Below is a transcription of the March 14th episode of the podcast Money on the Left.

Saas: You are listening to Money on the Left, the official podcast of the Modern Money Network: Humanities Division, or MMN-HD. Ndongo Samba Sylla is a Senegalese development economist, and research and program manager of the West Africa office of the Rosa Luxemburg Foundation. Sylla is also the author of many articles and three books, including the recently published L’arme invisible de la Françafrique, or ‘The Invisible Weapon of Franco-African Imperialism’. In that book, Sylla and co-author Fanny Pigeaud lay out a comprehensive case against the CFA Franc, which is the neo-colonial currency union that presently constrains the social, political, and economic prospects of each of its member states. In this episode, Scott and Max talk with Sylla about the history of political economy in pre- and post-colonial Africa, the theoretical bases and political stakes of the anti-CFA Franc movement, and how Modern Monetary Theory (MMT) ought to inform current and future efforts to restore political and economic sovereignty to West African nations. Special thanks to Ndongo for taking the time to speak with us, and to Alex Williams for producing this episode.

Seijo: Ndongo Samba Sylla, welcome to Money on the Left.

Sylla: Thank you, thank you for your invitation.

Seijo: So I was wondering … if you could tell us a bit about your personal, educational, and political background.

Sylla: Yeah, I am a Senegalese citizen. I currently live in Dakar, where I grew up (Dakar is the capital of Senegal). I did my early studies in Senegal, until the Baccalaureate, in 1996. From there, I went to Paris for my university studies, and I obtained a master’s degree in sociology at the Institute of Political Studies in Paris, and also a master’s degree in development economics at the University of Paris I Panthéon-Sorbonne. And then I did a Ph.D. in economics at the University of Versailles Saint-Quentin-en-Yvelines, and my dissertation was about employment relationships in Senegal.

Professionally, I started my first job as a researcher in 2001, in a public research center in Paris specialized in employment issues. I worked there under the supervision of one of my professors, and I had to participate in the writing of evaluation reports about The European Employment Strategy, which was an initiative launched in 1997 by the European Union.

From there, I worked for the government. I was, between 2006 and 2009, technical advisor at the Presidency of the Republic of Senegal, and I left this job in 2009. After that, I worked as a consultant for the Fair Trade worldwide umbrella organization. Since then, in 2012, I worked in Dakar as a program research manager at the West Africa office of the Rosa Luxemburg Foundation, which is a leftist German political foundation. And regarding my writings, I have authored a book on Fair Trade, named ‘The Fair Trade Scandal’. I have also authored one book on the story of democracy, and recently I co-authored a book with a French journalist, Fanny Pigeaud, on the story of the CFA Franc.

Ferguson: So your recent work, and your recent co-authored book, focuses primarily, as you said, on the present history of the neo-colonial monetary system that is the CFA Franc, in Francophone Africa. And really, in this conversation, I want us to dive into that. But before we start, I was wondering if you could sketch out for us how you approach this question through political economy, and how do you understand money. I’m also curious, given your background and training, thinking about employment and unemployment, how you see the relationship between money and employment.

Sylla: It’s difficult to give a definition of money of my own. I do not have a definition of my own. But I somewhat subscribe to some existing views about money. Namely, the view that money is an important social institution, which helps, lets say, settle debts and credit relationships in given polities. And this function is more or less possible because if money has to work, first you need a unit of account allowing to count the debts and the credits, and also you have to establish rules for exchange, payment, and accumulation of social values. But the view of money which doesn’t convince me is the neoclassical view of money as commodity, which helps overcome the shortcomings of barter. I am really not convinced by this view, and the neoclassical view, too, that money is a neutral economic instrument.

Generally, I often like to quote Aristotle in his book, Nichomachean Ethics (in French it’s Ethique à Nicomaque), where he says the word that designates law in Greek [nomos], shares the same etymology, the same root, with the word referring to money/currency [nomisma]. So that means that you could not find a more political topic than money. Sometimes people told us that money is a complicated subject, only for experts, but with the observation made by Aristotle, we could be sure that money is, let’s say, a political topic, which needs a really democratic framework for debate. So I think, as progressives, it’s important to open the money ‘black box’, and make it understandable for ordinary people. And that’s why I also appreciate very much the efforts made by the Modern Monetary Theory movement.

Regarding now the link between money and employment, I think there is a clear link between them, because in the capitalist economies, money is at the beginning of production. It’s at the beginning, and it’s at the end. And you have to create money to start production. And by the act of creating money, you create production, and at the same time you create jobs. So in capitalist economies, you need money to create jobs. You have to provide money. And when you say ‘money’, it’s not just existing savings, or means of payment, but newer means of payment – monetary creation. That’s why there is a strong link between money and employment.

Seijo: So I was wondering, if we can take those ideas – money is inherently political, and that in the production context it’s present in the first and last instance – and I was wondering if we could apply it to the pre-colonial northern and western African societies. And I was wondering if you had any insights into the credit and debt relations that perhaps preceded European invasion and colonization.

Sylla: Yes, in fact, the role of money in … capitalist economies is obviously different to its role in pre-colonial, pre-capitalist societies. Because if you remember the formula of Marx, M-C-M’ [Money-Commodity-Money plus], that means you have money at the beginning, and also money as the object of production. In pre-colonial societies, pre-capitalist societies, money has a different function, and this is eloquently shown in the book of David Graeber, his best-selling book Debt, and he was saying in his book that pre-capitalist societies, the function of money is not only to facilitate economic exchanges, but first to rearrange, to repair existing social relationships. For example, in the case of West Africa, the currencies were used, for example, to pay dowries, to pay fines, but also blood price. If you take the national languages, you could see this importance of money in the language. For example, in my own mother tongue, which is Wolof, the word ‘nephew’ literally means ‘blood price’, while the word ‘uncle’ means ‘let him sell’. In fact, in the Wolof societies, the family structure was matriarchal, so the uncles who were … captured, could be exchanged with their nephews, and their nephews could also be used to play the blood price. So it was … one view about money.

But Africans before colonization knew also that money is not a commodity, but a social relationship, because you would see that there was many types of currencies, which had classical functions – unit of account, means of payment, store of value. They were commodity currencies for the most time – rubber bars, iron and copper bars, shells, cotton, things like that–and they knew, of course, that through those objects they were trying to shape social relationships. And there was the cowries, which were the … most successful currency, probably, in West Africa. And they were used throughout the region at the point that the people were talking about the cowries-Zone. And even the cowries were used, in fact, were listed, in France, so they could be exchanged with French currency. So money in the pre-capitalist societies was not … used primarily for economic objectives, but … for political and cultural, and sometimes religious, uses. But only, as in capitalism, to create, to accumulate value, to extract value, et cetera.

Ferguson: Thanks. So this leads to our next question: what changes under colonial rule? …. Do you see colonization, and changing money relations, as a purely top-down process, or do we see instances where local political, legal, customs, play a large role also in shaping colonial relations?

Sylla: Yeah. I would say that colonialism has transformed deeply the monetary experience of African people. First we have to remind that colonialism was first associated with … violence. And you could see that with the example of the conquest of Algeria. Because it happened in the 1830’s, and it was … the beginning … of the military colonization of the continent. What happened there was … looting, and the French troops, for example, looted the stock of gold, the stock of silver, of Algeria, and this was shared by the looters, by the French Treasury, and by King Louis-Philippe himself. And this was important because just after the conquest of Algeria, in 1848, there was the abolition of slavery in France. And this was something really important from a monetary point of view, because the slave owners, French slave owners, had to be compensated. … Part of the compensation was used to set up colonial banks under the supervision of the Bank of France.

This is, for example, the case for the Bank of Senegal, which was created in 1853, and which had its headquarters in a town named Saint Louis in the north of Senegal. And this Bank of Senegal is the ancestor of the current Central Bank of West African States. So you could see through this telling example the relationship between debt, credit, money, and … the setting up of the banking system. I [remind] this story because the creation of this Bank of Senegal was illustrative of the objectives of the … colonial project and also the place of money in the colonial project. Because the colonizers used money for extractive purposes–that means to bring the colonies to produce the resources and products demanded by the metropolis, and also to drain economic surpluses to the metropolis.

At that time, there was something called the “Colonial Pact.” … The Colonial Pact is not really a pact, … [a] convention between partners. It was a way of designing … the operating principles of the colonial economy. And those operating principles were, for example, the fact that the colonies were legally prohibited to industrialize–they had just to supply raw materials to the metropolis, which would transform them into finished products, and then sell them back. The metropolis had also the monopoly on exports and imports from the colonies. It also had a monopoly on the transportation of the products of French trade of the colonies. And in this colonial economic system, the role of money was to allow this extraction of value. That’s why, when banking credit was created for production, it was limited just to the production of cash crops and raw materials demanded by the metropolis. And when credit for consumption was created, it was just to create a demand for the goods imported from the metropolis.

[W]hat is sad is this colonial function of money is still in full force in countries using the CFA Franc. So the first impact of … the introduction of colonial currencies has been to kill the monetary pluralism that was a characteristic of African polities. Because you could see, in the same town, different currencies. But when the European powers came, they wanted to lower transaction costs. That’s why they created currency blocs. But those currency blocs were not what we would call now ‘Optimal Currency Areas’; … they were created just for colonial purposes. And by doing that, the colonial powers have disrupted African economic structures, and they have made them dependent on external economic diktats. That means they are no longer sufficient, … economically speaking.

Ferguson: So, to follow up on that, you were discussing the ways in which you’re very critical of the commodity theory of money, which we sort of associate with the classical political economy of Locke and Smith, and it transforms, and takes on new forms, in the marginalist revolution, and the turn to what we call neoclassical economics. Where does that intellectual history link up with the story of European invasion, colonization, and violence?

Sylla: I think that neoclassical economics does not talk in a satisfactory way about the origins of money, and how money was created, for example, by … countries or regions which have been colonized by Europe. They will just say that money was created because it is more efficient than barter. And European powers, of course, knew that money does not work like that. That’s why what they did first [was] imposed their own currency. In our book, we have quoted Hyman Minsky, who used to say ‘everyone can create money; the problem is to get it accepted’. And for me, this is really interesting when we think about the story of the imposition of colonial currencies.

If we take the case of the cowries, for example. When France conquered West Africa, and created the Federation of West Africa, the first thing they did is to stop the imports of cowries, because the cowries came from the Indian Ocean. And so they stopped that, and sometimes they went to markets with military people, just to impose traders to use the French currency. And they have put legal sanctions for people not accepting French currency. But we also see the importance of … the fiscal instrument, to generate a demand for money. Because through the obligation that indigenous people have to pay taxes, they created a demand for the colonial currencies, because people had to work in sectors where they would receive the cash, so they would be able to pay their taxes. And this is something which, let’s say, this process, this way of ‘money-to-work’, you could not see that in neoclassical economics, but you could see that, clearly, for example, in Modern Monetary Theory. That is, the issuer of the currency has to spend, first, before … the people who have to pay taxes pay their taxes. This is something you could see in the history of the colonial currencies, but this kind of story, you will never find that explained in neoclassical economics.

Ferguson: So, I know this is a sweeping generalization, but would it be fair to say in terms of the conscious intentions and actions of the French in the 19th century, that they were commodity theorists at home, and chartalists abroad when they needed to be?

Sylla: Yeah, I would agree with that. They clearly acted in the chartalist way. And yeah, they knew that if they wanted to substitute the French currency, and abolish the indigenous currencies, they had to impose taxes. … Through that, they were able to create a demand for the French currency. Because African people had resisted … five decades before they came to really accept the French currency. And this had been possible through the fact of saying if you do not pay taxes, you will face legal sanctions, and yeah you have to pay taxes. And when you have to pay taxes, you have to earn money, and you could earn money only by producing what is demanded by the metropolis. And that’s how they manage to impose their currency.

Ferguson: Thank you.

Seijo: So I wanted to bring this back to some of your more recent work, specifically on the CFA Franc. And I was wondering if, for our listeners, you could define what the CFA Franc is, and then, perhaps, narrate how it shaped the post-colonial political economies of Francophone Africa in the early years of decolonization.

Sylla: Yeah. The CFA Franc is … a currency born during the colonial period. Now it is the acronym for two different currencies. The first is the Franc of the African Financial Community, this is the currency of eight countries, members of the West African Economic and Monetary Union. And there is another CFA Franc, it’s the Franc of the Financial Corporation of Central Africa, for the six countries belonging to the Central African Economic and Monetary Community. So we have two CFA Francs, but at the beginning there was just one CFA Franc. And the beginning was in 1945, that is just after the Second World War. And at that time, the acronym meant ‘Franc of the French Colonies in Africa’. So it was clear that this was a colonial currency, which was circulating in sub-Saharan colonies of France. The currency was created, officially, on December 26, 1945, by the General de Gaulle and his Finance Minister.

30 Minute Mark

Sylla: [It was clear that this was a colonial currency] which was circulating in the sub-Saharan colonies of France. The currency was created officially on December 26, 1945, by General de Gaulle and his finance minister. And the currency was created the same day that France ratified the Bretton Woods agreement; the same day also that the new parity of the French franc was declared to the IMF (which was just born).

The CFA Franc was created in a context where the French economy had been destroyed during the war, and there was not enough foreign exchange reserves. There was high inflation, many shortages, et cetera. And so, the decision at that time was whether we should have a devaluation of the French franc, which would be homogenous throughout the empire. Because at that time, there was just one currency circulating in more or less the whole empire, except, for example, in India and Indochina. It was the French franc which was circulating in the empire, and of course the bank notes were more or less differentiated from one place to another. But it was basically the French franc. And as the French economy was in a more precarious state, the technicians of the ministry of finance in France said “it would be better that we devalue the French franc.” And that decision implied that the new currencies be created. And the CFA franc was created in that context.

That means it has been created with a devaluation of the French franc. And the devaluation of the French franc has abolished what was called “monetary unity”—that is, one currency circulating in the whole empire. So, the CFA Franc is … a devalued French franc. But what is interesting is that when the CFA Franc was created, it had an external value higher than the French franc, because one CFA Franc was exchanged with 1.70 French franc. And in 1984, there was a devaluation of the French franc, which was not followed in the colonies. And as a result of that, one CFA Franc was worth 2 French francs. That means that the CFA Franc was born overvalued, because in the British colonies, their currencies had parity, which was obviously weaker than the British pound. But France decided to keep the CFA Franc at an exaggerated external value, because it was in interest for France to break up the ties that the African colonies had nurtured during the war with the other parts of the world—for example, Latin America and Asia.

During the war, the trade between France and its colonies had decreased a lot, and France wanted to regain control of that trade. And so, it was interesting for France to have colonies with overvalued currencies. As a result of this overvaluation, the colonies could no longer sell competitive products in Asia and Latin America, so they were obliged to sell it to France. And at the same time as their currency was overvalued, they could buy, cheaply, goods from France. So it was very profitable for France to have colonies with overvalued exchange rates. What was also profitable for France is that the French franc was, at that time, a very weak currency. And the Bretton Woods regime was a regime with U.S. dollar hegemony. And goods had to be bought in U.S. dollars. But with the CFA Franc, France could buy all the raw materials, all the products, in its colonies without using U.S. dollars, because France could just credit the amount of exports of the colonies in the French franc. And that’s what France did. This was really important for France, as it contributed to strengthen, a little bit, the French franc exchange rate. Because if France had to earn dollars to buy its imports in Africa, it could have been very disruptive for the French economy, which was really in a mess just after the second World War. The creation of the CFA Franc was also a means for France to have total control on its colonies, because all the decisions—economic, financial, and political—were taken from France.

Seijo: So you’ve just explained the historical creation of the CFA Franc, and how it shaped African political economics. Could you talk about what the current status of the CFA Franc is, and how it’s related to the Euro currency zone?

Sylla: Before answering that question, I’ll give some context about why the CFA Franc still exists. Because after the creation of the CFA Franc, there was some political concessions from France, which allowed the colonies more autonomy and which recognized some rights—labor rights, etc. This process has led to decolonization. But what is particular in the case of France is that other monetary blocks—because in Africa you had many monetary blocks: you had the sterling area; you had the peseta zone; you had the Belgian monetary zone; the dollar zone —and all those monetary blocks were dismantled after formal decolonization.

But this did not happen with France. Because when France knew that the decolonization was something inevitable, France said to African leaders—because most of the Francophone leaders were trained in France; sometimes they even had seats in the French parliament; and those elites would afterwards rule the newly independent African countries. And France told those leaders: I will grant you independence, provided you sign what was called “cooperation agreements”—that means agreements giving France monopoly rights in many areas, for example: raw materials, currency diplomacy, armed forces, higher education, civil aviation. In all those domains, there were cooperation agreements. And this was something very clear: the prime minister of France at that time wrote to the Prime minister of Gabon at that time, telling him that we will grant you independence but you have to sign those agreements. Without the signing of those agreements, no independence. And it was clearly written. As a matter of fact, all those countries would more or less stay in the safer zone. You could see even in the case of a country like Gabon the cooperation agreements were signed the day of its official independence. So that means that in Francophone Africa, there was not really a full decolonization, but only a partial decolonization. So this is the context which explains why the CFA Franc survived the wave of formal independences in Africa.

Ferguson: This history, it seems to me, is illuminating in a way that we often don’t hear when we hear about the story of decolonization. We hear narratives about various formerly colonized peoples winning or receiving or agreeing to take up their own political autonomy or their political capacity, but they remain economically dependent. And usually, my sense of the way that that conventional narrative is told, even if it’s on the side of decolonialization, it takes money for granted—sort of treats money as a commodity, and doesn’t really open up a question of how money is really the central question and problem when it comes to the process of decolonialization. Is that your sense? Do you have a sense that putting money at the center of the story brings new light to this history?

Sylla: Yeah, and I must say that I have learned a lot, and [began] seeing things differently, when I started to work on the CFA Franc. I had the more or less conventional view about the process of decolonization, but when you factor in the money aspect, you see why you could not really talk of real decolonization without taking into account whether the money management was decolonized or not. And clearly, in the case of the CFA Franc, one of the most important aspects for France was to have the CFA Franc zone maintained. And you could see many statements from ministers, from MPs, saying that it’s important that African countries remain in the CFA zone. Because if they remain in the CFA zone, it is as if those African countries were an administrative department of France. Because as France could buy all African products, just by credit—so it is a very critical thing for them, very critical, because they could buy everything just by crediting it in their own currency in the operations account. And that means that what is called the exorbitant privilege for the U.S. dollar is somehow what France enjoys in its former colonies through the maintaining of the CFA Franc. Because France has an exorbitant privilege. But now this has declined with the arrival of the Euro. But nonetheless, it has been a very important exorbitant privilege. And I think that, without this arrangement, it would have been really tough for France to rebuild its economy and also be a major economic power.

Seijo: So can you talk a little bit about how the CFA Franc is operating in the Euro context?

Sylla: In fact, the CFA Franc mechanisms have not changed since colonial times. They are really simple; they are based on four principles. The first principle is the fixed parity against the French currency. Which was the French franc before, and now the Euro. That means the peg is always there, it’s the same peg and it normally should not be devalued. The second principle is the freedom to transfer capital and incomes within the Franc zone. The Franc zone gathers the 14 countries using the CFA Franc, and also the Comoros and France. The Comoros have a so-called national currency, but it functions in the same way as the CFA Franc. It’s just the parity that is different; otherwise it’s more or less the same working principles. The third principle

45 Minute Mark

Sylla: The third principle is that the French Treasury promises to guarantee the convertibility of the CFA Franc into French currency. And this convertibility guarantee means that the French Treasury promises to lend foreign reserves, Euros, to the two central banks–the one in West Africa, the other in Central Africa–if they no longer have any foreign exchange reserves. That is the promise of lending money. It is as if the French Treasury was acting like a private IMF for the African Central Banks. [A] private IMF to say that if they have … [a] shortage in foreign reserves, [the] French will be there to lend them money so that the fixed peg is maintained, so that the free transfer of capital in incomes will not be impeded. What has to be said is that France has seldom performed that role of lending money in times of crisis.

The fourth principle is that, as a result of this convertibility guarantee by the French Treasury, the central banks, the central banks are required to deposit in a special account of the French Treasury fifty percent of their foreign exchange reserves. After independence, this was one hundred percent. This has been lowered to sixty five percent in 1973. And since 2005, it’s fifty percent. So, those foreign exchange reserves are deposited at the French Treasury as a counterpart to the guarantee of convertibility. And this is something you would never see anywhere else than the CFA Franc. All of these mechanisms date back to the colonial period. And they are still functioning like they functioned in the colonial period. The French authorities are represented in the bodies of both … central banks and they have veto power. That means that no monetary policy decisions, including the decision to devalue the CFA Franc, can be taken without the approval of the French government.

People don’t know also that the CFA Franc is a currency unknown in international markets. Every time a CFA Franc is exchanged against the Euro this has to pass through the French Treasury. That means that the French Treasury is de facto the foreign exchange office of African countries because the CFA Franc is unknown in international markets. Everytime there is a conversion it is through the French Treasury. I have to add that the bank notes, the coins are still produced in France without any international call for tenders. And the stock of gold of the central bank of West African states is at 90% held by the Bank of France.

All these elements show that the CFA is a colonial monetary arrangement. It’s workings have not changed with formal decolonization. It is interesting to say that [in] the first report about the Franc Zone published in 1953, it was clearly indicated that the CFA Franc is technically similar to the French franc. In fact, the CFA Franc is a sub-multiple of the French franc because there is a total integration between the monetary space in the franc zone countries and the monetary space of France. So, it’s the same money. The sole difference is that, for the CFA Franc countries, you have different bank notes; but it’s more or less the same.

Now with the era of the Euro, you could say that the CFA Franc is the sub-multiple of the Euro. What has really changed with the arrival of the Euro is that the governance of the CFA Franc now includes the European Union authorities [Council of the EU, European Central Bank, Economic and Financial Committee]. Because when the French knew that the French franc would disappear and [cede] it’s place to the Euro, they negotiated with their European Union … partners and they [said] they want to peg the CFA Franc with the Euro. They had to negotiate that with their partners because there were some critical voices, for example Germany and Austria, which [said] that, normally, if France want[s] to peg the currency of its former colonies, it’s the European Union who will be sovereign. There will be no place for France to [have a] say. What happened is that France was efficient enough to convince the European Union authorities [of] the fact that guaranteeing the convertibility of the CFA Franc is not a danger to [the] French public budget and so to European Union stability. They made a compromise on that basis.

The compromise was that now France [had] to have the consent of European Union authorities if the membership of the CFA Zone is to be enlarged. Also, exchanges have to be brought to the French convertibility guarantee. In the same way, France should give the European Union authorities prior information in the case that the CFA Franc parity is planned to be modified. For example, if a devaluation is planned France has to inform first the European Union authorities. These dynamics mean that now the CFA Franc is under the tutelage of both France and the European Union authorities. So, this is a change brought by the arrival of the Euro.

The second change …. has, let’s say, an economic nature. By pegging the CFA Franc to the Euro, now the African countries and their central banks are more or less submitted to the same restrictive rules in terms of inflation, public debt and public deficit[s]. The mandate of our central banks is to have price stability and they target a rate of inflation below three percent. This kind of setting tends to lead to deflationary outcomes, which are bad for the long-term growth of African countries. The other thing is that African countries receive their export income in dollars, whereas their currency is pegged to the Euro, which has often appreciated a lot vis-a-vis the dollar. For example, between 2002 and 2008, the Euro has appreciated a lot vis-a-vis the dollar–more than ninety percent cumulatively. At that time, many agricultural producers were bankrupted because of just one factor: the Euro was so strong. So, the arrival of the Euro means less export competitiveness for African countries. This is a serious handicap for structural transformation and also the capacity to record trade surpluses.

Ferguson: In the way that you tell the story of the rise and evolution of what is essentially a colonial project, the CFA Franc, it seem that it begins with a clear, somewhat clear, chartalist intention and consciousness. But by the time we get to the later twentieth century and the Eurozone, it seems like the chartalist insights, as evil as they were put to use, are really lost. And my sense is that this happens in the way that both the Eurozone and, of course, the CFA Franc really provide little place for fiscal capacity in any of the European economies or the Francophone African economies. Is that fair to say?

Sylla: Yes, that’s true. Because we are no longer in the same type of international mindset. From 1945 to 1980 more or less, there was the idea that economic development should be encouraged using heterodox policies. And so there was an active role for central banks and an active role for states. But since then the mindset has changed. Now, monetary policies are too orthodox, at least for developing countries like those of the CFA zone. The budgetary policy, fiscal policies are too orthodox. African countries are trying to follow the dictates of France, the IMF, and also the European Union. You don’t have to have budget deficits. You don’t have to borrow money passed some given level, etc. And so, it has become difficult for many countries. At that time, as you say, there was this chartalist perspective by France on African countries. But with the integration of France in the European Union this chartalist perspective has disappeared. Because now France had no longer the same margins to create money to, let’s say, buy African products. France is no longer sovereign monetarily and you could see that with the relationships with the African countries, which are blindly following the crazy Eurozone model.

Ferguson: We’ve been talking at a theoretical level for a while and I was wondering if you could give our listeners a real contemporary example of the disaster that the CFA Franc for people in communities, whether it’s in Senegal or elsewhere.

60 Minute Mark

Sylla: You just take a look at the long term growth rates. For example, if you take the real GDP per capita of the most important economies in the Franc zone, you’ll see that today it is lower than 40 years ago. Take the case Côte d’Ivoire. In 2016, its real GDP per capita was 1/3 lower than it was in 1978, which was its best year. The annual growth rate of real GDP per capita for Côte d’Ivoire, between 1960 and 2016, is more or less 0.5%. In my own country, Senegal, during the same period, annual rate of growth for real GDP per capita is 0.02%. That means there has been no long term growth at all.

Nowadays, you will hear people say that the CFA Franc countries today have a high rate of economic growth. And that’s true; since 2012 there has been a 6% rate of economic growth. But this is a kind of economic growth which is catching up with the past best levels of economic performance. Out of the whole 14 CFA Franc countries, 9 of them are ranked as less developed countries, and four of the remaining five have a real GDP per capita lower than they had in the 1970s and 1980s.

What’s also interesting is that you could not explain why this CFA zone still exists. Because you’ll see that trade between African countries and the Franc zone is very limited. In Central Africa, it’s less than 5%. After 70 years of so-called monetary integration, they have just much less than 5% of original trade. If you take the case of West Africa, it’s better but nonetheless not very important. Between 10-15%. If you take also the level of competitiveness of African countries of the Franc zone they fare the worst in the world. In w Africa, except Côte d’Ivoire all the remaining countries and chronically in a state of trade deficit. Countries like Benin, Niger, Mali, Burkina Faso, they never recorded one year of trade surplus. They are structurally in a situation where they have to be indebted in foreign currencies. They will never be able to develop because the mechanism of the CFA Franc will never allow them to be developed. On the one hand, as I said earlier if you want to produce you have to create money, but in the CFA Franc Zone the central banks are more or less forbidden to facilitate money creation. The reasoning of the French authorities for this is very simple. They say that more bank credits means more imports. More imports mean less exchanged reserves. And less exchanged reserves imply more pressure to defend the fixed peg to the euro. So at a macroeconomic level there is this rationing of credit. And there are some crazy indicators that show that the CFA Franc exchange rate is more or less functioning like a currency board. That means that the monetary base of CBs is covered nearly at 100% by foreign reserves. In this context there is not enough credit to stimulate production. And those who happen to produce in order to sell abroad cannot be competitive because the currency is too strong because it is pegged to the Euro.

So on the one hand, there is no credit for production. And when you are able to produce you cannot sell abroad because you have a strong currency. Because you have no monetary sovereignty. So this is the case of the CFA Franc zone and that’s why there is no economic dynamism at all. Economic growth in the CFA Franc zone is never triggered by internal dynamics, but just by external dynamics. For example, good terms of trade and cheaper interest rates, … on international financial markets. So this is the sad story of the CFA Franc. Somehow owing to these mechanisms when there are economic crises it’s much more difficult for CFA Franc countries than others because the exchange rate cannot be used as a policy variable. As they follow the neoliberal rules, so public deficits are not really encouraged and the central banks generally in those circumstances follow an orthodox monetary policy, and that means that whenever there are economic crises, the main way of adjusting economically is what is called internal devaluation. That means lowering internal prices and limiting public deficits and letting the private sector enterprises go bankrupt. That is the main mechanism of adjustment in the CFA Franc.

Siejo: So, given those harms, how has the CFA Franc been challenged by African people and governments, in the past and now?

Sylla: There have been many attempts to challenge the CFA Franc, at least there have been four periods. The first took place just after the independences. Guinea was the first [Sub Saharan African] country to challenge the CFA Franc. Guinea took their independence in 1958. Two years after, they had their own national currency and left the CFA Franc. But France did not accept that, and in retaliation the French secret services flooded the Guinean economy with counterfeit bank notes. Through a large scale military operation called Operation Persil. This operation is described in books and especially by the people who performed it. And obviously those counterfeit banknotes disrupted the Guinean economy, and this was a warning from France saying that if you want to get rid of the CFA Franc reflect twice because we will sabotage your economy.

Another example is Togo in the early 60s. They had a political leader named Sylvanus Olympio, who had been trained at the London School of Economics. He wanted a national currency and to diversify Togo’s international relationships, namely with American, German, etc. But he had never been able to create his national currency because he was killed days before its launch, in front of the American embassy in 1963. Togo and Guinea were the first two countries to challenge France, but more or less they have failed. Togo has failed and Guinea has exited, but its economy never recovered.

There were also attempts to challenge France in the mid 1970s. In that period, there was some turmoil following the suspension of the Dollar-gold convertibility. Africans were angry to see that France had devalued its currency without warning them. This devaluation of the French Franc was followed as a result of the fixed peg by the African countries using the CFA Franc. This has increased inflation, the debt burden, and also had reduced the value of their foreign exchange reserves. Because at that time, all the foreign exchange reserves were held at 100% in French Franc, so Africans were not happy about that. France responded with some minor concessions. Since then, France allowed African countries to reduce their monetary deposit rate to 65% and accepted that the CBs now be managed by African staff. Until the mid 70s, the CBs managers were in Paris. But as I said earlier, France is still represented and has a veto power.

There was a third wave of challenges in 1994, when the CFA Franc was devalued for the first time in its history. This was a shock for many African leaders who opposed the devaluation, but it was nevertheless enforced by France and the IMF. When France decided that there would be a devaluation, this produced inflation, impoverished urban dwellers and led to riots in which many people were killed in the days that followed. Those protests were not against the CFA Franc in particular, but were an immediate response to the devaluation.

And now there is this current wave of protest that started in 2015/2016, and what’s interesting about this wave is it’s more popular and more Pan Africanist. For the first time, everyone is talking about the CFA Franc. Recently, Italian government officials accused France of behaving like a colonial power in Africa, and this of course brought more visibility to the CFA Franc.

There is an episode which is not really known, but which is interesting as it illustrates how France dominates this system…

75 Minute Mark

Sylla: Now the issue of the CFA Franc is gaining more visibility and recent declarations of Italian government officials accusing the French of behaving like a colonial power in Africa have also given more visibility to the CFA Franc.

There is an episode which is not really known, but which is also really interesting as it illustrates how France dominates this system. In 2011, there was a presidential election in Côte d’Ivoire. There was some tension between Laurent Gbagbo, who was the incumbent President and Alassane Ouattara, who was a former IMF staff and also a protege of France. There was an electoral dispute and France [took] sides with Ouattara. To put pressure on the Gbagbo government, the French government asked the BCEAO, the central bank of West African states, to stop supplying the Ivorian economy with bank notes, and to stop dealing with the Gbagbo regime, which could no longer access its accounts at the central bank. The French government also asked the French banks’ in Côte d’Ivoire to cease all external operations, and finally, the French government blocked the operations account. The operations account is the account where all operations to convert the CFA Franc into Euros, and vice versa, pass.

As a result, there was a financial embargo against Côte d’Ivoire and against the Gbagbo regime. The Gbagbo regime [then] chose to create a new national currency and were [having] discussions with some countries [about helping] them manage their foreign exchange reserves. But they didn’t have time to create this new currency, as France bombed Gbagbo’s palace to install Ouattara. This was one intervention among more than forty-some done by France since the independencies in Africa.

So, there have been many attempts to challenge the CFA Franc, but each time France has been very strong and sent very clear messages that France will never allow African countries to exit the CFA Franc. But I think now with the current wave [of dissent], it will be much more difficult for France to have that stance.

Ferguson: From what I’ve read, there seem to be two resistance strategies right now to the CFA Franc, and ways of exiting it and potentially breaking it up. Could you quickly outline those two strategies and discuss what you believe their strengths and weaknesses are?

Sylla: Yeah. In fact, we could exit the CFA Franc on a national basis. That means Senegal would say, “I want my own national currency,” and so I’m exiting the CFA Franc. This is the path followed by Guinea, Mauritania, Madagascar, etc. And legally speaking, it [would be] very easy. The Senegalese government would just have to notify the West African monetary union of this decision, and in six months they could have their own national currency. But it’s difficult because if you go alone, you don’t know what consequences you could face from France. This is what I call the nationalist exit, but there is another type of exit, what I call the Pan-African exit. That means, instead of African countries trying to initially have their own currency, they say, “we no longer need France.” France could [then leave] the CFA Franc system.

This option is made plausible by the fact that the so called guarantee of convertibility by France doesn’t exist because this guarantee of convertibility, as I said, is a promise to lend money in Euros when the central banks are devoid of any foreign exchange reserves, and this generally doesn’t happen. It [only] happened in the 80s because it was a very difficult period marked by the international debt crisis, and even in that time the amounts lent by France were really ridiculous. Since African countries [were] independent in the 1960s, the French convertibility has been used for about a decade. That means that African countries don’t need France, and they could tell France that they don’t need its “convertibility guarantee”. That is possible, but the Pan-Africanist and the nationalist exit are just formal ways of exiting the system. The important questions are, “what are you going to do? How could we achieve monetary sovereignty?” In this regard, there have been many proposals.

Seijo: What do you see as the path forward for African nations looking to exit the CFA Franc?

Sylla: With regard to the issue of how to get out of the monetary status quo, there are in my opinion, four different points of view. First, there is the perspective I call symbolic reformism, which consists [of] touching only the visible systems of monetary coloniality without touching the fundamentals of the CFA Franc system. This includes proposals such as changing the name of the CFA Franc, having banknotes and coins manufactured outside of France, and even further reducing the deposit rate of foreign exchange reserves at the French treasury. Emmanuel Macron, for example, made this type of proposal, and he even suggested that he was open to expanding the CFA Franc zone to a country like Ghana.

There is the second perspective that I call adaptive reformism. These are reforms that aim to adapt the CFA zone to the current context, marked by the economic and geopolitical decline of France and the Euro, but with the ultimate objective of maintaining it. This is the case, for example, of those who want the parity of the CFA Franc to be more flexible because the peg to the Euro is too rigid and undermines the price competitiveness of African exports, and because the CFA zone is increasingly trading with China and other countries [using] the US dollar.

For many economists of different sides, there is this proposal of [basing] the exchange rate of the CFA zone on a basket of currencies, but the problem with this perspective is that it is simply unrealistic because it ignores the functioning of the CFA zone. Exchange rate flexibility is not an option in the CFA system because the convertibility guarantee is offered at a fixed exchange rate and in the currency of the guaranteeing authority. Many people who claim to be experts and moderate [still don’t] understand that the demand for flexibility is incompatible with the maintenance of French guardianship; it is one or the other.

Thirdly, there is the perspective I call neoliberal abolitionism that is an exit from the CFA Franc that follows the neoliberal monetary integration model. By that, I am referring to the Eurozone model. I have in mind those countries in West Africa who want to be part of the single currency project of the ECOWAS (Economic Community of West African States). This single currency project for West Africa normally should be launched next year, but I don’t this this will be done, owing to technical and political problems. Technically, no country yet fulfills the convergence criteria copied from the Maastricht Treaty and defined as prerequisites for entry into the new monetary zone to be created. Politically, the current Nigerian President, who has just been re-elected, Muhammadu Buhari, has been demanding, since 2017, a divorce plan from the French treasury of the eight West African countries that use the CFA Franc, but [since] then, the countries of the West African monetary union that use the CFA Franc have remained silent, for fear of angering France. It is very unlikely that there will be an ECOWAS single currency by next year.

Even if it were possible, for me it would be a very bad idea, for the simple reason that sharing the same currency is not justified among ECOWAS countries, owing to a number of factors, like for example Nigeria’s disproportionate weight. Nigeria accounts for at least 70% of West African GDP. [As well], there are differences in economic specialization. Nigeria is an oil producer and exporter, whereas, you will find in West Africa at least nine countries which are net oil importers. There is also the fact that economic cycles are not synchronous in West Africa and the level of inter-ECOWAS trade is very low. All of these elements point to the fact that a single currency is premature and not justified economically in West Africa. We have to also say that there is no planned federal fiscal mechanism, but rather, limitations on public debt and deficits, following the Maastricht criteria. That means, in case of economic crisis, countries in this currency union would only have the option of so called internal devaluation [via] the lowering of internal prices, which often comes to austerity policies and the growth of unemployment.

Lastly, there is my extremely minority perspective which I call sovereign abolitionism that is an exit from the CFA Franc that breaks with the neoliberal model of economic integration and that strengthens the sovereignty of individual countries and also the sovereignty of [countries] collectively. If we put aside the political criticism of the CFA Franc, the real economic criticism is that the CFA zone must not exist because it has no economic justification. It is not a so called “optimal monetary zone.” Each country must have its own national currency because economic fundamentals, levels of development and productive dynamisms are not the same. But saying that does not mean that we cannot have systems of solidarity between African countries. For me, this is possible.

That’s why my preferred option is that of solidary national currencies. Concretely, that means that each country has its own national currency with its national central bank. The exchange rate parity is determined according to the fundamentals of each country, and countries have a common payment system. Their currencies are linked by a fixed but adjustable parity to a common unit of account, and also there is solidarity in the management of foreign currency reserves. Finally, there are common policies to ensure energy and food self-sufficiency, because in the ECOWAS zone energy and food products represent between 25-60% of the value of imports, depending on the country.

The advantage of this option for me is that it makes it possible to reconcile macroeconomic flexibility at the national level, that means the possibility to use the exchange rate as an instrument of adjustment, and at the same time to have solidarity [between] African countries. This option also helps break the Anglophone, Francophone, and Lusophone divide, [which] is a legacy of colonialism. What is unfortunate is that this option is unlikely to emerge. Generally, people talk about national currencies in the CFA zone, and many Pan-Africanists are convinced that Pan-Africanism means having a single currency for the largest possible number of African countries. I see this position as not really solid on economic grounds. Unfortunately, those who defend the CFA Franc are not interested by national currencies and those Pan-Africanists that want to get rid of the CFA conceive of the alternative as just the single currency, but not national currencies. That is a little bit unfortunate, but obviously, I will try to push this argument about the necessity to have national currencies organized in a solidary way.

Seijo: Before we conclude, we wanted to give you the opportunity to talk to our listeners, and tell them what they can do to help overturn this unjust monetary order.

Sylla: To finish, I would like to make a call to the MMT community to join us, to support our fight for the abolition of the CFA Franc and also for an international monetary system better suited to the needs of developing countries, the so called global south. In this perspective, if the basics of MMT were made more available in French, and other languages besides English, it would also help.

Seijo: Well, Ndongo, it was a real pleasure having you on Money on the Left.