with the choice between life or death, victory or defeat, war governments were forced into implementing economic practices that were unheard of— or better, unimaginable— until that moment. Th e selfregulating capacities of the market had proved inadequate for the unprecedented productive necessities of the war struggle.

Most economic historians of World War I and the interwar period focus on the “economic problems” facing countries because of the monetary and fi nancial outcomes of war: soaring infl ation and mounting debt had compromised countries’ creditworthiness, creating deep uncertainty and threatening capital fl ight. But looking deeper at these dynamics, it emerges that economic uncertainty was only a part of the problem. Part of what this book will explore is how economic uncertainty in these postwar countries had a political basis— indeed, how the economic and political crises were inseparable, with the former imposed by the latter. Th e postwar fi nancial crisis was a crisis of legitimacy for capital order and its social relations.

Th e general public was noticing that state intervention within the economy was not a neutral act in the name of the good of the whole, but rather an authoritarian force to ensure the profi t of the ruling classes. Chapter 2 explores how pressure from below pushed states to extend welfare measures in an attempt to appease their restless citizens. However, while these measures were reformist in intention, they were not so in their outcome. Indeed, they triggered further demands to fundamentally eradicate the very capitalist pillars that states set out to protect.

Put simply: the new, historic conditions of the war eff ort and the interwar period allowed citizens, especially those in the working class, to see that society could be diff erent. Th e selfrationalizations of the system were breaking down, and with their deterioration came proposals for radical alternatives that could overcome them. … In aggregate, these workers demanded an overhaul of their economies, a replacement for the capitalist industrial system that moved toward a new social order in which associations of workers would control industries, either partially or completely. … In this sense, emancipated work would replace capitalist exploitation, and public service and production for use would replace production for profi t.

Th e popular struggles in the two countries examined here exemplifi ed the wideranging courses of action: from union campaigns that successfully pierced the establishment, to the eff ective operation of British building guilds that produced “for need” within the capitalist market, all the way to Italian factory occupations that were led by revolutionary workers’ councils.

In sum, the degree of state intervention during the war and the heightening of class antagonism that it engendered constituted a great revolutionary rupture from 1918 to 1920. It was the largest crisis in the history of capitalism, embodied in the unprecedented popular mobilization of strikes, alternative policy proposals, and alternative organizations of production. Th e logic of austerity can only be understood as a dramatic reaction to this landscape.

World War I was primarily an industrial war: military victory vitally depended on the production apparatus of the belligerent countries and their technicalindustrial eff orts. Indeed, once expectations of a short war faltered, an escalation of production was a prerequisite to survive the confl ict. Th e “home front” gained decisive strategic weight.

Britain and Italy faced a similar problem, albeit from completely diff erent positions. Britain was the world’s fi rst industrial power; Italy was still a largely agricultural country that had only recently begun industrializing, and its young capitalism was still highly dependent on foreign capital and imports. On the eve of the war, Italy’s GDP (only a quarter of which was industrial) was less than half of Britain’s. In 1913 Britain produced nine times more steel than Italy, and for other raw materials the disproportion was even greater.

Britain went to war convinced of the power of what Adam Smith described as the invisible hand: relying upon private enterprise and the law of supply and demand to secure the most effi cient outcomes, even in war. E. M. H. Lloyd, a civil servant employed in the British war offi ce, described the British establishment’s approach to the war eff ort: “the doctrine implicitly acted upon was that the higher the price and the greater the freedom allowed to the private contractor, the greater would be the increase in the supply; it followed that if only the Government paid high enough prices and left private fi rms to their own devices, munitions would be forthcoming in abundance” (Lloyd 1924, 23). Before long, business as usual did not deliver. By 1916 the failure of laissezfaire and the free price mechanism was unmistakable. Increased government demand and price increases led to profi teering, but did not bring increased supplies. While the country suff ered supply shortages and infl ation, private businesses diverted resources to the more profi table business lanes of the moment— luxury goods and exports.

It was the unprecedented scale of this practice during the war that shocked contemporaries. Prior to the war the country's real expenditures were 17 percent of nominal GDP; they shot up to 40 percent in 1918 (Ciocca 2007, 172). While private consumption grew by 6 percent from 1913 to 1918, the numbers for public consumption were unheard of: rising by almost 500 percent.

Likewise, the Italian state owned 60 munitions factories; by 1917 it had seized the right to requisition plants and take direct control of the production process in cases of ineffi cient private management. Th is legislation was preceded by other actions that expropriated private property, even without consent. Such expropriations included government seizure of industrial patents in order to orient them toward national security.

Control of munitions production soon led to control of essential raw materials, factory space, and sources of power and labor (see Wrigley in Burk 1982, 46). Th ese ministries also developed research departments for technical innovations and conducted experiments in chemistry, physics, electronics, and other fi elds.

In sum, in all the ways discussed above— from industrial production to land cultivation and pricefi xing— the British and Italian states barged into the realm of the economic. For the fi rst time, capitalism witnessed a threat to the inviolability of private property. Private property had to subordinate its prerogatives to a political and national interest and even to people's basic needs. In this way the state shook one of the supposedly unshakeable pillars of capital accumulation. Th e tremors in laissezfaire capitalism did not stop here, however, reverberating to another fundamental pillar: wage relations.

A market economy requires a pool of unemployed workers who are ready to be hired to meet increased production demands. Within a capitalist society, these people are structurally competing with one another. Th e presence of these individuals guarantees lower labor costs (because workers are replaceable) and “naturally” disciplines the workers, who have an incentive to keep their jobs and paychecks. Under normal conditions, the reserve army of labor is replenished by the very process of capital accumulation: in their competition to lower commodity prices, capitalists constantly seek out new technological innovation, which in turn expels a segment of the working class from the process of production. Th e reserve army is further replenished by mechanization, in which the process of production is simplifi ed or automated, and skilled workers are made expendable.

It followed that the prewar tradition of selfregulation and industrial autonomy had to be abandoned in favor of forceful state regulation. As observed by Humbert Wolfe, controller of the laborregulation department at the British Ministry of Munitions, “[l]abour ceased to be a commodity to which the laws of supply and demand applied” (Wolfe 1923, 102).

Wartime states seized control of the supply of labor to tackle the problem of manpower shortages. A basic step in this direction was to expand the pool of available workers through the process of dilution: i.e., the introduction of unskilled labor, including women, in jobs formerly reserved for skilled men. As mentioned, dilution is integral to capitalist production where the competition among capitalists and the pressure from workers induces the capitalist constantly to cut costs by technological innovation and more effi cient reorganization of the labor process. During the war, countries greatly boosted this tendency through increased mechanization of production, which broke the work process into simple stages that less skilled workers could manage.

In Britain, section 7 of the Ministry of Munitions Act prevented workers from transferring freely from one job to another by requiring workmen to obtain a leaving certifi cate before engaging in alternative employment. Th is harsh provision had a twofold motive. First, the depletion of the reserve army of labor gave workers enhanced bargaining power, which forced employers to bid up wages in order to attract available labor, especially skilled labor. By imposing a political limit on such mobility, the government could ensure a cap on wages. Second, these certifi cates also prevented the constant turnover of labor, which hampered the production process.

Th e rank and fi le all over the country revolted against a measure that tied the hands of the employee but not the employer, who was left free to fi re his workers and was not compelled to issue a certifi cate even once he fi red them. Th rough union bargaining, the certifi cates were repealed in October 1917.

Under laissezfaire capitalism, wages were mainly settled through local bargains between labor and capital; governments had no say in the process. Th is changed during the war: industrialists competed for scarce labor through wage increases, while mounting worker mobilizations (to cope with the concurrent increases in cost of living) also pushed for higher wages. Here the state did intervene, acting promptly against this threat to capital accumulation by taking control of wage contracts. Th e words of the historian Samuel Hurwitz hold true for both countries: “it would be a mistake to think that on the whole the British worker was better off because of Government intervention. State interference in wage settlements ‘acted to keep the level of wages rather lower than would have otherwise been the case’” (Hurwitz 1949, 129).

In sum, the war brought about an unprecedented degree of state control over labor. In setting the price of labor, disciplining it, and controlling its supply, the Italian and British governments had exposed the profoundly political nature of the capitalist economy. No longer was surplus extraction a matter of mere economic coercion executed by the impersonal laws of the market; exploitation was now enforced by state intervention. Th is meant that surplus extraction became explicitly political, emblematically represented by the fact that Italian workers who refused to sell their labor power would be condemned to prison or to the front. Th e basis was set for those who were living through these changes to gain awareness of the link between economic power and political power. Th e full consequences were cropping up: if economic power is political, it means there is nothing natural about economic power, and the systems by which it is distributed can be changed through struggle.

Th e impact of the Great War could not have been imagined before it actually happened. Britain— the major capitalist economy up until the war— experienced extensive nationalization of the means of production, and young capitalist countries like Italy followed in its footsteps.

In 1918 the British War Cabinet noted that "[t]he nation today is far better organized and far more productive than it has ever been before" (HMSO 1918a, xvi). And indeed, the controlled economy delivered beyond anyone's expectations. Despite a dearth of material, losses at sea, and the shortage of manpower, the total output of British industry had hardly declined at all during the war (Pollard 1969, 53– 54).

In Italy, the same was true. Notwithstanding the exorbitant costs, corruption, and managerial problems— much of which the enquiry on war expenditures exposed for all to see— the Italian war eff ort proved impressive: within just a few years of nationalization, the country was equipped with a military arsenal that was not much inferior to the other belligerent powers (Romeo 1972, 116), even producing more cannons than Britain itself (7,709 vs. 6,690) and exporting military equipment. In those years, northern Italy completed the industrial transformation that had been initiated at the beginning of the century.

Th e rhetoric of “the equality of sacrifi ce” appeared empty in the face of soaring profi ts of industrial capital and speculation on the one end, and insuffi cient wages to cope with the mounting prices of basic living necessities on the other. Headlines from the Daily Herald, the independent daily of the British Left , denounced what workers widely saw as criminal political choices: “Merciless Exploitation: Labour Calls on Government to Reduce Cost of Living or Resign” (July 10, 1919) and “Penalty of Being Poor: How Workers Struggle Daily to Exist Under Present High Prices. Forced to Work Overtime” (August 26, 1919).

As embattled British labor leaders would declaim, the government was “compelled to drop its mask of impartiality and appear in its true character as an instrument of class domination” (Gallacher and Campbell 1972, 6).

During World War I, the political states of both Britain and Italy broke capitalist dogma and forcefully intervened in their countries’ economies. For the political survival of each state, these interventions were necessary: they sought to promote the necessary capital accumulation to win the war, even while they sullied the sanctity of freemarket capitalism in the process.

Most importantly, the British and Italian states’ command over the two pillars of capitalist accumulation— private ownership of the means of production and wage relations— had the fundamental eff ect of politicizing their economies. Indeed, it exposed how relations of production could be a terrain of political contestation, thus prone to social change. Th e British and Italian workers were in the best position to grasp the full meaning of such an unprecedented turn of events. Th eir governments had tightened the exploitative grip on the workers; but unlike the grip of the invisible hand, the state’s chokehold was visible and could thus be subverted.

Th e workers— whose unions’ contractual power had increased during the war— could now land heavy blows by demanding more social rights and diff erent organizations of production.

Th e "reconstructionist" forces within government posed a frontal assault on capital accumulation in two main ways. Th e fi rst, which will be explored in chapter 3, is how the reconstructionist motivation for social appeasement oft en, perhaps unavoidably, fueled the workers' revolutionary spirits. Th e second, and the focus of this chapter, is how the reconstructionists themselves actually challenged the purity of laissezfaire capitalism— and with it, the established identity of capitalist states. Th e unparalleled bluster of social reforms between 1918 and 1920— those called for and those enacted— refl ect the existential nature of this threat for capitalism. Th ese social policies were the outcomes of the postwar repoliticization of private property and wage relations— the two pillars that during the war had been decoupled from market forces. Th e glass had already been broken; the previously untouchable economic institutions could now be molded toward unimaginable political ends.

A pamphlet written by two bureaucrats of the Italian Ministry of Military Assistance and War Pensions, Leo Pavoni and Diego Avarelli, echoed this same belief: "Th e war has been a war of ideas. Out of its miseries and catastrophes a luminous path has been traced for the ends of the State . . . [the war] has laid the foundations of the distinguished edifi ce of human solidarity" (Ministero per l'Assistenza Militare e le Pensioni di Guerra 1919, vi- vii).

Th e pamphlet continued by stressing a historical aufh ebung: "Th e state of law that was considered the most elevated form of state before the war . . . has suddenly been overtaken and surpassed by the highest of conceptions: the state of law and social welfare" (ibid.

Reconstructionists aimed to concretize the social progress made during the war eff ort, which in their view represented a great stride toward a better society based on notions of social justice and redistribution.

First, and most critically, emancipation from impersonal economic laws meant that social reforms could no longer be "delayed or refused sanction on the grounds of expense" (Addison 1918, 1).

In Italy, it was only aft er the country’s defeat in the Battle of Caporetto in November 1917— a massive loss of life that hollowed the spirit of the Italian people— that the state took on a central role as a social actor. It established the Ministry of Military Assistance and War Pensions, which would benefi t citizens generally, and not just soldiers.

Th e very fact that Italian social reforms were introduced by decree— an executive urgency procedure to overcome lengthy parliamentary debates— expressed the necessity of quick intervention for the sake of class appeasement and a recognition of popular demands. Th is remained vital even aft er the armistice, since the meager stateprovided war welfare sparked additional discontent, its value regarded as laughable in the face of exploitation and infl ation.

Th e Italian infl ation crisis of the country’s “red years” of 1919 and 1920 was marked by protests against the high cost of living and the predatory behaviors of “i pescecani” [literally, “sharks”]— a nickname for profi teers and speculators who embodied the iniquitous eff ects of infl ation. Beginning on June 11, 1919, and continuing for almost a month, hungry and exasperated crowds dashed into stores throughout the country, taking food, clothing, and all manner of merchandise. Looting and chaotic riots began in the town of La Spezia, and then spread everywhere— from the northern towns of Liguria, Piedmont, Lombardy, and Veneto, to the central towns of Tuscany and Romagna, all the way to Rome and Palermo.

In a moment of unprecedented social tension, members of the state apparatus had no choice but to be receptive to these demands. In 1917, the economist Francesco Saverio Nitti, in his role as Treasury minister, had to publicly accept that the workers in the “trenches and fi elds” deserved “full rights of citizenship” and “no one could divert them.”

Even for wealthy and propertied classes, the state responding in a way that avoided the worst possible break from the capitalist order was a clear necessity. In 1920, Vittorio Cottafavi, a wealthy property owner and MP of the Liberal Constitutional group, wrote to Nitti, who had become prime minister, to stress the strategic need to publicize the social role of the state as an antirevolutionary antidote: To draw near the workers to the state so that they can see in it a friend and a protector .

Th e Housing and Town Planning Act of April 1919 promised to build 500,000 new houses in three years. Th is reform was “heroic” (Johnson 1968, 425) in its break from the past: it was the fi rst offi cial recognition of the political obligation of the state to house its citizens. A plurality of enlightened commissions under the Ministry of Reconstruction gave shape to the legislation and substantiated the widespread realization that private enterprise— responsible for approximately 95 percent of housebuilding prior to the war— was unable to grapple successfully and speedily with this social crisis.

Th e women's committee's impressive scheme encompassed rules on windows, ventilation, and "laborsaving devices" for the housewife, such as the American "kitchen cabinet" that would save "unnecessary walking to and fro" (ibid., 9). Most importantly, the committee experimented with "wide possibilities of communal life"— gardens, playgrounds, social centers— since its members believed that "full attention should be given to the organisation of the resources available for social and intellectual development" (ibid., 20). Th e committee stressed the material conditions for women's emancipation.

In those early postwar years, all of these committees gave voice to a larger workingclass constituency that aimed to develop the foundations for a revolution in social life based on "cooperative buying and selling" and especially "the spread of communal living" (Ministry of Reconstruction Advisory Council 1919, 14).

Its members honored the newly acknowledged centrality of labor with a groundbreaking commitment written in capital letters that is still an unmet ideal today: "adult education is a permanent national necessity, an inseparable aspect of citizenship, and therefore should be both universal and lifelong."

Th e Adult Education Committee envisioned the spread of critical economic knowledge to the rural areas. It remarked: "it is certain that with the growth of trade unionism amongst agricultural workers, there will be a demand for economic history and economics from the point of view of the workers' experience and interests" (ibid., 146). Th is vision of cultural empowerment gave rise to ambitious schemes of public transport and urban planning, for example to build a Village Institute- "a living nucleus of communal activity" that included "a hall large enough for dances, cinema shows, concerts, plays, public lectures, and exhibitions," as well as "a public library and local museum" (ibid.

Many in the House stood in favor of reinforcing the power of action of the Ministry— especially concerning mental health and funds for medical research. Unfortunately, as we will see in the second part of the book, universal national health care was doomed to be a victim of postwar austerity.

Emancipatory projects regarding healthcare were put on the back burner by the Liberal postwar governments and later drowned by the Fascist austerity campaign. Aft er this setback, the universal national health system would not become a reality in Italy until 1978. And in the early 1990s, the resurgence of austerity again began chipping away at these government programs.

For the fi rst time, this law made insurance for accidents in agriculture public and mandatory, applying the modern principle of an automatic right to compensation that was not linked to the contribution of the employer. With this reform, 9 million farm workers gained social protection, joining the industrial workers. In a 1921 decree, Prime Minister Giolitti would further extend the law's scope by lowering the barrier to eligibility. Mussolini's austerity axe of 1923, however, made sure to immediately gut Giolitti's decree (Royal Decree Law 432, February 11, 1923, in GU 64 [March 17, 1923], 2286).

Notably, even in such an explosive social moment, most social reforms were not actually so reformist in their results. Rather than appeasing workers, the "enlightened agenda" stimulated higher expectations for a better future. Cracks between reformers and radicals emerged.

To halt the threats to the old order, a vocal “antiwaste” campaign against public expenditure burst through the seams and found strong institutional support in the austerity crusade of the experts at the British Treasury.

Its immediate agenda targeted "the socialization of fi nancial capital, the suppression of state debt, the socialization of housing, means of transportation and of big agrarian property and of the big industrial and commercial business" (L'Avanti, August 8, 1919).

More dramatically, the Socialist Party also rejected any form of parliamentarism. It fought fi ghts in electoral terms and with a cleareyed revolutionary set of objectives. Th is most intense dissemination of communist principles was meant to "facilitate the abolition of the institutions of bourgeois domination" (Tasca 1965, 95). Elections were thus understood as a barometer to measure the shift of power toward labor and as a powerful means of cultivating class consciousness.

In Britain, the industrial capital of the world, between 1914 and 1918 trade union membership rose from 4 million people to 6.5 million people, and eventually reached a record fi gure of almost 8.4 million in 1920. In just six years, unionization had doubled: 40 percent of the total working population joined the unions. In Italy, the escalation was just as impressive. Th e thrust of trade unionism into the urban and rural proletariat escalated like never before: almost 3.8 million workers— fi ve times the prewar total— participated in organized labor protests. What's more, the socialist workers' federation surpassed all others in popularity. Th e CGdL grew impressively: in just the two postwar years participation climbed eightfold, reaching 2 million members by 1920.

By 1920, nominal weekly wages for British manual workers had soared 178 percent with respect to their prewar levels— a high of £3.70 compared to £1.26 in 1910 (Scholliers and Zamagni 1995, table A.23, 261). To give a sense of these gains, consider that for an entire century before the war, the incremental increase of average British weekly earnings from one year to the next never exceeded more than £0.10.

A month later, July 20– 21, 1919, CGdL and the Italian Socialist Party organized a general strike, calling on workers across the country to march in solidarity with their struggling Russian comrades. Later, in June 1920, Italian soldiers and workers in the city of Ancona took control of the military barracks and refused to depart for Albania, which was then under Italian occupation (see L'Avanti, June 30, 1920). Th is action precipitated solidarity strikes and popular uprisings throughout Italy, where the people opposed arms production and called for repatriation of all Italian soldiers. Th e movement ultimately contributed to the full recognition of Albanian independence and the cessation of deployment of Italian soldiers.

What had previously registered as strictly economic demands, such as hours and wage increases, were now considered as part of more systematic demands that directly involved the state (which had become the de facto employer). Th e direct intervention of the state in production meant that industrial struggles against the employers immediately developed into political struggles against the state— and thus to demands that state power be used to bring social production under democratic control (Clarke 1988, 199).

Moreover, unrest was no longer occurring primarily as an intervention for immediate economic benefi ts. Quite the contrary: a large motivating factor was social revolution. An offi cial British memorandum of February 1919 stressed this shift : "Th e fundamental causes of labour unrest" were to be found in "the growing determination of Labour to challenge the whole existing structure of capitalist industry," and no longer only in "special and smaller grievances which come to the surface at any particular time."

Workers rebuff ed the core assumptions of capitalism. As the British report put it, they were "no longer prepared to acquiesce in a system in which their labour is bought and sold as a commodity in the labour market" (Cole 1920a, Appendix 1, 250), and once put to work they 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" (ibid.)

Frank Hodges, a miners' union leader in Britain, described the movement as a secession from capitalism: "He (the worker) wants to know the social purpose of his work; in short, he wants to feel the joy that comes to a man whose whole personality is impressed on the object which he is in the process of creating, instead of being mere plastic clay in the hands of a system which turns his whole being into a marketable commodity" (Hodges 1920, 110- 11).

Politically, circumstances favored the workers. Aft er the war the country was experiencing a coal shortage: not only would a strike directly impede the provision of energy to households; it would also close down industries in the early stages of conversion to peacetime production and imperil the eff ort to recapture overseas markets (shipping vitally needed coal). Moreover, the stakes were extremely high. Th e political situation was unpredictable: with the industrial unrest prevailing throughout the country a miners' strike could potentially escalate into a political breakdown. For the Scottish Socialist John Maclean and other infl uential members of the MFGB, "a miners' strike over hours and wages might, in the context of mass mobilization, pull in millions of workers from other industries with potentially revolutionary results" (Ives 2016, 47). Th ese were not completely unrealistic thoughts. In the early months of 1919, the forces of law and order were— in the British government's own estimation— unreliable. If upheaval occurred, the likelihood of containing it seemed low.

Cabinet evidence shows that most ministers were hostile to the miners' claims. But given the circumstances, "in much haste and alarm" (Morgan 1979, 62) the cabinet opted for a reconstructionist approach and suggested that miners' demands be investigated by an impartial government commission under the neutral chairmanship of Sir John Sankey, a judge of the high court.

Although some historians' retrospective accounts (for example, Mowat 1955, 30– 36; Kirby 1977, 37) have tended to view the episode of the Sankey Committee as an event that, by buying time, killed the revolutionary potential of the miners, it is certainly the case that the workers had produced a historical breakthrough. Th eir challenge to the pillars of capitalism entered the foyer of the capitalist fortress. Th e threat of direct action and its paralyzing eff ect sparked a political debate that shook the heart of the British establishment, intimately involving the parliament and the national press.

In their negotiations with the British government, the three miners' representatives, together with the three economic experts, all agreed on a basic point: freemarket capitalism had to be denounced and overcome. Smillie and Hodges openly addressed it as "the old regime" (Arnot 1919, Preface).

Union leaders Smillie, Hodges, and Straker (the secretary of the Northumberland Miners), as well as Cole, who was asked to give a deposition, argued for a binding relation between workers' control and nationalization (in the form of abolition of royalties and state ownership of coal seams): “Just as national ownership is inadequate without workers' control, so workers' control is inadequate without national ownership” (Cole, in Arnot 1919, 33). Indeed, nationalization in itself did not secure the abolition of the wage system, under which “the worker sells his labour to an employer in return for a wage, and by this sale is supposed to forgo all right over the manner in which his labour is used” (ibid.). Th e bold demand was for economic democracy: joint control, shared between miners and the state.

According to Vernon Hartshorn, a leader among Welsh miners who had given witness during the Sankey proceedings, the miners had unearthed a constitutional mechanism by which structural change could take place in Great Britain. Commenting on the proposals of the second report, Hartshorn wrote: “Th ey go to the very roots of the capitalist system. Th e recommendations comply with all the forms of constitutional procedure, though they foreshadow change which is truly revolutionary” (South Wales News, June 30, 1919, reprinted in Ives 2016, 208).

However, in August, aft er months of procrastination and political uncertainty, the government offi cially rejected Sankey's fi nal majority report (which had won the support of seven out of thirteen commissioners). Pressures from economic experts at the Treasury to abandon state control of industry in order to safeguard public fi nances had a decisive weight in the rejection. Starting in July, the government sought to exploit the fear of poor fi scal balances "to paint the miners' demands as excessive and damaging" (Ives 2016, 232) to the national coff ers. Th ese rationales were the early antecedents of formal austerity; the refrains were picking up steam.

By that time, workers found little hope in fi ghting back. In March 1920 the end of the economic boom sounded a death knell for the miners' political power. Indeed, as Cole recalls, priorities changed: "Trade Unions were more concerned with looking to their own defenses, industry by industry, in face of the threatened depression than with supporting the miners or any other section in essentially socialistic demands" (Cole 1958, 419).

Monetary austerity infl icted heavy damage on British trade, especially coal exports: sterling rose against other currencies, making British goods more expensive than those of other countries in world markets. Bad business meant a surge in unemployment, which crushed unions and especially their power to press for social change.

Such an austerity policy might appear economically irrational in the sense that it damaged the economy. But it was very rational in that it guaranteed the survival of capitalism and its relations of production. G. D. H. Cole put his fi nger on the essence of the austerity counteroffensive, which will be explored in the coming pages: “Th e big workingclass off ensive had been successfully stalled off ; and British capitalism, though threatened with economic adversity, felt itself once more safely in the saddle and well able to cope both industrially and politically with any attempt that might still be made from the Labour side to unseat it” (Cole 1958, 419). In a nutshell, the economic downturn fortifi ed capitalism. Not only were the pillars of private property and wage relations reaffi rmed— austerity also guaranteed wage repression and a resurgence of private profi t.

Th e miners' strike that followed began on April 1, 1921, nominally to fi ght for a national wage; it represented the last heroic eff ort to counter declining living conditions. Th e strike went down in defeat, when on April 15 the leaders of the railway and transport unions decided to back away and left the miners on their own. Th is episode is famously known as Black Friday: the moment the British labor movement was forced onto the defensive. Later that year coal returned to interdistrict competition for business, and with it the full rigors of the private system. By 1922 the miners who were still at work were earning about half of what they earned in 1919; in just two years they saw a nominal weekly wage drop of 46 percent (Scholliers and Zamagni 1995, table A.

To conclude, the miners’ movement for workers’ control opted for an alliance with the state, but found in the state its ultimate defeat. As we shall explore, the Treasury and the Bank of England were capable of prompt reaction: they unleashed monetary austerity at the height of these events. At that point institutional change became impossible, caught as it was in the clasp of broader change in the name of austerity: the new priorities were cutting labor costs and cutting government expenses at whatever price.

A month into their experience of free management, the Castenaso coop members wrote a manifesto for other Italian workers: “We wish and hope the story of the Castenaso workshops can serve as an example to all Italian workers— still oppressed and exploited by capitalist gluttony [ingordigia]— so that they can once and for all redeem themselves from the servitude of the boss to set out courageously towards a Communist Society!”

Th e cooperative movement exploded during the Italian “red biennium” (1919– 1920). It was “a form of reaction against the abuses of capitalism” (Buff etti 1921, 360) that off ered an overcoming of private capital accumulation and traditional wage relations. Workers were members of the cooperative; thus they owned their means of production and shared in their surplus.

A 1921 cooperative handbook described the nature of this alternative: “Industrialcommercial business are managed by capitalists who aim for the greatest profi t of capital invested”; on the other hand, “cooperatives are managed by people who have in production a central aim that is diff erent from that of the capitalist— that is, workers who want to benefi t the most from their labor power. . . . Th e net profi t that in an ordinary enterprise increases the benefi t of capital, in a cooperative enterprise increases the benefi t of cooperators” (Buff etti 1921, 35).

By 1920, when the CGdL led some 800 of these cooperatives, there was seething unease among the country's economic establishment. Even in their gradualism, the extent and political infl uence of these noncapitalist organizations was a menace to the status quo. Economists like Maff eo Pantaleoni branded them “Bolshevik associations” [associazioni bolsceviche] or “red cooperatives” [cooperative rosse], organizations that were “destroying the bourgeoisie who had created all the existing enterprises” (Pantaleoni 1922, viii).

However, guilds in Britain went a step further since they got rid of not only the pillars of private property and wage relations, but also profi t as the driver of production altogether. Like the miners, the guilds intended to enable a “new industrial system” based on a new motive, “the motive of public service under free conditions” (Cole 1921b, 17), deemed far superior to that of private profi t. Guild Socialist leaders, including Cole, Frank Hodges, and S. G. Hobson, envisaged a starting point for the fullblown realization of a guild socialist society based on a democratic economy and a new industrial system.

Th e fi rst had to do with the nature of the industry itself. Building was an industry that required little fi xed infrastructure (e.g., no factory or expensive machines), “so that the problem of the ownership of the instruments of production is relatively unimportant” (Cox 1921, 788). For this reason there was not, as had been the case with the miners, a binding need for a direct political struggle over systematized nationalization. Second, guilds were good at picking their spots: “the guilds compete in a fi eld in which the capitalist system, with its motive of profi tmaking, has proved itself exceptionally incompetent to fi ll a great and widespread public need” (ibid.).

As we know from chapter 2, aft er the war Britain faced an acute shortage of housing; combined with strong popular pressure for change, this induced the government to adopt the ambitious Housing Acts. Th ese initiatives divided England into eleven districts, with each local authority held responsible for investigating the housing needs of the community, raising the money to meet those needs, and accepting contracts (approved by the Ministry of Health). Th e government would off er subsidies.

In the throes of this expansionary policy, building guilds were able to bid on housing contracts. In September 1920, the Ministry of Health approved contracts with the Manchester and London guilds for a total of more than 800 workingclass houses. By November, more than eighty local guild committees of buildingtrade workers had organized for work. By December, “contracts involving the erection of more than a thousand houses had been accepted and were waiting the approval of the Ministry of Health” (Cox 1921, 780).

However, the peaceful approach of the guild socialists that sought to achieve revolution through gradual change meant that in practice guilds would have to operate and survive, at least initially, within a monetary capitalist economy. Producing in a capitalist economy meant that the building guilds had to purchase their plants, equipment, and raw materials in an inherently volatile market. As guild socialists themselves realized, "it is not easy to isolate a particular industry or a part of a particular industry and to make of it an oasis of Guild organization in the midst of a capitalistic system" (Cole 1921b, 18).

Within an economic boom and with the benefi t of state support, the building guilds thrived for eighteen months. But the clouds of austerity loomed on the horizon. By July 1921, amid a rollout of monetary austerity, an economic downturn, and a mounting "economy campaign," the government decided to withdraw all state aid from local authorities, leaving them stripped of the ability to fi nance housing projects, even though less than onefi ft h of the houses urgently required had been built.

Following the economic interventions of their governments during World War I, the working classes of Britain and Italy were uninterested in a smooth reintroduction of capitalism. By 1919 the old system was in fullblown crisis, and its component parts— workers, union leaders, and economic experts— were all announcing the end of the old order. Postcapitalism, whatever its form, was on its way. … What was the basis for this conviction, which was mirrored by a sense of apocalyptic panic among the bourgeois establishment? Capitalism was strongly contested at its very core.

In these pages we have shown how political imagination toward the abolition of private property and wage relations moved from abstraction to reality. In the fi rst place, the soaring “strikomania” of the British and Italian workers was political: it demanded new relations of production. Th ese demands took the form of the struggle for workers’ control that peaked in 1919– 1920 with the objective of selfgovernment to secure the emancipation of the majority.

Chapter 4 explores the movement for industrial councils that emerged in the Clydeside region of Britain and reached its peak in Turin, Italy. Th e eff orts of these rankandfi le workers took on a clearcut revolutionary form in opposition to both capital accumulation and the state— and pushed capitalism to the brink. In this space, a class of experts found their most useful tool: a new rationale for austerity, one that became the narrative of the threatened and powerful.

Against the orders of offi cial leadership, the shop committee movement practiced two interconnected forms of direct action: strikes and workers' control. … Strikes were eff ective because they stimulated the construction of instruments of direct democracy: workers' committees. Workers' committees placed “the control of the product in the hands of the workers themselves” (Gallacher and Campbell 1972, 31) and allowed for the coordination of strikes, boosting the workers' power to develop more committees. Hence, workers' industrial organization was the main organ of industrial control— and potentially, of political emancipation.

In Britain this development began in Clydeside, a dense area of munitions industries in Scotland that was at the forefront of the opposition to the government's authoritarian manpower policies. In February 1915, during an unoffi cial strike for higher wages and shorter hours, metal workers collectively organized so as to impede the divideandconquer strategies of the employers, who tried to negotiate separately with different categories of workers. Th e fi rst strike committees developed into a more permanent body, the Clyde worker committee, that represented all grades of workers regardless of their skill. … Th e strikes of May 1917 were the largest of the war, involving 200,000 metalworkers for more than three weeks.

Th e Socialist of January 1919 announced: “the striking masses have spontaneously created the workers' committees, the basis of the workers' state . . . these committees representing every department in every mine, mill, railway, or plant, contain the elements of an organization which can transform capitalism into a Soviet Republic. . . . All Power to the workers' committees” (Th e Socialist, January 30, 1919, reprinted in Hinton 1973, 302). … Th at same year, the Italian worker Mario Montagna expressed similar optimism for his own country: “we believe that the construction of the workshop councils (consigli di offi cina) represents the fi rst concrete affi rmation of the communist revolution in Italy and that these councils of peasants and workers are the basis for the whole future system” (Montagna 1919, 202– 3).

Th e weekly paper, founded and led by four young Marxists— Gramsci (28 years of age), secretary of the editorial staff and director; Palmiro Togliatti (24 years of age); Angelo Tasca (28 years of age); and Umberto Terracini (24 years of age)— began as an independent culturalpolitical experiment in May 1919: "a lively and fecund exercise (training ground) of discussion on the fundamental motives of a communist society and its practical organization."

Th e journal was a crucible of thoughts that spanned from workers to socialist leaders and intellectuals. It documented and discussed the revolutionary movements and theories that were sweeping across Europe. It was the main sounding board of the program of the Th ird Inter national and its leaders, presenting articles from the likes of the Russians Vladimir Lenin, Nikolai Bukharin, Grigory Zinoviev, and Leon Trotsky; the Hungarians Béla Kun and György Lukács; the Polish Rosa Luxemburg, active in Berlin; and Sylvia Pankhurst of England— all of whom widely reported on the British shop steward movement.

In the view of Gramsci and his cohort, economic conventions such as private property were not fi xed and indisputable givens, but rather the embodiment of collective actions that constitute a historically specifi c economic system— i.e., capitalism. In its simplicity this intuition actually carries radical political signifi cance: it allows us to realize that strong and conscious class struggle may completely overthrow the current order and reinvent a new social world.

Togliatti wrote that workers “put a limit to the absolute freedom of the boss”; they subverted “the 'natural' conditions of the market”; and thus, their labor power ceased “to be a commodity that is subject to the iron 'laws' of supply and demand.” In other words, “men have rebelled against economics: [now] their conscience and wills count more than the 'scientifi c laws' of economics” (Togliatti 1919a, 72).

As workers came into a new status as protagonists of a political process advancing toward a new economic system, bourgeois economists categorically denied this agency (and continue to do so today). Indeed, mainstream economists portray workers as substitutable cogs in the economic machine— in essence, inputs in the production machine. Workers' only constructive action is their choice of moving from one wage job to another.

Once again, aft er World War I the Ordinovisti shook these bien pensants in their primary assumptions: “those who speak of fallacious illusions necessarily imply that the working class always has to bend its neck in front of the capitalists, [they] imply . . . that the working class has to persuade itself of being incapable of having its own conception to counterpose to that of the bourgeois, of having ideas, sentiments, aspirations, and interests that are contradictory to the ideas, sentiments, aspirations, and interests of the bourgeois class” (Gramsci 1920f, 2). On the contrary, workers were the revolutionaries whereby “being revolutionary means working eff ectively toward transforming the whole productive order” (Togliatti 1919a, 72).

Zini critiqued the abstract, indirect concept of political freedom: in short, he said that political freedom is impossible in the presence of "economic unfreedom," the state of market dependence in which the majority of people are forced to sell their labor power in order to survive. Th e theories from bourgeois economists oft en concealed such forms of economic coercion, but these were nonetheless felt by workers: "Today all men, if they want to live, if they don't want to die of hunger and of cold, are obliged .

Th e factory council, as "an absolutely original institution" of the proletariat, was a strategic vehicle for toppling the pillars of capital accumulation. It was also a venue in which workers could concretely experience politicaleconomic unity: "born from labor, [the council] adheres to the process of industrial production . . . within it economics and politics merge, in it the exercise of sovereignty is all one with the act of production . . . in it the proletarian democracy is realized" (Gramsci 1919b, 117). Indeed, within the councils, the organization of the production process was deeply political. Th us, in their proceedings, councils put into practice the core of an alternative society, one in which "the mendacious bourgeois democracy" [menzognera democrazia borghese] and its expression in "parliamentarism" was suppressed in favor of an antiauthoritarian "selfgovernment of the people" embodied in the "proletarian state"-an institution that would no longer be alienated from the people but rather be part and parcel of their daily activities.

In Italy, the turnover of factory commissars every six months— and their “obligation to announce frequent referenda in their departments on social and technical questions and hold frequent assemblies”— institutionalized the urge to keep the decisionmaking power with the workers themselves.

In Turin, Milan, and Genoa, the occupation grew into a mass popular movement. It by turns captured, riveted, and alarmed the Italian public. It bubbled with novelty. Neither FIOM nor the industrialists had in any way intended or accounted for their industrial confrontation to spiral into an unexpected revolutionary experiment: the enthusiasm of the rank and fi le was about to produce something unimaginable.

Il corriere della sera, a mainstream Italian newspaper, vividly captured the improvised and vibrant beginnings of the Milanese occupation: "the factories yesterday evening presented a singular spectacle. One reached them through crowds of women and children, coming and going with dinners for strikers, voluntary prisoners of the factories . . . entrances were strictly guarded by groups of workers. Not the ghost of an offi cial or a police offi cer in sight. Th e strikers were complete masters of the fi eld. Whoever passed, in car or cab, was subjected to control as if he were crossing the frontier, control exercised by vigilance squads of workers and their enthusiastic companions" (Il corriere della sera [August 31, 1920]; reprinted in Spriano 1975, 54).

Occupations proceeded in a relatively peaceful manner. Th e workers' anthem was sung, and red fl ags were erected to the factory fences and chimneys. Battista Santhià, a worker on strike in Turin, described the experience: “In those days it really seemed like the future of the working class was in our hands. Th e master was overthrown from the factory which was directly managed by the workers.”

Factory councils took on the direct control of production in its entirety; they had no other choice aft er higherranking technicians and engineers left their posts on industrialists' orders. Th e Ordinovisti actively participated in the occupations, broadcasting the work of the councils in the improvised coordination of production, exchange, sale of products, and the assistance and defense of the factories. In Turin, by the second week of occupation, most of the working classes across all industries were involved. Not only the small, medium, and large metal fi rms (cars, coaches, foundries, service factories, railway material, marine engines, machine tools, typewriters, etc.), but also rubber fi rms, footwear plants, textiles, and silk industries were occupied, extending from the city to the province.

On September 19, 1920, the government summoned the parties to Rome and mediated the fi nal phase of negotiations. Prime Minister Giolitti, who had fully supported the CGdL's proposal for worker control, asserted that the historic moment demanded a radical transformation in the relation between capital and labor. It was no longer tolerable that in industry "one man should command, and thousands obey. We must give the workers," said Giolitti, "the right to know, to learn, to raise themselves, the right to share in the running of the fi rm, to assume some of the responsibility" (reprinted in Spriano 1975, 103).

Th e neutralist behavior of the government was not the only factor that incensed industrialists and agrarian capitalists. Th ey viewed the events' concluding agreement in apocalyptic terms. Th ere was also the presence in parliament of a socialist minister of labour, Arturo Labriola, who in interviews and statements spoke openly of a phase of transition from a capitalist to a socialist economy. Moreover, as we have seen in chapter 3, those years marked an assault on capital through reforms, including measures against speculation, the taxation of excess war profits, the extraordinary tax on property, the compulsory registration of shares in the owners' names, steeper death duties, the legalization of land occupation, and much more.

In March 1920 the Confi ndustria had situated itself as a national organization, complete with its own general political line and tactics. Industrialists could now think of themselves as a national political power— an "industrialist class" (Il corriere della sera, March 9, 1920) with a centralized membership. Seventytwo associations were federated, with 11,000 members. All large industries, and threequarters of the mediumand smallscale industries, adhered to this association. Th at August the agriculturalists had done the same: they founded La Confederazione Generale dell'Agricoltura, which united large and small agricultural property and industry. It was a new "political body of battle and resistance to coordinate all the forces of property and agriculture industry" (Bachi 1921, 302).

Th e impulse of revenge (an impulse the government failed to address) was to be satisfi ed with Fascist violence. Fires would soon burn down many worker organizations' headquarters. Camere del lavoro (chambers of labor), le case del popolo (citizen centers), cooperatives, and newspaper offi ces were reduced to ash. Armed attacks would kill thousands, from socialist majors to rankandfi le workers, until the ultimate advent of the Fascist government in October 1922.

Tasca eloquently captured the counterrevolutionary spirit: "Th ey [the industrialists] received the jolt [scossa] of [one who,] having bordered death and now returning to life, feels like a new man" (Tasca 1965, 129– 30). He added, "the blood that they will have spilled will appear to them as a ritual of an expiatory ceremony, necessary for the purifi cation of the violated temple of private property" (ibid., 143).

Th e Ordinovista movement proposed a twofold break from the capitalist order, one that was at once institutional and methodological. Rather than being a means to strengthen peoples’ passive consent to the capitalist order, knowledge became critical and empowering.

Its emancipatory potential rested on the four main foundations explored above: the abolition of the fetish of “economic necessity”; the centrality of workers’ agency (theoretical, economic, and political); the connection between theory and practice; and the connection between the political and economic domains. Th ese foundations broke away from any topdown and technocratic conception of knowledge— a conception of knowledge that the austerity experts would indefatigably strive to reestablish.

Th e factory councils embodied such a methodological revolution. Councils united workers of all ranks as thinkers and producers— to control production, to end private ownership of the means of production and wage relations, and to bridge the divide between economics and politics in order to give true force to economic democracy.

Th e nationwide occupation of factories coordinated by the councils ignited the establishment’s greatest fears, and cemented the antisocialist bloc across liberals, nationalists, and conservatives alike. Th ese factions would soon merge in the armed off ensive of Fascism and a widespread austerity agenda that proved itself in its full antilabor force.

Mussolini’s Fascist regime represented more than stick and castor oil— it was an “austere” fascism. Th e Duce surrounded himself with economic experts who fi rmly reimposed— both through theory and policy making— the divide between the economic and the political that the workers had breached. As we will see in the second part of this book, austerity’s birth as the new champion of capitalism operated to foreclose any alternative to it. Indeed, in a crisis of this proportion, either the organizations of people can move beyond capitalist relations, or the ruling class will reimpose its rule. Austerity served the latter end.

Th e crisis of capitalism that followed the Great War was, for some people of means, an acute and terrifying development. Once workers stormed the stage of history with ideas for an alternative society, the defense of capitalism took on novel and more powerful forms. Guardians of capitalism went back to the drawing board to refurbish the old order, and their manufacture of austerity became their main weapon. Austerity consisted of a twofold process, at once material and ideological. Or better, it consisted of a twofold strategy— coercion and consensus.

Austerity— both in its material form as a coercive policy and in its theoretical form as a consensusbuilding set of theories— repudiated the workers’ revolutionary wartime and postwar gains, especially those of the Ordinovista movement. Th e group’s practical and theoretical alternatives were the gravest enemy to the capitalist system, an enemy that originators of the austerity doctrine were determined to defeat. In fact, and as we shall further explore in the second half of the book, austerity smashes the Ordinovista methodological/institutional foundations. Austerity a) renaturalizes the capitalist pillars of private property and wage relations; b) denies the political and economic agency of workers; c) vindicates the priority of topdown economic science; and d) reasserts the divide between the economic and the political.

Th is austere view of the social world is also refl ected in its liberal thought leaders’ support of the Italian Fascist regime. Indeed, as chapter 8 investigates, the international liberal establishment was convinced that Mussolini’s dictatorship was the only solution to force the austerity pill upon the “turbulent” Italian people. Fascist political methods to achieve economic success, however gruesome, could be largely tolerated thanks to their accompanying conviction that the economic and the political were two separate domains. Chapter 8 details how liberal technocrats played no minor role in consolidating Mussolini’s rule.

Chapter 9 presents empirical evidence on the motives and political endgame of those who conceived austerity as policy. What was presented then and now— the rehabilitation of capital accumulation as a means to save the hungry masses— has time and again delivered on its true purpose: to facilitate permanent and structural extraction of resources from the many to the few.

Th e purpose was to defend capitalism from its "enemies"; the logic was to blame said enemies for national economic troubles and to enforce upon these populations the sacrifi ce of hard work and low consumption. Th e circular nature of austerity, in policy terms, guaranteed this form of coercion: fi scal, monetary, and industrial policies operated harmoniously to reestablish the economicpolitical divide, to renaturalize wage relations and private property, and fi nally to usurp peoples' agency. Th ese outcomes ran in direct opposition to the foundations for an alternative society set forth by the Italian Ordinovista movement that we studied in chapter 4, and even in direct opposition to the British guilds of chapter 3 as well as the reconstructionist movement in chapter 2. Rescuing the structures of capital accumulation meant quashing all popular expectations for social emancipation following the sacrifi ce they underwent during the war. Th e prize of postwar reconstruction was no longer democratic control of industry, nor "a home fi t for heroes"; it was, in the words of the merchant banker R. H. Brand of Lazard Brothers, London, the "hard truth" of "labour and suff ering" (League of Nations, Brussels International Finance Conference 1920, Verbatim Record, vol.

Th e authority of the experts provided a channel to build consensus for a truth that, even if hard and painful, was “universal” and “objective,” and thus had to be swallowed. For these technocrats, austerity’s rationality was synonymous with rationality itself, because they held that the capitalist order was the only order possible.

In February 1920, the Council of the League of Nations met in London to summon the “world’s fi rst International Financial Conference,” to be held in Brussels from September 24 to October 4, 1920. Th irtynine nations were called to the table, representing threequarters of the world’s population.

Th e conferences succeeded in establishing an agenda to solidify the faltering pillars of capitalism. While the capitalist powers may have failed in their horizontal relationship— establishing a system of power with one another— they most certainly achieved success in their vertical relationship— to labor, that is, in subjugating it.

Stanford economics professor Joseph S. Davis commended Brussels as a "conference of specialists in fi nancial disease." Th eir assembly "for diagnosis of the acute illness of the nations" was a victory, Davis argued, in that the attendees reached "unanimous agreement upon the main points of a diagnosis and upon the mode of treatment appropriate to the present stages of the disease" (Davis 1920, 350). Davis's claim of a unanimous agreement was centered less on international cooperation than on austerity. Or better, international cooperation found useful expression in austerity, with the latter silencing the powerful enemies of capital accumulation and foreclosing any noncapitalist alternatives of postwar reconstruction, including projects for economic democracy.

Without paying your way as a nation, without getting that equilibrium and stability which is at the basis of confi dence, there can be no hope whatsoever. To that we have to devote all our energies. How are we to do it? I think the answer is a very painful one and yet a very simple one. It is this: that we must all work hard, live hard and save hard.

Th e austerity agenda that was shared among the Brussels meeting's "specialists in fi nancial disease" (Davis 1920) consisted of both a "diagnosis" and "a mode of treatment." Th e diagnosis was harsh and evoked a sense of dramatic emergency: the world economy was in severe crisis and "the severity of the malady" varied immensely "in proportion to the degree in which each nation has been immersed in the maelstrom of the war" (Brussels 1920, vol. 1, 4).

Hard work and economy— as in budget cuts and individual abstinence— were the guiding principles that formed the essence of austerity as a response to crisis. In themselves these were not much of a novelty; they had been an integral part of the conceptual toolbox of the renowned classical economists Adam Smith, David Ricardo, and Th omas Robert Malthus for at least a century. What was new in the early twentieth century was that the general public had seen the fault in such narratives.

In the same vein, the League of Nations had addressed the necessity of "keeping expenditure within income," balancing expenditure out of revenue: "Th is principle must be clearly brought home to the peoples of all countries; for it will be impossible otherwise to arouse them from a dream of false hopes and illusions to the recognition of hard facts" (Th ree months of the League of Nations, vol.

Coercion resided not only in how economic policies were passed, but in how these policies worked. Technocrats devised monetary, fi scal, and industrial policies that imposed hard work and economy on a population in need of discipline. Aft er all, as the offi cial proceedings of the Brussels resolution pointed out, "[t]he country which accepts the policy of budget defi cits is treading the slippery path which leads to general ruin; to escape from that path no sacrifi ce is too great" (Resolution II, Commission on Public Finance, Brussels 1920, vol.

Th e joint statement from the experts at Brussels left no doubt about the European states' new economic legislative priorities: "Th e equilibrium of State budgets must be restored" and "[f]loating debt should as soon as practicable be funded" (Monetary Problems, Joint Statement of Economic Experts, Brussels 1920, vol. 5, 2- 3). Th e Genoa conference repeated the refrain: "Th e most important reform of all must therefore be the balancing of the annual expenditure of the State without the creation of fresh credits unrepresented by new assets" (Genoa Conference 1922, Report of the Second Commission [Finance], Resolution VII, in Gordon and Montpetit 1922, 68- 69).

It follows that a state that utilized fi scal austerity to reach budgetary equilibrium demonstrated its fi nancial stability and creditworthiness, and thus fostered savers' confi dence in its capacity to uphold favorable conditions for capital accumulation. In the words of Lord Chalmers: "without paying your way as a Nation, without getting that equilibrium and stability which is at the basis of confi dence, there can be no hope whatsoever" (Verbatim Record, Brussels 1920, vol. 2, 26).

Alberto Beneduce, an Italian professor of economic statistics and CEO of the National Institution of Insurance (INA)— who would go on to have a lasting career as parliamentarian, senator, and economic adviser of Mussolini's regime— had no doubt: it was necessary to "act upon public opinion, on the psychological state of the masses, so that they would no more impede but help to reestablish the budget of the State" (Verbatim Record, Brussels 1920, 75, my italics). Beneduce gave voice to these preoccupations during the plenary discussion of September 20, 1920. Th e date is signifi cant: on that day in his own country an unprecedented class struggle was at its peak. Th e factory occupation had been going on for almost a month. Th e "psychological state of the masses" seemed rather projected toward a postcapitalist society where private ownership and wage relations were to be abolished.

How could austerity proceed in such a turbulent time? Here again, experts induced consensus through the persuasive powers of an “objective” economic science. Experts justifi ed the necessity of fi scal austerity by suggesting that social reforms were only “concealing from the people the true economic situation” (Resolution V on Public Finance, Brussels 1920, vol. 1, 14). Once again, we notice the “neutral” standpoint taken by these experts whose purported role was to “inform” the people— incapable of understanding on their own— of the “true” road to economic redemption.

In fact, the state— in its role as eliminator of expenditures— was a fundamental precondition to reconstruct the material (and ideological) conditions necessary for the divide between the economic and the political domains to regain its hold. Clearly the very withdrawal of the state from the realm of economic interventions was a drastic and heft y political decision, but it was nonetheless justifi ed as apolitical and economically necessary— a process guided by technical reason, thus fundamentally uncontroversial.

Economic experts at the two conferences defi ned infl ation as an “artifi cial and unrestrained expansion of the currency” that had the eff ect of reducing the currency’s purchasing power per unit. Infl ation “debased the currency,” and its degeneration could be monstrous: to buy the same goods at higher prices, one needed additional currency, which was procured by further “infl ation,” thereby creating a “vicious spiral” of “constantly rising prices and wages, and constantly increasing infl ation” (Recommendations of the Conference, Brussels 1920, vol. 1, 9).

Infl ation was diagnosed as a pernicious outcome of war collectivism: i.e., of state interference with the “natural” laws of supply and demand. Th e wartime politicization of the economic domain was characterized as the main catalyst for infl ation, especially its consequent rise in wages and production costs, all of which hindered capital accumulation. “It is generally recognized that continued infl ation, which is primarily due to excessive Government expenditure, has a serious eff ect on production,” noted R. H. Brand (Verbatim Record, Brussels 1920, vol. 2, 17). It followed that fi scal austerity was a primary remedy for infl ation, since— in the framing of the conference experts— budget defi cits forced governments to fi nance their expenditures by issuing either more paper currency or fresh credit, thereby increasing the amount of legal tender in circulation.

Th e Genoa proceedings relied heavily on one of Hawtrey’s insights: that budget cuts were indispensable to check the consumption not only of the state but also of the general public. In eff ect, Hawtrey’s principle reduced the disposable income of the working classes. Th is amounted to a check on public demand, which lowered and stabilized internal prices while also securing external monetary stability, since a reduction in both government and private outlay discouraged imports and thus improved the balance of payments.

To defeat infl ation and to fully rein in the purchasing power of workers, fi scal austerity was to be supplemented by monetary austerity. Th e latter meant a direct and deliberate credit contraction through an increase in interest rates, which would defl ate prices and in turn boost confi dence in the value of the currency. Th is was the core of the socalled policy of “dear money” (Resolution VII, Commission on Currency and Exchange, Brussels 1920, vol. 1, 19). Vissering declared: “the purchasing power of money [can], by way of remedy, be forced up somewhat by making money scarce” (Verbatim Record, Brussels 1920, vol. 2, 45).

Like fi scal austerity, monetary austerity fundamentally worked to shape the behavior of economic agents in a way that was favorable to capital accumulation. If depreciation “leads to a spirit of reckless extravagance and a determination to spend at once what in any case is likely to be lost” (R. H. Brand, Verbatim Record, Brussels 1920, vol. 2, 18), then revaluation incentivized savings— the most virtuous economic behavior— on the part of those who have the means to save. Th e former governor of the Bank of England, Brien Cokayne, under his new title as fi rst Baron Cullen of Ashbourne, sat as a member of the Commission on Currency and Exchange. He was adamant that “the last rise in money rates in Great Britain appears to have acted, as it naturally should, as a considerable stimulus to thrift . Bankers now receive numerous enquiries as to the terms on which they will accept deposits now that rates are so high” (Verbatim Record, Brussels 1920, vol. 2, 71).

In sum, monetary austerity and fi scal austerity were two sides of the same coin that worked in a reciprocal fashion. British Treasury offi cial Sir Otto Niemeyer summarized this clearly when he advised the Brazilian government, in his capacity as executive director of the Bank of England: “Th e two factors, budget equilibrium and stable money, must march together; and neither one can be maintained without the other” (Niemeyer 1931, 4). Indeed, we have seen how budgetary orthodoxy was a prerequisite for the revaluation of currency. At the same time, defl ationary monetary policy— in the form of rising interest rates and the curtailment of money supply— increased the cost for the government to borrow, thus limiting its expansionary projects. Resolution VII of the Brussels Commission on Currency and Exchange was explicit: “If the wise control of credit brings dear money, this result will in itself help to promote economy” (Resolution VII, Commission on Currency and Exchange, Brussels 1920, vol. 1, 19).

Most importantly, these policies robbed the people of all economic agency, and silenced their demands for higher wages and social redistribution, not to mention their demands for nationalization and alternative relations of production.

Not only did the two mutually reinforce one another, they also stood for the same purpose. Fiscal and monetary austerity favored wealthy savers while the rest of society was forced to consume less via diminution of government resources, payment of taxes, and lower wages. Th e dual operation of fi scal and monetary austerity put the burden of capital accumulation on the working classes to ultimately reestablish the divide between the economic and the political and protect private property and wage relations.

Vissering, praised for his “high scientifi c and practical competence” (Verbatim Record, Brussels 1920, vol. 2, 83), asserted that “depreciation of money is not a cause in itself,” but “is only the effect of other causes, and that these other causes are to be found in the acts of national and municipal governments on the one hand, and in the acts of individuals, more particularly employees, on the other.”

Resolution V explicitly states that capitalist production required the elimination of any aspirations of the working people for alternative organizations of production. Such aspirations could be thwarted through two measures: privatization and the control of labor. Th e two would ultimately guard against the fundamental culprits of economic crisis— the wrong actions of governments and of individuals (or better, of employees).

Notwithstanding the prima facie interpretation of infl ation as a monetary phenomenon, economists made clear that, beneath it, the solution was about subordination of the citizens to capitalism. Th ese thoughts were coherent with a deepseated fear about the political consequences of infl ation.

Th e policy change advocated for by austerity economists was one that “diminish[ed] the sphere of government” (Verbatim Record, Brussels 1920, vol. 2, 20). Such “sound policy” would “allow the natural economic laws to have full possibly of acting in all their intensity” (Beneduce, ibid., 73), thus leading to “sound fi nances” (ibid., 142) and especially to a boost in the effi ciency of production.

To sell their recipes, the austerity advocates leaned heavily on a “crowding out” argument— a battle horse of the British Treasury— that the British delegates shared during the conference discussions: “Since there is not enough capital to go round, which is to have it— governments or private industry? . . . Th e more capital is absorbed by Governments, the less is available for private industry. . . . Which is likely to use capital more productively, Governments or private industry? Th e answer is in favor of private industry” (ibid., 17).

Privatization was meaningless if not accompanied by the “cooperative” behavior of those who were expected to labor within the capital order. As such, the unprecedented industrial mobilization of the interwar period would have sent a chill down experts’ spines: instead of working hard for increased production, a great number of workers were doing the exact opposite. Vissering voiced concern: “Th ey demand shorter working hours, without correspondingly improving their work which would permit of intenser production,” and in order to enforce these demands “they moreover frequently strike, which means a fresh drop in production” (Verbatim Record, Brussels 1920, vol. 2, 50).

If one could not convince the majority to work hard (while consuming less), the experts knew that the depoliticization of the economy would get them to submit. Indeed, the agenda was to remove “controls in various forms,” including laws that protected labor. Th e reestablishment of an unfettered labor market, especially in times of defl ation, warranted a natural disciplining of the labor force through a threat of ending up in the ranks of the reserve army of labor if they refused to accept lower wages.

Austerity as it is known today was an off spring of crisis— not merely economic crisis, but crisis of capitalism as a socioeconomic system. Th e preceding chapters have shown that aft er the war, for the fi rst time, the challenge to the pillars of capitalist accumulation became a mass phenomenon. Th e working classes acquired a sense of entitlement and participated as protagonists in the political scene. In the minds of the people, private ownership in the means of production and wage relations were no longer natural, indisputable givens.

Hence, the experts forged the drastic cure of austerity: a doctrine of economy and hard work, ostensibly for the good of nations (or at least their economies). As framed, austerity was about individual sacrifi ce on the part of “patriotic” citizens who had to practice frugality in lifestyle and discipline in labor. Half a century later, in 1979, the powerful Chair of the American Federal Reserve, Paul Volcker, used the same mantra to tackle another great crisis: “the American standard of living must decline” (Rattner 1979), he announced, while supporting the government’s fi rm resolve to break strikes and delivering on a shocking dosage of dear money.

In such a turbulent moment, the application of the austerity principles required an emphatic justifi cation. One of the most novel aspects of modern austerity was that, as an antidote to capitalist crisis, it could no longer dismiss or disregard the actors that were deemed responsible for that very crisis. Experts had to deal with public opinion, either through consensus or through coercion— or, most practically, through both. Th is constituted the dual strategy of austerity.

Austerity sought consensus through the sponsorship and intellectual authority of technocracy, which operated as both its epistemic grounding and its political force. As preachers of “pure economic science,” experts imparted their teachings to all citizens. Th ey set out to educate the general public about the truthfulness of the prescriptions upon which their economic behavior should be shaped. Once disarmed of any agency to advance economic alternatives, the people had no choice but to either comply or be forced to comply with the economic necessity. And once the economic/political divide was reestablished, the coercive market forces would naturally work to discipline disarmed workers.

Austerity proved to be more than just wishful thinking on the part of the experts at the international conferences of Brussels and Genoa. Chapters 6 and 7 will investigate how these experts successfully implemented the international code of austerity. We will begin by looking at Britain, a country that pioneered austerity starting in 1920, then explore how, starting in 1922, Mussolini’s Italy painstakingly followed in those footsteps. Th at these dates are so close to the two international conferences (Brussels and Genoa) is telling of the rapid ascent of austerity across Europe.

Increased production, cessation of Government borrowings, and decreased expenditure both by the Government and by each individual member of the nation are the fi rst essentials to recovery.

Even before the principles of austerity were codifi ed in Brussels and Genoa beginning in 1920, its component policies were already spreading. Th is was particularly the case in Britain, which at the time was the most advanced capitalist country in Europe. Faced with rising labor mobilization and rising prices, the country adopted two public axioms— produce more, consume less— that served to smother any rays of hope for a reconstructionist program, to say nothing of a noncapitalist future.

It was a handful of Treasury offi cials who played a crucial role in orchestrating this turn of events— a turn that had been unimaginable in the immediate aft ermath of the Great War. In their role as controllers of fi nance during the turbulent postwar years, Basil Blackett and Otto Niemeyer had the largest sway over the chancellor of the exchequer, the head of the Treasury. Th ey did not have to worry about political reelection, and their names were not under the public eye; thus these experts could act behind the scenes to shape and rationalize austerity.

Austerity was most certainly a political project, but its assumptions weren't necessarily wrong. Indeed, it laid bare an undeniable truth: for capitalism to function, workers had to be disciplined into accepting the two pillars of capital accumulation— the primacy of private property and wage relations.

Niemeyer heavily underlined and annotated the memorandum. Th e document, like many others, attests to the general awareness of the primary political issue at stake: austerity policies had at their basis the sacrifi ce of the vast majority of British citizens.

How were the experts capable of contending with such an onslaught stemming from the very heart of the establishment? Th e answer lay in an appeal to high economic theory. Indeed, the entwinement of economic theory and austerity policies— so crucial in a moment of high contestation— is the defi ning characteristic of austerity as we know it today, where consensus complements coercion.

Hawtrey established his name as a prominent monetary economist with his 1913 Good and Bad Trade— a book that articulated the monetary business cycle. His repute increased in 1919 with Currency and Credit.

Currency and Credit was widely used as a textbook in the 1920s. It became a standard text for the Cambridge Tripos in economics as well as overseas, including in the Harvard economics department, where Hawtrey taught as a visiting professor in 1928– 1929. David Laidler has documented how during the interwar years Hawtrey’s infl uence even reached the Chicago School of Economics (Laidler 1993).

In sum, Hawtreyan economics spread far and wide, becoming embedded in the worldview of the most commanding minds of the leading technocratic institutions that implemented austerity aft er World War I. In a moment when budget cuts and dear money policies had lost their veneer as “natural” policies and faced harsh public backlash, they required economic theory to justify them. Th eir grounding in economic theory came through the personalities at the levers of power. Th is was the true novelty of austerity— a project that was at once theoryand policymaking, at once an ideological, material, and personal process.

Despite its technical jargon, the message of the Hawtreyan model was actually quite simple: infl ation was the main threat to the market economy, and the causes of infl ation fundamentally rested in exaggerated spending on the part of the general population— especially its lower ranks. Indeed, the “unruly” nature of credit and its tendency to expand excessively was fundamentally based on the unruly behavior of the majority of citizens who undertook “unproductive” consumption.

Blackett derived the class consequences that were concealed by the neutral syntax of the Hawtreyan model: the cause of the crisis rested in workers’ wasteful behavior. Whereas before the war they were limited by economic constraints, once their wages had risen workers were fundamentally reluctant to save.

Blackett took the mission to heart, and between 1916 and 1917 he traveled across Britain and the United States to zealously lecture audiences on how to “deny themselves comforts and luxuries” (Blackett 1918a, 16). In a public speech in New York City he spelled out the spirit of sacrifi ce that would become the basis of austerity: “Produce more, consume less, waste nothing . . . it does not matter whether or what you are paid for your services: spend your money and yourself in the service of your country” (ibid., 70).

Th is prescription was not to be interpreted as grim and exceptional, he clarifi ed, but rather as a condition for economic progress to be developed into a universal norm. Blackett admonished the crowd, “[w]ere we not all tired of the ostentatious extravagances of the prewar period? Has not the war taught us that our sense of values had gone wrong?” (ibid., 20). Learning the custom of thrift , he told the New York teachers, had to begin at a very early age: “By not buying candy, or by not going to the movies, they [children] could increase the amount standing to their credit in the school War Savings Association” (ibid., 73– 74).

Niemeyer shared these beliefs. A decade later, he exported the British model to Brazil by advising its government “to encourage the formation of a voluntary committee of suitable persons for the organization and propaganda of thrift throughout the country” (Niemeyer 1931, 22). Britain’s experts were, however, under no illusion: aft er the war, the degree to which the system was being contested meant that workers were no longer inclined to abide by the behavioral dictates of the ruling classes.

Against this “relaxation” of spirit, Hawtrey, Niemeyer, and Blackett espoused economic policies that would directly impose abstinence on the working classes, thwarting any unwillingness to sacrifi ce. Fiscal, industrial, and monetary austerity served exactly this purpose.

"Taxation," Hawtrey wrote, "by reducing people's resources, gives them an inducement to reduce their consumption of commodities" (Hawtrey 1919a, 351). In a moment in which overextending taxation to the working classes faced peak opposition, Hawtrey praised taxation's ability to force abstention on the people.

With the same goal of rewarding the saver/investors, experts conceived of ways to lower taxation for the wealthy classes. Here again the rationale was simple: since the wealthy classes have a natural propensity to save, high direct taxation on these classes would check savings and discourage investment.

Blackett warned of the dangers of the government's complicity in supporting citizens to live beyond their means: "Th e attempt to maintain standards of living for everyone, above those which the economic activities of the nation justifi ed, by means of government expenditure out of taxation is in part responsible for the breakdown" (Blackett 1932, 240).

In the summer of 1919 the chancellor complained loudly: “the number still employed in the public services have, in the aggregate, hardly decreased perceptively since the war. Th at cannot be defended. . . . Everything in excess of this must be ruthlessly cut down. In the interest of economy we must be willing to content ourselves with the second best where the best is too costly” (August 28, 1919, T 170/171, fol. 2).

In 1920 and 1921 total civil employment fell from 19,537,000 to 17,417,000 (Feinstein 1972, Table T- 126), meaning that the government laid off 11 percent of all public employees in a single year. Th e Geddes Axe also contributed its share, saving the Treasury 5 percent in GDP through layoff s and cuts in wages.

In Niemeyer’s words: “Industry could not permanently prosper while the state was absorbing the greater part of investible savings” (T 176/21, fol. 26). In 1922, Blackett used the same terminology: “the fund of investible capital is reduced by the lending to the government of what might otherwise be lent to trade” (T 171/202, fol. 23). Here lies the crux of the crowdingout argument: the government is accused of diverting private savings from the investment market— money that would otherwise be invested in more productive private enterprises.

Of course, lower wages as an "indispensable condition" for capital rehabilitation was the opposite of what people were demanding. And once again, these experts were aware of the class confl ict in the offi ng. Hawtrey wrote: "It seems not unlikely that the diffi culty of reducing [wages] again will be the determining factor in the settlement of the future monetary units."

Even Millis had to admit that the act was a unique episode in British history, inasmuch as it “curtailed the rights of labour on both the industrial and the political fi elds” (Millis 1928, 315). Th e results were immediate. Th e average number of disputes in 1927 and 1928 fell to half of those in the years 1924 to 1925 (Mitchell 1998, Table b.3, 176). Even more impressively, as Miliband put it, “while the average number of workers involved in strikes and lockouts in each of the three years 1919– 1921 was 2,108,000, in each of the thirteen years 1927– 1939 it was 308,100— and not by any means because Labour lacked major grievances in those years, or achieved notable successes by the use of its parliamentary strength” (Miliband 1961, 148– 49). By 1930 union membership had halved with respect to 1920 (going down from 8.4 million to 4.8 million participants— see chapter 9, fi gure 9.4).

Th is momentous turn of events, from labor empowered to labor defeated, cannot be fully explained without an investigation into the workings of monetary defl ation— the queen of all austerity policies in Britain— without which the subjugation of the British workers could not have been achieved.

Th e Treasury controllers stood fast on Hawtrey’s main theoretical principle: credit was “unruly,” or “a peculiarly unstable and sensitive phenomenon,” as Blackett wrote in a note to Chamberlain. Th is theory had a weighty policy implication. Credit’s lack of selfregulation and its constant expansionary tendencies required “national control” over its supply (Hawtrey 1919, 50). Hence, rather than a handsoff monetary policy, British experts wholeheartedly endorsed monetary management through the manipulation of the bank rate in order to achieve the desired economic “equilibrium” (Hawtrey 1919a, 24).

A return to currency stability, Hawtrey wrote, entailed “a painful and laborious journey,” and “the painful and laborious journey must be travelled, aft er every indulgence in infl ation . . . aft er the debauch comes the headache” (Hawtrey 1919a, 375). Once more the burden of this journey fell primarily on the workers through reduced incomes and restricted consumption— both necessary for monetary management to be successful.

What some economists today would characterize as a mistake of economic management had clear political advantages. Th e evil of unemployment was not so evil for the longterm survival of exploitation, a principle upon which capital accumulation rested. Unemployment weakened workers’ position, silenced demands for greater economic democracy, and guaranteed lower labor costs … As Cronin put it: “Th e astronomical levels of unemployment in some of the most militant and strike prone industries must have served to lower the expectations of workers and erode the bases of workshop organization” … Indeed, technocrats got what they wished for: wages fell tremendously as a consequence of the austerityinduced slump. Average money wages and retail prices plummeted by 30 percent between 1920 and 1923, a remarkable degree of fl exibility (Peden 1985, 68).

Once high bank rates defl ated domestic prices, those high bank rates had to persist in order to achieve an even costlier objective: returning to the gold standard at the prewar parity of 1914. Th is amounted to a long haul of defl ation, as the sterling needed to be raised from $3.40 in 1920 to $4.86 in 1925- a 10 percent price defl ation (see Peden 2000, 128- 89).

For the Treasury and the Bank of England, returning to gold, so costly in terms of unemployment and social sacrifi ce, had a further invaluable political payoff that was worth any economic sacrifi ce. Th e gold standard buttressed the exemption of monetary policy, and consequently also of fi scal policy, from political discussion and intervention.

Monetary management, he declared, is "a technical task which is the fi eld of the expert" (ibid., 239), and thus has to be "made the subject of intensive scientifi c study of a kind that would be inappropriate to broad political decisions" (ibid.). No exception could be made regarding the requirement "to separate the central bank, as the expert body, from the executive Government" (ibid.). In Britain, Hawtrey told the reader, the separation had been fully accomplished: "the Bank of England is the property of its shareholders, and the governors and directors are responsible to no one else." He then added: "It is thoroughly understood, however, that their position is one of trust for the public interest" (ibid.).

Undoubtedly, in this framework, what was good for the central bank was also good universally and for the public at large. Any faint doubt that, as a private institution, the central bank could work in favor of the ruling class was strongly disregarded, since "the only defence against infl ation is to be found in the wisdom of the fi nancial world in general, and of Finance Ministries and central banks in particular" (ibid., 240– 41).

Hawtrey was adamant that it was precisely in a “democratic age” that technocratic exemption from democracy was “an advantage.” One had to escape “ill judged pressure at critical times,” and especially any opposition to defl ation on the part of workers and business. Indeed, until “a healthy public opinion could ever be evolved on the subject of credit control”— and Hawtrey declared himself agnostic on whether it would ever be possible— “the welfare of the community” depended “vitally upon the technical effi ciency and enlightenment of those who administer the great central banks of the world” (ibid., 244). … Th e eliteness of scientifi c knowledge thus became the means to justify the undemocratic nature of an institution with immense social power and impact on everyone’s lives. Hawtrey’s innocent parallel between the workings of the central banks— which he admitted would “intimately [aff ect] the entire economic life of the country”— and the colonial offi ce governing a colony betrays the fundamental antidemocratic or even repressive content of the austerity project.

Keynes agreed heartily. He wrote: “My own view is in complete accord with that of Mr. Hawtrey, that this activity is one which should be pursued by a semiautonomous body not subject to political interference in its daily work” (“Discussion by Prof. J. M. Keynes from the Chair,” in Hawtrey 1925a, 244). Th e common ambition was impeccable: the economic sector must be depoliticized.

On February 17, 1929, now in his role as director of the Bank of England, Blackett proudly testifi ed his past eff orts: “I arranged with the Chancellor of the Exchequer soon aft er April 1920 to revert to the prewar practice of either not informing the Chancellor of the Exchequer in advance of an intended change in the bankrate or letting him know only at about 10:30 or 11 of the Th ursday” (T 176/13, fol. 25). As a government representative, the chancellor did not have, and ought not to have, any offi cial role with respect to the bank rate. Setting the bank rate, Niemeyer commented, was to be the decision of a “private corporation” (T 176/13, fol. 26). … As a private corporation, the Bank could put economic priorities over all social concerns; in the meantime, the Treasury could happily escape all accountability for the social sacrifi ce, especially in the form of unemployment, that austerity measures were infl icting on the British population.

Technocracy as the rule of experts had as its basis an assumption of epistemic superiority. In this sense, the experts were the guardians of untarnished objective knowledge on how to properly stabilize credit and run the market economy. As we have explored in depth in the preceding pages, such knowledge prescribed the austerity motto— produce more and consume less. Hence, it emerges that austerity was not only an antidemocratic project, but, at its core, a repressive one: it forced people to sacrifi ce without criticism.

A fundamental step in this direction was to depoliticize the economy— that is, to abolish any form of state control so that wages would again be subject to impersonal market pressure rather than be prone to political contestation. Looking closely, it emerges that the fi xation of the experts on balanced budgets and on curbing infl ation had a deeper goal: reconfi guring the indisputability of capitalist relations of production, based (as we know) on the pillars of private property and wage relations.

Indeed, the Treasury and the Bank of England prolonged their dearmoney policies even aft er infl ation was curtailed. Furthermore, the British state did not loosen its fi scal belt even aft er budgetary surplus was achieved in 1920. Th e austerityinduced downturn and consequent unemployment was no economic mistake, but rather a powerful means to cool the collective temperature of an embattled working class, to create the pathway to dismantle reconstructionist plans and shift resources to the creditor classes of society.

Th e British experts were of course aware of the nonneutral class impact of austerity. A 1920 memorandum of the Bank of England read: "Th e process of defl ation of prices which may be expected to follow on the check to the expansion of credit must necessarily be a painful one to some classes of the community, but this is unavoidable" (Bank Memorandum, February 10, 1920, T 172/1384, fol. 30b). Th ese lines disclose how austerity proceeded to normalize class repression through the idea of "unavoidable" and "natural" economic truths that only our experts could deliver.

Th e main contribution of Hawtreyan economics was to fortify the concept of monetary management (or austere management) of the market economy and to assign managerial command to a technocratic institution. As a private body, Hawtrey told us, the Bank of England was "free" to infl ict austerity without ever having to "explain," "regret," or "apologise." In this sense it emerges that there was nothing more political than the technocratic mission to depoliticize.

In his fi rst speech in Parliament as the newly nominated prime minister, Mussolini spoke the language of austerity: “thrift , work, discipline,” he said, pledging to depoliticize the nation’s economy by putting an end to all “state interferences.”

Mussolini delivered on his promises. Fiscal and industrial austerity (1922- 1925), followed by monetary austerity and continued industrial austerity (1926- 1928), bulldozed hardwon social reforms and workers' aspirations. Th ese policies served to enact a common purpose: the rehabilitation of the fundamental pillars of capital accumulation- nowhere better observed than in the regime's capacity to secure brisk "industrial peace."

A year into the new regime, the minister of fi nance, Alberto De Stefani, could toast to labor's defeat: "In 1920/21 the loss through strikes was 8,201,000 working days and in 1921/1922 7,336,000 days. From 1st November 1922 to 31st October 1923 the loss has been only 247,000 [days- a 97 percent drop in two years]. Profi ts and revenues are increasing" (Summary of Financial Statement, Italian Senate, December 8, 1923, FO 371/8887, fol.

A focus on austerity also off ers a new lens to historically evaluate Italian Fascism and its economic agenda. Indeed, while traditional historiography stresses the discontinuity between the fi rst laissezfaire period (1922– 1925) and the corporativist period that followed (with the latter usually understood as the real expression of Fascism), I suggest that a continuity can be drawn between the two: austerity. Whatever its historiographic period, austerity was always much more than laissezfaire; it embodied the active intervention of the state against capitalist crisis.

Ricci acted with determination: as we shall see, the national railways were among the institutions most aff ected by cuts, while the Fascist government also privatized the National Institute of Insurance. But Ricci proved to be more austere than even Fascism could satisfy. In the name of a strict defense of austerity, he ended his service to the government in February 1925. Indeed, the polemic that distanced Ricci from the regime had little to do with breaching political freedom and everything to do with breaching "economic freedom"— the freedom of the market.

Ricci and Einaudi— celebrated as Italy’s most authentic ambassadors of liberalism— had one priority during the postwar crisis: deploying austerity to guard the market economy against an imminent collapse. Such austerity was embodied in the Fascist policies of the 1920s, with repressive politics as an integral component. Ricci and Einaudi didn't have to declare loyalty to Fascism to be of service to it; austerity weaved Fascism and liberalism together in a shared, coercive pursuit.

All four of austerity's Italian economists shared this intellectually elitist position, not to mention a tendency toward selfadulation. It was a set of conceits expressed through Ricci's religious metaphor, by which the "contemplation" of "the divine science" of economics is "the privilege of the few" and "does not always appear as beautiful, true and good to the profane public" (Ricci 1926, 72).

Pure economics is imbued with this manner of positivism. (I use the present tense here with a nod to how this continues with presentday neoclassical theory.) Over time, the discipline achieved a reputation for rigor and epistemic legitimacy that equaled that of other hard sciences. In Ricci's evocative words: "Th e socialist and the protectionist are to the economist like the astrologist to the astronomer, the alchemist to the chemist, the sorcerer to the doctor" (Ricci 1926, 25).

Pure economics aspired to be something like the Platonic form of social inquiry. Just as ideas for Plato were the authentic essence of existing phenomena, so too economic ideas were more real than reality itself. Th ey were the true model, the archetype that reality played out. Its selfdescribed “purity” did not stem from a detachment from the real world; to the contrary, economics had an undeniable and practical end game. Like Plato’s philosopher, the economist had to return to the cave and rescue the unenlightened from their ignorance. Th e four professors had as their ambition to eradicate the impurities of the real world so that it would conform to the purity of their mathematical models.

Aft er the war it was indeed the majority of citizens that required taming, since they had revolted against the authentic essence of things.

Th e models of these four economists captured just such an essence— a society in which capital, not labor, was the engine of the economic machine.

In 1920 Luigi Einaudi wrote a polemic in the Liberal newspaper Il corriere della sera bemoaning Marxist economists and their labor theory of value: “Why should a capitalist profi t only because the machine is his? Why shall he live without doing anything? Is it not obvious that his profi t comes from the exploitation of someone else’s labour?” he asked, sarcastically. “Th is is the celebrated and vulgar sophism of Marx’s Capital. . . . But it is enough to ask: how much would be produced if the savers did not produce capital? Th e answer: nothing. Without capital, labour produces zero.”

De Stefani off ered a similar explanation to his students: “Capitalism is the phenomenon of a class that lives on the specifi c 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 specifi ed, “a result of savings and conservation, useful actually to the very working classes” (De Stefani 1919, 164).

At a moment when workers endorsed economic theories that put labor as the source of capital formation, these highly visible national experts championed an opposing set of theories: it was actually the saverinvestors who held the keys that propelled the system. In this manner, economists provided scientifi c grounds to naturalize a class society— and thus to justify its inevitability, and ultimately its fairness. Th ey did so by equating the members of the bourgeoisie with the concept of the homo economicus— a rational agent who acted out of selfinterest.

Accordingly, private savings and private accumulation never clashed with the general interest. On the contrary, public interest depends on these private "virtues." Th ese principles remain embedded in the standard economics textbooks of today; they are so ingrained that our protagonists' exhaustive defense of them seems overboard.

Pantaleoni's public interventions demonstrated his belief that the economic status of the working classes refl ected their lack of social and economic merits: "all considered, it seems obvious that the classes with lower incomes are signifi cantly defi cient in qualities with respect to others. So that this defi ciency [defi cienza] is the cause of the lower income and not the lower income the cause of the defi ciency" (Pantaleoni 1922, 36). Members of the working classes were such because they suff ered from incurable vices, such as wasteful consumption, and were hangerson to a more perfect economic system populated by savers. Being poor or workingclass was a choice and a pathology.

Pantaleoni's characterization of the Italian working class was conspicuous in its timing: war had brought "undeserved" wealth to the Italian workers thanks to higher nominal wages and government price controls on foodstuff s and other social services. In Pantaleoni's telling these same workers, rather than saving, had indulged themselves to a point of moral and economic degradation (1922, 58): Th e working classes basically don't save and spend everything in plea- sures [godimenti], with the consequence of a remarkable decay of their moral qualities.

Ricci joined, too: "Th e darlings [beniamini] of economic policy during the war and aft er have been the workers of the great cities. In other words, the savers were punished, and the squanderers rewarded" (Ricci 1921, 450). Th e economist architects of Italian austerity distrusted, and perhaps despised, the working classes for their ineptitude in the vital action of economic growth: saving. While it is impossible to ascertain whether or not pure economics was the primary source of the economists' classist convictions, it is safe to assert that pure economics at least reinforced their classism.

Th ese campaigns' resemblance to the endeavors of Blackett and Niemeyer on the British savings committee is striking. More than in Britain, however, the Italian economists were convinced that aft er the war the situation in their country had gotten completely out of hand. For all their core ineptitude, workers had actually gained economic and political power. It was clear that only a strong government could set things straight for capital accumulation. Here entered the Mussolini dictatorship.

Fascist and Liberal economists shared a belief in the power and good of a government made up of economic experts— a technocracy. Th ey also agreed that the policies necessary to ensure sound economic principles were neither political nor pursuant of any partisan interest; they were simply true. It is the role and the duty of experts to defi ne and implement them.

Th is technocratic ethos permeated De Stefani's 1927 speech in front of an audience at the English Institute of Bankers: "We still judge of sound fi nance by the strict adherence of government practice to those laws that are not political but natural and human; and in all countries the people are inexorably forced to pay the penalty for disobeying them" (De Stefani 1927, 316, my italics).

In this heated moment, a technocratic government was necessary to advance the agenda of hard austerity. It was, however, not entirely suffi cient. Th e Italian government had to be strong, too. And by strong, the Italian economists did not mean a government with economic leverage; they envisioned an authoritarian, “law and order” government, one that would never hesitate to use repression against the population in order to protect the market economy and its natural laws (Pantaleoni 1922, 47– 48).

Far from a conscription of riches, De Stefani had actually managed to constrict wages. Moreover, to further (and silently) extract resources from the poorer members of society, the Fascist government steadily increased consumption taxes throughout the decade. Th e ratio between direct and indirect tax revenue dropped from 0.94 in 1922 to 0.72 in 1925, and to 0.61 by 1929— an even more pronounced trend than in the British case. More specifi cally, duties on basic commodities grew between 1922 and 1925 by approximately 5 percent per year in real terms (Toniolo 1980, 48). Meanwhile the government managed to abolish “vexatious taxation on luxury goods” (Einaudi 1927, 490).

A fi nal, devastating volley against the wartime economy came with the abolition of the Ministry of Labour and Social Insurance in April 1923— a blow to all Italian workers who had just recently won their twentyyear battle for the Ministry's creation.

Ultimately, the curtailing of social expenditures was undertaken with a more insidious objective than merely curbing the defi cit. It was about sound relations of production, and specifi cally about disciplining the workers. Here Ricci left no doubts when he attacked social reforms for "protecting hustlers [faccendieri] and troublemakers [facinorosi]" (Ricci 1926, 15). He was especially critical of unemployment benefi ts that quelled the market's force over labor: "When there is a government that gives out subsidies to the unemployed, the temptation is born to become unemployed [nasce la tentazione di disoccuparsi], to take the subsidy, to work less, and produce less" (Ricci 1926, 22).

On the other hand, a socialist economy was portrayed as giving the working classes a “free ride” to work less and consume more. For Italian economists it was understood that, once hired by the state, employees degenerated in their behavior, becoming the antithesis of the virtuous homo economicus. Public employees became immoral “loafers” [fannulloni] because they lost the sound economic incentive of the unfettered market (Ricci 1926, 13). “Th e employee is brought to consider the fi xed stipend as an acquired right, a guaranteed pension [pensione di garanzia] in exchange for which there is no obligation to give anything,” Einaudi argued. He scolded, “the duty to work arises when overtime begins, since it’s uncertain and is paid according to the work done” (Einaudi 1959– 65, vol. 5, 233).

Alberto Alesina, who studied economics as an undergraduate at Bocconi before a career at Harvard, bemoaned publicsector jobs as creating a “culture of dependency” whereby “residents in the South [of Italy] demand more public employment in order to take advantage of a large income premium and a greater job security” (Danninger, Alesina, and Rostagno 1999, 3– 4). To Alesina and others before him, public employment was synonymous with individuals who were unprepared to “face the market” (ibid.). In other words, citizens were unwilling to accept high enough exploitation.

In the meantime, in the name of greater revenue, a regressive rise in ticket fares forced workers to choose between giving up the service or paying the higher fares and thus "consuming less" in their other daily expenditures.

In this model, workers lost economic agency, bringing their work in line with the defi nition of labor in Pantaleoni's Pure Principles as a “complementary commodity.” Th is concept of labor stresses the priority of capital over labor, a priority also refl ected in the wagefund theory— again, an important building block of pure economics. Th is theory presupposes that wages are always and necessarily paid out of the entrepreneur's capital— not as a portion of the surplus he has reaped from workers' labor, but rather as something that is made possible only because of the entrepreneur's virtuous savings. Th e entrepreneur anticipates wages with his disposable capital and plays the vital task of disciplining/directing labor, insofar as the latter lacks the capacity to selfmanage: “Th e entrepreneur disciplines labour and discipline means coordination . . . this coordination is a diffi cult problem that few know how to resolve, and the one who knows how to resolve it is called entrepreneur . . . the entrepreneur does not tell the worker to work but to work in a certain way: you know how to organize without him? Go ahead [fate pure]" (Pantaleoni 1910, 230). … No economic theory could be more distant from the thoughts and practices of the Ordinovista movement detailed in chapter 4. For Gramsci and Togliatti, workers' political agency emerged from the centrality (and potential autonomy) of their labor. Instead, in the world of these four economics professors, workers' loss of economic agency ensured their loss of political agency: understood as any other commodity, economists saw labor as a thing to be exclusively priced through the laws of supply and demand.

In his academic lectures, Pantaleoni asked students: “what wage can the entrepreneur give to the worker?” He answered: “as much as he is worth. He certainly cannot pay him more than what he is worth, and by competition, he will not be able to pay him less . . . the rule that labour is paid how much it is worth [tanto quanto vale], nothing more nothing less, holds" (Pantaleoni 1910, 204).

In sum, the gold standard in Italy, as in Britain, did not merely represent the endpoint of muchsuff ered austerity. It was rather a device to enforce its “naturalization,” since under the gold standard austerity constraints were no longer politically disputable.

Th is chapter has set out to explore the birth of austerity in Italy under the “impartial” guide of four renowned professors of economics. Despite their ideological divergence, the four shared a deeper set of beliefs and a precise mission: they worked in concert as guardians of a universal economic science— a science that, despite its purported purity, had the intrinsic practical aim of “taming” citizens to consume less and produce more. Th e emerging Fascist regime endowed the professors with the opportunity of a lifetime: to actually mold society to correspond to the ideal of their models.

Indeed, pure economics operated to depoliticize economic theory by expelling class analysis, only to reintroduce classist assumptions covertly in their rigorous microeconomic calculations. In this manner, any class diff erence was the outcome of a diff erence in the extent of individual rational economic behaviors.

One need only step away from the abstractions of their academic works to attain a full view of their classist beliefs. Pantaleoni was the most explicit: “Bourgeois is whoever has the moral and intellectual value required to be such: he who lacks talent, activity, perseverance, control of his own passions and impulses, stops being a Bourgeois; these qualities are all required to emerge amongst comrades and dwell in a class that is not that of the plebes [volgo]” (Pantaleoni 1922, 109).

Moreover, to fully explain why austerity thrived in Italy, we need to tell another side of the story: how foreign interests infl uenced— and in some cases defi ned— the rebuilding of a country that had teetered on the brink of Bolshevism. By the 1920s Italy was a country with substantial war debt, and was heavily reliant on imports of goods and raw material. In other words, it was a country beholden to others: fundamentally dependent on foreign capital and credit for its economic investment and development. Italy’s position of dependence meant that international creditors could exert strong pressures— including pressures that would open Italy to foreign investment, even at the expense of the Italian people. Th is came in the form of austerity.

British technocrats understood that the groundwork for insulating capitalism in Italy would take the form of austerity, and implementing that austerity would require a strong government. Th e British found those conditions in the form of Mussolini’s dictatorship; Fascism imitated the principles of austerity. Th e British were not alone in this. Similarly to the austerity motives of liberal economists within Italy they refl ected a wider international consensus that proved fundamental in order for Fascism to gain legitimacy and consolidate its rule.

Th is chapter builds on the 1971 classic book by Gian Giacomo Migone, Th e United States and Fascist Italy: Th e Rise of American Finance in Europe (translated in English in 2015), which documented the substantial hand that American fi nanciers— especially those at J. P. Morgan— lent to Mussolini’s rule. Indeed, as Migone explores, Fascist Italy acted as a key agent for the expansion of American capitalism in Europe after World War I.

More than just coal, wool and meat were also missing. As a Treasury fi le of 1919 revealed, “there are many other commodities, equally important to the economic life of the country, which are not imported at the present time, merely on account of lack of fi nance” (T 1/12343/10710/19). A continuation along the vicious spiral of high indebtedness— which discouraged creditors and worsened monetary instability— could even result, many feared, in a fullblown monetary breakdown in which the lira lost all purchasing power.

Meanwhile, the Italian minister of Treasury Signor Luzzatti stressed to others outside Italy that granting credit was no mere charity, but rather a matter of mutual interest in preventing revolution. Italy was a nation “whose dire stress might be the means of producing a confl agration,” Luzzatti warned, noting that such developments “might spread to England herself” (ibid., ff . 4).

Th e Italian and British establishments coalesced around a shared narrative of the problem: to understand the Italian economic crisis, "the political reason was to be put in the fi rst line" (April 12, 1920, T 1/12551/1). Italy's economic problems could only be solved aft er addressing its political problems. Aft er all, strikes and redistributive policies were primary factors "in the nervousness shown abroad towards Italy's fi nance," and moreover, foreign fi nancial observers understood notions like taxes on profi ts or luxury goods as an expression of "the selfi shness and the cupidity of individuals and classes" in Italy (ibid.). Here again, the blame fell on the majority of the population— backward masses who consumed too much and produced too little.

Capel- Cure expressed deep dissatisfaction with the country's lack of resolve: "Th e Italian government has to cope with a number of white elephants. Th eir railways, posts, and telegraphs present a continuously increasing defi cit to be met sooner or later by the taxpayer" (July 21, 1922, FO 371/7656, fol. 283). Capel- Cure argued that wage increases were a central part of the problem: "government offi cials and employees who are organized under trade unions have been able to exact from the state a considerable amount of salaries and wages." Th e British commercial counselor warned that this trend could spread to nonunionized workers and further deplete state fi nances (ibid.).

De Stefani's alacrity was also doted on by the liberal press: "he lives, sleeps, eats in the ministry, and his day is 8 to 8 with half an hour for lunch, for seven days in the week. I suspect that this superactivity is due to his not unnatural mistrust for the offi cials whom he has inherited."

On November 3, 1922, a dispatch from British ambassador Graham emphasized a breakthrough that had already occurred in both economic policy and political power. He described plans for privatization and reductions in public services, concluding that "[the] government is much stronger than its predecessors for enforcing measures of the above nature" (FO 371/7660, fol. 185).

In Mussolini's senate address on June 8, 1923, the Duce asserted that “the dominant fact in 1919– 1920 . . . the occupation of the factories, the continual and permanent strike of state employees” had been eliminated and punished, thanks to the Fascists' replacement of a state “devoid of virility” with one that “was growing stronger and stronger and could impose discipline upon the nation” (ibid., fol. 75). Th e British embassy described this speech as “convincing”: “his speech shows the Fascista movement in its true light as the reassertion of 'authority' against 'liberty' as the idea of government . . . the complete subordination of the rest to the Fascisti” (FO 371/8885, fol. 73).

Th e tone of British observations during the early days of the Fascist regime was not condemnation, but a nodding appreciation for the Fascist leader's good sense. Graham, for example, said that for Italy, “the chief failure lay in 'parliamentarianism'” (FO 371/7660, fol. 198). With its factious dynamics, parliamentarism— or democracy— only increased ungovernability at a moment when grave economic necessity and revolutionary threat called for something stronger.

[T]he Italian people are the descendants of Roman slaves. Aft er the de- cay of the Roman power, they remained for some fourteen centuries under the domination of various warring sets of foreigners .

British and American fi nanciers were more than just supportive spectators of Fascist austerity. Th eir acceptance of Mussolini's regime within the capitalist international order was crucial for the regime's consolidation.

Mussolini's message was clear: international fi nancial confi dence could make or break the Fascist regime. Settling the war debt and achieving the gold standard were the surest paths to guaranteeing the durability of that confi dence. Notably, this agenda of Mussolini's presupposed proving the country's creditworthiness through austerity.

Indeed, international fi nancial experts explicitly pressured Fascism to defeat labor’s demands. For example, while examining Italy’s request for a stabilization loan, Fed governor Strong urged Italy to maintain its balance of trade with a further reduction of cost of living and wages, which the governor of the Bank of Italy, Bonaldo Stringher, gave assurance he would achieve.

By exacting sacrifi ces on the working classes, Italy could fi nally participate in the international capitalist order. Aft er gold stabilization, the Economist announced that it expected “foreign capital, mainly for the United States and Great Britain,” to “seek more freely temporary or permanent investment in Italy.”

For their part, J. P. Morgan and other bankers “were anxious” that “stabilization should proceed whenever possible and Italy should naturally be [the] next place”— i.e., whatever interventions were necessary to stabilize the currency should be taken (cable of J. P. Morgan to Norman, November 8, 1926, G1/307, fol. 15).

Austerity was, and remains, a shrewd endeavor. By critically studying its origins and architects, we see again and again that austerity was conceived, and succeeded, as a counteroff ensive: it functions to preserve the primacy and indisputability of capitalism in times when capitalism is under political threat. And it does so by introducing structures— policies— that shift resources from the working majority to the saver/ investor minority. Th e immediate distributional impacts have the important longterm function of disempowering the majority and thus reinforcing the general acceptance of the pillars of capital accumulation: private ownership of the means of production and wage relations. You get what the boss gives you.

Th e study of class shares (i.e., wage share versus profi t share) provides a clear sense of the losers and winners of austerity, and in turn its political implications. Class shares measure the portion of GDP that goes to labor and to capital— the most immediate indicator of the balance of forces between a society's two main classes. Th e reassertion of capital order, i.e., the primacy of capital over labor, is foundational to promoting capitalist investment: capital does better when workers are subordinated, wages are low, and regulation is minimal. Following World War I, austerity's knack for collapsing the wage share was vital in a moment when the wage share had reached an unprecedented high, stirring among workers great expectations of a breakaway from capitalist exploitation. Th us the political utility of austerity becomes obvious. A rescue of the hierarchical laborcapital split meant an escape from the capitalist crisis (and the egalitarian impulses that came with it) triggered by the Great War.

To give a sense of who was part of “labor” and who was part of “capital,” it is useful to recall that in 1921 the British working classes encompassed more than 60 percent of the population, while the “owner class” was roughly 7 percent (Gómez León and de Jong 2018). In Italy, the propertied upper class (bourgeoisie) constituted only 1.7 percent of the entire population, against a working class (in both agriculture and industry) that was almost half of the population (Sylos Labini 1975, Table 1.2). Given these tiny fractions of society that benefi ted from austerity, the movement’s losers extended well beyond wage workers: these groups comprised most of the middle classes that made up the populations’ middle grounds— public employees, independent farmers, soldiers, shopkeepers, and other professionals.

Measuring austerity’s economic eff ects in Britain and Italy also corroborates one of the main claims of this book: that there is a profound parallelism between austerity in a democratic setting and austerity in a Fascist setting. In the 1920s, the repressive nature of British austerity primarily took the form of market coercion: workers were forced into compliance with the logic of capital accumulation aft er the Treasury and the Bank of England devised policies that triggered high unemployment and curtailed welfare rights. Increased economic necessity brought workers to their knees. Th e Italian version of austerity did not need to rely on unemployment as such, since it was accompanied by Fascist state interventions that slashed nominal wages by decree and annihilated genuine worker’s representation.

Th e two forms of austerity, Fascist and democratic, aligned in their success at thwarting dissent. Th is can be seen in the similar riseandfall patterns of worker strikes and the riseandfall patterns of compensation and wage share. Th e data presented in this chapter illustrate how the repressive drive of austere Italian Fascism behaved much the same as austerity in the British parliamentary democracy, both aft er World War I and today.

To grasp the political (and economic) implications of austerity, there are three main timelines to consider: the wage share of national income, the ratio of nonwage to wage incomes (known as the rate of exploitation), and the profi t rate.

Figure 9.1 shows the wage share— the portion of GDP that goes to wages (i.e., the income of the working class) as opposed to profi ts (i.e., the income of the capitalist class). In essence this relation is zerosum: what is taken from one class is gained by the other.

Never had workers in either country gained such a high proportion of the national output. During these red years, the Italian wage share grew to 49 percent in 1919 from 35 percent in 1918, and peaked at 55 percent in 1922. Th is was a huge increase even compared to the prewar levels (44 percent in 1913). It meant that in 1921, capital reaped fewer fruits from economic growth than labor, something unseen until that moment. Capital share dropped from 65 percent in 1918 to 45 percent in 1922.

Th ough more moderate, the British case still looks quite impressive. Wage share rose from 71 percent in 1918 to 78 percent in 1921. Th is was an unprecedented increment with respect to the prewar years (in 1913 it was at 67 percent). Even if the surge is numerically not as striking as the Italian case, two factors must be kept in mind to evaluate the potentially explosive eff ect of the British circumstances. First, British workers were in possession of a signifi cant amount of the GDP, a measure of their strength, which gave them a greater voice in settling economic agendas; second, that power had still increased like never before. Th e troubles for capital were embodied in a 7-percentage-point drop in profi t share between 1918 and 1920 which swept away the war gains. Th e postwar profi t share was onethird of the prewar amount. As in Italy, these class gains were also fuel for a movement to nationalize and give British workers a central, potentially independent role in the production process.

Th e austerity counteroff ensive had an unequivocally uniform impact on both countries: it reversed both countries' labor gains dramatically. Under Fascist austerity the gross wage share of Italian workers tumbled throughout the 1920s, reaching a new low in 1929 when it touched the level of 1913. Capital had gained back its dominant position. British labor experienced a similar fall: by 1929 workers had lost all of their postwar gains in share of national income.

An immediate consequence of Britain’s austerityinduced downturn was the wave of economic coercion that overtook British workers. Amid rising unemployment, organized labor lost much of its political power. By the end of the decade, only onefourth of the working population was unionized, down from almost 40 percent aft er the Great War (see fi gure 9.4).

Mussolini's industrial austerity forced underpaid work on Italy's population through a form of political coercion that was unthinkable in Britain: the Duce outlawed independent unions and slashed wages by decree. However, intersections between the two examples are abundant. In fact, the austere British government did not fear enacting explicit, repressive labor laws against strikers to complement the economic coercions imposed by the market. On the other hand, once unemployment rose, the Italian state's violent political attacks on dissenting workers were complemented by the economic coercion of impersonal market forces.

But if this book highlights one thing, it's that the perpetuation of austerity to this day should not be reduced to a matter of irrationality or bad economic theory from the experts who run economies. Austerity is a tool to maintain capitalist social relations of production— to maintain class. In an austere capital order, popular protests may arise, but the protesters face a political landscape that structurally disempowers them: it's hard to protest capitalist austerity when you have to depend on capitalism to survive.

In other words, when economists peddle austerity as a means to "fi x the economy" their goal is something more insidious. In describing the austerityinduced economic downturn of 1921, the British economist G. D. H. Cole (who did not favor austerity) captures the essence of how austerity moves and shapes a society: "Th e big workingclass offensive had been successfully stalled off ; and British capitalism, though threatened with economic adversity, felt itself once more safely in the saddle and well able to cope, both industrially and politically, with any attempt that might still be made from the labour side to unseat it" (Cole 1958, 419). Far from irrational, austerity was a wily counteroff ensive that protected capitalism and its relations of production against the inroads of democracy. To be sure, austerity successfully disempowered the majority.

Th e interwoven devastations of fi scal, monetary, and industrial austerity smothered all forms of classbased activism in 1920s Britain and Italy. In Britain, a handful of remaining strikes sought only to achieve sectional industrial interests, not the fullblown recasting of the organization of production; in Italy strikes disappeared altogether.

Wages and labor rights continued to fl ourish throughout the decade. In Italy, the years 1970– 1977 saw real wages rise at an annual average of about 7 percent (Levrero and Stirati 2004, 2), with the wage share increasing and reaching a high of 70 percent in 1977. Similar trends were on display in Britain, where workers' activism in the postwar decades brought the national wage share as high as 79 percent in 1975.

During the country's socalled winter of discontent— from October 1978 to February 1979— strikes occurred on a scale unseen since the General Strike of 1926. In 1979 alone, 4 million people were withholding labor, a fi gure equaling the combined number of strikers during 1919 and 1920.

Th e collapse of the most powerful group of workers in the country changed the face of British labor relations. … From 1975 to 1996, rates of economic exploitation almost doubled. In those same years the profi t rate grew from 21 percent to 32 percent. … Following the advances of labor in Italy during the 1970s, austerity was reintroduced and was predictably successful in quieting and disciplining the majority.

All of this came to a head in June 2011, when the Italian people turned out in record numbers to vote on a referendum to halt the privatization of all public utilities, including water, with the objective of transforming them into common goods. It had been more than fi ft y years since the country had successfully utilized its constitutional instrument of direct democracy in this way. Many read the episode as a signifi cant manifestation of popular agency, or perhaps more radically a step toward a modifi ed organizing of Italian social life. Two months later, and as had been the case in Italy for nearly a century, the austerity refl ex kicked in.

Italian austerity was far from an externality imposed by the economic troika (ECB, European Commission, and IMF). Within Italy, the intellectual hold of the country's austere economists— the socalled "Bocconi boys"— continues to dominate debates around politics and economy, both domestic and international. Th at Bocconi University proudly maintains the tradition of Luigi Einaudi, who taught public fi nance there from 1902 to 1925, is no small part of this. Like their predecessors in the 1920s, Italian economists such as Alberto Alesina, Silvia Ardagna, Carlo Favero, Francesco Giavazzi, and Guido Tabellini have served as prominent advisors to the IMF, the World Bank, and the ECB, entrenching a core belief that economic growth requires a public majority to accept working harder for lower wages.

Th e economic experts at the Brussels and Genoa conferences would not have envisioned themselves as subordinating the will of the majority as such. Rather, in the dissonance that is common among economists, they would have seen their reforms as grounded in an elevated understanding of how the world works. Th ese fathers of today's mainstream economics presented austerity policies as the outcome of theory that was objective and neutral, a worldview that transcended class relations. Th eir stated urge to "tame men," in turn, was not domination, but rather a necessity for an organized society— something above mere politics or class. Such is the manner of depoliticization: it served (and still serves) to conceal economic coercion under the guise of building consensus— in this case, as elsewhere, for the disempowerment of the many.

However, a theory that masquerades as being above class is also a theory that fails to account for class in its theoretical framework. Th at austerity came to exist in the shadow of the Great War— a "classagnostic" economic framework deployed for a moment of unprecedented class confl ict— demonstrated the imperiousness, and deniability, of its originators.

Economists renaturalized capital as a social relation by walling off its alternatives. While L'Ordine nuovo theorized labor as the source of value for employers and criticized exploitation as a structural trap for workers, economists portrayed these relationships as equal exchanges among equal individuals— a road to prosperity for all those who demonstrated a rational capacity to optimize. Economists modeled the market society as one in which all people, if suffi ciently rational and virtuous, could potentially thrive. Th is seemingly emancipatory insight was actually among the most classist: social hierarchies were refl ections of individual merit, meaning that those who weren't at the top didn't deserve to be. Th e saverentrepreneurs' profi ts were the products of their virtuous behavior, the same behaviors that signed workers' paychecks and propelled the economy.

No physical weapon could have been as powerful as this theoretical framework in removing agency from workers and justifying private profi t. Th e message is one that today we have all internalized: if enough eff ort is exercised, we can elevate ourselves to become part of the savingandinvesting class. Th ose who fail to do so can blame only themselves.

As Pantaleoni put it bluntly in 1920, economic policy making could not be “at once popular and exact.” Th e problem of political democracy was that people did not understand what was in their best interests; they had to be kept away from economic decisions for their own good. Today’s austerity politics remain grounded in a drive to shield economic governance from popular opinion— to keep the economy from getting political.

Even if diff erent in implementation, the Italian and the British technocrats shared a common purpose: imposing sacrifi ce on the majority of the public. Both did so without any real rebuke.

Once people were removed from the decisionmaking process, the models of pure economics could reassert the primacy of the market, letting it function as it should— i.e., unabated and free from worker demands. In their view, economic freedom was more important than political freedom— especially the political freedom to manage the economy democratically. In fact, these economists understood economic freedom not in the Gramscian sense, where economic freedom meant emancipating the majority from exploitation (as detailed in chapter 4), but rather as the protection of the savingandinvesting minority and the unfettered free market in which this minority operated. In other words, economic freedom meant the operation of capital accumulation, which required the economic coercion inherent to wage relations and thus the unfreedom of the popular classes. Th e technocrats' conception of economic freedom was indeed incompatible with any empowerment of the majority.

Th e EU era has also given austerity hawks a window to advance institutional reforms that explicitly strike at the foundations of democratic principles— political guardrails that, especially in Italy, were formalized to mark a distance from the country's Fascist past. Similar to Fascist economists in the early 1920s, these contemporary fi gures advocate for electoral reforms to diminish proportional representation (and thus favor stronger governments) and to rewrite countries' constitutions to include an obligation to a balanced budget. Italy implemented both policies in the 2010s.

Much as it did with Mussolini’s dictatorship in the 1920s, the Economist had no qualms in justifying Yeltsin’s strongman actions as the only path that could guarantee capital order: “Mr. Yeltsin had to choose between smashing his rival with force or seeing himself, his government and any prospect of reform destroyed. . . . Mr. Yeltsin’s opposition was a bizarre coalition of extremists of every kind, more than a few of whom, to western eyes, seem downright crazy. . . . Th e threat, in the end, was extreme— and so, necessarily, was the response.” Th e article concluded, “Th ese gains— the restoration of Mr. Yeltsin’s power to govern and renewed progress in economic reform— are great indeed.” In the months that followed, as the Economist doted on the rapid privatization of Russian industries, data from the World Bank showed that unemployment had reached double digits. If, in 1987– 1988, 2 percent of the Russian people lived in poverty (i.e., survived on less than $4 a day), by 1993– 1995 the number reached 50 percent: in just seven years half the Russian population became destitute. In the same period, nonwage income rose from 5 percent to 23 percent of GDP.

Summers was adamant that, for Russia, “the three ‘- ations’— privatization, stabilization, and liberalization— must all be completed as soon as possible. Maintaining the momentum of reform is a crucial political problem.” As a foreign interest, the United States was keen to solve this crucial problem: President Clinton passed billions in aid to Yeltsin, and USAID lavishly funded the Harvard Institute for International Development, directed by the economist Jeff rey Sachs, to advise Yeltsin’s austerity project.

In her essay “What Is Authority?” the twentiethcentury political theorist Hannah Arendt wrote: “Th e search for the best form of government reveals itself to be the search for the best government for philosophers”— the people doing the search— “which turns out to be the governments in which philosophers have become the rulers of the city” (Arendt 1961, 114). For austere economic experts imposing their wills on transitional economies since the 1920s, the process is very much the same: at the very moment their supposedly pure knowledge of transcendent economic ideas is applied to governing the real world, it quickly becomes clear that economic ideas are not really transcendent aft er all. While these economists may refute the suggestion of an agenda in these moments, their keenly political interventions reveal them, no matter how they may want the story to be told, as inescapably party to a struggle to preserve capital order— seemingly the only form of social order they can conceive of.

Th e austerity impulse is present even where it appears otherwise. So far in the twentyfi rst century, two fi nancial crises have been met with economic responses labeled “Keynesian” for their decisions to spend rather than cut. But some old habits don’t die. Aft er 2008, governments took care to save fi nancial institutions fi rst, thereby draining resources from the public in the years that followed. Th e rationale for such activities perfectly matched those that we have encountered in this book: a shift of resources from the many to the few.

Unlike many of the radical reconstructionists studied in chapter 2, Keynes's advocacy for state intervention was not the advocacy to emancipate political priorities from economic ones. Quite the contrary: the domain of the political was functional to the reproduction of the capital order, an order led by the virtuous few.

One crucial and oft en neglected element is the magnitude of the existential threat to capitalism immediately aft er the Great War— reconstructed in the fi rst half of this book. Slobodian emphasizes the eff ort to guarantee international economic integration and “global governance” via a legal institutional framework in the face of a crumbling Habsburg empire. Unlike Globalists, this book studies how, outside of Eastern and Central Europe, it was class confl ict rather than new nationstates that challenged the existing order to its core. Under the guidance of economic experts, austere states actively intervened through economic policies that were key to secure the material disciplining of the majority through an expropriation of resources and wage curtailment.

By telling the story of post– World War I reconstruction through the lens of austerity, this book has demonstrated how austerity was, and remains, an elaborate exercise in class domination. It is unquestionably more pernicious than the traditional telling of this story, one in which an international coalition worked to reestablish the gold standard after the war with the operating intention of securing and stabilizing global international exchanges. (Barry Eichengreen’s wellknown 1992 book Golden Fetters tells this story most notably.) As this book shows through archival and newly translated material, this “gold eff ort” was a surface manifestation of something deeper: a technocratic collaboration that successfully foreclosed alternatives to capitalism.

Th e dramatic events of the 1929 economic crash and the Great Depression that followed have attracted no shortage of scholarly attention, a focus that has obscured some of the political and ideological dynamics of the years before the Depression and following the Great War. Th e choice to focus this book on the early 1920s to the exclusion of later years does not take away from this period’s relevance to understanding the Depression; as readers will fi nd, a study of austerity serves to untangle the precipitating factors that promoted the crash and exacerbated the Depression.

Traditional historiography envisages a discontinuity between Fascism's initial laissezfaire period (1922- 1925) and the corporativist epoch that followed in Italy (usually understood as the "real" expression of Fascism). By viewing this same period through a lens of austerity, in terms of both economic policies and economic ideology, one can observe greater coherence across these two diff erent phases. Austerity, in fact, is the thing that ties the two together. It embodied the active intervention of the state to reinforce capital accumulation through privatizations, bailouts of fi nancialindustrial complexes, monetary defl ation, and especially coercive control of labor. Speaking broadly, the nationalist slant of Fascist austerity emerges through the sacrifi ce of the majority for the saving/investing minority, who purported to represent the interests of the whole nation. Our story supports the notion that the interwar economy's truly Fascist element was its coercive control of the labor force (see Toniolo 1980, xii- xiii; and Ciocca 2004, 198- 99).

Gianfranco is my greatuncle, child of my greatgrandmother Clara Mattei, whose name I carry. Following two days of constant brutalization, Gianfranco hanged himself with his belt rather than betray his comrades in the resistance. His last words, written on the back of a check and surreptitiously passed to his cellmate, were for his parents: “Siate forti, sapendo che lo sono stato anche io” (Be strong, knowing that I also was).

In 1914 it produced 4,800 automotive vehicles, and by 1918 its production rose to 70,862, of which 63,000 were for the Italian government. Th e aeronautic industry, practically nonexistent in 1913, employed by the end of the war around 100,000 workers. Th e chemical and textile industries also developed impressively, especially because of large state subsidies and direct intervention to support their technical apparatus, for example with the formation of the committee for chemical industries [Comitato per le industrie chimiche] (see De Stefani 1926a, 151- 53).

Th e preservation of workingclass organization in Britain meant that the labor movement was, from the beginning, aware of its strength and able to set some conditions for its cooperation in the prosecution of the war” … Under the war government of Lloyd George, Labour MP Arthur Henderson joined the War Cabinet. John Hodge, the secretary of the Steel Smelters, and George Barnes, the former secretary of the Amalgamated Engineers, took the new posts of minister of labour and minister of pensions, respectively.

Unlike Italy, in Britain the state’s eff orts in maintaining the levels of agricultural production and imports of consumption goods, rationing, and rent control raised the living expectations of the poorest, while public health and food quality improved (Procacci 2013, 48). While in Italy average real daily earnings decreased during the war years (falling continuously from 1915 to 1918), in Britain the average weekly real wages increased over the same period (rising continuously from 1913 to 1919).

Th e declared profi ts of the public limited companies jumped from 4 percent on the eve of the war to 8 percent in 1917. Th e profi ts of iron and steel industries jumped from 6 percent to 17 percent, automobiles from 8 percent to 31 percent, and wool from 5 percent to 19 percent (Porisini 1975, 34).

Lloyd George had made explicit that "a vigorous community, strong, healthy men and women, is more valuable even from the commercial and industrial point of view than a community below par in consequence of bad conditions- treated if you like not as a human proposition, but as a business proposition" ("Mr.

Th e system was funded by joint contributions from workers, employers, and the state, with considerable aid from municipalities and local charities, which increased their function and fi nancial autonomy.

Cermenati was adamant that "Th e worker's right to social assistance, in all cases, is guaranteed. His old age is safe from penury and indigence, he can be certain to receive proper support in times of involuntary unemployment, and soon enough, there will also be provisions for what most concerns the working classes, that is, aid in the event of illness" (Minutes of the Consiglio Superiore della Previdenza e delle Assicurazioni, meeting of December 2, 1919, in INPS, 1962, 352, quoted from Pavan 2019, 851).

Th e Socialist Party conference of October 1916 in Rome drew up a plan for universal and mandatory social insurance for illness, invalidity, and old age. Less than a year later the national council of CGdL unanimously pushed for an extension of insurance to safeguard maternity and protect against work accidents and poverty (Cherubini 1977, 225ff .)

In 1920 the Unemployment Insurance Act extended the 1911 scheme to cover most industrial workers. It expanded coverage "from 2- 3 million in 1912 to over 12 million" people (Peden 2000, 168). Aft er the summer of 1920, when unemployment in Britain tripled in just a few months, reconstructionists pushed for many proto- Keynesian proposals of loanfi nanced public works to keep people in jobs; in their means and objectives these projects deeply contrasted with prewar budgetary orthodoxy (see chapters 3 and 6).

Th is function of social control of welfare is especially important in times of economic downturn when the labor force is separated from its primary system of control (that is, the labor market). Th e idea is that welfare inhibits workers' inclination to break with the system as they still have something to lose.

Zamagni documents that in Italy the level of mobilization during the red biennium was "really exceptional" with respect to other countries: industrial disputes involved 30 percent of the labor force, while the percentage in other countries was around 20 percent (see Zamagni 1991, 151– 52).

We are confronted with an increasingly educated working class; a class which more and more rejects the imposition of external will and authority over it; a class which yearns for the status of responsible manhood in industry and which rebels against any cramping institution which thwarts its aspirations for freedom. Th e purpose of life is becoming more generally manifest as the enjoyment of freedom.

Th e struggle was widely popular throughout the British labor movement, which launched a strong campaign for "hands off Russia." Starting in January 1919 and covering the issue daily, Labour tried to convince the government to withdraw troops from Russia. At the Labour Party conference of June 1919, the speech of the chairman invoked the offi cial stance of the Labour Party: "We must resist military operations in Russia"- (A Voice: "And Ireland")- "and the perpetuation of conscription at home. Th ere can be no peace so long as we continue to indulge in military adventures in Russia. Russia must be left free to work out its own political salvation, and it would be far better to send to the people the means to stabilise and consolidate the democratic growth of the country than the means for one section to destroy another or perhaps also the Revolution itself" (Report of the Nineteenth Annual Conference of the Labour Party, June 25, 1919, 113, at https:// babel .

For generations it has been believed by the working classes that the only institution which stood in the way of freedom was political in character. Th e freedom of political democracy is a magnifi cent accomplishment, but it is now realized that the slavery of industry is harsher than the slavery of the unfranchised serf. Hence the impulse of industrial freedom. Th e struggle to shake off the imposition of external wills because the instruments of production are owned by the possessors of such wills is the most remarkable phenomenon of the age" (Hodges 1920, ix- x).

Each report gave a diff erent view of the managerial weight of the workers in the production process. Sankey's scheme put the minister of mines (responsible to Parliament) in supreme control, with the obligation to consult the National Mining Council on "all questions connected with the operation and management of industry." On the other hand, the miners' scheme understood the National Mining Council itself— the minister of mines being a member— as the supreme authority. In this scheme, half of the Mining Council was composed of members elected in Parliament (including technicians, experts, and managerial workers), and the other half was elected by the workers. Th e Council would engage in all activities of production, distribution, and export of coal (Miners Bill, reprinted in Arnot 1919, 37– 47).

Commissioners gave lengthy technical reports on the workings and economic benefi ts of nationalization: the unifi cation in production, in buying and selling, in transport, and in distribution would result in enormous economies and far greater effi ciency in the coal mines, securing "a cheap and adequate supply of coal" (Great Britain, Royal Commission on Coal Industry 1919b, vi). In his report, Sidney Webb summarizes the rationale behind the experts' view: "Nationalisation is called for (1) as the only means of adequately improving the position of the miners with regard to housing, accidents and special disease and infantile mortality; (2) as the only means of dealing economically and effi ciently with the nation's coal resources; and (3) as the only means of ensuring that the coal is supplied to the consumers with regularity and at the lowest cost" (Great Britain, Royal Commission on Coal Industry 1919b, 478). Th e potential merits of nationalization were considered even by orthodox economists such as A. C. Pigou. In his deposition to the commission in April 1919, Pigou stated that "under full nationalization there are possibilities of results better than any other plan can off er" (Great Britain, Royal Commission on Coal Industry 1919b, 417). Nationalization was thus understood as a guarantee of effi ciency and the common interest; it was going to benefi t the nation, not just the miners. As John R. Clynes, Labour MP, put it: "National ownership is advocated not for a trade, or a class, or a sectional benefi t. Gain for the community inspires the demand made for immediate changes in both the terms of service, and the conditions of ownership of this great property" (Hodges 1920, iv).

Th e Times, for example, published the reports in full. See "State Coal," Th e Times, June 23, 1919, 19– 20. 38 Th e connection between monetary austerity and unemployment was clear in the minds of Treasury offi cials such as Ralph Hawtrey, who on multiple occasions affi rmed that "it was true that unemployment was due to a contraction of the supply of the means of payment."

Gramsci envisaged the factory council as a fi rst nucleus of a classless society: "Th e factory council must be formed according to the principle of organization by industry; it must represent for the working class the model of communist society, at which it will arrive through the dictatorship of the proletariat; in this society there will not exist divisions of class, all social relations will be governed according to the technical requirements of production and of the corresponding organization, and will not be subordinated to an organized state power" (Gramsci 1921).

Antonio Gramsci (1891– 1937) is to this day among the most infl uential thinkers of the twentieth century. Born in Sardinia, he studied philosophy at the University of Turin. He was an active and militant intellectual until his imprisonment in 1926 by the Fascist regime. He spent the rest of his life in prison, and died at the age of 46.

Gramsci recalls the incident: "Th e insurrection exploded on 23 August 1917. For fi ve days the workers fought in the streets of the city. Th e insurgents, armed with rifl es, grenades and machine guns, managed to occupy some quarters of the city and attempted three or four times to possess the city centre where the government institutions and military commands were located. . . . Th e people erected barricades, dug trenches, surrounded some districts with barbed wire and electric current and held back for fi ve days all the attacks of the troops and the police.

Prior to 1914 the elected shop stewards were few, had limited representative tasks and belonged mainly to skilled organizations. With the war a new type of steward, unoffi cial (no longer appointed by trade unions, but chosen by groups of workers in each establishment) and with considerably wider powers, took the leadership in every industrial dispute within the trade.

25 Gramsci 1920a, I, n. 12, 95. And again, in his Prison Notebooks he would remember the journal as follows: “Th is editorial board was not abstract, did not consist of repeating mechanically scientifi c or theoretical formulae . . . it applied to real men, formed in specifi c historical relations, with specifi c feelings, ways of life, fragments of conceptions of the world . . . this element of 'spontaneity' was not neglected nor despised: it was educated and directed” (Gramsci in Spriano 1971, 136).

23 Th is principle represented a big shift with respect to the war industrial committees: no longer were the commissars picked by unions, who— as the worker Arturo Jacchia remarked— “took care of picking the members of the committee from the workers who were agreeable to the administration.” Instead, “Today it is preferable that [the commissars] belong to socialist organizations” (Jacchia 1919, I, n. 9, 66).

28 Th e full "Second Th esis on Feuerbach" reads: "Th e question whether objective truth can be attributed to human thinking is not a question of theory but is a practical question. Man must prove the truth— i.e., the reality and power, the thissidedness of his thinking in practice. Th e dispute over the reality and nonreality of thinking that is isolated from practice is a purely scholastic question." See Marx and Engels ( 1969, vol. 1, 13– 15).

Workers were “realizing that the right to vote for parliament, once in fi ve years, is of little value compared with the right to vote on the way industry should be carried on” (Gallacher and Campbell 1972, 3).

According to Gramsci, the proletarian revolution would solve the pernicious “southern question,” as the industrial workers would break the chains of “capitalist slavery” and eliminate at once the colonization of the south of Italy by the northern bourgeoisie.

In Luigi Einaudi's words from 1933: “Th e situation would really have become revolutionary if the leaders of the socialist movement had exploited the revolt of the factory workers and moved to an assault on the regime” (Einaudi 1933, 332).

22 As we shall see in chapter 6, funding the fl oating debt acquired a further important political purpose in Britain: to eliminate the exceptional postwar situation whereby, due to the excessive circulation of government bonds, the Bank of England's monetary sovereignty was being challenged. Indeed, creditors could evade the credit restrictions of the Bank by not renew- ing their Treasury bonds at maturity.

19 Th e Genoa resolutions reaffi rmed that to achieve currency stability “the reduction of Government expenditure is the true remedy,” since “in order to gain eff ective control of its own currency, each Government must meet its annual expenditure without resorting to the creation of fi duciary money or bank credits for the purpose” (Report of the Second Commission [Finance], Resolution 7 and Resolution 11, in Gordon and Montpetit 1922, 68– 70).

16 In the words of Brand, vice president of the fi nancial committee in Brussels, “revenue should at least be suffi cient to meet all ordinary recurring expenditure, including interest and sinking fund on debt” (Brussels 1920, vol. 2, 19). Lord Chalmers went so far as to speak of a “universal” and “imperative” principle: individuals “must pay their way” (ibid., 25).

20 Th is diagnosis of infl ation runs counter to the Keynesian argument developed in the 1930s, by which infl ation is not caused by public defi cit spending per se, but rather emerges when the economy reaches full capacity and demand structurally outstrips supply. Th us, in the Keynesian argument defi cit spending does not provoke infl ation until full employment.

17 One of Th e General Th eory’s main points of contention against the mainstream framework was the rejection of the idea that investments = savings (the socalled Say’s law). For Keynesians, what capital accumulation needs is not more (potentially idle) savings, but rather an incentive for investors to invest— that is, high enough profi t expectations. High profi t expectations come with the expectation of selling more goods that can be guaranteed by high aggregate demand— especially more government spending.

21 Lloyd (1925). In its critical tone the article clearly specifi es the pitfalls of defl ation. Th e rise of the value of the pound necessarily involved: “1) a rising exchange which was bound to hit the export industries particularly hard; 2) falling prices, which were bound to hamper trade and industry in general; 3) a reduction of costs, which was bound to mean primarily a reduction of wages; and lastly, 4) general unemployment on a large scale, since this is the only known means by which wages can be forced down . . . and rentiers, as a class, have not had their money incomes reduced as abstract justice would have required” (1925, 414).

Pantaleoni specifi ed: “Governments have everywhere, but in a diff erent measure, taken into their management and away from private management, a very large series of services for which they are utterly unfi t, as ancient and recent experience has proved, viz.: (a) Th ey cannot manage railways; (b) Th ey cannot manage shipping; (c) Th ey cannot manage harbours; (d) Th ey cannot manage international commerce; (e) Th ey cannot manage the commerce in bills; (f) Th ey cannot regulate prices of commodities; and (g) they cannot conserve and distribute commodities aft er requisition” (Brussels 1920, vol. 5, 102).

Hawtrey did not endorse a pure gold standard; rather, he proposed a gold exchange standard that would allow central banks to hold a limited amount of reserves in goldrelated currencies as fully equivalent to gold, thus economizing on the use of gold and reducing the excess demand for it, which would further increase the necessity of defl ation.

For Hawtrey, the initiative of production rested on the orders of the “dealer” or trader, i.e., the intermediary between the producer and the consumer. Th e subsequent process of production gives rise to a chain of debts: “Th e manufacturer or contractor becomes indebted day by day to his employees. Th e merchant becomes indebted to the manufacturer” (Hawtrey 1919a, 376).

Th e innovation that explains why Keynes attached such an importance to government expenditure is his idea that, within free market capitalism, eff ective demand is usually defi cient with respect to the level needed to achieve full employment. Th is is because, most of the time, entrepreneurs do not have suffi ciently high expectations to actually invest.

“So we reach the conclusion that an acceleration or retardation of the creation of credit means an equal increase or decrease in people’s incomes” (Hawtrey 1919a, 40). And again: “Infl ation consists in the spread of the infection of high prices through production to the consumers’ income and thus to the consumers’ outlay” (ibid., 114).

Th e exemption limit was reduced from £160 to £130, which meant a threefold increase in taxpayers by 1918– 1919 as compared with fi ve years prior. By the summer of 1917 there was a fullblown movement in opposition to the reduction of the exemption limit, mainly led by miners and coal workers who oft en refused to pay income tax.

Th ese demands for economy persisted for years. A confi dential circular communication of 1923 "on the subject of economy" (also called "the economy letter" or "the Treasury circular on economy"), sent from the Treasury to all departments, including the board of Education, the Ministry of Labour, and the Ministry of Pensions asking for their expenditure and aggregate savings estimates, communicated that "every eff ort in economy will therefore be needed in order to balance the budget in 1924/25" (N. F. Warren Fisher, June 1, 1923, T 160/159).

"A large part of the debt is held by the banks and in connection with the monetary system of the country; here the interest will in general be placed at industry's dispose. Another large part is held by joint stock companies, and the interest is a direct payment to industry; the same is true of interest paid to those individuals who will invest it in private businesses of their own" (HMSO 1927, 99).

However, until that autumn the government's commitment to the “Land Fit for Heroes” prerogative remained intact. Treasury cavils were rejected on the grounds that the government could not aff ord to break its pledges on housing. Not until 1921, with the collapse of the postwar boom and the weakening of labor's power, were the political conditions ripe for the government to surrender to the Treasury's demands for economy. 53 In March 1921 the government transferred Christopher Addison from the Ministry of Health to the anomalous post of minister without portfolio. Aft er he resigned, Addison wrote a fi erce pamphlet, Th e Betrayal of the Slums (1922), to denounce the government's austerity moves.

According to this view, the crowding out occurs because savers invest in government bonds instead of other productive ventures and because in borrowing from the public the government competes for a limited pool of funds and thus increases the cost of borrowing money for other private investors.

Niemeyer had already expressed these thoughts clearly to the colonial secretary, Winston Churchill, in October 1921. Churchill had asked him to disclose the Treasury view concerning fi nancial conduct and employment, and his reply was concise but eff ective: “Th e best assistance which the State can give to unemployment . . . is 1) to reduce its expenditure 2) to repay its debts” (T 176/5, part 2, fol. 39). Th us, he continued, “It is obvious that certain minimum immediate assistance must be given to the unemployed to prevent starvation but for the ultimate solution of the unemployment problem it is essential that this assistance should be kept at the minimum” (ibid., fol. 38).

In his memorandum on “Unemployment,” Baldwin’s home secretary, Sir William Joynson- Hicks, made clear that the only way for the Conservative government to escape “vilifi cation” at the general elections for “its insuffi cient unemployment policies” was a “comprehensive” stimulus through large publicly funded loans to extend the productive power of the dominions and “road construction on a fairly large scale” (HMSO 1929, 294– 300) that could compete with the ambitious proposals of the Labour and Liberal parties.

Blackett warned the chancellor that any form of government expenditure would prevent wages and costs of living from going down. In his words, “So long as the British government is creating new credit to meet its expenditure or to replace maturing short debt, there is added diffi culty in getting prices and wages and the cost of living down to reasonable fi gures” (August 6, 1921, T 175/6 part 1, fol. 15).

Hawtrey fundamentally thought that in moments of economic downturn the creation of bank credit alone would be suffi cient to increase employment, and that public works would be “unnecessary.” He put it strongly: “Th e public works are merely a piece of ritual, convenient to people who want to be able to say that they are doing something, but otherwise irrelevant. To stimulate an expansion of credit is usually only too easy. To resort for the purpose to the construction of expensive public works is to burn down the house for the sake of the roast pig” (Hawtrey 1925b, 44).

Blackett displayed a sharp understanding of the political issues at stake: "Falling prices," he emphasized, "are disliked by all traders, and however much a worker as a consumer may dislike high prices, he dislikes still more reductions in wages and lack of employment" (T 176/5, part 2, fol. 50).

Another crucial aspect of the Trade Disputes and Trade Unions Act was the limits it placed on the political power of labor, striking at its party and unions. Th e Labour Party was robbed of much of its funding with the prohibition of "any contribution to the political fund of a trade union" unless a formal notice was sent out declaring the union members' "willingness to contribute to that fund." Instead of "contracting out," as stipulated by the 1913 Trade Union Act, union members now had to "contract in." As a result of this legislation, in just two years the Labour Party lost substantial fi nancial resources (a quarter of its total income from affi liation funds) and a third of its subscriptions (Cole 1948, 195).

Keynes's Note of Interview with Chancellor" (February 15, 1920, T 172/1384, in Howson 1973, 459). 73 Falling prices increased the value of fi nancial assets that were fi xed in nominal terms, notably the warswollen national debt, and thus increased the wealth of holders of these assets— mainly the betteroff members of the community and fi nancial institutions.

In March 1920 Blackett shared with the chancellor an article by Pigou that reiterated the common dogma: "Th e country is in tremendous need for new capital. . . . It is imperative, therefore, that people should save. Cheap money does not encourage them to do this. Dear money does" (A. C. Pigou, "Dear Money," Th e Times, March 1, 1920, 10; also in T172/1384, fol. 50).

High rates persisted throughout the decade, with the result that currency in circulation dropped impressively, falling by almost 21 percent from 1920 to 1929. One must consider that high bank rates in a time of falling prices were much higher in real terms, since they had a large deterrent eff ect on investment by creating expectations of falling prices and thus falling profi ts. Th is was the typical defl ationary spiral that haunted Britain for the decade.

A royal decree is synonymous with a presidential executive order— one that does not require a bill to be introduced in the parliament and subjected to scrutiny and debate. See "Legal Decree for the Delegation of Full Powers to Sir Majesty's Government for the Rearrangement of the Taxation System and of Public Administration," Law 1601, December 3, in GU 293 (December 15, 1922).

Michelini (2011a) convincingly argues that there was a continuity between Pantaleoni's anti- Semitic polemics and his anticollectivist and antisocialist polemics. Th us, the explanation of anti- Semitism and Fascism cannot be considered as an external component with respect to his theoretical economic analysis and especially his austere views.

Italian Bolshevism- an epithet that was the title of Pantaleoni's famous booklet published in 1922- was loosely used to denote any state intervention within the sphere of the market and any form of social redistribution. Einaudi agreed that "socialism of whatever type was inevitably synonymous with reckless and pleasureloving spirit, of a run towards immediate consumption, with demands of larger wages for less work" (Faucci 1986, 176).

Pantaleoni's elitist view is inseparable from his Social Darwinist perspective, by which in his lectures on political economy he teaches his students that the economic qualities are innate and cannot be compensated for with education or external factors. Inequality is explicitly a natural fact, and a very healthy one for society. As he bluntly put it: "the most complex of social organizations does not require any other condition than freedom of action and choice in order to proceed with increasing virtue for the selective elimination of the incapable" (Pantaleoni 1922, 197).

In 1924, the British embassy transmitted two copies of the publications issued by the Ministry of Finance called “Fascist Financial Policy” which stated: “the number of income tax payers has increased from 600,000 to 700,000. Th e entry on the roll of contributors of labourers hereto exempt from taxation . . . has increased the number by another 100,000 to which must be added a further 1,250,000 through the application of this tax to incomes derived from farming” (Ettore Rosboch, Rome 1924, FO 371/9936, fol. 35 [p. 11]).

Inheritance tax provided the state with revenue of 305 million in 1922– 1923. When De Stefani's law exempted 65 percent of inheritance from taxation, the revenue went down to 72 million by 1925– 1926 (La Francesca 1972, 10). With the new law, only transfers outside the family (defi ned as “ascendants, descendants, spouses, siblings, uncles/aunts, nephews/nieces”) were taxed (Gabbuti 2020a, 16). Pantaleoni prepared the study of inheritance tax for De Stefani that reached the following conclusion: “it is desirable to arrive by degrees to the abolishment of inheritance tax” [è perciò opportuno arrivare per gradi alla soppressione totale della imposta successoria] (see Ricci 1939, 94).

55 Social expenditure lagged at around the 1931 level (1.2 percent of nominal GDP) until 1936, when it jumped up to almost 2 percent. Th ese were the years of the Ethiopian war, when total public spending jumped to 37.9 percent in 1935 and 44.9 percent in 1936.

53 Rassegna della previdenza sociale vol. 6 (1923): 120. Th e ministry would be rehabilitated only aft er 1945. In the 1920s the Fascist regime even abolished the Superior council of labor, a symbol of liberal reformism that since the beginning of the century guaranteed participation of workers’ organizations in the activities of the State.

51 “In February 1923, the state raised the degree of disability that farm workers had to demonstrate in order to obtain compensation for workrelated injuries from 10 percent to 15 percent. Th ese measures had reversed the extension of Giolitti in 1921. Th e right to indemnity shrank to include workers age 12 to 65 instead of 9 to 75 as provided by the Gilittian reforms. Th e reform also made mezzadri and tenant farmers responsible for paying a portion of the contributions that up to then had been entirely covered by their employers. By 1925, the Cassa Nazionale Infortuni reported that their contributions fell by 43 percent” (Pavan 2019, 866).

52 By the end of 1923, the state’s yearly contribution to unemployment insurance was suspended (Royal Decree 3184, December 30, 1923, in GU 40 [February 16, 1924]). Most importantly, its mandatory nature— the true achievement of the many popular movements just a few years prior— was trashed. Moreover, farm workers, domestic staff , and home workers were exempt from insurance obligations. Pavan comments: “Th e most innovative feature of the Italian laws, which were the fi rst in the world to envision unemployment insurance even for farm workers, was erased” (Pavan 2019, 867).

50 Brosio and Marchese (1986) provide data even more stark than those in Ragioneria Generale dello Stato (RGS, 2011). Th ey show that redistributive expenditures dropped more than three times from 1922 to 1924 (from 6,664 million lire to 1,911 million lire). If aft er World War I redistributive expenditures had quickly increased to reach 26 percent of total public spending in 1921, they were cut back to 11 percent by 1923 (elaborations from the data in Brosio and Marchese 1986, tables 1A and 4A).

As Ricci put it, "it must be those men capable of producing and interested in producing are not chased away [scacciati] and tormented by government" (Ricci 1920a, 8).

Among many other economists, Giorgio Mortara was of the same opinion: "performance has diminished due to the spirit of indiscipline and negligence that looms over the railway workers" [ma ancora più il rendimento è diminuito per lo spirito di indisciplina e di negligenza che aleggia fra gli agenti ferroviari] (Mortara 1922, 298).

Th e Bedaux system consisted of a wage incentive scheme "based upon the scientifi c measurement of human labor" (ibid., 324) that could track eff ort expended by the worker and could rank their effi ciency, speed up production, and eliminate idle time.

Th e historian Jon S. Cohen concludes his classic article on the battle of the lira with the following remarks: "When the [Fascist] government became directly involved in the private sector in the 1920s and 1930s, the motivation was to protect and support private interests, not to usurp their control. Th ere was no confl ict of interest between Italian fascism and Italian capitalism" (Cohen 1972, 654).

Following the British procedure, the Fascist regime introduced a sinking fund in August 1927 (FO 371/12947, fol. 162). Th is permitted consolidation of the fl oating debt whereby the fi veand sevenyear Treasury bonds were converted into the longerterm "littorio loans" (on November 6, 1926, "conversione forzosa"). Th e littorio loans represented a popular "eff ort" [sforzo] that attracted the small savers for the national "economic battle" [battaglia economica] (Volpi, in Cotula and Spaventa 1993, 588).

Real annual wages reached their historical minimum in 1936 due to the infl ationary wave sparked by the war against Ethiopia and the international sanctions that followed. In 1936 real wages dropped by almost 20 percent from 1921 levels— decreasing from 17.34 lire in 1921 to 13.98 lire in 1936 (daily real wages at lira 1938; Zamagni 1975, Table 1 and 3).

Favero (2010) stresses that the decision of the Fascist state to fi x a 20 percent generalized reduction in the country's nominal wages was based on a calculation of the consumer price index (CPI) by ISTAT (Italian National Institute of Statistics) that was manipulated downward.

It is worth noting that monetary austerity in Britain could aff ect the amount of the Italian loan. On June 16, 1920, the Italian chargé d'aff aires, Gabriele Preziosi, wrote in a preoccupied tone to Chancellor Neville Chamberlain: "When the agreement of 8th of August 1919 was negotiated the bank rate had kept steady for a long time at 5 percent. Aft erwards it rose to 6 percent and recently to 7 percent, causing a considerably larger increase of the debt of the Italian Treasury" (T 160/10/12, fol. 3). Th e British government consented to fi x a uniform rate at 5 percent interest for all renewals of Italian bills.

Political pressures that opposed welfare cuts were especially troubling: "the head of an English bank had told me," Capel- Cure reported, "the adverse point which made a special impression on fi nancial circles in the city of London was that the Italian government had been forced to yield to the clamour of the socialists in their attempt to take off the subsidy now given on bread" (April 12, 1920, T 1/12551/4).

Italy of an enormous political upheaval unless they are allowed in some way to obtain the essential imports for their industries in order that their people may continue in employment. Th e cost of living there has reached such limits that the people are extremely restive and any lack of employment would probably result in revolution and bolshevism. Th is country has already lent Italy about 400 million sterling and it would seem almost a necessity for us to give them the further assistance they now require for a period of two years, in order to protect the amount we have already at stake. I am aware that in the city of London at the present time there are certain prominent people who are of opinion that England cannot aff ord now to give long credits to other countries but the danger of unrest among peoples is very great and any trouble in Italy might quickly spread.

And in 1924 Th e Times praised Fascism as a solution to the ambitions of the "Bolshevist peasantry" in "Novara, Montara, and Alessandria" and "the brutal stupidity of these folk." Th e article continued, "For two years and a half, agricultural strikes, so virulent that the crops were left to perish in the ground, were the order of the day. Th e petty leaders of the Communists, more stupid even than their followers, desired to make here the fi rst experiments in socalled collective management" ("Th e Dissident Fascisti," Th e Times, June 17, 1924, 15).

In November 1922 the Economist had noted that "Apparently the object of Signor Mussolini is to form a Government of the best men of his own choice, not at the dictation of the groups from which they come, and one of the fi rst planks in his programme is drastic cutting down of public expenditure. . . . Th e attempt to perform it will be watched with sympathy by observers of whatever nationality, who realise the crying need for sane fi nance in Europe" ("Th e Fascisti in Power," Economist, November 4, 1922, 840ff .)

Th e chairman of the bank, Beaumont Pease, reported that "Nothing but a return to loft y ideals, to the highest conception of State authority, to stern civic discipline and selfsacrifi ce, to strenuous work and thrift , could save the nation from complete moral and economic disruption" ("Th e British Italian Banking Corporation, Limited," Economist, March 22, 1924, 640ff .)

In August 1928 Graham wrote to Chamberlain and spoke of a tradeoff between liberty and order in which the second prevailed: "Th ere is the question of liberty, which exercises so many minds. Th ere is no doubt that the restraints are actually or potentially harsh, and are oft en unfair. But there are very many Italians who ask themselves if they were better off , spiritually, in the days when Giolitti held sway, or when Nitti failed to govern, when strike succeeded strike and violence followed violence, when Italy's claims were impatiently regarded by other Powers, and her international position politely, or impolitely, questioned" (FO 371/13679, fol.

Th e electoral violence was largely downplayed ("there were relatively few serious cases of violence and bloodshed," April 18, 1924, ibid., fol. 61) and once more understood as a typical trait in Italian aff airs: "Th at the sweeping Fascista victory was due in some degree to improper measures of coercion is no doubt the case, but it must be born in mind that violence and corruption have always been widely prevalent in Italian elections, particularly in the south" (April 11, 1924, FO 371/9938, fol. 51). Ultimately what mattered was that Mussolini represented political stability. He commented that, if the English electoral system (i.e., a majoritarian voting system) were adopted, "practically the whole chamber would be Fascista" (ibid.).

Starting in 1925, the British embassy widely reported on the subordination of labor to the Fascist state (October 9, 1925, FO 371/9936, fol. 257) through the outlawing of strikes, lockouts, and unions— except for the Fascist Syndicate— which were reduced to a “state of complete impotence, so far as negotiations with the employers are concerned” (December 1, 1925, FO 371/9936, fol. 259). Fascist syndicalism, Graham specifi ed, “was a factor for collaboration in production” (December 21, 1925, FO 371/9936, fol. 276).

As we know from chapter 6, in Britain monetary austerity hit starting in the spring of 1920, producing a slump that was followed by a decade of "doldrums." In Pigou's words: "Th e Doldrums was a period of relative stability and quasiequilibrium. But the equilibrium was not a healthy one, because it was characterised throughout by a very large amount of involuntary idleness" (Pigou 1947, 42).

Th e renewed favorable environment for investment is visible in the remarkable growth of share prices. In Britain these prices increased by 63 percent from 1923 to 1928. In Italy the index of stock and dividend yield too made an astounding recovery aft er a bad setback during the red biennium. Indeed, as we know from chapter 7, privatization, tax breaks, and bank rescues provided "excellent profi t opportunities for fi nancial intermediaries" (Toniolo 1995, 300- 302). It guaranteed a total yield of stocks and dividends that almost tripled over the course of the decade. From 1923 to the end of the decade, the new publicly traded companies increased their value by almost 40 percent. Th is rise indicates how austerity created favorable conditions for the Italian fi nancial world (see Siciliano 2001, fi gure 1.

Even if the class implications of austerity are embodied in the profi t rate itself, regardless of the secondary question of how much of the profi t rate the capitalists wind up investing, it is interesting to note that in our case high profi t rates favored greater capital accumulation, evidenced by the impressive growth of industrial production starting in 1921. In both countries, industrial production almost doubled over the decade (Mitchell 1998, 422). Capital stock also grew substantially. In Italy it rose by 18 percent between 1922 and 1929. Th is is an impressive spike given that the British capital stock increased only 4.8 percent during the same time.

In Britain, the series reached a new minimum in 1938 (73 percent), while in Italy the wage share saw its lowest level in 1942– 1944 (41 percent). 2 Th is working measure of exploitation does not consider “unproductive labor,” i.e., all the work of domestic servants and the like which in those years was a signifi cant part of the labor force in both countries. In principle the wages of unproductive labor ought to be added into the measure of surplus value; thus our working measure understates the rate of exploitation. In Britain, the rate of exploitation increased from 0.29 in 1921 to 0.36 in 1929. In Italy, in 1918 the rate of exploitation was 0.82 and in 1928 it was 1.25.

Contrary to what the Fascist propaganda declared, "assistance funding was even cut by 4.5 million between 1929- 1930 and 1930- 1931" (Melis 2018, 468), resulting in a contraction of poverty relief (Preti and Venturoli 2000, 744).

Indeed, the austere experts displayed a constant anxiety for the potential disruption of the orderly basis of capital accumulation. To them, “debtfi nanced increases of public employment, wages of public sector employees, unemployment benefi ts and labor taxes put pressure on unions’ wage claims, leading to higher private sector wages, lower employment, capital and output” (Alesina and Ardagna 2013).

As Alesina astutely summarized: “What keeps an economy from slumping when government spending, a major component of aggregate demand, goes down? . . . Th e answer: private investment. Our research found that privatesector capital accumulation rose aft er the spendingcut defi cit reductions, with fi rms investing more in productive activities— for example, buying machinery and opening new plants. . . . Aft er the taxhike defi cit reductions, capital accumulation dropped” (Alesina 2012). Furthermore, Alesina and Perotti (1995) claim that “the main theoretical reasons which suggest that fi scal adjustments may not be contradictory is the ‘crowding in’ argument: a reduction in the government borrowing requirement, by reducing interest rates, may ‘crowd in’ private investments” (1995, 21).

36 Milanovic (1998, 68, table 5.1, for household budget surveys [HBS]). Klein (2008, 237- 38) gives a good picture of the decline in the living conditions of Russians in those years, which were refl ected in higher addiction, suicide, and homicide rates.

"Art 21.1 forbids the ECB to open [new] lines of credit to community or national public institutions, not even on a temporary basis. Th e same article bans the ECB from participating on the primary market for national government bonds" (Alesina and Grilli 1991, 14- 15).

35 In Russia unemployment was 5 percent in 1991 and 13 percent in 1998 (see https:// www .macrotrends .net/ countries/ RUS/ russia/ unemployment - rate). Real wages declined 40 to 60 percent between 1987 and 1996, catalyzing a major reduction of wage shares, which dropped from 41 percent of GDP in 1987– 88 to 26 percent in 1993– 94 (see Milanovic 1998, 29).

30 Functional Distribution of Income (Percent), Table 2, base 1977 in Agacino and Madrigal (2003, 47). Here the rate of exploitation is calculated as net profi ts/wages. Th e authors show that the trend continues, even if at lower rates, aft er the fall of Pinochet. Th e change in regime does not mean a change in the underlying austerity agenda. For a brief discussion on how successive governments in Chile preserved Pinochet’s economic and institutional model, and on the current struggles to gain back citizens’ role, see Vergara (2021).