Africa Needs Economic Sovereignty

Africa Needs Economic Sovereignty

An upcoming conference in Dakar seeks to promote policies and pathways to empower the continent

Perhaps no continent suffers more from the legacy of European colonialism than Africa. Following centuries of enslavement, violent dispossession, and forced assimilation, African countries finally gained their independence in the mid-twentieth century, only to find themselves trapped in world economy dominated by their former colonial masters. Beset by industrial underdevelopment and a global financial framework that systematically favoured wealthy Northern countries, even Africa’s most ambitious and radical post-colonial governments struggled to make meaningful progress in building up their economies and ensuring prosperity for the broad majority.

Today, global economics remains dominated by neoliberal orthodoxy, according to which poor countries can do little more than sell off their natural resources and ship their labour force abroad. For Africa, this has meant even more dispossession, extraction, and brain drain. But a new generation of thinkers is pushing for an alternative path. Inspired by various heterodox traditions, including Modern Monetary Theory (MMT), economists in Africa and around the Global South are calling for a new era of economic sovereignty, peaceful development, and multipolar rebalancing.

The upcoming conference “Facing the Socio-Ecological Crisis: Delinking and the Question of Global Reparations”, organized by the African Economic and Monetary Sovereignty Initiative with the support of the Rosa Luxemburg Foundation, will be an important site of debate and exchange around precisely these perspectives. Andreas Bohne sat down with the conference’s organizers, Kai Koddenbrock, Maha Ben Gadha, and Ndongo Samba Sylla, to learn more about the event and the kinds of policy initiatives they hope it will promote.

Modern Monetary Theory, or “MMT”, plays a prominent role in the upcoming conference on African economic sovereignty you are organizing. What attracted you to MMT as a tool for progressive economic and fiscal policy?

Ndongo Samba Sylla (NSS): MMT is primarily a research programme that helps to objectively describe how the monetary system works, namely the relationships between treasuries and central banks when it comes to government spending, taxes, and issuing government bonds. In that sense, MMT allows us to make a distinction between real and sometimes self-imposed constraints.

For example, when some governments that issue a sovereign fiat currency say they lack “money” or frame economic austerity and mass unemployment as “inevitable outcomes”, we can use MMT to debunk those claims. MMT eloquently shows that countries that issue a fiat sovereign currency cannot go bankrupt — they can always pay for obligations denominated in their unit of account. The actual constraint they face is inflation.

MMT literature acknowledges differences between core countries such as the US, Japan, or the UK and peripheral countries in terms of their flexibility in policymaking. Moreover, MMT rightfully rejects the monetary and fiscal foundations of the approach that has dominated the international development agenda since 1945, which is premised on the idea that developing countries lack “money”.

One of the liberating messages MMT has for peripheral countries is that whatever is possible from a technical and material point of view can be financed in the national currency. Does this mean that peripheral countries do not face any “external constraints”? Not at all. Rather, MMT urges their governments to spend in a way that relieves their “external constraint” and addresses inflation, such as by promoting food and energy sovereignty.

The colonial “model” consisted of mobilizing domestic resources within the limits and according to the needs of the metropolitan economy. In my view, MMT allows us to challenge this model by focusing on mobilizing domestic resources for internal accumulation.

MMT is not uncontroversial on the Left. I’m thinking of things like the role of effective consumer demand, which often focuses on the interests of the middle class. How do you deal with these kinds of contradictions?

NSS: I would say that MMT, as a macroeconomic approach, focuses more on the nature and role of government spending than on consumer demand as such. Sometimes households and corporations may want to save. For this to happen, the government must generally incur deficits. That is an inescapable logic.

MMT shows that the government is different from other economic agents. It has the capacity to stabilize the economy by maintaining price stability and full employment. It can help address demand constraints, which are always critical in a capitalist system.

For example, one might say that the pattern of aggregate demand should be altered to promote environmental sustainability. In these circumstances, the MMT argument is generally that “money does not grow on rich people”. What I mean by that is, as long as real resources are available, the government can issue its currency to spend on the public good.

Taxes play many useful functions, but they do not finance government spending. Taxing the wealthy could be justified on ecological and equality grounds, but that is not a constraint for state spending in projects considered as fulfilling a public purpose. This must be clarified, and MMT does just that.

Your upcoming conference is about promoting economic sovereignty for countries of the Global South, but it looks like most of the world is heading into another period of austerity, with a newly empowered IMF attaching its loans to budgetary discipline rather than social or environmental concerns. How can developing countries respond?

Maha Ben Gadha (MBG): What we call “restoring economic sovereignty” is really about implementing domestic economic policies that prioritize the country’s needs over creditors’ greed, and prioritize the needs of the majority over the profit-seeking of a minority of elites. We call for universal public services such as health care and education, guaranteeing food, employment, ensuring decent wages, and a decent income for those who are unable to work. We are convinced that this can be only done through public spending and not austerity.

As the gatekeeper of global financial capitalism, we don’t expect the IMF to push sovereign economic policies. We all know that profit accumulation is based on dispossession, resource extraction, and labour exploitation. Pushing the austerity agenda can only undermine countries’ fiscal flexibility and make it impossible for governments to pursue these objectives. That’s why we think the first step is to break down this austerity narrative and deconstruct it.

We must ask ourselves: who profits from spending less on public health care? Who profits from spending less on education? Who profits from liberalizing vital sectors of the economy? Certainly, not the majority of the population. Does the IMF ask governments to spend less on arms? No. Does the IMF ask governments to fix prices to save lives? There are plenty of such examples.

The second thing we need to understand is how austerity mechanisms are established in countries: are they mandated by an explicit constitutional article balancing the national budget? Are they imposed by laws prohibiting the central banks from funding governments? Or are they imposed by the power of debt conditionality, or by monetary, institutional, technical, or political arrangements?

This is where democratic debate should occur in each country, where progressive movements should fight, and where policymakers should provide answers. Scholars, legal experts, and scientists have a duty — they can no longer be neutral in the face of such aberrations. Struggles on the ground should be supported by alternatives, innovative solutions, and clear practical proposals.

That the African continent is not economically sovereign is not a new insight — I’m thinking of the work of figures like Samir Amin or Raul Prebisch. Although their ideas have proven popular throughout the Global South, little political progress has been made changing this reality. Why do you think that is?

NSS: People like Prebisch and Amin demonstrated how the world system historically worked to constrain the economic sovereignty of the periphery and its development prospects. Post-independence African governments made some efforts to conquer more policy space in the world system between 1960 and 1980, but these achievements were jeopardized by neoliberalism.

Many movements and allies in the Global North have worked hard to fight alongside the Global South against unfair trade agreements, unfair tax treaties, the foreign debt burden, etc., but their power is limited. I would say that progressive movements everywhere have a double challenge: re-creating the foundation for domestic social equality, while simultaneously working for a balanced and non-imperialist world system.

The failure to achieve either explains the revival of right-wing demagoguery and other fundamentalist currents. In this growing multipolar world, Pan-Africanism and more South-South cooperation could be one way forward.

Let’s talk about the topics your conference will address. You speak of “delinking”, a strategy that Amin also propagated. What does that mean?

NSS: Delinking is probably one of the least understood critical concepts coming from the Global South. Amin used it to make two points. First, “catching up by imitation” is impossible for the Global South as a whole because the trajectory of Western (and Japanese) development was based on particular historical and ecological conditions that cannot be reproduced everywhere, such as the possibility for industries to absorb the huge labour force released by the destruction of the peasantry in productive jobs, mass international migration of surplus labourers to wealthy countries, “free” carbon polluting, and more.

This does not mean that the Global South will remain underdeveloped. Rather, and that is the second point, the Global South has to create its own model of development. Escaping from the colonial economic legacy to chart an autonomous development path requires “delinking”, reinverting relationships between domestic economies and the world system.

It does not suppose “autarchy”, as is often believed. Having some control over the remuneration of the labour force, over money and finance, over domestic markets, over local innovation systems, and over the exploitation of domestic natural resources are all important aspects of the delinking agenda.

Despite all the recent talk of “deglobalization”, Europe in particular is not interested in delinking, as can be seen not only in its adherence to the international division of labour, but also in its energy imports. On the other side, however, are African governments — I’m thinking of many states’ plans to significantly increase oil and gas exports. Does the current geopolitical situation work against the national scope for socio-ecological transformation and reinforce the asymmetrical relationship between Africa and Europe?

Kai Koddenbrock (KK): Your question raises a couple of important issues. First, how asymmetrical is the relationship between Africa and Europe? Second, how much socio-ecological transformation can be enacted at the national level? And third, what kind of alliances do we need to make it happen?

Submitting to the volatilities of the world market already entails important hierarchies that are easier to handle the more government revenue you generate at home. How much scope for action governments in the Global South have in the international division of labour has been one of the core problems of radical politics since the end of colonialism. Many different strategies have been tried, from Ujamaa in Julius Nyerere’s Tanzania in the 1960s to Thomas Sankara’s agriculture and literacy campaigns in the 1980s, not to mention the ongoing reliance on raw commodity exports such as coltan and copper in the Democratic Republic of Congo to diamonds in Botswana and oil in Nigeria, Angola, and Algeria.

All of these different strategies point towards the core problem of the correct degree of domestic resource mobilization and export income to finance imports. Governments have always had some degree of choice in this, but the setbacks can be brutal when global economic crisis hits, the dollar appreciates. or both. The current situation presents very good opportunities to gas-, hydrogen-, or solar energy-exporting countries to form new cartels. The dependence of many countries on African natural resources should be leveraged as best as we can, while at the same time phasing out of their exploitative, destructive, and dispossessive logic.

Given the climate crisis, there is no alternative to a certain degree of de-linking and thus de-globalization, while at the same time looking for progressive allies both in our countries, in the region, and internationally to get these kinds of cartels off the ground. That our governments cannot be trusted to help progressive popular alliances and movements goes without saying. The only thing they are good for is creating better or worse enabling conditions for progressive change, but the streets have to push them through. Building up that kind of pressure and sustaining it has been the biggest challenge for the Left worldwide.

The second major theme of the conferences is “global reparations”. Can you elaborate a bit on what you mean by that?

MBG: The colonial legacy is the root of Africa’s climate catastrophe. Exploitation and extractivism produced long-standing structural dependencies that persist even in the postcolonial area.

Despite attempts at emancipation, many African countries have followed the same extractive and exploitative path, while some were only able to develop by accumulating fossil fuel revenues. Many other countries, lacking natural resources, relied on tourism or heavy industry. Others were dependent on remittances from migrants working in the Global North for low wages.

Moreover, so-called “Structural Adjustment Plans” and indebtedness have reproduced the conditions for inequality. In our countries, the climate catastrophe is not approaching — it is already reality. Whether we are talking about people displaced by floods, or forced to move due to unliveable temperatures, or people who collect plastic waste to sell to factories and are killed by phosphorous emissions — the international community cannot ask these people to shoulder the transition to a more sustainable model without admitting the responsibility of the Global North in such a catastrophe. We cannot imagine a peaceful and sustainable future without addressing the question of reparations.

That said, our view on reparations is more comprehensive than money transfers to compensate for damage. It is more than anything a question of justice. It should include debt cancellation, a degree of freedom of movement for workers, and it should be acknowledged in international law. That is what we intend to discuss in our conference.

Reparation claims, whether justified or not, run into various problems. How do you deal with questions like whose suffering is more important, or how should funds be distributed?

MBG: I think the most problematic issue is not how to target victims or how to compensate them, but rather to know where internal and external opportunities exist, and where a shift in the balance of forces is needed to make this restoration happen.

For example, in 2019 the Tunisian Truth and Dignity Commission called for reparations from France, the IMF, and the World Bank over human right abuses and violations of economic and social rights. These reparations consisted of an apology, compensation to the victims and the state, and the cancellation of Tunisia’s multilateral debt. It also introduced the notion of “victim zones” that suffered systematic marginalization or exclusion.

This could have been a huge opportunity for the democratic transition government to build on the work done by civil society, instead of asking the IMF and World Bank for new loans, but the authorities boycotted the work of the commission, undermined its credibility, and refused to publish its report.

Another important aspect is how international law can be used to make reparations happen. Can we imagine a UN resolution that forces financial institutions to pay reparations, based on the UN independent expert report on foreign debt and human rights, which argued that international financial institutions can be held responsible for economic reforms that violated human and socio-economic rights?

Another important aspect of reparations is the principle of non-repetition. The non-repetition of structural adjustment plans disguised as “national reforms” would be provide relief to a large number of countries in Africa and the Global South more generally. How could this principle be implemented? Our aim is to learn from each others’ experiences to better formulate strategies and discuss practical solutions for a more just future.

Are “delinking” and the call for reparations connected? After all, one could argue that with “delinking” Europe can continue to act as before, while merely making transfer payments for things like adaptation like climate damage.

KK: In Samir Amin’s original formulation, delinking did not refer to complete decoupling but the right amount of delinking. He considered 70 percent to be a lot, and he was conscious that delinking might be more difficult for a relatively small and poor country than for a large economy like China.

Transfer payments for climate crisis will never happen unless there is a new Non-Aligned Movement and serious collective action by the Global South. If the pressure does not increase substantially, the only thing that may change might be a slight shift in aid expenditure from the UN Development Programme and other institutions for climate adaptation projects.

What we would need is an automatic climate adaptation funding mechanism that operates based on the logic of reparations. The West and North would have to be forced to set up this institutional mechanism, which obviously could never be administered by the IMF or World Bank with their US dominance.

Progressive economic policy is often portrayed as naive or wasteful by its opponents, while economic approaches like MMT are difficult to communicate. Moreover, it seems like left-wing economic approaches are only accepted within a microeconomic framework, but never on the macroeconomic level. How can we make left-wing economic ideas more widely accepted?

KK: I think the political and social environment of a particular idea matters a lot. Take the idea of the gas price cap: ridiculed at first, then nearly unanimously agreed to — if not yet implemented. The question of mobilization and power in institutions is crucial here. Heterodox economics departments don’t really exist in Germany and critical political economy is marginal. We all have to contribute to increasing their relevance and weight wherever we are.

Without organizing, no progressive idea will gain traction. The Deutsche Wohnen und Co. Enteignen campaign in Berlin is a great example of sound progressive ideas at least partially being put into practice through organizing. That said, the usual challenges of long-term organizing apply there just as brutally as anywhere else. You need large numbers of people, people in key posts within institutions, and the power to push things through when the time is ripe.

I think we just don’t believe in the possibility of progressive economic policy anymore, because what Mark Fisher referred to as “capitalist realism” has had us in its grip for a long time. This is changing and will change even more as the world goes up in flames.

Following the conference, you plan to found the African Heterodox Economics Network. Why is there a need for this network and what do you hope it will achieve?

NSS: After the conference, a number of institutions including the Council for the Development of Social Science Research in Africa, International Development Economics Associates, the Rosa Luxemburg Foundation, and others will brainstorm with scholars from the continent and abroad on the establishment of this Pan-Africanist and internationalist network aiming to promote heterodox economics.

Mainstream economics dominates teaching, research, and policymaking practically everywhere in the world. Sadly, this is even truer in Africa, as a recent study by Howard Stein demonstrated. Yet, Africa needs fresh and innovative economic thinking to tackle its numerous challenges, and thus a kind of epistemological “break” is necessary. This will require an institutional foundation, committed people, and access to funding. The African Heterodox Economics Network will mark an important step in that direction.

• Maha Ben Gadha is Senior Economic Program Manager at the Rls North Africa Office based in Tunis.

• Kai Koddenbrock is a political economist at the University of Bayreuth working on the international monetary order, geoeconomics, and the links between security and economic policy.

• Ndongo Samba Sylla is a Senior Research and Program Manager at the Rosa Luxemburg Foundation’s West Africa Office.