The Invisible Arm: Chapter 1

[James Keenan]

(First in a series of chapter-by-chapter summaries of
L'Arme Invisible de la Françafrique:  Une Histoire du Franc CFA by Fanny Pigeaud and Ndongo Samba Sylla.)

Pigeaud and Sylla start Chapter 1, "A currency at the service of the 'colonial pact'," with this quotation:

Tout un chacun peut creér de la monnaie: le problème est de la faire accepter.

You have to love a book that starts out with Hyman Minsky's most famous aphorism.  It's appropriate here, because this chapter is concerned with how France forced its African colonies to use the franc as its currency.  The book as a whole is concerned with how France continues to force its former African colonies -- all of them nominally independent since the 1960s -- to use its currency (first the franc, now the euro) and how that permits France to continue to dominate those countries' economies.

In the nineteenth century France joined Britain, Germany, Italy, Spain and Portugal in carving up Africa into colonies.  To extract wealth from their colonies, the European imperialists had to forcibly integrate the colonies into the emerging worldwide capitalist system.  That meant suppressing the use of indigenous currencies like cowrie shells and mandating the use of European currencies, especially for the payment of taxes.  This was not easy; it took France some fifty years to have the franc "get accepted" in its African colonies.

The French colonial system was governed by adherence to the "rules" of what has been called the "colonial pact":

• The colonies were forbidden to industrialize.
• The colonies' role was to furnish the "mother country" with raw materials and to consume finished goods produced in the metropolis.
• The metropolis had a monopoly on exports and imports and a monopoly on international transport of goods to and from the colonies.
• The metropolis extended certain trade preferences to the colonies.

This colonial pact evolved into what became known as the "franc zone" -- essentially, a weak sister to the "sterling zone" led by Great Britain.  The Great Depression forced France off the gold standard in 1936 -- after both the U.K. and the U.S. had left.  The franc zone, formally established in 1939, was part of France's continuing response to the international political and economic crises of the period.  World War II weakened France's grip on its colonies and forced certain adaptations to new geopolitical realities.  At the end of 1945 France decreed the creation of two new currencies, one for its African colonies and one for its Pacific colonies.  The African colonies were dubbed the "Colonies françaises d'Afrique" or CFA -- the first of several political entities with the initials 'CFA'.  France devalued the franc with respect to the US dollar and then set the value of the CFA franc at 1.70:1 to the French franc -- a ratio that was soon felt to be over-valued but was nonetheless raised to 2:1 in 1948.  (On January 1 1960, 100 "old" French francs were redenominated as 1 "new" French franc.)  France devalued its franc at least six times betwen 1948 and 1986; the CFA franc moved in lockstep.  (See also the Wikipedia article on the CFA franc.)

In the 1950s and 1960s national liberation movements overthrew the French in Vietnam and Algeria.  Seeing the handwriting on the wall, France granted independence to Morocco, Tunisia, Laos and Cambodia and realized changes were needed to maintain French hegemony in sub-Saharan Africa.  In the late 1950s France began to offer independence to its sub-Saharan colonies on the condition that they sign "cooperation accords" with France.  The key aspects of these accords were that the colonies, upon achieving formal independence, would continue to use the CFA as their currencies; that all of their foreign reserves would be deposited in "operations accounts" in the French Treasury; and that France would have an effective control over the central banks used by the new nations.

In this way, France emerged as the only colonial power to retain its monetary zone in Africa after independence.  The colonies also conceded military bases to France; gave trade preferences to French products; and permitted France to buy goods from zone countries with its own currency (as distinct from an international currency like the US dollar in which those goods might normally be traded).  France thereby conserved its foreign currency reserves for other purposes.