When we think of the rise of Fascism in Italy, we often picture blackshirts, street brawls, and the March on Rome. We think of violence. But there was another, quieter form of violence that was just as instrumental in cementing Mussolini’s power: austerity.

In this week’s podcast, I explored a fascinating paper by economist Clara Mattei, Austerity and Repressive Politics. Mattei argues that the early years of the Fascist regime (1922-1925) were defined by a brutal economic agenda designed to roll back the democratic gains of the post-WWI era.

The Fear of Democracy

After the First World War, Italy experienced a “democratizing moment.” The state, which had taken control of the economy to fight the war, introduced an 8-hour workday, unemployment insurance, and progressive taxation. This was the era of the Biennio Rosso (the Two Red Years), where workers occupied factories and peasants seized land.

To the Italian elite—the landowners, the industrialists, and the liberal establishment—this looked like the end of the world. They looked at the Russian Revolution and feared they were next. They needed a way to put the genie back in the bottle, to discipline a workforce that had realized its own power.

Enter Fascism

Mussolini offered a solution. While his street thugs broke the strikes with clubs, his finance minister, Alberto De Stefani, broke them with policy.

De Stefani’s motto was “Nothing for Nothing.” Under the guise of “balancing the budget,” he unleashed a wave of austerity that targeted the poor to benefit the rich.

• Public Sector Purges: 65,000 public employees were fired.
• Regressive Taxation: Taxes on luxury goods were cut, while taxes on basic consumption were raised.
• Veteran Betrayal: Funding for war pensions and invalid subsidies was slashed from 20 billion to 3 billion lire.

One of the most telling examples discussed in the episode is the railway reforms. The Fascist government fired 27,000 railway workers and hiked ticket prices. But they didn’t hike them equally. Third-class tickets (used by the poor) went up by 15%, while first-class tickets remained unchanged. It was a perfect metaphor for the regime: a transfer of pain from the wealthy to the working class.

The Liberal Complicity

What makes this history so uncomfortable is the role of the liberal establishment. Leading economists like Luigi Einaudi, who would later become the first President of the post-war Italian Republic, supported these measures. They viewed Fascism as a necessary, if unpleasant, corrective to the “excesses” of democracy.

They believed that by imposing hardship, they could force workers to accept lower wages and restore the profitability of private capital. In doing so, they normalized a regime that would eventually destroy liberty altogether.

A Warning from History

This isn’t just ancient history. The logic of austerity—that the state must shrink, that workers must be “flexible,” and that the market must rule supreme—remains with us. The Italian case shows us that austerity is not a neutral economic necessity; it is a political weapon. It is a tool used to reorder society, often at the expense of the most vulnerable.

In the 1920s, the Italian bourgeoisie thought they could use Fascism to protect their wealth. They learned too late that the monster they fed would eventually consume them too.

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Transcript

Nick: Hi there and welcome again to the Explaining History podcast.

Tomorrow I’m going to do the final part of our year in review, looking at Trump and India. But today, I’m going in a slightly different direction. I want to explore a brilliant essay by academic Clara Mattei titled Austerity and Repressive Politics: Italian Economists and the Early Years of the Fascist Government (2015).

This paper considers the early phase of Fascist Italy (1922-1925), often termed “liberal,” as a case study to explain austerity not just as an economic policy, but as a form of repressive political rationality. Mattei argues that austerity was the guiding principle of the Fascist economic agenda, serving to extinguish the democratization process that followed World War I.

Part of the problem with our thinking about austerity is that it has been framed by neoliberals as a tool for freedom—getting the “big ugly state” out of the way to unleash entrepreneurship. But the Italian case shows a structural connection between austerity and social repression. Fascists didn’t pretend they were about personal freedom.

Mattei focuses on four economists—two Fascists (Alberto De Stefani and Maffeo Pantaleoni) and two Liberals (Luigi Einaudi and Umberto Ricci)—who acted as the guardians and enforcers of this policy.

To understand why this happened, we have to look at the context. World War I initiated a strong democratization process in Italy. The state took an active role in protecting labor, introducing unemployment subsidies, mandatory insurance, and the 8-hour workday. Real wages rose by 50% between 1919 and 1920.

This social redistribution came at the expense of private capital. Progressive taxes were introduced on wealth and inheritance, and war profits were seized. This terrified the Italian bourgeoisie. They looked at the Russian Revolution and the unrest in Germany and Hungary, and they feared the militancy of their own workers during the Biennio Rosso (Two Red Years).

Private capital needed a “strong man” to put the workers back in their box. Mussolini was that man. The establishment accepted the violent nature of Fascism in the name of economic stabilization.

When Mussolini took power, his first speech in parliament declared that the financial problem was crucial and the budget had to be balanced. His directives were “thrift, labor, and discipline.” This resonated with moderate and liberal opinion, which believed the workers had “had it too good.”

In December 1922, Mussolini was granted full powers to reform the tax system and public administration. De Stefani, the Finance Minister, implemented drastic measures under the motto “Nothing for Nothing.”

The policy was simple:

1. Regressive Taxation: The burden shifted to lower-income households. Taxes on basic commodities grew, while the wealthy received tax relief.
2. Spending Cuts: Public spending fell from 27.6% to 16.5% of GDP.
3. Layoffs: The bureaucracy was purged in the name of efficiency. More than 65,000 public employees were fired.

Crucially, subsidies for war veterans were slashed from 20.3 billion to 3.1 billion lire—flinging veterans into poverty.

The railway reforms are particularly telling. The administration fired 27,000 workers and raised ticket prices. But they raised third-class fares by 15% and second-class by 6%, while leaving first-class fares unchanged. This perfectly encapsulates the nature of the regime: it was there to protect private capital and the wealthy at the expense of the majority.

Fascism in Italy was a tool used by private wealth to protect itself from the threat of socialism. Fascist austerity was the economic weapon used alongside the physical violence of the Blackshirts to break the power of the working class.

I’ll leave you there. I hope to be back tomorrow with the Trump/India episode. Have a great New Year’s Eve, and look out for our study day announcements on January 1st!

Take care