Caroline Cornier argues that economic and financial turmoil in Africa could be a favourable moment for fundamental monetary reform. Cornier reflects on a conference held in Dakar that focused on the challenges facing the continent in the context of ecological, economic, and political crisis.
By Caroline Cornier
Africa, like the rest of the world, is in crisis. Yet Africa is particularly ill-equipped to deal with it, as it grapples with external public debt reaching new records at a time when the central banks of the countries of the North are continually increasing their key rates, African monetary systems’ rigidity or predisposition to inflation paralyzes political action, and, finally, parts of the continent remain plagued by various conflicts.
But a crisis can also open up new horizons. The current economic and financial turmoil could represent a potentially favourable moment for fundamental monetary reforms. Similarly, the energy crisis coupled with the global need for green energy could provide a new basis for negotiations for Africa.
With the support of the Rosa Luxemburg Foundation, International Development Economics Associates (IDEAs) and Politics of Money Network, the second edition of the Conference on African Monetary and Economic Sovereignty was held in Dakar from 25-28 October 2022 under the motto of “Facing the Socio-Ecological Crisis: Delinking and the Question of Global Reparations.” In the wake of the first edition held in Tunis in November 2019, the organizers Ndongo Samba Sylla, Maha Ben Gadha and Kai Koddenbrock invited participants to analyse the monetary and economic constraints faced by countries of the South, particularly Africa, and devise strategies to overcome them. The focus was on pan-Africanist and internationalist responses to the current socio-ecological crisis based on the mobilization of heterodox economic approaches. Indeed, the collapse of public policies inspired by mainstream, neoclassical economics was a widely shared observation.
Broadcast online and translated simultaneously into French and English, the conference brought together 100 researchers, activists, and representatives of national and international organizations. The debates focused on the concept of delinking, the ills of the global financial system, its role in the ecological crisis, and the need for global reparations.
The need for delinking
The basic concept animating the conference was that of “delinking” developed by the French–Egyptian economist Samir Amin in his 1985 book, Delinking: Towards a Polycentric World. The concept comes from dependency theory, which originated mainly in Latin America and seeks to explain the inequalities in economic development between the centre of the capitalist system and the periphery. The state and the local bourgeoisie have control over the process of internal accumulation in the core of the system, whereas in the periphery the logic of economic accumulation is subject to external forces and their demands.
Faced with this situation, Amin’s delinking agenda consists of a reconfiguration of the economic relations between the peripheral countries and the countries of the centre. This process does not imply autarky, but rather aims to make self-centred development possible in the periphery through policies oriented around having greater control over the conditions of internal accumulation, that is, policies that work to subject global logics to domestic priorities.
As the Senegalese economist Demba Moussa Dembélé noted at the beginning of the conference, this “re-conquest of sovereignty” concerns three key sectors: the monetary and financial sector, the energy sector, and the food sector. According to Dembélé, the African continent imports 80 percent of its basic products while African governments often spend more than 10 percent on them. This not only creates considerable financial dependencies, but also great vulnerability to shocks affecting supply chains, as recently demonstrated by the pandemic and the war in Ukraine.
Delinking is not just an intellectual utopia but a primary necessity to bring about real change. According to Dembélé, three additional pillars of delinking in Africa will have to be the acceleration of regional and interregional integration, the reconstruction of developmental states that pursue a policy of industrialization based on the use of domestic resources, and the restoration of sufficient fiscal space to finance this industrialization, notably through the cancellation of external debt considered illegitimate and the fight against illicit financial flows.
The relevance of delinking today
Several participants recalled the limits of dependency theory in a world that has evolved considerably since the current peaked in the 1960s and 1970s. Since then, several so-called “emerging” countries have managed to join the ranks of the “semi-periphery”.
Nevertheless, other speakers were keen to draw attention to the particular context of countries such as Taiwan and South Korea, which for geopolitical reasons were strongly supported by the US and thus benefited from a rather favourable international environment. Moreover, the question of whether these countries (including China) have really succeeded in freeing themselves from the particular constraints faced by the periphery was raised. Indeed, economist Andrew Fischer reminded attendees that, contrary to popular belief, countries like South Korea had recurring trade deficits during the early stages of its industrialization. This led him to argue that dependence (particularly on imports of technology and equipment) is not so much a relic of the colonial past as a dynamic that is perpetually reinforced with industrialization. Moreover, he continued, the ecological transition will require the countries of the South to import a large number of technologies that are invoiced in foreign currency.
South African economist Fiona Tregenna of the University of Johannesburg supported the notion that dependence remains relevant for studying the economies of the South as well as the functioning of our global economic system, using the issue of industrialization as a concrete example. Similarly, Ingrid Kvangraven, a researcher in economic policy in London, called for the reintegration of this perspective from the 1970s into economics at a more theoretical level. It was at this time, during the implementation of structural adjustment programs under the aegis of the International Monetary Fund and the World Bank, and the failure of the attempt by the countries of the South (the “Third World”) to create a new, more egalitarian international economic order, that Samir Amin developed the concept of delinking.
Reconnecting with this project and its theoretical foundations — which also apply to the European periphery, as Portuguese economist Alexandre Abreu reminded participants — implies integrating it into the core of contemporary economic discourse. Unfortunately, mainstream, neoclassical economics has not only served the northern part of the planet — it also continues to ignore a number of structural economic mechanisms and dissident voices from the South. It seems more urgent than ever to decolonize economics in order to make the discipline more relevant to the countries of the South and their populations. Hence, the importance of building endogenous knowledge production institutions in Africa — a need that justifies the project of some of the participants to set up an African Heterodox Economics Network (AHEN).
Using the 1929 novel Banjo by African-American writer Claude McKay on the precarious life of a group of black dockworkers in Marseilles, historian Peter James Hudson deftly reminded the conference that the expansion of the dollar-based global monetary system is, in essence, an expression of imperial white supremacy and one major cause of global inequality. Giving the example of the dockworkers he argues that for many peoples, money is not a sign of wealth but a symbol of their economic subjugation. According to him particularly striking examples of monetary oppression, such as Haiti, should therefore be taken as a starting point for understanding the role of monetary hierarchies today and for articulating an agenda for global reparations.
One of the lessons of the conference was therefore that delinking is not just an intellectual utopia but a primary necessity to bring about real change, or even, in the case of countries facing monetary sanctions, a reality that must be overcome with intelligence. It was also noted, especially by Senegalese economist Ndongo Samba Sylla, the main organizer of the conference, that such a political endeavour requires a better appropriation of African history as well as a break with the narrative that trade liberalization based on comparative advantage is beneficial to all countries.
Areas in need of delinking
During conference discussions, participants identified the agricultural sector and tax policy as two areas where a delinking from the global system is important. For example, by becoming more oriented towards local demand, the agricultural sector could help boost the local economy and deploy the foreign exchange reserves saved to further stimulate domestic productive capacities. This sector enabled many Asian countries and China in particular to finance its industrialization in the 1960s, although it should not be forgotten that the size of China’s domestic market is incomparable to most African countries.
With regard to tax policy, Souad Aden-Osman, director of the secretariat of the African Union High Level Panel on Illicit Financial Flows (IFF), stressed the need to better regulate financial flows that impede the sovereign right of states to tax and which, contrary to the dominant narrative, are more the result of the practices of multinationals and criminal networks than of the corruption of African elites. She also noted that, for the time being, several multilateral and bilateral actors such as the OECD, the EU, and the GIZ [the main German development agency] seem to want to prevent a resolution on this issue reaching the UN at all costs.
In terms of agriculture, Max Ajl, a researcher at the Observatory of Food Sovereignty and Environment in Tunis, emphasized the need for an “ecological delinking” through agro-ecological methods, pointing to China, Vietnam, and Cuba in the 1970s as examples, and reinvestment in heavy industries. This last point was met with some scepticism, however, as recent history has shown that small countries are often unable to achieve economies of scale without strategic South–South partnerships. At the same time, however, Andrew Fischer insisted that where there is a will, there is a way, as shown by the example of some Asian countries.
Finally, in terms of ideas, many argued that too much ground had been ceded to neoliberal economic thinking. Jomo Kwame Sundaram called for an “intellectual insurrection” able to confront the de-industrialization underway in many countries of the South. This will have to be institutionalized. He argued that any delinking project would have to take into account that the service sector is now much more important than the manufacturing sector in most countries of the South. It would also have to take into account the fact that the African continent exhibits great diversity in terms of national productive capacities.
Constraints to delinking
For a government, achieving greater monetary sovereignty means having more fiscal space and increased capacity to spend in a non-inflationary manner to guide the trajectory and performance of the national economy. This point was illustrated by Chafik Ben Rouine based on the presentation by Fathimath Musthaq, Professor of Political Science at Reed College, on the origins of our current monetary system, as well as by Jamee Moudud’s interventions on the link between monetary sovereignty and legal systems, and finally by Jean-Michel Servet’s overview on the social dimension of money.
The level of monetary sovereignty is determined by the type of currency a government uses in combination with its level of foreign currency debt. The African countries of the CFA zone are therefore at the bottom of this monetary hierarchy, given that the exchange rate of their currency is linked to that of the euro and that all the countries of the zone have significant foreign debt. As Ali Zafar of the UNDP also showed, the pegging of the CFA franc to a currency as strong as the euro is not justified from a developmental point of view, as it leads to its chronic overvaluation. Consequently, this peg acts as a tax on the exports of countries using the CFA franc and as a subsidy to their imports.
With this type of monetary system, governments find it impossible to use the exchange rate as an instrument to adjust to external shocks, which makes it difficult to make local production more competitive and therefore more attractive than imports. Moreover, since the central banks of the two CFA franc blocs are obliged to defend a fixed parity, they tend to accumulate foreign exchange reserves and ration credit, which is the bedrock of capitalist economies. According to Zafar, the franc zone is trying to “run a marathon with a refrigerator on its back”. One concrete method of delinking could be to replace the franc’s indexation to the euro with a peg to a basket of currencies.
In addition to these regional obstacles to a more self-centred monetary policy, there are false solutions to the financial dependence and instability of the countries of the South. This is the case of “macro-prudential regulation”. As Indian economist CP Chandrasekhar explained, this concept refers to the preference for market-mediated stabilization interventions instead of structural interventions such as capital flow controls and foreign exchange regulation. The result of such intervention is a structural weakening of state capacity, aggravated, according to Daniela Gabor, a specialist in critical macro-finance, by the logic of “de-risking”.
According to this logic, the lack of “development” in the countries of the South is above all a question of financial risk. Consequently, state interventions, especially those aimed at the so-called “green” economy, must above all adjust the risk-return profile of assets invested by private capital. The problem with this “green de-risking state” is that while it is ostensibly beginning to reassume more responsibility for domestic development, in reality it is delegating the pace and nature of transformation and the management of public goods to the private sector. Gabor pointed out that this arrangement ultimately reinforces a form of neo-colonial extractivism that keeps the countries of the South in the position of generators of financial returns for global financiers and consumers of technological products from the most industrialized countries.
Hamza Hamouchene of the Transnational Institute illustrated this fact by taking as an example the so-called “green projects” promoted by European countries in North Africa. Moreover, as Kenyan environmental activist Ikal Angelei pointed out, the globalized private sector perceives the current ecological crisis as a new profit opportunity, which in turn creates new dependencies.
A final major obstacle to monetary sovereignty that received a lot of attention throughout the conference was external debt. Due to the liberalization of financial markets, the volatility of commodity prices, and the declining trend in development aid, debt is reaching increasingly worrying levels.
Pathways out of this threat to the economic transformation of the countries of the South include, on the one hand, the mobilization of domestic financing in national currency line with the ideas of Modern Monetary Theory (MMT). On the other hand, there is the possibility of repudiating what Eric Toussaint calls, in the words of Alexander Sacks, “odious debt”, i.e. debt that has not benefited the population and that creditors agreed to in full knowledge that it would not serve its stated purpose.
This system and the place given to Africa in it will not change without the pressure of blocs formed on the basis of broad alliances between different social forces at national and international levels.
According to Toussaint, a significant proportion of Africa’s debt can be characterized as odious. Sometimes it is the result of exogenous circumstances over which African countries have very little influence, such as climate change, the war in Ukraine, or interest rates hikes by Western central banks. On the other hand, the continent’s external debt could be significantly reduced if its savings were not transferred abroad through illicit financial flows, for instance, and if African economies were more oriented towards domestic demand.
Even if some African leaders, notably Macky Sall, the current president of Senegal, have called for the renegotiation of African debt, the path will not be easy. Indeed, according to Eric Toussaint, Africa has little weight in international financial institutions. For example, it has only four percent of the votes in the World Bank.
More fundamentally, debt is a primary mechanism for the control of Northern countries over the resources of Southern countries — not to mention that the expansion of foreign debt also benefits African elites. On the one hand, recourse to external debt is an alternative to raising tax rates in their countries. On the other hand, they can invest in the securities of this external debt, which are not only “de-risked” by the state but also offer particularly high interest rates. Éric Toussaint was therefore one of the few speakers at the conference who demonstrated that in order to conceive structural changes in the global monetary system, the role and interests of local actors must also be taken into account.
Overcoming constraints
Another topic that was discussed mainly from the African–American experience but also from a feminist perspective, notably by Crystal Simeoni of the Afrifem Macroeconomics Collective and Lebohang Liepollo Pheko of the Trade Collective in Johannesburg, was that of global reparations. According to Pheko, global reparations from North to South are more than an economic necessity to rebalance the global economic system. They would allow for a concrete recognition of past injustices, including the fact that what is represented as “common wealth” is in fact a case of “common theft”, and would make the affected populations feel that they have finally been recognized as sovereign subjects.
Following presentations by Franklin Obeng-Odoom of the University of Helsinki and Lisa Tilley of SOAS, who made a point to highlight the link between colonial extractivism and the current ecological crisis, Keston Perry of Williams College reaffirmed this overarching lesson, which in some ways was the foundation of the entire conference. Using, just like James Peter Hudson in relation to monetary imperialism, Haiti as an example, he demonstrated that slave plantation economies and environmental degradation are intimately linked. Therefore, the ecological crisis today represents the material basis for renewed demands for reparations. Given previous failures at the international level, these will have to be carried by a pan-African popular movement anchored in community-based organizations rather than by nation-states.
While supportive of this agenda, Matthew Robinson, a research fellow and doctoral student in the Department of Economics at the University of Missouri–Kansas City, offered a caveat. Referring to the preparations for reparations that have been undertaken by and for the African–American community in Kansas City, he emphasized the need to “fix the plumbing before you turn on the tap”, that is, to put in place structures that will be able to ensure that the money will be invested in a way that is useful and sustainable for the recipients.
Broader proposals for delinking were also made by Nancy Kachingwe, a feminist from Zimbabwe, who suggested changing the patriarchal and neo-colonial status quo through a form of feminist delinking. Dzodzi Tsikata from the University of Ghana proposed a revaluation of social policies instead of focusing only on economic policies, and German researcher Matthias Schmelzer defended de-growth in the North as a way to do justice to the countries of the South.
Peter Doyle, an independent macroeconomist, complemented this claim with two concrete demands aiming to ensure that the 1.5°C goal will be achieved while guaranteeing greater global economic equality. First, he suggested that the least developed countries should be entirely free of any CO2 emissions limits until they have reached per capita income parity with the OECD. To this end, he proposed the introduction of an emissions inefficiency tariff for OECD countries. He further suggested the establishment of a Global Rainy Day Fund financed by a recurring tax on the world’s billionaires to fund the necessary technologies.
From why to how
All of these innovative suggestions bring us back to the question of how these alternative structures will be put in place. At the end of the conference, a local participant remarked that the fundamental problem for Africa was that while Asia has become the world’s factory and South America its orchard, Africa has remained its mine, i.e. a site of pure extraction.
The purpose of the conference was to reflect on how to get Africa out of this extractive servitude, how it could put its currency at the service of its people, and how it could produce wealth and keep it at home. The global economic and financial system clearly does not serve this purpose. On the contrary, the mechanisms at work continue to serve an extractive system that contributes to keeping part of the world’s population in poverty and to depleting the planet’s resources for the benefit of a small, privileged minority.
It is essential to keep in mind, however, that this system and the place given to Africa in it will not change without the pressure of blocs formed on the basis of broad alliances between different social forces at national and international levels. Or, in the words of Souad Aden-Osman, as long as these visions are not heard at the table, those they defend will continue to be on the menu.
What remains to be done, then, is to link the structural analysis of the current monetary and economic system to the identification of political forces — external and internal — that can change the situation and find language and proposals that anchor the conversation in concrete realities, especially those of the younger generations who continue to be excluded from the discussion.
Caroline Cornier is a PhD student at the University of Bayreuth, where she is part of the comparative research group, “Economic and Monetary Sovereignty in West Africa.”
Featured Photograph: West African participants march at the Second World Festival Games. Banner reads: “West African Youth Greets [the] Youth Fight[ing] Against Imperialism [and for] National Independence” (Budapest, Hungary, 1949).
