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African Currency Unit: An Urgent Question in the Midst of the Capitalist Crisis

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by Horace G. Campbell

Massive capital drain from Africa and that Africa is a net creditor to Europe and North America. Without an African central bank functioning under democratic control and a credible African currency, the drain of resources will continue to rob Africa the means to achieve development. “It is in the interest of all to work for the new multipolar currency regime.”

 

African Currency Unit: An Urgent Question in the Midst of the Capitalist Crisis

by Horace G. Campbell

This article previously appeared in Pambuzuka News.

“The predators on Wall Street are now attacking the currencies of the exploited world.”

When the Constitutive Act of the African Union was written to implement the Sirte Declaration [adopted in Sirte, Libya, in 1999], there were three financial institutions that were established to facilitate interAfrican trade. These were: the African Investment Bank (AIB), the African Monetary Fund (AMF) and the African Central Bank (ACB). It was agreed that it would be necessary to establish a single common currency in Africa in order to speed economic integration. The planning for the African Monetary Fund and for the African Central Bank was supposed to be a phased process alongside the process of the full unification of Africa, leading towards the Union Government of Africa.

When the Constitutive Act was written, there was no sense among the leaders of Africa that the capitalist crisis would bring down governments in Europe, spawn a Eurozone crisis along with the current currency war that is being waged against the poorer nations. Since the start of 2014 the world has witnessed a new battleground as currency speculators put the reserves of poorer countries under pressure. The attacks on the currencies of societies such as Argentina, Brazil, Indonesia, South Africa, Turkey, India, and others have reached the front pages of international news beyond the financial pages. What is clear is the predators on Wall Street are now attacking the currencies of the exploited world and nations with the smallest reserves have to dig into their reserves to fend off currency speculators as we are continuing to see the exchange rates of Africa under pressure. What is less clear in many countries in Africa and other parts of the Third World, though, is the ways in which this currency war is inextricably linked to the volatility of Wall Street. Neo-liberal interpretations of the world allow policy makers to promote prescriptions that exacerbate capital flight from Africa. The belief in markets is one myth that has suborned technicians in Africa to continue to support the political and military power of the USA. The assertion that the United States has a comparative advantage as an originator of high value quality financial assets can now be dismissed as the justification for supporting the military power of the USA.

Neo-liberal interpretations of the world allow policy makers to promote prescriptions that exacerbate capital flight from Africa.”

It is within this context that it is urgent that Africa begins to work toward a single currency. One of the prior steps would be to establish the African Currency unit with strict benchmarks for the integration of Africa towards the adoption of a single currency.

Stemming Capital Flight from Africa

Progressives in all parts of the world must have clarity on the phases of the Union government and the building of transparent and democratic leaders to stop the plunder of Africa alongside the massive capital flight from the continent. There is enough research to clarify the reality that there is a massive capital drain from Africa and that Africa is a net creditor to the states of Europe and North America. In short without the establishment of the African Central Bank that functions under democratic control, and a credible African currency the drain of resources will continue. The amount of documented evidence is well known. Research from the African Development Bank (AfDB) revealed in May 2013 that in the three decades from 1980 to 2009, African countries lost up to $1.4trn in illicit financial flows, known as capital flight. These figures from the African Development Bank are repeating the scholarly findings of James K. Boyce and Léonce Ndikumana that has been around for about twenty years. [1]

Since this kind of scholarship has been done, international financial institutions continue to preach about Millennium Development Goals without the necessary attention to the return of the illicit funds plundered from Africa. While African universities continue to focus attention on the so-called MDGs there is a conscious effort to divert attention from the Stolen Asset Recovery Initiative (StAR). The ending of exploitation, the enhancement of the rights of African workers and farmers and popular democratic relations are all linked up with African control over her resources. In this context one of the most urgent political matters for the progressive forces is to end the capital flight from Africa and the seizure of African resources for external forces in alliance with African militarists. Capital flight from Africa ensures that there are no resources for infrastructure, for social development and programs and to provide for the needs of the majority of the African peoples.

One of the most urgent political matters for the progressive forces is to end the capital flight from Africa."

Progressives and those working for the full unification of Africa should be promoting the process of establishing a common currency in Africa so that Africans no longer keep their foreign currency reserves in the US dollar, Euro or the pound sterling. Recently the Executive Secretary of the UN Economic Commission for Africa (UNECA) Carlos Lopes stated that Africans had over $200 billion reserves overseas. This is obviously a small amount and we do not have the figures for the amount of money that African oligarchs have stored in banks in Switzerland, Hong Kong, London, New York, Malaysia, Singapore and the offshore banks in the Caribbean.

What Can We Learn from Asia?
Carlos Lopes and the UNECA need to go to the next step for mandating think tanks, universities and policy makers and forces within the global African family to set up the political and technical stages for the convergence of currencies so that Africa establishes its own common currency moving in tandem in working towards a Union government. The process must begin right away with the establishment African Currency Unit. There would also be a clear path and date for the integration where there would be a single currency for Africa.

Africans can learn a lot from what is being done in the ASEAN societies where the first step of monetary integration has been placed on the table in the form of the Chiang Mai Initiative. This Initiative has laid the basis for a number of ventures such as bilateral swaps to protect the societies of East Asia from the Wall Street foreign exchange traders and to enhance regional trade. The planning for the Asian Currency Unit is following the lines of creating a firewall in Asia to protect the societies from the currency wars being waged by currency traders. Within Asean states bilateral pacts to swap and repurchase central-bank reserves have prevented the kind of raiding that went on at the time of the Asian financial crisis 1997-1998. These societies in Asia do not agree politically and have many differences but they are all agreed to establish various initiatives to ensure that their societies are not bullied by the IMF or the World Bank. Moreover, they have learnt the harsh lessons from 1997 when George Soros and other derivative traders undermined their currencies. The establishment of the Asian Monetary Fund and the Asian Bond Fund have been supported to escape the surveillance and strictures of the International Monetary Fund. Thus, the Asian Bond Market, the Asian Monetary Fund and the Chiang Mai Initiative are all steps on the road towards the single currency in Asia. In order to seal this pathway, they have now launched the Regional Comprehensive Economic Partnership (RCEP) which is to be concluded by 2015. In short, the citizens of Asia are now waiting for the collapse of the dollar to disengage from the International Monetary Fund and the raiding of currencies by Wall Street Traders.

African Currency Unit Now Long Overdue

Despite the clear planning for Free Trade Areas in Asia, the levels of integration in Africa at the level of the people are in many ways more advanced than Asia. Traders in differing parts of Africa, especially women traders from West Africa, have demonstrated a certain ease in traversing the continent and doing business. The customs and immigration laws across Africa continue to hinder the free flow of goods, services and people. International capital and international capitalist can move freely across the lines drawn in Africa as borders, but the so-called leaders continue to try to enforce laws that prevent the freedom of movement while they and their family illicitly export needed reserves from Africa.

The majority of African governments keep their reserves in dollars. Their membership of the IMF dictates the terms of their financial engagement with the international capitalist system. The US devalues the dollar by printing US $65 billion every month. Africans are losing in a number of ways but two are most blatant.

So-called leaders continue to try to enforce laws that prevent the freedom of movement.”

First, many African states keep their reserves in dollars and these are devalued under the Quantitative Easing of the USA dollar which permits the Federal Reserve of the USA to simply offload dollars on the world. In the past three years the US government has been printing over a trillion dollars every year. Second, foreign exchange reserves have to be used as a shock absorber during times of volatility when Central Banks have to use their reserves to buffer their currencies against sharp decline by buying even more US dollars to support their currency.

Another hidden side of the super exploitation of Africa emerges in the form of those central banks that are hedging against the dollar. Many of the oil producing states of the Middle East are hoarding gold because of the currency wars and the devaluation of the dollar. These societies support front persons in Africa that abet the flow of gold and diamonds out of Africa.

Political Will and the Integration of Africa

When one reads the statements of the economic planners one does not get a sense of urgency for the full integration of Africa and the building of a common currency. Hence, we have vision statements from countries stating that they will reach targets by 2030 or 2040 without reference to the current Eurozone crisis or the rigged stock market in the USA. Only recently Michael Lewis brought out another book about how the financial markets in the United States are rigged in favor of high-speed electronic trading firms, which use their advantages to extract billions from investors. [2] It is also well known that the real value of US stocks are overvalued because the Wall Street barons have been buying back their own stocks to make the US financial markets seem far more healthier than they are. It has been estimated that in the past 9 years, the barons of Wall Street have bought back over $4.21 trillion of their own stocks. [3] Over the last four years Matt Taibbi has been writing on the fraudulent operations of the Wall Street bankers and wonders out loud why these gangster bankers are not arrested. In penetrating, the mantra of “Too Big to Fail” as “Too Big to Jail,” Taibbi has exposed the nature of the LIBOR scandal, the money laundering and other corrupt practices, Taibbi exposed how Wall Street killed financial reforms in the United States. [4]

In the present global crisis of capitalism, the Wall Street bankers are enjoying the support of the US military to prop up this currency so that the gangster bankers can carry out fraud while the currency traders raid those countries that have not established a firewall against the predators. When African leaders open discussions about the creation of the African monetary system and the African central bank, the think tanks and the US strategic planners descend on Africa to divert attention from real planning for the integration of Africa. However, what is uncontroversial is that the printing of dollars under the so called Quantitative Easing has placed the international monetary system in an even more precarious condition. The US capitalists are trapped by this QE policy. By printing dollars, the stock prices surge and Wall Street makes trillions in dollars. At the same time countries that have to keep their reserves in dollars are looking for alternatives.

Wall Street bankers are enjoying the support of the US military to prop up this currency so that the gangster bankers can carry out fraud.”

The African peoples and societies have the economic resources for the establishment of a common currency. What is missing is the political will. We have to place this unification of Africa at the top of the agenda for Africa. It will not be necessary for all 54 countries to be part of this currency unit at the start. Because France dominates those countries that are in the CFA Franc zone, France remains opposed to the establishment of the African Central Bank and the Common Currency for Africa.

In this present capitalist crisis there are three alternatives for Africa:

1 Continue the fragmentation and disunity and Go down with the dollar and be the battleground for US finance capital.

2. Be the backstop for a dying EURO or

3. Unite the currencies of Africa to create one common currency and one government.

Serious African planners are working for the third alternative. Those with the political will have to take the lead to hasten the studies by the governors of the Central bank for the convergence process for the African Currency Unit.

There are so many institutions in Eastern, West and Southern Africa that can undertake these tasks.

A Phased Process

What we may have to do is to create the African Currency Unit for the regions of Eastern Africa, Southern Africa, and those in ECOWAS who will join. Ultimately, the puppet states that are in the CFA franc Zone will be pressured to join. After the revolutionary process exhaust itself in Egypt, it will also join. At this moment the political will to create the common currency cannot wait on consensus. The foreign reserves of Africa are being devalued by Quantitative Easing and Africans have to work hard to break the Exorbitant Privilege of the dollar. [5]

It is in the interest of all to work for the new multipolar currency regime.

In Latin America, the peoples have on the agenda a common currency. The Europeans have created a common currency –the Euro- to break from the dollar. The Chinese are working for the convertibility of the RMB. The ASEAN countries are working for the creation of the ASEAN currency. Oil producers in the Middle East are looking for an exit from the dollar. What are Africans waiting for?
The Abuja Treaty was signed more than thirty years ago on June 3, 1991 in Abuja, Nigeria, to create the African Economic Community, and called for an African Central Bank to follow by 2028. The current plan is to establish an African Economic Community with a single currency by 2023. The global capitalist crisis has demonstrated that long before 2023 Africa will have to create a common currency to withstand the current vicissitudes of the US financial markets.

Horace G. Campbell is Professor of African American Studies and Political Science at Syracuse University. He is also a Special invited Professor at Tsinghua University, Beijing. He is the author of Global NATO and the catastrophic failure in Libya.

END NOTES

[1] James K. Boyce and Léonce Ndikumana, Is Africa a Net Creditor? New Estimates of Capital Flight from Severely Indebted Sub-Saharan African Countries, 1970-1996, publication (Amherst: University of Massachusetts, 2000

[2] Michael Lewis, Flash Boys: A Wall Street Revolt, W. W. Norton, 2014

[3] Jason Zweig, Will Stocks Buy back bite Back, Wall Street Journal, March 21, 2014, http://blogs.wsj.com/moneybeat/2014/03/21/will-stock-buybacks-bite-back/

[4] Matt Taibbi, “gangster Banksters: Too Big to Jail, http://www.rollingstone.com/politics/news/gangster-bankers-too-big-to-jail-20130214

[5] Barry Eichengreen, Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International Monetary System, Oxford University Press, new York 2012

 

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GET REAL ABOUT CURRENCY UNIFICATION NOW, 4 ALL AFRICANS' BENEFIT

One of the main obstacles to currency unification across Africa is the “my-dog-is-better-than-your-dog” braggadocio and paternalistic mentality that pervades the thinking and actions of many national leaders of Africa’s larger economies toward nations with “smaller” GDPs.  These leaders point to the relative “size” of their economies in a manner that masquerades as “national pride”, but which actually is a way for them to maintain their kleptocratic self-interests.

This misguided hubris influences the leaders of nearly all African nations to pursue policy and analytical imperatives that only consider quantitative criteria rather than those that are qualitative. For instance much has been made of the overtaking of South Africa by Nigeria as the continent’s largest economy.  However this is merely economic book-cooking sleight of hand accomplished by changing the base year from 1990 to 2013 for calculating GDP output to reflect newly emerged sectors of the Nigerian economy such as telecoms, information technology, music, online sales, airlines, and film production. But in terms of per capita income, Nigeria's global ranking is still a grim 121, and the World Bank’s most recent release listed Nigeria alongside four other countries in the world’s extreme poverty category. 

African leaders must be confronted with genuinely useful economic facts rather than economic hoopla so that the true nature of the situation can be dealt with effectively. The point is that NONE of the African countries are doing well macroeconomically and people are suffering because of the redundancies, gaps and inefficiencies in resource allocation.  This is precisely why those who detract from the notion of a common African currency are so misguided in their opposition.  Detractors profess concern about the loss of individual nations’ abilities to protect themselves from economic shocks.  But none of Africa’s economies (except South Africa) are sufficiently diversified for this to be a realistic concern.  Increased economic cooperation would bring the type of economic diversification on a continental level that would eliminate this chief risk of currency unification.  Furthermore, the two other chief economic tools that are used to minimize the risk of economic shock: price flexibility and wage flexibility, are already a way of life for African markets. And under a unified currency, that persistent and inherent disadvantage could be turned into a strategic advantage.

Continental currency unification makes sense whether the objective is to modernize African economies along the lines of regional capitalist cooperation or along the lines of scientific socialism.  To truly make a unified currency work, there must be companion policies that are people-oriented and driven by institutions that are subject to non-oligarchical public oversight and that promote cross-border trade, investment and mobilization of labor so that susceptibility to shocks are further minimized and so that demoralizing trade imbalances won’t develop in the overwhelming favor of the more industrialized African countries.  Yes, this is all easier said than done, but there are functional institutional foundations already in place that can abet this process. The prime areas to start are the East African Community (EAC), which has had a pact in place since 1999 (which replaced the original EAC dating back to 1967, from which important lessons were learned) and ECOWAS.  Only when indigenous currency unification is a reality will Africa start to retain not only the money that is being expatriated at alarming rates, but also the human capital, intellectual property and other resources that that the expatriated money actually represents.



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