MMT Conference -- my favorite moment: Ndongo Samba Sylla on why monetary sovereignty matters
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James Keenan
Sep 30, 2019, 9:28:21 AM9/30/19
to Modern Monetary Theory
This past weekend (Fri-Sun, Sep 27-29) I attended the Third International MMT Conference held at Stony Brook University on Long Island. Three days of lectures and discussions were both exhilarating and exhausting. I ended up with over 15 pages of written notes.
Several other subscribers to this list attended as well. I encourage each of you who attended to write up a description of one conference session that you attended or one discussion in which you participated.
What follows is my write-up of one session which I unexpectedly found to be compelling.
At the Saturday evening banquet, the keynote address was given by Ndongo Samba Sylla. Sylla is a Senegalese development economist currently working at the Dakar (Senegal) office of the Rosa Luxemburg Foundation. He is the author of several books, including Fair Trade Scandal: Marketing Poverty to Benefit the Rich. He is the co-author with Fanny Pigeaud of a 2018 book, L’arme invisible de la Françafrique which has yet to be translated into English but whose major theses Sylla presented in the conference keynote.
Here is why Sylla's ideas are so interesting from the MMT perspective.
MMT argues that money is a creature of the state. The sovereign government creates a currency and spends it into the economy in order to provision itself with goods and services held by the non-state sector of the economy. The state does so in order to pursue the public purpose, however defined. To ensure that individuals in the non-state sector accept the state's currency in exchange for those goods and services, the state imposes taxes on the population which must be paid to the state in the currency issued by the government. The need to pay taxes drives public acceptance of the state's currency.
The description above clearly has a strong tone of compulsion. If a nation is (more or less) a democracy, the individuals in the non-state sector -- the citizens -- presumably establish the state in the first place and then control its operations through democratic means. In that case, the "public purpose" as defined by the state is actually a set of goals determined by the citizenry and the need to accept the state-issued currency and to pay taxes using that currency is broadly accepted.
But what if the nation is not a democracy but a land which has been conquered by a foreign power? What if it is that foreign power which is defining the public purpose -- not the residents of that land? In short, what if the land is a colony?
More specifically, what if the land in question is a colony where the colonizing country -- the imperialist country -- has to overcome resistance on the part of the colonized to using the imperialist's currency -- a currency which the imperialist power is using to secure its political domination over, and economic explanation of, the colony.
This is what happened in the second half of the nineteenth century when the European powers were establishing colonies in Africa. The British had to impose taxes on people in Nigeria and other British colonies in order to compel the residents of those colonies to use the pound sterling. The French similarly had to impose use of the franc on the populations of their colonies in west Africa and central Africa.
What Sylla described in his conference talk was how the French continue to use money to dominate and exploit francophone west Africa and central Africa. During the colonial period the French imposed on its colonies a currency, the CFA, which was tied to the French franc. Colonial independence from France in the 1960s came with strings attached: the continued use of the CFA. This meant that countries like Senegal and the Ivory Coast did not issue their own currencies and did not have monetary sovereignty. They were therefore unable to chart their own paths of economic development if those paths met opposition from France: the definition of neocolonialism.
France, of course, has surrendered its own monetary sovereignty by giving up the franc and accepting the Euro as its currency. The west African and central African countries continue to use variants of the CFA, so now they have a double loss of monetary sovereignty. Their monetary fate is tied not just to the whims of the French government but to the German-dominated policies of the European Central Bank.
Several other subscribers to this list attended as well. I encourage each of you who attended to write up a description of one conference session that you attended or one discussion in which you participated.
What follows is my write-up of one session which I unexpectedly found to be compelling.
At the Saturday evening banquet, the keynote address was given by Ndongo Samba Sylla. Sylla is a Senegalese development economist currently working at the Dakar (Senegal) office of the Rosa Luxemburg Foundation. He is the author of several books, including Fair Trade Scandal: Marketing Poverty to Benefit the Rich. He is the co-author with Fanny Pigeaud of a 2018 book, L’arme invisible de la Françafrique which has yet to be translated into English but whose major theses Sylla presented in the conference keynote.
Here is why Sylla's ideas are so interesting from the MMT perspective.
MMT argues that money is a creature of the state. The sovereign government creates a currency and spends it into the economy in order to provision itself with goods and services held by the non-state sector of the economy. The state does so in order to pursue the public purpose, however defined. To ensure that individuals in the non-state sector accept the state's currency in exchange for those goods and services, the state imposes taxes on the population which must be paid to the state in the currency issued by the government. The need to pay taxes drives public acceptance of the state's currency.
The description above clearly has a strong tone of compulsion. If a nation is (more or less) a democracy, the individuals in the non-state sector -- the citizens -- presumably establish the state in the first place and then control its operations through democratic means. In that case, the "public purpose" as defined by the state is actually a set of goals determined by the citizenry and the need to accept the state-issued currency and to pay taxes using that currency is broadly accepted.
But what if the nation is not a democracy but a land which has been conquered by a foreign power? What if it is that foreign power which is defining the public purpose -- not the residents of that land? In short, what if the land is a colony?
More specifically, what if the land in question is a colony where the colonizing country -- the imperialist country -- has to overcome resistance on the part of the colonized to using the imperialist's currency -- a currency which the imperialist power is using to secure its political domination over, and economic explanation of, the colony.
This is what happened in the second half of the nineteenth century when the European powers were establishing colonies in Africa. The British had to impose taxes on people in Nigeria and other British colonies in order to compel the residents of those colonies to use the pound sterling. The French similarly had to impose use of the franc on the populations of their colonies in west Africa and central Africa.
What Sylla described in his conference talk was how the French continue to use money to dominate and exploit francophone west Africa and central Africa. During the colonial period the French imposed on its colonies a currency, the CFA, which was tied to the French franc. Colonial independence from France in the 1960s came with strings attached: the continued use of the CFA. This meant that countries like Senegal and the Ivory Coast did not issue their own currencies and did not have monetary sovereignty. They were therefore unable to chart their own paths of economic development if those paths met opposition from France: the definition of neocolonialism.
France, of course, has surrendered its own monetary sovereignty by giving up the franc and accepting the Euro as its currency. The west African and central African countries continue to use variants of the CFA, so now they have a double loss of monetary sovereignty. Their monetary fate is tied not just to the whims of the French government but to the German-dominated policies of the European Central Bank.
Sylla stated in his talk that he had not heard of MMT before 2017. But in just a few years he and his co-author have produced a masterful study of the real-world impact of lack of monetary sovereignty. He recommends that francophone African countries move to sovereign absolutism in which they would reject use of the Euro-tied CFA, adopt their own currencies and practice cross-African solidarity for the development of new trade relationships. He urges attendance at a conference to be held in Tunis in early November, "The Quest for Economic and Monetary Sovereignty in 21st Century Africa".
Thank you very much.
Jim Keenan
Jim Keenan
Yi D
Sep 30, 2019, 10:41:52 PM9/30/19
to Modern Monetary Theory
I talked to Sylla after his presentation and suggested him take a look at Mark Carney's Jackson Hole speech last month, which I consider to be one of the quintessential readings of the year. There is a parallel story in the picture painted by the Governor of Bank of England.
Sylla showed that as former colonies of French empire, even given democracy and other forms of freedom, the sovereignty of CFA Franc countries are in real trouble because their abilities to exercise monetary policies are severely constrained. Not only does the unified currency zone limit internal policy spaces for each individual member, but also its financial and banking structure is anchored by Euro, which ironically represents another monetary union. (Not to mention, how much French interest is there to persevere its economic imperialism?) In that sense, it is really a double or triple whammy situation.
This troublesome setup of a currency and political entity is echoed in Carney's speech. No wonder the title of his speech is "the growing challenges for monetary policy in the current international monetary and financial system." To be brief, Carney argues that using USD as global reserve currency for Emerging Market economies increase systemic risks and reduce financial stability because the reliance on USD decreases the effect of shock absorbers due to the whimsical of USD strength or the Fed's policies. The globalization has permanently weakened the traditional sovereign tools to isolate the domestic environment from the outside weather in relation to USD regime.
James E Keenan
Oct 5, 2019, 9:17:34 AM10/5/19
to modern-mone...@googlegroups.com
On 9/30/19 9:28 AM, James Keenan wrote:
> This past weekend (Fri-Sun, Sep 27-29) I attended the Third
> International MMT Conference <https://www.mmtconference.org/> held at
> This past weekend (Fri-Sun, Sep 27-29) I attended the Third
> Stony Brook University on Long Island. Three days of lectures and
> discussions were both exhilarating and exhausting. I ended up with over
> 15 pages of written notes.
>
The conference as a whole got this favorable and fairly accurate
> discussions were both exhilarating and exhausting. I ended up with over
> 15 pages of written notes.
>
write-up in the New Republic:
https://newrepublic.com/article/155249/spreading-gospel-modern-monetary-theory
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