State Power Upholds Capitalism by Obscuring Its True Nature

The conventional wisdom of economics often obscures the true nature of capitalist systems, leading to policies that benefit elites at the expense of the majority. This conversation with Professor Clara Mattei reveals how mainstream economic narratives, by taking capitalist structures for granted, actively suppress the possibility of alternative systems. The hidden consequences of this intellectual framework are policies like austerity, which exacerbate inequality and discipline the working class, rather than solving systemic problems. Those who understand this dynamic gain a critical advantage, enabling them to identify and advocate for genuinely emancipatory economic structures. This analysis is crucial for anyone seeking to move beyond the limitations of current economic thinking and build a more equitable future.

The Illusion of Spontaneity: How State Power Upholds Capitalism

The prevailing economic discourse often presents capitalism as a natural, spontaneous order, a system that simply is. This framing, however, masks the fundamental role of state intervention in creating and maintaining its core pillars: private command over investment and the perpetuation of wage labor. Professor Clara Mattei argues that this is not an emergent property of free markets, but a deliberately constructed political order. The state actively "encases and de-risks" private investment while simultaneously ensuring the continued necessity of wage labor through economic coercion. This coercion, often disguised as freedom, stems from the removal of basic necessities, forcing individuals to sell their labor power for less than the value they produce.

"The idea is that actually the market would not exist without this forceful state intervention to protect the two pillars of our capitalist system: private command over investment on one end, so keep encasing and de-risking and incentivizing private investors, while maintaining intact the other pillar, which is wage labor."

-- Clara Mattei

This dynamic is not an anomaly but a core requirement of capitalism, as exemplified by actions like cutting healthcare or food subsidies. These are not exceptions but accelerations of a system that requires the disciplining of the population to prevent the emergence of alternative economic systems, which the capitalist elite inherently fears. The consequence of this intellectual obfuscation is that people feel the oppression but lack the conceptual tools to articulate and challenge it, leaving them disempowered.

Austerity: A Solution for Profit, a Problem for People

Austerity, often presented as a necessary measure for economic virtue and living within one's means, is revealed by Mattei to be a tool that serves the logic of profit, not the well-being of the populace. Far from curing debt, austerity is expensive and increases it. The stark contrast between the benefits enjoyed by the wealthy and the struggles of the majority highlights this systemic bias. For instance, tax breaks for high earners, like the projected $114 billion collective break for those making over a million dollars in 2027, occur simultaneously with soaring homelessness and widespread hardship.

This dissonance is a direct result of economic narratives that fail to point fingers and assign responsibility. Instead of questioning the system, mainstream economics offers solutions that punish the workers who had no say in the decisions that led to the crisis. The idea that "tightening our belts" applies only to the working class, while the elite continue their lavish lifestyles, is a recurring pattern. This is not an accidental outcome; it is a feature of a class system where policies are designed to maintain power structures.

The Exploitation Engine: Interest Rates as a Tool of Control

The common response to inflation, such as raising interest rates, is often presented as a necessary evil. However, Mattei, drawing on the work of Duncan Foley, reframes this policy not as an inflation-fighting measure, but as a mechanism for targeting the "rate of exploitation." While raising interest rates may or may not curb inflation, especially when inflation is driven by high profit margins, it effectively serves capitalism's need to maintain the subordination of the working classes.

"Increasing interest rates may or may not solve the inflation problem. It usually doesn't, especially when inflation is due, as you explain always very well, due to the high profit margins. But it does solve for what capitalism needs to be solved, which is the power relation, the subordination of the working classes."

-- Clara Mattei

By increasing unemployment, this policy creates a price that benefits the logic of profit. The mainstream economic understanding, shared by the Federal Reserve and economists, recognizes that unemployment is not a problem for the economy's profit motive but a solution. This reveals a fundamental truth: under capitalism, there is no policy that works for everyone; policies are designed to benefit the classes that uphold the logic of profit, often at the direct expense of the majority.

Escaping the Mental Trap: Reclaiming Agency and Building Alternatives

The difficulty in imagining an end to capitalism, as noted by Mattei, stems from deeply ingrained ways of thinking that obscure reality. The dominant narrative presents capitalism as natural and fair, a "spontaneous and fair order," when in truth, it is a system built on political power and class division. This mental trap is what the elite actively works to maintain, often through media and academic channels.

Mattei emphasizes that breaking free requires new categories of thought that can reveal the oppressive and unsustainable nature of the current system. This is not about academics dictating solutions from above, but about theory emerging from participation in struggles. Initiatives like the Forum for Real Economic Emancipation aim to reverse this hierarchy, fostering knowledge production from assembly spaces where people organize horizontally and anti-capitalistically.

The success of movements like the Vietnam mobilization or the Civil Rights movement, which had anti-imperialist and anti-capitalist roots, demonstrates that challenging the system is possible. When people demand resources and receive them, their demands escalate, pushing for something better. This is precisely what threatens the system, making the narrative of inevitability a crucial defense mechanism.

The path forward involves not only theoretical reorientation but also tangible experiments. Participatory budgeting, for example, while sometimes co-opted by the system, can reintroduce a sense of agency. Pushing for these tools to include revenue generation and questioning the source of funding can transform them into genuine instruments of emancipation, offering a cure against austerity and a step towards a more equitable economic future.

• Immediate Action: Actively seek out and engage with alternative economic theories and frameworks that challenge mainstream narratives.
• Immediate Action: Question the presented solutions to economic problems, asking who truly benefits and who bears the cost.
• Immediate Action: Support initiatives that promote worker ownership and democratic control of economic resources.
• Longer-Term Investment: Participate in or advocate for participatory budgeting processes that include revenue considerations, not just spending decisions.
• Longer-Term Investment: Engage in discussions and movements that aim to build new economic systems, recognizing that theory and practice must go hand-in-hand.
• Discomfort Now, Advantage Later: Embrace the discomfort of questioning deeply held economic assumptions; this intellectual rigor builds the foundation for lasting systemic change.
• Discomfort Now, Advantage Later: Advocate for policies that prioritize social well-being over profit margins, even when such policies are unpopular or require challenging established financial interests.