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Introduction – The Last Colonial Currency: A History of the CFA Franc – Part 1

Summary:
I have been commissioned to write the Introduction (Preface) to the upcoming book – The Last Colonial Currency: A History of the CFA Franc – by Fanny Pigeaud and Ndongo Samba Sylla, which is an English version of the original 2018 book, L’arme invisible de la Françafrique. It will soon be published by Pluto Press (UK) – as soon as I finish this introduction. The book is incredibly important because it shows the role that currency arrangements play in perpetuating colonial oppression and supporting the extractive mechanisms that the wealthy have used for centuries to further their ambitions. It also resonates with more recent neoliberal trends where these extractive mechanisms, formerly between the colonialist (metropolis) and the occupied peripheral or satellite nation, have morphed into

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I have been commissioned to write the Introduction (Preface) to the upcoming book – The Last Colonial Currency: A History of the CFA Franc – by Fanny Pigeaud and Ndongo Samba Sylla, which is an English version of the original 2018 book, L’arme invisible de la Françafrique. It will soon be published by Pluto Press (UK) – as soon as I finish this introduction. The book is incredibly important because it shows the role that currency arrangements play in perpetuating colonial oppression and supporting the extractive mechanisms that the wealthy have used for centuries to further their ambitions. It also resonates with more recent neoliberal trends where these extractive mechanisms, formerly between the colonialist (metropolis) and the occupied peripheral or satellite nation, have morphed into intra-national urban-regional divides. I am very appreciative for the chance to write this introduction for these great authors. This is Part 1. Part 2 follows tomorrow. And then you can all rush out and purchase the book.

Introduction

Metropolitan France has been torn in 2019 by the uprising of the gilets jaunes, who give credence to the prediction made by Christian Guilluy in his 2016 book Le crépuscule de la France d’en haut that there would be a “modern slave rebellion” against low pay, high unemployment, and high taxation, all of which has spawned rising inequality and a depressed material outlook among the regional working class in France who lead struggling lives in “La France périphérique”.

Guilluy’s culprits are the so-called “bourgeois-bohèmes” or “bobos”, the urban elites who have largely benefited from the globalised world and have “supported the economic policies of the upper class for 30 years now”, which reward them with well-paid employment, superior status, rising wealth through housing price inflation, often through the gentrification of traditional working class suburbs, access to a diversity of cultural pursuits and the rest of it.

But while this group have embraced globalism, the working class, who live and struggle outside the “new citadels”, have increasingly been left behind. To accentuate the divide, these global beneficiaries adopt a rather schizoid attitude to the disadvantaged.

The ‘bobos’ on the Left (referred to in the modern hip jargon as ‘the woke’) speak of international solidarity and advance, in David Harvey’s words, “the Kantian dream of cosmopolitan republicanism” (Harvey, 2000).

But then, as if forgetting their bountiful faith in humanity, they accuse those who support Brexit or the breakup of the EU, for example, as being ‘particularists’, who are racist and supportive of xenophobic nationalism, are ignorant of human potential, and have abandoned the moral responsibilities to a greater humanity. This disdain soon morphs into accusations about fascism and all manner of evil.

It is clear that La France périphérique is in rebellion, albeit somewhat disorganised.

But the shift in outlook is undeniable. And it has been exacerbated or engendered by the fact that the traditional political voices of the working class, the Socialist Party in the French context, has largely been seen as being complicit in introducing policies that have worsened the divide.

Guilluy’s thesis translates directly to recent events across the English Channel, where the disdain for Brexit among the urban, educated elites, who otherwise advocate progressive policy interventions by government, compromised the British Labour Party so much that it turned its back on the traditional supporters in the Midlands and the Northern regions and reneged on its promise to support the Leave outcome of the June 2016 Referendum. History now tells us that that decision has had catastrophic consequences for the Party’s electoral prospects into the future.

As British academic Ursula Huws (2019) noted:

… the very creation of the category ‘woke’ sets up the counter-category of the ‘unwoke’. People who do not share the ‘woke’ values are likely to be characterised as racist, sexist, homophobic and transphobic. Not only are they considered stupid and unenlightened; they may even be demonised as proto-fascist ground troops, vulnerable to any siren call from the far right that is directed towards them.

And therein lies the problem. Nobody likes to be labelled stupid or ignorant. Or to see their culture demonised.

I raise these issues here because they illustrate how neoliberalism has evolved over the decades. Our meaning of the term ‘periphery’, as it entered the lexicon via world systems theory, has changed.

The underlying neoliberal ideology that has created these urban-regional divides among people in our advanced nations in recent decades is, in fact, an advanced expression of the earlier extractive mechanisms that the wealthy have used for centuries to further their ambitions through invasion and occupation (colonialism).

In that context, the ‘periphery’ referred to the less developed nations relative to the ‘core’ nations, the latter being where wealth and economic power was concentrated.

One of the curiosities I have encountered in my work as a development economist is: Why are the nations in Africa, for example, so poor, when it is obvious to all and sundry that they possess massive resource wealth and burgeoning populations, that would achieve high levels of education and skill development in advanced nations?

This is the topic of dependency theory, which provides a solid framework for understanding the nature of underdevelopment.

Dependency theory was developed to help us understand the functional relationships that define how the two types of nations interact and how the core extracts productive resources and wealth from the periphery in the name of economic development.

In other words, the ‘core’ is reliant on exploiting the ‘periphery’ for their continued material prosperity and to prevent realisation crises occurring in their domestic markets.

The vehicle of that exploitation also evolved from the brutal slavery regimes to much more sophisticated and less obvious means of maintaining political and economic servitude.

Andre Gunder Frank, who completed his doctorate at the University of Chicago under the supervision of Milton Friedman, became a fierce critic of the free market approach espoused by the Chicago Boys, who were Friedman’s collection of doctoral students most noted for the socio-economic damage they did in Chile after the illegal overthrow of Salvatore Allende in 1973 by General Pinochet.

Gunder Frank’s 1967 book, Capitalism and Underdevelopment in Latin America, built on the late 1940s work by the economists Raúl Prebisch and Hans Singer.

The traditional theory of economic development (modernisation theory) suggested that nations follow a pattern where they begin as undeveloped, primitive societies and through industrialisation (investment, adoption of best-practice technology) and institutional and governance development, begin to operate like developed nations.

A middle class forms and incomes grow.

An export-orientation is then encouraged to plug the nation into the world economy.

The – Prebisch–Singer Thesis – challenged this traditional neo-classical theory (which originated from David Ricardo’s notions of comparative advantage) and conjectured that the terms of trade moved against poorer nations without an industrial base in favour of richer industrial nations.

In other words, the world prices of primary commodities (agriculture etc) declines over time relative to the price of industrial goods, which increases income and wealth inequalities across (and within nations).

The policy implications, pushed by the authors, included recommendations that the development process should begin with the creation of a import-competing manufacturing base.

Dependency theory extends that work and posits that the nations that we now consider to be developed were never ‘undeveloped’ in the way we view nations in, say, Africa.

Rather, the nations that are called undeveloped have a unique role in the world system unlike anything that the rich countries have ever played.

The mainstream view is that Africa is poor and interventions from the advanced nations are required to make it rich. But dependency theory considers Africa to be ‘rich’ and those riches are being continually drained to the benefit of the core wealthy nations.

Dependency theory posits that resource flows are from periphery to the core rather than the other way around. The rich nations do not ‘invest’ in the ‘income poor’ nations to make the latter richer.

Essentially, Gunder Frank argued that the underdeveloped countries were in that state because they were functionally essential to making the developed nations at the core richer.

So what the mainstream considered to be a rather benign supportive role by the colonialist, was rather better seen as the rich nations establishing processes (supported by international institutions such as the IMF and the World Bank) to ensure that resources flow to the benefit of the advanced world.

These processes, which include legal frameworks and tax rules, privatisation, and the imposition of fiscal austerity to suppress public good development, undermine the opportunities of the ‘income poor’ nations to use their own resource riches to their own advantage.

So the sort of policy structures advocated by multilateral institutions such as the IMF and the World Bank were not about developing the undeveloped nations.

Rather, they had the effect of developing the richer nations further and holding the underdeveloped nations in a state where they could act as resource conduits for the richer nations.

Along the way, the underdeveloped nations develop a middle class and a localised upper class but they only serve to drain the resources in favour of the richer nations even more efficiently.

Gunder Frank (1966: 20) said that the underdeveloped nations serve “as an instrument to suck capital or economic surplus out of … [the] … satellites and to channel … this surplus to the world metropolis”.

He also eschewed the use of export-oriented development – favoured by the World Bank and the IMF – believing that it destroyed the local subsistence systems and accelerated the transfer of surpluses to the core while leaving the peripheral economies heavily indebted and in precarious states.

A May 2017 Report from Global Justice Now – Honest Accounts 2017 – affirmed this view:

Africa is rich – in potential mineral wealth, skilled workers, booming new businesses and biodiversity. Its people should thrive, its economies prosper. Yet many people living in Africa’s 47 countries remain trapped in poverty, while much of the continent’s wealth is being extracted by those outside it.

There are many well-known methods of surplus extraction that have been used to maintain this situation.

And, currency arrangements are a crucial part of this story.

Modern Monetary Theory (MMT) shows that a currency is intrinsically related to the way the government is able to shift productive resources from the non-government sector to the public sector in order to fulfill its socio-economic mandate.

In the context of colonial, and then neocolonial relations, currency arrangements also serve to facilitate the transfer of wealth from peripheral nations (the colonies) to the metropolis (the colonial power).

In the case of French Africa, these arrangements have continued, even after independence was granted to the colonies by Charles de Gaulle in 1960.

Which is why this book – The Last Colonial Currency: A History of the CFA Franc – by Fanny Pigeaud and Ndongo Samba Sylla, an English-language version of the original 2018 book, L’arme invisible de la Françafrique, is so important and should become essential reading for all.

The excellent decision by Pluto Press to commission and English translation for this book will extend its readership considerably and hopefully influence the progressive debate.

The authors’ exposition of how currency arrangements in fourteen African countries, organised as two separate but linked monetary zones, introduced by the French in 1945 in (mostly) their former colonies, have maintained the colonial wealth extraction systems, even though these nations achieved independence in 1960.

They show that the CFA franc maintains a “diabolical” system of exploitation that, despite the popular narratives, which construct France as some sort of benevolent protective force in Africa, helping the colonies advance towards prosperity, has, instead, served to guarantee “France’s economic control of the colonies” and facilitate “their wealth’s drainage towards the then economically fragile metropole.”

The CFA franc is a construction of the French Treasury, despite the ‘Africanisation’ of the actual monetary instruments. The French Treasury “has the power to determine the external value of the CFA franc” and “all the foreign exchange transactions (the purchase or sale of CFA francs) of the fifteen countries of the franc zone have to go through the French Treasury.”

As the authors show, the CFA franc:

… is the most powerful weapon of the ‘Françafrique’, this peculiar neocolonial system of domination that the French state established on the eve of the independence of the former colonies, with the precise aim of preserving the advantages of the colonial pact.

So how did that all come about?

Conclusion

I will finish this work in Part 2 where I discuss a little more of the history, current trends, and the role of the European Union in maintaining this austerity-biased oppression.

That is enough for today!

(c) Copyright 2020 BIll Mitchell. All Rights Reserved.

Bill Mitchell
Bill Mitchell is a Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at the University of Newcastle, NSW, Australia. He is also a professional musician and plays guitar with the Melbourne Reggae-Dub band – Pressure Drop. The band was popular around the live music scene in Melbourne in the late 1970s and early 1980s. The band reformed in late 2010.

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