The Bocconi boys go to Brussels: Italian economic ideas, professional networks and European austerity

ABSTRACT

This article shows how a specific set of Italian economic ideas, which were first formulated in the first half of the twentieth century and later espoused by a network of economists from Bocconi University, Milan, came to play an important role in shaping European policy responses to the Great Recession and establishing the doctrine of ‘expansionary austerity.' It argues that two factors – the formalization of these ideas in the language of mainstream economics and the establishment of professional networks that operated across a host of linked ecologies – contributed to their influence. The result was a ‘boomerang effect’, or a transfer of economic ideas from the European periphery to centers of policy-making power and back again. This phenomenon is understudied in the existing political economy literature, which tends to assume that ideational traffic is one-way, with ideas originating in centers of power and travelling from there to the periphery.

KEY WORDS:

• Austerity
• economic ideas
• European crisis
• networks
• power

INTRODUCTION

From the outset the idea of European unification has served as a blank canvas on which thinkers of divergent political and economic stripes have projected their visions, ranging from labor parties’ hopes for a ‘social Europe' to Friedrich Hayek's free-market ‘interstate federalism’. Accordingly, this article treats European co-operation as an active site of ideational contestation (Mudge and Vauchez 2012; Parsons 2006; van Apeldoorn 2002). It departs from the finding that a set of Italian liberal economic ideas which framed European co-operation as a means to constrain statist policies and fiscal expansion, formulated by Italian economist Luigi Einaudi (Einaudi et al. 2014) in the first half of the twentieth century, became influential in European Union (EU) policy-making in the aftermath of the Lehman crisis, though they were not very prominent when they were originally formulated (Blyth 2013).

While a general shift away from embedded liberalism in the last 40 years (Blyth 2002) almost certainly made politicians and policy-makers more open to market liberal ideas, it does not explain how this particular set of ideas could become significant. Indeed, most of the literature on economic ideas stresses the dominance of Anglo-Saxon and German ideas, with little allowance for comparatively peripheral countries like Italy as centers of epistemic innovation (McNamara 1998; Schmidt and Thatcher 2013). This case is therefore an unusual case of a ‘boomerang effect’, in which ideas originate in the periphery, gain legitimacy in the core and are diffused back to the periphery from there.

In trying to understand the ascendance of these particular ideas, this article makes three related claims. The first is that even abstract economic theories understood to have global purchase have roots in a particular time and place. The most prominent contemporary proponent of the economic ideas in question, Harvard political economist Alberto Alesina, has been referred to as Einaudi's ‘full heir' (Santagostino 2012: 380). His policy vision is most clearly articulated in the principle of ‘expansionary austerity’, the notion that cutting public spending can lead to growth. This principle is embedded in a very specific view of European co-operation as a means to constrain government spending and ensure monetary co-operation. Though deceptively simple on the surface of it, this political vision has been decades in the making and is composed of several interlocking parts, which hearken back to Einaudi's thoughts (Einaudi et al. 2014). His ideas, in turn, were heavily influenced by political and economic realities that were particular to Italy. In this sense the genesis of the economic theory of expansionary austerity cannot be disentangled from the traumas of Italian history.

Second, the article argues that the contemporary influence of these ideas was facilitated by the fact that their proponents, many of whom were centered in Bocconi University in Milan, Italy, were adept in the formalized language of neoclassical economics. They could thus formulate their ideas in a way that was compatible with the mainstream of the discipline. By contrast, this shared mathematical language was not yet fully formulated in Einaudi's time (Fourcade 2006).

Third, formalization gave advocates of these ideas access to international centers of epistemic power, including élite United States (US) universities, EU institutions and international organizations (IOs). This was at least in part the result of a conscious effort by Bocconi University, which developed a clear strategy of promoting its graduates in élite institutions, while also allowing them to maintain ties to Bocconi. Under the leadership of Francesco Giavazzi, Bocconi teamed up with the American National Bureau of Economic Research (NBER) and the European Commission and made a successful effort to recruit internationally renowned economists and to disseminate their work in top-tier journals.

The article proceeds in three parts. First, it posits its theoretical underpinnings, with a focus on the formalization of economic knowledge and the role of transnational networks in diffusing it. Second, it discusses Einaudi's (Einaudi et al. 2014) economic ideas and puts them in the context of Italian economic history. Finally, it provides a systematic overview of the component parts of expansionary austerity through the prism of Alesina's research and traces the professional trajectory of several of his co-authors from Bocconi University across different sites of power, furthering the argument that strong networks and access to revolving doors enabled these policy-minded economists to influence European crisis politics.

THEORETICAL FRAMEWORK

The role of economists as agents of globalization is often understood as mostly unidirectional: intellectual models are generated in American or North-West European centers of power and then exported to the periphery. Thus, a number of studies have noted that graduate training in American economics departments shapes the professional identities and preferences of policy players and academic economists worldwide (Colander 2005; Fourcade 2006). Similarly, foreign economists trained in prestigious US academic institutions often become economic policy leaders in their own countries. This dynamic was at work in the story of the Chicago Boys (Babb 2001; Markoff and Montecinos 1993), with more recent scholarship arguing that the same happened in other parts of the world as well (Chwieroth 2010).

Others have noted that things are not always this simple. Dezalay and Garth (2002), for example, argue that the transmission of economic ideas from core to periphery also represented the extension of Western intellectual ‘palace wars’ to the Global South. Similarly, Marion Fourcade's account of the internationalization of the economics profession takes the dynamic nature of diffusion into account. Fourcade argues that the ongoing reconstruction of economies worldwide is ‘symbiotically related to the ongoing transformation of the intellectual and professional jurisdictions of economists’ (Fourcade 2006: 183–4) – a claim that also serves as the departure point of this account, albeit with certain modifications as argued below.

Fourcade posits that three factors have been critical to the deep institutionalization of the economics profession on a global scale. The first was the establishment of a broadly universalistic rhetoric, under which ‘economics knowledge appeared inherently transferable and “transformative,” both politically and institutionally, thereby authorizing easy replication and diffusion independently from the national context' (Fourcade 2006: 156). More concretely, this universalization of economic knowledge rested on mathematical formalism, methodological universalism and theorizing that treated social units as comparable.

Second, and closely connected to the process of rhetorical universalization, was the transformation of economic knowledge into a technology of political and bureaucratic power. Originally the nation state was the locus of this transformation: in the first half of the twentieth century, economics was incorporated into the toolkit of governments so that economic outcomes might be engineered to suit statist political goals. Ironically, with the resurgence of market-centric neoclassical economics in the 1970s, the nation state was to an extent pushed out of this equation. As a result, the economics profession not only superseded its national loci, but also played a role in circumscribing the economic tools available to nation states. This coincided and dovetailed with the emergence of a transnational capitalist class with considerable lobbying power (see also van Appeldoorn 2002; Van der Pijl 1998).

Third, Fourcade argues that the existence of transnational linkages, or networks, centered in the United States, played an important role in the internationalization of the economics profession. Here, she stresses the importance of education in mediating the relationship between core and peripheral states. For example, the fact that in the year 2000 more than half of all students pursuing a PhD in economics in American universities were foreign, and that the impact of this was highly asymmetrical for periphery and core, is crucial to her argument. She argues that for peripheral states transnational linkages have been important sources of legitimation, ‘both virtually through the uniformizing culture of the neoclassical paradigm, and materially through the countless formal and informal linkages with international organization and foreign scholarly and professional communities’ (Fourcade 2006: 157). Conversely, the economics profession in élite institutions in core states derived symbolic and material rewards from influencing other parts of the world (Fourcade 2006).

Though compelling, Fourcade's analysis, like that of a number of other scholars (Babb 2001; Markoff and Montecinos 1993), runs the dual risk of overestimating the coherence of American graduate education and portraying foreign students as blank slates that simply absorb what they are taught upon arrival.¹ By contrast, this article argues that American expert networks, and academia in particular, are somewhat porous and open to foreign participation and influence. What seems like influential ‘Anglo-Saxon' economic thought can therefore have originated in other parts of the world. Graduate students and professors that come to the United States can carry with them their own national traditions and translate them into the universalizing rhetoric of economics, In this way the prestige of élite American institutions can be used to legitimize and diffuse economic logic that stems from other national traditions through what can be termed a ‘boomerang effect' (Keck and Sikkink 1998). In this sense the relationship between ideas and centers of power is less linear and straightforward than it appears. The theoretical goal of the article, then, is to extend Fourcade's reasoning by arguing that peripheral states can generate mainstream economic knowledge, as well as absorb it.

Methodologically, the article makes use of process tracing. Tracing the lineage of expansionary austerity – both its deeper historical roots in Einaudi's (Einaudi et al. 2014) work and its contemporary refinement through Alesina's corpus – serves the purpose of showing that these ideas were at least in part exogenous to the policies they later informed and therefore not just post hoc justifications. However, as Jacobs notes ‘[d]emonstrations of antecedent origins do not, by themselves, establish exogeneity’, as decision-makers can simply cherry pick the sets of ideas that best suit their interests. It is therefore also important to demonstrate both that the ‘carriers’ of new ideas are prominent enough to shape the broader intellectual environment and to identify plausible pathways, or ‘transmission belts’, for disseminating their ideas (Jacobs 2011). This article finds that Alesina was a high-status innovator and carrier of the expansionary austerity thesis and that his network of co-authors, with connections to transnational centers of epistemic and political power, acted as a transmission belt for that thesis. The benefits of studying carriers and transmission belts are obvious in that they are observable in a way that ideas themselves are not.

While this case does not provide a ‘smoking gun' to show that universalizing language which distances national economics from their local roots, strong networks and access to transnational sites of power contribute to the ascendency of certain sets of economic ideas, it can act as a ‘hoop test’. While a hoop test isn't enough to affirm a hypothesis, but it can be used to establish necessary, if not sufficient conditions (Mahoney 2012; Van Evera 1997). The fact that Alesina had access to these while Einaudi did not also acts as a kind of counterfactual ‘hoop test' of this proposition.

EINAUDI'S VISION: EUROPE AS A BUTTRESS AGAINST FASCISM

Gualmini and Schmidt (2013) argue that Italy's post-war economic liberalism (or liberismo) was different from other forms of liberalism in that it emphasized skepticism of mass politics and the state and preferred markets instead. This echoed German Ordoliberalism and foreshadowed the swing to neoliberalism in the 1970s (Ban 2012). Einaudi's liberismo was derived not only from the classics of liberal thought, but also from personal experiences that were particular to Italian history (Forte and Marchionatti 2012). After the end of the First World War, parts of Northern Italy experienced the so-called Two Red Years (1919–1920), a period when socialist, social-Catholic and communist movements occupied land and factories and pushed for progressive wage and labor legislation. Moreover, in many municipalities unions were powerful enough to dictate political outcomes. In reaction, the Italian industrial and agrarian élite threw its weight behind the fascist movement. Soon enough, however, it became apparent that fascism was a force in its own right that could not be controlled by the old élites. Instead, it channeled its energies into constructing a state-led economic model and gutting Italy's liberal institutions (Battente 2000).

Einaudi, who had critiqued the old liberal order in Italy for falling short of the liberal ideal, was a vocal opponent of statist experiments in general and Italian fascism in particular. By 1943, his anti-fascist stance had become a liability and, fearing for his life, he fled Italy, crossing the Alps into Switzerland on foot at the age of 69. It was in this historical context that Einaudi formulated his view of European integration as a liberal vehicle for constraining state intervention and buttress against fascism (Forte and Marchionatti 2012; Gualmini and Schmidt 2013).

Though his vision for a liberal Europe was sharpened by the threat of fascism, Einaudi had begun arguing for a federal system of European institutions based around a strong independent central bank, a federal system of finance and a unified customs system that could curtail ‘feelings of nationality' as early as 1916 (Masini 2012: 43). He had a deep aversion to inflation, which he believed undermined the propensity to save and innovate and could act as a gateway to fascism. It was this fear that led him to advocate for an independent central bank at a time when this idea was barely known outside of Germany. Accordingly, he supported constitutional rules banning fiscal deficits (Forte and Marchionatti 2012).

Einaudi did not subscribe to the post-war Keynesian consensus that the Gold Standard was a recipe for disaster. To the contrary, he believed that European integration should be based on monetary arrangements that closely approximated the gold standard (Einaudi et al. 2014). Writing on the economic institutions of the future ‘European Federation’, as he called it, he argued that they should have a constraining effect, similar to the Gold Standard, and that the right to issue currency should be moved from the national to the federal level. This would make fiscal activism impossible and forge an austere political order in which the central bank would be spared the role of lender of last resort for the state. The larger goal was the abolition of monetary sovereignty (Santagostino 2012).

The fascist years aside, Einaudi's career was successful in settings as diverse as academia, media and politics. As a professor of economics both at the University of Turin and at Bocconi University, he taught many of Italy's best-known twentieth-century economists. It bears mentioning that though Einaudi had a clear vision for Europe, he was by no means a dogmatic mentor and his students’ views sometimes diverged greatly from his.² After the Second World War he was one of the founders of the Italian Republic, boosted by anti-fascist credentials. He held a number of public offices, serving as minister of finance, governor of the central bank and finally as president of the new Republic. Einaudi also had an international presence as The Economist’s Italian correspondent. Moreover, he was an active member of the transnational liberal networks that established Colloque Lippman (1938) and the Mont Pelerin Society (1947), both of which played a crucial role in the formation of modern neoliberalism. As such, he was Italy's only internationally recognized liberal economist at the time (Mirowski and Plehwe 2009; Peck 2010).

However, professionally successful though he was, Einaudi's vision did not carry the day when it came to creating the post-war international monetary and financial institutions or in Italian politics. The former were constructed along Keynesian lines, while the latter were characterized by a mixture of ‘public neo-capitalism’, party patronage and clientalism (Schmidt and Thatcher 2013). In this context it is important to note that the international networks that Einaudi was part of, like the Colloque Lippman and the Mont Pelerin Society, were originally relatively diverse and marginal umbrella organizations that were not embedded in transnational sites of power. Indeed, they were founded because their early members saw liberalism as threatened by both Keynesian planning and Marxism (Mirowski and Plehwe 2009; Schmidt and Thatcher 2013). Moreover, Keynesians replaced liberals in key sites of institutional power such as universities and IOs (Chwieroth 2010; Pauly 1997).

Nor did Einaudi and his peer liberals present a united front in terms of methodology. Though Einaudi was interested in methodology and argued for ‘working at the same time both with a deductive and inductive manner of proceeding, abstract reasoning and its empirical verification” (cited in Forte and Marchionatti 2012: 365), a great deal of his work took the less formalized shape of moral and political essays and economic history (Einaudi et al. 2014). At a time when the Chicago School and its followers were preparing anti-Keynesian attacks using the language of econometrics, Einaudi's methodology seemed outdated and unscientific. In short, lacking both an embedded transnational network and a transferable language to diffuse his ideas, Einaudi's work did not have an international resonance during the early post-war decades.

Liberal economic thinking remained mostly dormant in Italy from the 1950s to the 1970s, and resurfaced only in the 1980s and 1990s in the work of a new cohort of economists at Bocconi, many of which did their graduate work in the United States and Britain. Steeped both in the Italian tradition and in the methodologies of Anglo-American academia, they borrowed many of Einaudi's ideas. Yet, unlike him, they formalized their work, published it in internationally recognized journals and acceded to positions of influence in the ‘linked ecologies’ (Seabrooke and Tsingou 2015) of transnational sites of power (Blyth 2013; Gualmini and Schmidt 2013; Radaelli 2002). The most influential of these ideas was the thesis of expansionary austerity, to which I turn next.

ALESINA'S VISION: EUROPEAN INTEGRATION AS A CONSTRAINT FOR PROFLIGATE WELFARE STATES

Alesina as an influential ‘carrier' of expansionary austerity

Alberto Alesina is the most prominent and successful proponent of expansionary austerity. Over the course of the last 30 years he has published over 90 articles, most of them pertaining to macroeconomic questions. Of these, many have been published in top journals such as American Economic Review, European Economic Review, Journal of Public Economics and Quarterly Journal of Economics, to name but a few. He earned his PhD from Harvard University in 1986 and is currently the university's Nathaniel Ropes Professor of Political Economy.

A graduate of Bocconi, Alesina has also remained closely affiliated with that university, doing research stints there and working with faculty. He has been referred to as Einaudi's ‘full heir' and has made his admiration for Einaudi's work clear, notably in an introduction to a recent collection of Einaudi's essays (Einaudi et al. 2014). Indeed, many of Einaudi's ideas percolate in Alesina's research, and the two share a core vision of a liberal Europe as a means to constrain state economic activism and support free markets. Unlike Einaudi, however, Alesina and his larger network have had a profound influence on economic policy-making, as demonstrated most clearly by Blyth (2013). To date, the policy of austerity has been maintained in Europe, even as economic and social outcomes have continued to disappoint and frustrate (Matthijs and McNamara 2015).

Though Alesina's core argument – Europe has been profligate and must now curtail spending to grow again – appears both simple and intuitive, the economic theory underpinning it was decades in the making. Seemingly disparate threads of research, animated by themes that Einaudi also grappled with, had to be joined together for the formula for expansionary austerity on a European level to add up. Specifically, five logical steps were required to get there, each of which is discussed in more detail below:

1. Democratic political systems have an inherent tendency to build up excessive debt.

2. Much of the debt is used for welfare transfers and austerity should therefore be geared towards reining in welfare spending rather than raising levels of taxation.

3. Such spending cuts are both economically and politically viable.

4. Governments benefit from a degree of discipline and insulation from political pressures, allowing them to enforce austerity.

5. European institutions are ideally placed to provide such discipline and insulation.

A great deal of Alesina's early research focused on the potentially detrimental impact of democratic politics for macroeconomic outcomes, particularly for levels of public debt (Alesina 1987; Alesina 1988b; Alesina and Carliner 1991; Alesina, Cohen and Roubini 1991; Alesina and Roubini 1992; Alesina and Sachs 1988). He argued that disagreement between current and future governments can lead to debt accumulation, even when the majority of voters oppose it (Alesina and Tabellini 1989, 1990; Tabellini and Alesina 1990). Moreover, this research shows that high debt and an unstable political situation with frequent shifts between parties with divergent agendas results in fiscal deadlock and increases the potential for capital flight, exchange rate instability and inflationary pressures. The dominance of one political group, by contrast, results in a more stable situation (Alesina 1988a; Alesina, Mirrlees and Neumann 1989; Alesina and Rosenthal 1989; Alesina and Tabellini 1989, 1992). This, however, is unlikely to happen in an electoral system that allows different groups to engage in a ‘war of attrition' over who will shoulder the burden of adjustment, thereby postponing the moment of reckoning, making it worse in the process (Alesina 1994; Alesina, Ardagna and Trebbi 2006; Alesina and Drazen 1991). High debt can then become self-perpetuating, since citizens in indebted countries lose confidence in the financial system and choose to invest in foreign rather than domestic debt (Alesina, Prati and Tabellini 1990).

But why do states take on so much debt to begin with? A number of Alesina's research papers depart from the observation that over the course of the last 30 years growth in government spending has resulted not from the purchase of goods and services, as was formerly the case, but rather from welfare transfer programs. Moreover, he argues that welfare systems are rapidly becoming unsustainable (Alesina and Perotti 1995a, 1996a, 1996c, 1999), that they undermine European competitiveness (Alesina and Perotti 1997b) and that high government spending is strongly correlated with corruption (Alesina and Angeletos 2005). These observations led Alesina and Bocconi professor Roberto Perotti to conclude that fiscal adjustment should consist not of higher levels of taxation, but of significant cuts in the welfare state that could reverse this dangerous historical trend (Alesina and Perotti 1995a).

Moreover, Alesina and Perotti and Ardagna suggest that such fiscal adjustment could actually have expansionary outcomes (Alesina and Perotti 1995a; Alesina and Ardagna 1998). This ran counter to an earlier consensus that austerity was inherently contractionary. Looking at OECD countries over three decades, Alesina and Perotti found that even ‘harsh' fiscal adjustments were not systematically followed by recessions. On the contrary, sometimes adjustment were followed by growth. However, outcomes depended on the ‘type' of fiscal adjustment pursued. Adjustments that relied on spending cuts as opposed to tax increases were not just a historical corrective but also more likely to improve the fiscal situation, more likely to last (Alesina and Ardagna 1998, 2010, 2013; Alesina and Perotti 1996c, 1997a; Alesina and de Rugy 2013), and less costly in terms of output (Alesina, Favero, and Giavazzi 2015). These findings were bolstered by arguments that public spending on wages in particular has a very negative impact on profits and business investment, even more so than taxes (Alesina, Ardagna, Perotti and Schiantarelli 2002). Importantly, Alesina and his co-authors also argued that governments that pursue austerity are no more likely to be voted out of office than those that pursue activist fiscal policies (Alesina, Carloni and Lecce 2013; Alesina, Perotti and Tavares 1998).³

Since Alesina saw the problem of debt as stemming from politico–institutional variables, his solution lay in altering these, preferably by insulating government institutions from political interference. While he argued that balanced budget legislation was probably too inflexible (at least at the national level, though he did find it very successful in managing state finances in the United States [Alesina and Bayoumi 1996; Alesina, Perotti and Spolaore 1995]), he advocated a reduction of veto points that could delay fiscal adjustment and the centralization of power over budgetary matters in the executive (Alesina and Perotti 1996a, 1999). He was also an avid advocate of independent central banks (ICBs) that would restrain government access to seigniorage (Alesina and Perotti 1995b). In 1985, Kenneth Rogoff had argued that ICBs reduce inflation, but at a cost in output variability. Alesina, along with fellow Harvard economist Lawrence Summers, took the argument further. They found that ICBs bring about low inflation at no apparent real costs. Rather, the variability was caused by exogenous shocks and political shifts that heighten uncertainty (Alesina and Gatti 1995; Alesina and Summers 1993).

In turn, this institutional vision was part and parcel of a very specific view of European co-operation as the ideal venue to provide market discipline and a degree of insulation from factional national politics (Alesina and Grilli 1992). Europe's role should be to guarantee free trade and monetary unification, centered on independent and clearly delineated institutions, while leaving national governments room for maneuver in other matters (Alesina et al. 1992; Alesina and Grilli 1993). Monetary unification, in particular, should provide external fiscal discipline, when it could not be mustered domestically.

This embrace of monetary union did not, however, extend to fiscal union. Discussing redistribution within the European Union, Alesina and Perotti stressed the attendant political risks, stemming from uncertainty regarding tax rates and the difficulty of aggregating diverse preferences. They concluded that fiscal redistribution within Europe would take integration too far (Alesina and Perotti 1998). Elsewhere Alesina made a similar case that:

Europe is going too far on many issues that would be better dealt with in a decentralized fashion, while it is not going far enough on policies that guarantee the free operation of markets both across and within the countries of the Union. (Alesina and Wacziarg 1999; see also Alesina, Angeloni and Etro 2005; Alesina, Angeloni and Shuknecht 2005)

Arguments along these lines are also the subject of Alesina's 2006 book with Bocconi economist Francesco Giavazzi, The Future of Europe, in which they compare European welfare states to a ‘frog in slowly warming waters', boiling alive without the wherewithal to save itself (Alesina and Giavazzi 2006: 10).

Alesina and Giavazzi's fears hearken back to Einaudi's worries that the Schuman Plan for the European Steel and Coal Community would become a French dirigiste project that marginalized liberal policies. In fact, Alesina's views mirror Einaudi's in several respects. Most of his major themes are present in Einaudi's earlier work: electoral politics as potentially detrimental for economic outcomes, the dangers of welfare spending, focus on fiscal retrenchment, the need for ICBs and constitutional rules to impose monetary and fiscal discipline, and the hope that European institutions can curtail national excesses. In sum, then, Alesina's vision is composed of several interlocking and interdependent parts that echo Einaudi's earlier preoccupations, and which have been articulated in articles and studies published in internationally recognized economics journals. Thus, when the European crisis came to a head, Alesina's oeuvre offered a comprehensive and intuitive interpretation of the crisis, as well as a concrete set of policy reactions that European policymakers could grab ‘off the shelf'.

The Bocconi network as a ‘transmission belt' of expansionary austerity

Importantly, however, Alesina has not been alone in promulgating the policy of expansionary austerity and the ideas of liberismo more generally. Most of the articles cited above are co-authored, often with fellow Bocconi graduates. Many of Alesina's Bocconi co-authors are established in transnational sites of epistemic and political power in academia, policy-making, think tanks and the global financial sector. Publicly available curriculum vitae information shows that their positions include tenured posts and affiliations at the economics departments of élite universities such as Harvard, Yale, Columbia, Stanford, University of Chicago, Massachusetts Institute of Technology, University of California, Carnegie Mellon University, European University Institute, Boston University, Boston College, Cambridge, Wellesley, London School of Economics and London University.

The Bocconis have also sat on the boards of prestigious academic journals, authored and edited books published at top academic presses and obtained a number of large American and European grants. Many have also held prominent positions in respected transatlantic institutions for the dissemination of policy-relevant economic research such as NBER, the American Finance Association (AFA) and the Center for Economic Policy Research (CEPR), Bruegel and the Aspen Institute.

Moreover, their success has not been isolated to academic positions. As their academic star has risen, many members of the Bocconi network have gained access to the revolving door between academia and the economic policy-making sphere. Some of them cut their teeth on emerging markets’ financial crises and their macroeconomic implications as consultants or fellows for the Bretton Woods institutions: Giavazzi served as an external evaluator for the IMF's research; Silvia Ardagna was a visiting fellow at the International Monetary Fund's (IMF's) Fiscal Affairs Department; Alesina was a visiting researcher and Perotti and Tabellini were consultants for the Fiscal Affairs Department. Alesina was a visiting scholar at the Macroeconomic and Growth Division and the Public Economics Division of the World Bank (WB); Perotti, Tabellini and Favero were economic consultants for the WB; and Angeloni worked with the Bank as a representative of the Italian government.

The group was even more prominent in EU institutions. Alesina was a regular at the ECB and a frequent guest and speaker at high level European Commission and European Council events. Ardagna and Perotti consulted for the ECB and the former also consulted for the Directorate General for Economic and Financial Affairs (DG ECFIN). Before becoming finance minister for the Mario Monti government, Grilli was first vice-president and then chair of the EU's Economic and Financial Committee (EFC), an influential body established by the Maastricht Treaty ‘to keep under review the economic and financial situation of the Member States and of the Community and to report regularly to the Council and the Commission on this subject’. In practice, this means that the EFC prepares the agenda of the European Council with regard to monetary and fiscal policy issues and serves as a framework for ECB–European Council dialogue. It is interesting to note that the idea of expansionary austerity has had much more resonance and impact in the EU, where this network was dense, than in the IMF where it was sparser.

However, even as they become members of these transnational sites of power, many also stayed focused on the realities of domestic economic policy. Almost all worked as consultants or had short stints as advisers for powerful government agencies such as the French Treasury, the New York Federal Reserve, the Italian Treasury and the Italian central bank. Even more prestigiously, Tabellini worked as economic advisor to the Italian prime minister Romano Prodi, and during the sovereign debt crisis Giavazzi served as the economic advisor of Mario Monti (another Bocconi graduate) while sitting on his Government Spending Review. Most famously, Grilli left the top job at the EFC to manage Italian austerity as minister of economics and finance in the Monti government from 2012 to 2013.

These densely interconnected career trajectories across an array of transnational sites of power are illustrated in the network map in Figure 1. Red nodes, slightly larger than the rest, represent Alesina and his Bocconi co-authors on expansionary austerity. The smaller nodes represent their various affiliations, distinguished by color: Academic affiliations show as turquoise nodes, think tanks are green, IOs blue, European institutions yellow, national government agencies purple and financial entities pink. Each of these smaller nodes is also labeled by the name of the institution in question.

Figure 1. Network illustrating the interconnected career trajectories of Alesina and his austerity co-authors across an array of transnational sites of power

Note: Red nodes, slightly larger than the rest, represent Alesina and his Bocconi co-authors on expansionary austerity. The smaller nodes represent their various affiliations, distinguished by color: Academic affiliations show as turquoise nodes, think tanks are green, IOs blue, European institutions yellow, national government agencies purple and financial entities pink. Each of these smaller nodes is also labeled by the name of the institution in question.

Thus, in addition to being prominent enough an academic to shape the broader intellectual environment and act as a ‘carrier' of a clearly articulated economic and political vision, Alesina was part of a network that had access to the revolving doors of several transnational sites of power. It seems reasonable to assume that this tightly knit network served as a ‘transmission mechanism' to further the policy vision of expansionary austerity.

CONCLUSION

This article has sought to further our understanding of how a set of Italian economic ideas, which were originally formulated in the first half of the twentieth century and then advanced and diffused through a network of academics affiliated with Bocconi University, could become prominent in shaping European policy responses to the Great Recession. The article has stressed the fact that the economic view of the Bocconis, most clearly articulated in the policy of expansionary austerity, is part and parcel of a vision of Europe as a means to constrain the economic sovereignty of European states and curtail government spending.

In its earlier iteration this stance was meant to check the power of fascism, but in its contemporary form it has been reinterpreted as a means to deal with democratic inefficiencies and corruption. In this way the article has underscored the fact that international economic policies sometimes have distinctively national roots and that not all influential economic policies are Anglo-Saxon or German in origin, as much of the literature suggests. In this case, a set of economic ideas that have been felt keenly in Europe's southern and eastern periphery actually originated in Southern Europe.

This insight complements earlier work on the importance of the vincolo esterno (foreign constraint) in Italian politics, which focused on the ways in which weak domestic political actors could leverage European pressures to push through otherwise difficult reforms and strengthen their own mandates (Dyson and Featherstone 1996; Featherstone 2001; Ferrera and Gualmini 2004). This literature, however, tends to treat European policies as ‘unstoppable and largely uncontrollable by Italy' (Featherstone 2001: 4). This article contributes to this debate by shedding light on the origins of the vincolo, while also demonstrating that it is not always as esterno as it might seem. It suggests that this journey of ideas from periphery to core and back again can be understood as an ideational ‘boomerang effect'.

The case of the Bocconis suggests that such an effect can only take place given certain conditions: in order for these ‘peripheral ideas’ to gain legitimacy and influence, they had to be translated into the abstract and universalizing logic of mainstream economics and espoused by an influential network of scholars with access to established sites of power.

This insight stands to further our understanding of the ideational room for maneuver in contemporary European crisis economics. It suggests that more heterodox approaches to economics are likely to have limited resonance, even when their proponents hold positions of power. Similarly, even intellectuals that are part of the mainstream tradition are unlikely to have a significant impact on policy-making if they lack a strong high-status international network. If this is correct and those already embedded in the dominant intellectual tradition and influential networks are most likely to impact policy, the upshot is that ideational room for maneuver is rather restricted. This, in turn, may go some way towards explaining the resilience of austerity politics, even in the face of popular dissent and disconfirming evidence.

ACKNOWLEDGEMENTS

My sincere thanks go to Mark Blyth, Cornel Ban, Daniel Béland, Martin Carstensen, Thomas Ferguson, Richard Locke, Daniel Mügge, Michal Ben Noah, Vivien Schmidt, Leonard Seabrooke, Jazmin Sierra, Prerna Singh and two anonymous reviewers; moreover to the participants in the Copenhagen Business School's Snekkersten workshop on ideas and power in international political economy, the European Commission's ‘Global Reordering: Evolution through European Networks’ (GR:EEN) and the Brown graduate workshop in comparative politics. The usual disclaimers apply.

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Oddný Helgadóttir

Biographical note

Oddný Helgadóttir is a doctoral candidate at Brown University.

Notes

1 It should be noted, however, that Fourcade argues that French thinkers, steeped in the French tradition, had an impact on American economic thought, in a pattern similar to that discussed in this article. I thank an anonymous reviewer for pointing this out.

2 I thank Thomas Ferguson for this insight.

3 It should be noted, however, that Perotti went on to break with this view and became a critic of expansionary austerity (Perotti 2011).