How Economists Invented Austerity and Paved the Way to Fascism (with Clara Mattei)

Episode Summary

Executive Summary: The episode introduces Clara Mattei’s book on austerity, arguing that austerity is not just budget cutting but a broader political strategy that shifts wealth and power from workers to savers, investors, and elites. Mattei links fiscal, monetary, and industrial policies to precarity, weakened labor power, and rising fascist tendencies through historical examples from Britain and Italy.

Main Topics: Defining austerity broadly (Priority: 5/5): Mattei argues austerity should be understood as a governing strategy that makes workers more precarious and dependent on markets, not merely as budget cuts. Fiscal austerity and spending priorities (Priority: 5/5): She distinguishes between cuts to social goods like housing, healthcare, education, and transport versus state spending that subsidizes industry, war, and finance. Taxation as a transfer upward (Priority: 4/5): Austerity includes regressive taxation: raising taxes on ordinary people while cutting taxes on capital, inheritance, and wealth. Monetary austerity and interest rates (Priority: 5/5): Interest-rate hikes are framed as a labor-disciplining tool that raises borrowing costs, slows hiring, increases unemployment, and weakens worker bargaining power. Industrial austerity and labor suppression (Priority: 4/5): The state can directly curb labor power through privatization, deregulation, wage suppression, and the firing of public employees. Historical analysis of Britain and Italy (Priority: 4/5): Mattei uses historical case studies to show how austerity evolved alongside economic theory and political authoritarianism, culminating in fascist outcomes.

Key Arguments: Austerity is fundamentally about shifting resources away from working people and toward savers, investors, and elites. The real issue is not whether the state spends, but where it spends: social services versus subsidies, war, and finance. Regressive tax policy is part of austerity because it burdens ordinary people while protecting accumulated wealth. Raising interest rates is not neutral; it is a way to slow the economy, raise unemployment, and weaken labor’s bargaining power. Privatization and deregulation are industrial austerity tools that increase precarity and reduce worker power. Austerity limits not only material well-being but also society’s ability to imagine alternative economic arrangements.

Data Points: Number of languages translating the book: over 12 - Mattei says the book is being translated internationally. Award recognition: prize of the American Historical Association - Mattei cites this as evidence of the book’s scholarly reception. Book-of-the-year recognition: one of the books of the year - The Financial Times included the book in its year-end selections. Time zone difference: 8 hours ahead - Nick explains why he has been waking up early for podcasts while in London. Podcast recording time: 8.30 in the morning - David jokes about being forced to wake early for work.

Pivotal Quotes: "austerity really shapes our lives, fundamentally and daily" — Clara Matei: Her definition of austerity as a broad governing logic affecting everyday life. "the tool the governments use to manage the economy, and especially to shift resources away from working people in favor of savers investors" — Clara Matei: Her core explanation of what austerity does economically and politically. "what you call austerity, we in many ways call trickle-down economics" — Nick Hanauer: Nick connects Mattei’s framework to the show’s broader critique of supply-side policy.

Implications: Listeners are urged to see austerity as a deliberate power strategy, not a neutral economic necessity. The episode suggests current debates over interest rates, taxes, spending, and privatization directly shape inequality, labor power, and democratic possibility.