Africa’s Way Out of Monetary Colonialism

Since the early 1960s, Africa nations have gained politics independence from colonial forces, but the monetary colonialism associated with fiat money continues

Africa has been affected with rampant inflation and monetary instability over the past 50 years.

There have been numerous instances of currency crises and currency resets. Even hyperinflation, the most destructive economic sensation, has left its ruinous indicate on several African communities.

Some may say this is because African central banks are incompetent within managing their currencies. Others may claim, like the famous and infamous former chief excutive of the central bank of Zimbabwe,   Gideon Gono , that pumpiing is “ related ” with droughts or some other planetary sensation. Finally, more incognizant commentators may assert monetary lack of stability is a “ normal” function of developing economies.  

Those plus similar views are outright incorrect. Africa has been afflicted by monetary instability, rampant pumpiing, and even hyperinflation because of fiat money regimes imposed simply by African governments under  48 Comments . An arrangement that amounts in order to monetary colonialism.  

The Cause of Inflation plus Economic Instability

The Bretton Woods agreement of 1944 established how the US  dollar was to remain backed by gold, the anchor of monetary believe in and stability, at $35 per ounce, and all various other currencies would, in turn, become linked to the dollar. The suspension of convertibility of bucks to gold was “ supposed” to be temporary, because declared by President Rich Nixon in 1971.  

However , because of the rise of Keynesian economics coupled with governments’ insatiable appetite to spend more than they take by means of taxes, the US  authorities found itself issuing, publishing if you prefer, more bucks than it had gold to back up. This discrepancy led key countries in order to demand the redemption associated with some of their dollar holdings in gold. As pressure to redeem mounted, on Aug 15, 1971, President Nixon unilaterally ended the dollar’s (and thus the tour’s currencies) last link to precious metal, the most stable form of cash. He announced:  

I have focused Secretary Connally to suspend temporarily the convertibility from the dollar into gold or even other reserve assets, except in amounts and circumstances determined to be in the interest of monetary stability and the needs of the United States.

That was the final step in a long and government-orchestrated transition to fully fiat money that began with World War I. In essence, the fateful  Nixon shock   is how we, humanity, ended up shackled by fiat money regimes. And the instability, inflation, and more frequent crises result from it.  

For context, notice that within 1971, global affairs had been shaped by the two superpowers of the time, the United States leading the “ capitalist” bloc and the Union of Soviet Socialist Republics leading the communist bloc. Thus, the decolonization of Africa was taking place against the backdrop of the Frosty War. Since the “ capitalist” countries were the colonialists, many African liberation motions turned to communist countries for support. Which also supposed ideological alliance.  

Like almost all statist regimes, the Soviet Marriage, being a socialist dictatorship, rejected sound money in favor associated with fiat. So , after the Nixon shock, fiat money grew to become the new normal in the West. For African countries, this designed that whether one was in the “ capitalist” get away or the Communist bloc, the only monetary option was fiat currency— an inconvertible and unbacked currency of unlimited supply.

That said, African countries, though politically independent, remained economically plus monetarily dependent on the Western and the East. This also means African countries remained philosophically (economic thought) dependent on the West or the East. So , African countries live trapped in imported statist plus inflationist economic concepts motivated by fiat money.

When the USSR collapsed in 1991, the United States became the sole (fiat) superpower. Nevertheless , by this time, academic, authorities, and media circles within the “ capitalist” West already were heavily bent on Keynesian/statist economics. Keep in mind President Richard Nixon had declared in the early 1970s, “ We are all Keynesians now. ” From 1991 to the present, popular economics has become much more, not really less, statist. Moreover, notice that statist economics and financial inflation are eternally wedded. This is a crucial reason why statists of all persuasions prefer fiat money systems.  

So , this means that 99 percent of Africans qualified as economists in the West, in Africa, or elsewhere before and after 1991 are statist economists. Thus, proponents of fiat money and antagonist associated with sound money and monetary freedom. This further means that Africa leaders, politicians, and bureaucrats hold statist economic views. Hence, the insistence upon state-led economic development despite this model’s evident failure to make developed and prosperous African societies over the past fifty years.

Such is the statist economic thought and inflationist monetary system framework in which African countries gained “ independence” and have resided. In other words, postcolonial African communities were conceived in financial colonialism, (monetary/price) inflation, and consequently, economic instability.

Yet, despite the monetary damage seen in Africa, rather than concede to the fact that fiat money systems are inherently inflationary and unreliable, like Mr. Gono, many central bankers, statist economists, and other proponents associated with fiat money will not be reluctant to blame the hot weather, the cold weather, this or that will for the ruinous consequences associated with today’s chaotic monetary system.

Africa underneath the Fiat Dollar Standard

How have Africa societies fared over the past 50 years under fiat money and monetary colonialism? It depends upon whom one requests. It has been fantastic and very beneficial for African ruling elites and associates. However , it has been a nightmare of pumpiing, instability, and tyranny for the people.  

Postcolonial Africa has been mired in monetary instability: currency crises, erratic devaluations, destabilizing fluctuations, high inflation, countless currency resets, and ruinous hyperinflations (e. g., Angola in the 1990s,   Zimbabwe   within the 2000s, among others). Even before high inflation became a worldwide problem in 2021, Many African countries were already hyperinflationary. Yes, before the Russia-Ukraine war and the covid problems. For example , five African countries are mentioned in Ernst and Young’s  Hyperinflationary Economies   (updated April 2022), including Sudan, Zimbabwe (yes, again), South Sudan, Ethiopia, and Angola.   Zambia   might be considered hyperinflationary too.  

Under the present fiat system, African financial systems remained monetarily disconnected. There exists a lamentable state of affairs that significantly restricts and disincentivizes business among Africans. This is unusual and contrary to precolonial Africa’s  free and essentially borderless trade   history.  

One example, if a Nigerian vendor wishes to buy Ghanaian materials, she would have to first transform her cedis into ALL OF US dollars and then to nairas, a process that is burdensome and costly. There is no direct foreign exchange even between next-door neighbors like Nigeria and Cameroon. Angola and the Democratic Republic of the Congo. Egypt plus Sudan, etc .  

The government-managed fiat money system has been a headache for African societies along with ruinous economic, social, ethnic, and moral consequences. Nevertheless , the tragedy of fiat in Africa does not end there. Under the France-controlled CFA franc currency arrangement, fourteen African countries remain stuck in monetary colonialism which usually differs from the rest of the region, which is under not-so-direct financial colonialism.  

In “ Fighting Monetary Colonialism With Open-Source Code , ” human being rights activist Alex Gladstein pointed out:  

As 1960 contacted, decolonization seemed inevitable. European countries was united in disengaging from Africa after years of depredations and state-sponsored looting. But the French authorities realized they could have their wedding cake, and eat it as well, by ceding political manage while retaining monetary manage. This legacy still appears today in 14 countries that speak French and use a currency controlled by Paris: Senegal, Mali, Off white Coast, Guinea-Bissau, Togo, Benin, Burkina Faso, Niger, Cameroon, Chad, the Central Africa Republic, Gabon, Equatorial Guinea, the Republic of Congo and the Comoros. In 2021 the French still exert monetary control over more than 2 . 5 million square kilometers of African territory.

The Way Out plus Forward for Africa

African leaders can choose to:

  1. Continue to allow the injustice, tyranny, and ruination caused by fiat money under monetary colonialism to exist;
  2. Launch a single gold-backed African currency;
  3. Discard legal tender laws along with other repressive monetary laws entirely, thereby reestablishing monetary freedom (as it was in precolonial African societies);
  4. Create a legal and regulatory framework for cryptocurrency plus crypto solutions to coexist together with government fiat.

Like many millions of self-loving Africans, I would believe option 1 is undesirable and intolerable. Monetary colonialism must come to an end.  

Option two entails realizing a long-held pan-African vision. So , it is ideal. However , this would be an excruciatingly bureaucratic and thus long process given the political establishment’s fierce antagonism toward sound money. Besides the fact that this is a dream many Africans still dream of, additional supporting this option is the fact that both artisanal and industrial  gold production   is increasing in The african continent. However , this option could trigger NATO to unleash its terrifying planes to drop a tremendous amount of democracy across The african continent.  

Option 3 is to scrap legal tender laws and other repressive monetary laws entirely. Thereby, letting postcolonial Africans appreciate monetary freedom as precolonial Africans lived in monetary freedom (i. e., these people freely traded with gold, silver, copper, salt, plus cowry shells, among some other commodities, as money).  

This is the greatest, fastest, and most effective solution and past monetary colonialism. Given the predominance associated with statist economic thinking, this method may seem radical, perhaps even outlandish, at least from the perspective associated with politicians and bureaucrats. Nevertheless, this is the fastest and most efficient way out of monetary colonialism.

Option four is bureaucratic, costly, nevertheless repressive, and does not establish financial freedom but may well be the compromising middle ground. Africa governments would pass laws establishing a legal and regulating framework with this approach. Therefore , allowing the use of cryptocurrency together with fiat currencies.  

This already is occurring. The Central African Republic  has enacted  legislation that does just that and establishes Bitcoin since legal tender, to flow along with the Central African CFA franc. Similarly, Tanzania’s President Samia Suluhu Hassan  has directed   the central bank to prepare the country for cryptocurrencies.

Cryptocurrency adoption in  Africa   has been quiet but quick and furious. This tendency highlights that Africans, who are young, tech savvy, and yearning for change, and therefore are looking for ways to escape the problems of fiat money. Africa is certainly a  frontrunner   in crypto usage, boasting  some of the top   crypto ownership rates  worldwide , despite government antagonism.

Should African leaders stick with option 1, which means fiat money and therefore the continuation of monetary colonialism, character will do justice. Historical evidence unequivocally shows that fiat cash regimes always and undoubtedly fail. The fiat dollar standard will not stand the test of time. Natural law prevails over government law.  

Economist Peter Chemical. Earle  clarified :

Whenever Nixon closed the gold window, he promised the suspension of dollar convertibility was temporary. I view the last fifty years like a monetary interregnum: a period where a global experiment extending throughout not only world economies however the whole of commerce, academia, society, and culture will be taking place. Gold will go back to monetary preeminence not since it can or should yet because it must. Nixon’s short-term suspension will be exactly that; not because he said so , but rather because at some point there will be no other road forward.

Conclusion 

Over the past fifty yrs, Africa has been trapped in an impoverishing nightmare of rampant inflation, monetary chaos, plus economic instability. These are pervasive problems because African societies live under monetary repression underpinned by local fiat money regimes, which are, subsequently, derivatives of the fiat money standard.

Chief executive Nixon’s “ temporary” suspension of the link between the buck and gold will switch fifty-one years old coming August, and much economic, social, social, and moral damage continues to be done to societies worldwide during that time. Though for your West, the US in particular, this particular arrangement has been tremendously “ beneficial’” (i. e.,   the exorbitant opportunity ).  

As discussed in “ Money: What Is It? Moreover, Why Is It?, ” cash is the single most important good in the economy, without which society cannot exist. The ramifications of money reach every and everything aspect of human life. Hence, the type of money a community uses must be as stable, as trustworthy, and as incorruptible as possible.  

Enduring economic development plus lasting broad-based prosperity always require sound money. Hence, African leaders must accept sound money and finish monetary (and economic) clampdown, dominance if African societies are usually to become free, stable, tranquil, and prosperous. Such can be Africa’s way out of monetary colonialism.

Leave a Reply

Your email address will not be published. Required fields are marked *