The 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.
The coercion of workers was clear in the motto of austerity that was formulated at two pivotal international financial conferences, in Brussels (1920) and in Genoa (1922): “work more, consume less.” The capitalist states and their economic experts secured capital accumulation through policies that imposed the “proper” (i.e., class-appropriate) behavior on the majority of their citizens. The three forms of austerity policies—fiscal, monetary, and industrial—worked in unison to disarm the working classes and exert downward pressure on wages.
The operation of this austerity trinity and its material unfolding as a strategy for economic coercion is illustrated in the italicized text below. This illustration stresses the mechanisms through which fiscal, monetary, and industrial austerity mutually reinforce one another, revealing the overall mechanics of coercion under austerity.
The circular blueprint we have just detailed makes an important point in the story and history of austerity. Upon closer inspection, governments’ austere fixations on balancing budgets and curbing inflation serve the main goal of making sure capital (as a social relation) is indisputable, and that its pillars of wage relations and private property remain strong. For example, the main achievement of fiscal and monetary austerity was identical to that of industrial austerity: the subjugation of the working class to the impersonal laws of the market. Indeed, all three forms of austerity served to recreate the divide between economics and politics that war collectivism had temporarily suspended. Once the state stepped down as an economic actor (and as an employer), wage relations would again be subjected to impersonal market pressures. Austerity ensured and facilitated this retreat to the norm.
Here emerges a core argument of my new book, The Capital Order: How Economists Invented Austerity and Paved the Way to Fascism: the main objective of austerity was the depoliticization of the economic—or, the reinstallation of a divide between politics and the economy—after the wartime political landscape had dissolved it. In practice, the reinstallation of this divide took three forms.
Depoliticization refers to the state’s backing off of economic pursuits, which in turn allowed for (1) relations of production (owners versus labor) to revert to the command of impersonal market forces—while also suffocating any political contestation of such wage relations, or of private property. There was more to depoliticization, however. The book shows that depoliticization also meant (2) exempting economic decisions from democratic scrutiny, especially by establishing and protecting “independent” economic institutions; and (3) promoting a concept of economic theory as “objective” and “neutral” and thereby transcending class relations—the sort of omniscience that was the foundation for one of austerity’s ends: building consensus.