How liberals learned to love Mussolini

How liberals learned to love Mussolini
Benito Mussolini paved the way for modern austerity policies and suppressed the labor movement. Liberal economists at home and abroad admired him for this.

By Clara Mattei
Translation by Astrid Zimmermann
[This article posted on 3/6/2023 is translated from the German on the Internet, https://www.jacobin.de/artikel/wie-liberale-lernten-mussolini-zu-lieben-faschismus-austeritaet-sparpolitik-lohnabbau-clara-mattei.]

When we talk about concepts such as “totalitarianism” and “corporatism,” it is often assumed that fascism is far removed from the liberal market society that preceded it and in which we live today. However, if we take a closer look at the economic policies of Italian fascism, especially in the 1920s, we find that some of the connections that are typical of both the past and present centuries were already in place in the early years of Benito Mussolini's rule.

One example of this is the link between austerity and technocracy. By “technocracy,” I mean that certain policy measures that are very common today (such as cuts in social spending, regressive taxation, monetary deflation, privatization, and wage suppression) are decided upon by economic experts who advise governments or even govern directly themselves. In Italy, this has been observed in several recent cases.

As I argue in my book The Capital Order: How Economists Invented Austerity and Paved the Way to Fascism, Mussolini was one of the most influential pioneers of austerity in its modern form. This was largely because he surrounded himself with influential economists of his time who espoused the emerging paradigm of “pure economics,” which still forms the basis of neoclassical economics today.

A little over a month after the Italian fascists' March on Rome in October 1922, parliamentary votes by the National Fascist Party, the Liberal Party, and the People's Party (a Catholic party and precursor to Christian democracy, also known as Popolari) ushered in a “period of full power.” In doing so, they conferred unprecedented powers on Mussolini's finance minister, the economist Alberto de Stefani, and his staff and technical advisors, notably Maffeo Pantaleoni and Umberto Ricci (who, unlike the first two, was a liberal).

Mussolini offered these economic experts the opportunity of a lifetime: they were to shape society according to their ideal models. The pages of The Economist enthusiastically welcomed the authoritarian turn taken by Luigi Einaudi, who was celebrated as a champion of liberal anti-fascism and became the first president of Italy's postwar democratic republic in 1948. “Never before has a parliament vested the executive with such absolute power ... The public welcomed the parliament's relinquishment of all its powers for such a long period with general jubilation. The Italian people had had enough of talkers and a weak executive,” he wrote on December 2, 1922. On October 28, the eve of the March on Rome, he had proclaimed: “Italy needs a man at the helm who is capable of saying no to all demands for new spending.”

The hopes of Einaudi and his colleagues were to be fulfilled. Mussolini's regime implemented far-reaching reforms that promoted fiscal, monetary, and industrial austerity. Taken together, these reforms had an effect that demanded hard work and sacrifice from the working classes and ensured the restoration of the capitalist order. This order had been largely challenged in the preceding Biennio rosso (two red years) by numerous popular uprisings and sophisticated experiments in post-capitalist economic organization.

Among the reforms that successfully silenced any aspirations for social change were drastic cuts in social spending, the dismissal of civil servants (over 65,000 in 1923 alone), and increases in consumption taxes (at that time, the value-added tax, which was regressive because it was mainly paid by the poor). In addition, the progressive inheritance tax was abolished, accompanied by an increase in interest rates (from 3 to 7 percent from 1925), and a wave of privatization was launched, which scholars such as economist Germà Bel described as the first large-scale privatization of a capitalist economy.

Furthermore, the fascist state introduced forced labor into legislation, which caused wages to plummet and led to a ban on trade unions. With the introduction of the Workers' Charter of 1927, which blocked all class conflicts, the final defeat of the workers' aspirations was sealed. This charter enshrined the spirit of corporatism. Its goal, as Mussolini himself emphasized, was to protect private property and “reunite the harmful dualism of capital and labor within the sovereign state.” These were “no longer necessarily to be regarded as opposites, but as elements that could and should aim at a common goal, namely the supreme interest of production.”

Finance Minister de Stefani hailed the charter as an “institutional revolution.” The liberal economist Einaudi justified the “corporatist” setting of wages by claiming that there was no other way to mimic the optimal results of market competition according to the neoclassical model. The hypocrisy is obvious: the same economists who so vehemently defended the free market against the state had no problem with repressive state intervention in the labor market. Throughout the interwar period, real wages in Italy fell continuously—a unique trend among industrialized countries.

International enthusiasm
At the same time, increasing exploitation led to growing profit rates. The London Times commented on the success of fascist austerity policies as follows: “Developments over the past two years have led to capital skimming off a larger share of profits. This unleashing of entrepreneurship has certainly also been beneficial for the country as a whole.” This typical narrative is still used today to propagate the austerity doctrine and make it acceptable: The broad population's approval of austerity measures is based on rhetoric about the common good.
In short, at a time when most Italian citizens were demanding tangible social change, the rapid rise of austerity depended on fascism—it needed strong political leadership that could rule from above and enforce its nationalist will with impunity. Fascism, in turn, needed austerity to consolidate its rule. And indeed, austerity was crucial to the international and domestic liberal establishment's support for Mussolini's government even after the introduction of the Leggi fascistissime [literally: the most fascist laws] of 1925–26, which installed Mussolini as the country's official dictator.

The Economist, which on November 4, 1922, for example, expressed open sympathy for Mussolini's goal of enforcing a “drastic reduction in public spending” in the name of the “pressing need for sound financial policy in Europe,” rejoiced in March 1924: “Signor Mussolini has restored order and eliminated the central disruptive factors.” In particular, “wages reached their upper limit and strikes multiplied.” This was precisely what was perceived as a disruptive factor, and “no government was strong enough to take action against it.” The Times, which described fascism as an “anti-waste” government, praised it in June 1914 as an antidote to the ambitions of a “Bolshevik peasantry” in “Novara, Montara, and Alessandria” and “the brutal stupidity of these people,” who were seduced by “experiments in so-called collective administration.”

The British Embassy and the international liberal press continued to cheer Mussolini's triumphs. The Duce had succeeded in uniting political and economic order—the epitome of austerity. At the end of 1923, the British ambassador to Italy assured his compatriots that “foreign capital has abandoned the not unjustified restraint of recent years and is returning to Italy with renewed confidence,” as archive documents show. The diplomat repeatedly contrasted the ineptitude of Italy's post-World War I parliamentary democracy—which was considered unstable and corrupt—with Minister de Stefani's efficient economic management:

"Eighteen months ago, any trained observer of the national situation would have concluded that Italy was a country in decline ... Now it is generally recognized that the tide has turned ... public finances have stabilized in a remarkable way ... the number of strikers [has] fallen by 90 percent and the number of lost working days by over 97 percent. National savings have increased by 4,000 [million lire] compared to the previous year; for the first time, they even exceed the pre-war level by almost 2,000 million lire."

Nevertheless, the message was clear: in view of the successes of austerity, any concerns about the political abuses of fascism evaporated. After expressing his distrust of a fascist state in which “everything that stands in the way of otherness” had already been ‘eliminated’ and “all opposition had disappeared,” Montagu Norman, Governor of the Bank of England and leading advocate of liberalism, added: “This state of affairs is appropriate to the situation and can currently offer Italy the most suitable form of government.”

In a similar vein, Winston Churchill, then head of the British Treasury, declared: “Different nations do the same things in different ways [. . . ] If I had been Italian, I would certainly have been at your side from beginning to end in your victorious struggle against ... Leninism.”
In comments made both privately and publicly, both Norman and Churchill pointed out that illiberal solutions that were unthinkable in their own countries might be just right for a “different,” less democratic people such as the Italians—this duplicitous argument may sound familiar to today's readers.

Even when liberal observers expressed their concerns, it was less out of concern for democracy and more out of concern for what might happen once Mussolini was no longer leading the country. In June 1928, Einaudi stated in The Economist that he was concerned about a gap in political representation, but above all he feared a collapse of the capitalist order. He referred to “very serious questions” that preoccupied the British:

International politics was so impressed by Mussolini's austerity measures that it rewarded the regime with financial resources to further consolidate the country's political and economic leadership. Particularly noteworthy in this context were the settlement of war debts and the stabilization of the lira, as Gian Giacomo Migone explained in his classic work The United States and Fascist Italy.

The ideological and material support that the Italian and international liberal establishment gave to the Mussolini regime was not a special case. The mixture of authoritarianism, economic expertise, and austerity introduced by early liberista—i.e., economically liberal—fascism found many imitators: starting with the Chicago Boys, who were appointed under the dictatorship of Augusto Pinochet, to the Berkeley Boys, who supported Suharto's dictatorship in Indonesia (1967–1998), to the dramatic developments that followed the dissolution of the USSR and have recently come back into focus.

In the case of the former Soviet Union, Boris Yeltsin's government declared war on Russian lawmakers. The latter had opposed the IMF-backed austerity policy that Yeltsin was pursuing to stabilize the Russian economy. Yeltsin's attack on democracy reached its peak in October 1993, when the president deployed tanks, helicopters, and 5,000 soldiers to fire on the Russian parliament. Five hundred people lost their lives and many more were injured. Once the dust had settled, Russia was under dictatorial control. Yeltsin dissolved the “rebellious” parliament, suspended the constitution, banned newspapers, and threw his opponents in jail.

Similar to Mussolini's dictatorship in the 1920s, The Economist also justified Yeltsin's authoritarian actions without scruples as the only way to secure the order of capital. The famous economist Larry Summers, who served as Treasury Secretary during Bill Clinton's presidency, was firmly convinced that in Russia “the three ‘-izations’—privatization, stabilization, and liberalization—must be completed as quickly as possible. Maintaining the momentum of reform is a crucial political challenge.”

Even today, these same liberal economists make no concessions to their own compatriots. When it comes to tightening monetary policy in the US, Larry Summers is at the forefront. To counter inflation, he prescribes a dose of unemployment. Mainstream economists always end up with the same solution in mind. Workers should shoulder the bulk of the hardship in tough times—in the form of wage cuts, longer working hours, and social spending cuts.

Clara Mattei is a professor of economics and director of the Center for Heterodox Economics (CHE) at the University of Tulsa. Her book The Order of Capital: How Economists Invented Austerity and Paved the Way for Fascism was published by Brumaire Verlag in 2025.