Watch: Forum on 2022 Elections and Meeting the Moment

Last Sunday, Voices for New Democracy hosted our latest monthly political forum discussing prospects for the upcoming 2022 elections with friend, contributor, and MIT professor Phil Thompson.

Following up on his recent writings in the New Labor Forum (‘Is Now the Time to Break with the Democrats?: A Debate‘ and ‘Democratizing the Knowledge Economy: Will Labor Accept the Challenge?‘), Thompson contends that today’s moment is the one the Left has been waiting for since the 1970s, and outlined some of the key (and sometimes contradictory) trends of today’s political moment:

• The rise of the far-right, anti-democratic radicalization among the conservative movement
• Right-wing attacks on immigrants, labor, climate, and other progressive priorities
• Timid union leadership hesitant to seize power
• Long-standing weaknesses and failures of the Democratic party
• Resurgence of labor organizing among service sector workers and strong public support for unions
• Left-wing radicalization among young people and certain legacy institutions
• Progressive movements expanding and pushing local government to the left in strongholds like New York
• The growth of the knowledge economy and the possibilities it presents for organizing and the role of consumers
• And much more

Watch the full forum below.

Watch: Forum on the Future of American Socialism

Last Sunday, Voices for New Democracy hosted our latest monthly political forum with a wide-ranging discussion on the future of American socialism.

The extensive conversation covered key themes in contemporary American political economy and the state of class struggle today. Steve Clark kicked the forum off with a presentation on his latest essay, outlining several important currents in the trajectory of American politics and society, and offered interpretations of how these currents may shape opportunities to build socialism in the United States over the coming years. Thomas Blanton carried the conversation forward, discussing the importance of theory and building partnerships with diverse movements (especially those of oppressed peoples) in advancing a more progressive future. Eric Gill also discussed his perspective on the trajectory of the American left, class formation, modern imperialism, and the contradictions of contemporary capitalism amid the shift to a service economy, drawing on his own experience as a leader of the hotel workers union in Hawai’i. Finally, the forum shifted to an open dialogue drawing out key themes from these presentations.

Watch the full forum below.

Watch: Forum on the Climate Crisis

On Sunday, December 12th, Voices for New Democracy hosted our latest monthly political forum exploring the climate crisis and what it means for today’s left.

Moderated by our very own José Z. Calderón, the discussion was led by Voices for New Democracy friends Bob Eng and Harrison Carpenter-Neuhaus, starting with a presentation highlighting the scope of the climate crisis and the path toward a decarbonized world. The discussion touched on important and challenging issues raised by the specter of climate change: the disruption of extreme weather events, demobilization due to “climate grief,” a new era of geopolitics driven by demand for clean energy commodities like lithium, and the threat of exploitative business models driving the global energy transition. Conversation with the audience also raised important questions about how the left should orient itself politically amid these headwinds: whether we must embrace the movement for “degrowth,” prioritize indigenous liberation and anti-colonialism in our efforts (as advocated in The Red Deal), and how to engage with more mainstream labor-climate proposals like the Green New Deal.

Given the scope of the climate crisis, our presenters believe that climate politics represents the political terrain of the 21st century. But big questions remain about how the left can rise to the moment, and we need your analysis.

With that in mind, we encourage our readers to write to us to share their thoughts and analysis around these questions. If you’re interested in responding to any points raised by this discussion, please email voicesfornewdemocracy@gmail.com.

Watch the full conversation below.

Capitalism, Ecology, and the Green New Deal

| Harrison Carpenter-Neuhaus |

The world’s climate is changing, and it’s surprising — and disappointing — how little our responses have changed since we first recognized the problem decades ago. Since the 1970s, the world has been well aware of climate impacts of burning fossil fuels and many have recognized how our political economy lies at the heart of the problem. Marxist thinkers in particular, like Paul Mattick, were quick to describe the irreconcilable contradiction between our extractive and growth-oriented economic systems and the carrying capacity of our natural ecosystems. But despite these prescient warnings, the world today is still clinging to the same economic systems and largely failing to resolve these tensions. In the face of the accelerating crisis, it’s worth reflecting on the clear trajectory that thinkers like Mattick identified, and what it means for our options in the present moment. 

In 1976, Mattick published his analysis of the problem in “Capitalism and Ecology,” just four years after scientist John Sawyer published the study Man-made Carbon Dioxide and the “Greenhouse” Effect in 1972. Sawyer’s study summarized the scientific consensus at the time around the Earth’s pressing climate concerns: the anthropogenic attribution of the carbon dioxide greenhouse gas, their widespread distribution and their exponential rise throughout the modern era. By the mid-70s, even the Club of Rome recognized the impending ecological crisis in The Limits to Growth. In short, everyone was beginning to recognize the issue: too many of us are using too many resources, too quickly, in too many places. 

The fundamental problem is that we have not been able to reconcile science with the social imperatives of our economic system. The reality is, our system cannot decouple economic growth from environmental impact.

As Mattick writes, Marx recognized that “the exhaustion of the earth’s wealth and relative overpopulation were the direct result of production for profit” (a point that has been explored in great detail by a new generation of eco-Marxists like John Bellamy Foster). And science bears this out. Our world has only become more productive, populated, and globalized since the Industrial Revolution, and this has correlated closely with rising levels of energy usage and greenhouse gas emissions every year. As our economic activity increases, we cannot avoid using more raw materials to keep the system moving and maintain profit margins.

Ultimately, it is capitalist social relations that drive this ecological crisis. “Social phenomena are ecological phenomena,” Mattick writes. To keep profit rates high (the motor driving the entire system), companies simply have no choice but to keep expanding and growing, and that always requires the use of raw materials — and as global capitalism expands (and demand grows as populations increase and more workers are brought out of the subsistence economy into the wage labor system), that rate of raw material consumption can only increase. 

But this does not mean that the solution is to roll back our productive forces and institute new limits on personal consumption. For millions of exploited workers, a vision of the future defined by less is a very hard sell. In fact, if we take this approach, we risk undermining our own efforts to build economic justice. The Yellow Vests movement in France was sparked by a new tax on gasoline, as were protests in Ecuador against the elimination of a fossil fuel subsidy. The logic behind the proposals used an ecological rationale: wealthy people use far more oil, so limiting their excesses is sensible and, at first glance, progressive. The problem comes from the ways that such approaches are regressive at the margins. While lower income people do use far less oil than the wealthy, they rely heavily on subsidies and cheap fuel simply to be able to go about their days. The problem is that these approaches impose ecological austerity whose burden is felt most strongly by the working class, and offer little benefit to them in return. 

Besides, the promise of communism was the progressive advance of productive forces to improve overall human well-being. Rather than advance a dialectic, rolling back production and consumption would only turn back the tide of history to earlier modes of production. Fundamentally, we cannot resolve this crisis simply by turning back the clock. 

We must remember that humanity does not live separately from the natural world (even though we tend to conceive of ourselves this way); we rely on it to reproduce our societies every day. So the way forward must be with a recognition that the two are inextricably linked. It is our social reality that drives our ecological condition, and trying to treat the ecological condition without addressing the roots of our social relations will only lead to these kinds of regressive solutions. 

As Mattick summarizes, “[T]he problem is not so much the miserliness of nature as a social class system of institutions and power relationships that stands in the way of increasing production and productivity.” Rather, “it is landed property, the tenant-farming system, usurious loan capital, the plantation economy, and the parasitical state bureaucracy that hinder any progressive development by maintaining the existing social structure.” Likewise, “the increasing discrepancy between industrial and agricultural production has less to do with population growth and decreasing fertility of the soil than with the one-sided over-emphasis on industrial expansion, or capital’s expansion, demanded by capitalist competition” at the expense of agricultural output (let alone any embrace of polyculture or regenerative agriculture). 

The task, then, is to overcome the key issue we identified before: the link between economic activity and environmental impact. But to do so, Mattick writes, we must treat social liberation as the prerequisite to ecological transformation:

“What is necessary, today and tomorrow, is to end the human misery due to the capitalist relations of production, as the starting-point for a rationally planned mode of society in accordance with natural conditions—one based not on further privations but on a higher standard of living for everyone, on which the diminution of population growth depends, and which would make possible the further development of society’s productive forces.”

In other words, development itself is not the problem, but rather the way that it has taken place under conditions of competitive struggle, where environmental costs are externalized without frameworks for accountability. And critically, this competitive struggle is not dictated by our actual access to raw materials, but rather by a capitalist mode of production that perpetuates artificial scarcity to maintain competitive growth rates. With that in mind, the way forward is to continue developing productive forces progressively (and in ways that actually offer quality of life improvements for workers), but to do so under a new framework that is rationally planned, actually serves human need, and meaningfully takes ecological limits into account. 

Fortunately, one policy proposal has begun to synthesize these insights and, despite some gray areas, has managed to get buy-in across the political spectrum: the Green New Deal (GND). The GND represents a revolutionary shift in how we conceive of environmental policy by tying it inextricably to labor and industrial policy. This comes with both the benefits and risks of being a placeholder for a holistic social transition (onto which many different actors can project distinct visions). But it still shifts consciousness of the issue, and must be developed, not abandoned. 

The GND recognizes that, given the existential threat climate change poses to human society, the federal government (in coordination down to the local level) must lead a deliberate and expansive national mobilization to restructure our physical realities, as well as social and economic systems, and build a new, sustainable way of life in the country. It overcomes the binary between environmentalism and class struggle by placing workers and marginalized communities at the center of this transition, promising that high-paying union jobs will enact the program and build our carbon-neutral systems, with an emphasis on serving frontline communities and undoing the damage that the capitalist mode of production has already inflicted on working people through environmental racism and pollution. Furthermore, the GND is distinct in its national approach to the issue, which actually recognizes the sheer scale of what will need to be done to meet our climate goals. 

Ultimately, we must also challenge the idea that all forms of growth are equal. Much (if not most) of our productive activity is wasteful, and we should cut back on resource-intensive activities (which largely don’t benefit the public, anyway) and instead organize our economies around lower-impact, more human-centered labor like care work. Mattick writes that much of our wasteful economic activity “could be transformed into productive labor—’productive’ not in the sense of profitable but in the sense of creative of use-value [emphasis mine] —while shortening labor time.” We would still have to work and promote development in our communities to deliver improved quality of life and overall social prosperity, but we can approach it in a rational way that operates within ecological boundaries. This also implies new social, political, and economic relations that can build a more egalitarian society. 

This represents a more radical vision of what the Green New Deal can offer by reconceptualizing the goals of our economic and social systems. To truly operate within planetary limits, it’s not possible for individual consumption to remain at current levels. But at the same time, we must be able to offer a better future for the masses if we have any political hope of advancing a sustainable system.

The notion of public luxury could be the key to resolving this tension. In some ways, it’s common sense: collective problems require collective solutions, and collective cooperation makes for a smaller impact for each individual (hence the old saying “many hands make for light work”). Our social relations fundamentally define how we use energy and resources, so to be as sustainable as possible it only makes sense that we must embrace collective and cooperative frameworks to maximize efficiencies. And if we do so appropriately, we can truly speak of luxuries for the public: well-connected rapid transit systems, higher-quality housing, more green spaces and public parks, more resources devoted to healthcare and other care work, more free time, shorter hours, well-funded public amenities, etc.  

Systems driven by social competition produce destructive cycles for the individuals within them, and will reproduce similar forms of destruction on an ecological level. It is only through cooperation, coordination, and a commitment to collective well-being that we can deliver a sustainable and flourishing future. Whatever it’s called, such a system would represent a historic and revolutionary departure from the capitalist mode of production, and would likely have to approximate a form of communism. If that is the case, then true communism may be our only hope for a sustainable future on Earth. 

Still, we can’t be utopian in our outlook; there are limits to what can be done, both politically and ecologically. Any transition from our system will require massive amounts of lithium and likely more resource-intensive development to build the infrastructure for a sustainable society; this is sure to unleash new struggles over control of resources and raw materials and could meet justifiable resistance from frontline communities. And there are sure to be significant challenges in shifting our mode of production: as we restructure our way of life, new fractures are certain to emerge and new struggles will have to arise over the form that this takes. It will be a difficult line to walk, but the left must develop a vision that advances economic and political justice as a prerequisite to ecological transformation, and sustainably develops clean productive forces that don’t rely on moonshot technologies like carbon removal. Now more than ever, we must challenge the underlying logic and the basis on which our system operates, and we must remain committed to this radical vision for a different society. 

Politics Should Frame the On-Going Discussion of MMT and the Dollar Regime

| Steve Clark and Tom Clark |

Tom Clark and Steve Clark (unrelated) were the initial proponents of October’s two-part, Voices for New Democracy forum on Modern Monetary Theory (MMT).

The recent discussions about MMT and the Dollar Regime showed clearly that (1) we are all deeply opposed to US imperialism and wish to break its stranglehold on the global economy; (2) we all agree that finance capital uses its present domination at the IMF to retain US dollar dominance in the world’s financial affairs and to impose sanctions on those that resist this domination; (3) we all favor deep cuts in US military spending, an end to the US-imposed sanctions regime and, alternatively, development of international collaboration (climate change, etc.) and peaceful conflict resolution; and (4) we all want higher taxes on billionaires and corporations to constrain their private hoarding and political influence.

We differ on a number of interconnected monetary issues including (1) the nature and cause of inflation and what recent price increases indicate about potential for runaway inflation; (2) how interest rates come to be what they are (how they are set), their impact on the economy, and whether falling rates are a problem; and (3) whether rising deficit spending relative to GDP is a barometer of a nation’s financial fragility.

In our minds, the matters of unity are crucial for working together and uniting with other segments of the progressive movement. In contrast, the issues in struggle are less crucial and can be worked on (and worked out) in the course of today’s practical fight for progressive political power.

One meaningful two-line struggle clearly came out in these discussions. After Steve offered the view that progressives gained a significant measure of dual power in the 2020 elections and the key political task, now, is expanding our base in 2022 and 2024, this participant said (we paraphrase) that a peaceful path to socialism is near-fantasy and the overthrow of corporate power by force is the only real path to socialism in this country. No one overtly agreed with him so, presumably, he is alone on this point. Apparently, we others share unity that, currently, progressives are in pursuit of a socialist USA via non-violent struggle and the election box.

Another important two-line struggle may exist but needs more clarification. While we — Tom and Steve, representing the MMT perspective — say Biden’s agenda is fully affordable and should be enacted forthwith, it’s not entirely clear (to us) whether Dennis Torigoe (who wrote — again, we paraphrase — swords must be beat into plowshares because we can’t do both) supports its passage, given Biden’s on-going failure to restrict military spending and his anti-China adventurism. In our view, progressives should continue criticism of Biden’s imperialist agenda while fully affirming his effort to put domestic spending on a new foundation.

Certainly, the results in 2022 will turn on the voters’ perception of the Biden Administration’s efforts to pass its domestic agenda, as well as its approach to certain international issues (like immigration and climate change).

Yet, the Biden agenda is being sabotaged by conservative (corporate) Democrats who reject it for corrupt (bought-off) reasons while offering the public rationale that it is too expensive and can’t be paid for. In the context of such obstruction, MMT stresses that Uncle Sam is the monopoly supplier of US dollars and can always create as many as are necessary to fund Congressionally-mandated objectives. A decision not to fully fund Build Back Better agenda is politically, not financially, motivated.

We appreciate the views that were shared in the forums. Our discussion about the nature of contemporary public finance (aka, modern money) must continue, and the on-going struggle for social justice and ecological salvation, worldwide, will provide plenty of context for resolution of our current differences.

Monetary Imperialism & Apartheid in Africa: The CFA Franc

| Sherri Donovan |

Colonialist Northern nations utilize the IMF, the World Bank, legal frameworks, imposition of fiscal austerity, tax rules and privatization to deprive African cultures and countries of their own resources and to ensure such resources flow to the imperialistic nations and international corporate benefit.

After World War II, France was economically devastated and its currency was weak. France wanted the resources and wealth of African peoples and lands, and to extract it on exploitive terms. In the late 1950’s and early 1960’s after the independent movements and struggles of African peoples ( often met with brutal violence by Europe), Charles de Gaulle’s neo- colonization conditioned political independence of new West and Central African nations to maintaining economic ties to France to France’s advantage. As Franz Fanon stated, “Colonialism never gives away something for nothing.” Currency arrangements have in the past and continues under Macron to be a critical tool in transferring wealth and resources from Africa to France.

CFA stands for Communauté Financière Africaine (African Financial Community). The CFA is a colonial currency created December 26, 1945 by General De Gaulle and his finance minister. This was the same day that France ratified the Breton Woods agreement and the new parity of the french franc was presented to the newly born IMF. Fixed exchange rates trace back to the Bretton Woods period when 63% of Southern countries had their currency pegged to that of an imperialist country.

The CFA was originally translated as “Franc of the French Colonies in Africa” The CFA is still used in West and Central Africa by 14 countries and split into two monetary zones. The eight countries of West Africa using the CFA, with an ISO currency code of XOF are Benin, Burkina Faso, Guinea-Bissau, Ivory Coast, Mali, Niger, Senegal and Togo. They represent the West African Economic and Monetary Union, or WAEMU, founded in 1994 to build on the foundation of the West African Monetary Union, founded in 1973. The six countries of Central Africa using the CFA, ISO currency code of XAF are Cameroon, Chad, Central African Republic, Congo Republic, Equatorial Guinea and Gabon. They comprise the Central African Economic and Monetary Union, or CAEMC.

Although separate, the two CFA franc currencies have always been at parity and are effectively interchangeable. All were former colonies of France except Guinea-Bissau and Equatorial Guinea. All maintain French as an official language except Guinea Bisseau. Comoros also has its own central bank tied to France and is considered part of the CFA system.

In 1960, France actually had a larger population — around 40 million people than the 30 million inhabitants of what are now the 15 CFA nations.( including Comoros). In 2021, 67 million people live in France and 183 million in the CFA zone.According to UN projections, by the year 2100, France will have 74 million, and the CFA nations more than 800 million.

Given that France still controls their financial destiny, through the CFA, the situation is increasingly a monetary apartheid. The CFA is issued by three separate central banks, Banque Central des Etats de l’Afrique de l’Ouest ( BCEAO) and the Banque des Etats de l’Afrique Central( BEAC). Comoros has a separate bank, (BCC). It is mandatory that French officials sit on the boards of all of the CFA franc central banks and the French government has the authority to monitor all financial transactions of these 15 nations. The French people were permitted to vote on whether or not to adopt the Euro through a referendum. The African peoples of the CFA nations were denied any such right, and were excluded from the negotiations that would peg their money to a new currency. The French government can veto the decisions of the BCEAO and the BEAC. The monetary policy favoring European priorities is set by the European Central Bank ( ECB), previously set by the Banque de France. France is acting similar to an IMF for these West & Central African nations. The World Bank and the International Monetary Fund have historically worked in concert with France to enforce the CFA system, and rarely, if ever, criticize its exploitative nature.

French colonialism goes beyond money. It also affects education and culture. For example, Farida, a Togolese activist said, the World Bank gives $130 million per year to support Francophone countries pay for their books for public schools. Farida says 90% of these books are printed in France. The money goes directly from the World Bank to Paris, not to Togo or to any other African nation. The books are brainwashing tools, Farida said. She points out, that “They focus on the glory of French culture, and undermine the achievements of other nations, whether they be American, Asian or African.” French language is promoted heavily by France to ensure the colonial system of keeping the monetary and economic system bound to France. There are more French speaking people in Africa than France. Based on my personal observations of over twelve years of spending time in Senegal, most of the French who visit or reside in Senegal refuse to learn a word of Wolof. They expect all West & Central African people to speak French. The French are shocked or laugh in a condescending manner when they hear me converse without French, in Wolof (albeit simply).

Of course France has a long-standing pattern of subverting democracy and elections to maintain monetary and economic exploitation. An important part of the CFA system is French support for dictatorship. With the exception of Senegal, not a single CFA bloc country has ever had meaningful democratization. As Farida points out, “Every single successful tyrant in Francophone Africa, has had the full backing of the French government” as long as an African colonial elite will favor France. The French Treasury guarantees the convertibility of the CFA into the French Franc, and now the Euro. Independent economic and financial planning is impossible for these West and Central African nations.

The CFA system confers five major benefits to the French government: bonus reserves to use at its discretion; big markets for expensive exports and cheap imports; the ability to purchase strategic minerals in its domestic currency without running down its reserves; favorable loans when CFA nations are in credit; and favorable interest rates when they are in debt.

As Senegalese economist, Ndongo Samba Sally points out,

“By pegging the CFA franc to the Euro, now the African countries and their central banks are more or less submitted to the same restrictive rules in terms of inflation, public debt and public deficit.

The CFA guaranteed France’s chokehold on African economies and ensured wealth drainage to France. When the CFA was created, it served France’s interest by being born and maintained overvalued. It stopped the African nations selling competitively to Asian and Latin American nations and to trade exclusively with France. The overvaluation of the CFA kept France from having to use US dollars as the Breton Woods required which would have been very costly against the weak French franc. Controlling the monetary policies of 14 African nations (15 with Comoros) justified giving France a seat and vote at the UN Security Council.

In addition, the value of the CFA franc has been widely criticized as being too high, which many economists believe favours the urban elite of the African countries, who can buy imported manufactured goods cheaply at the expense of farmers who cannot easily export. The CFA permitted France to obtain raw materials and products from its former colonies by issuing a credit to the CFA nations.”

Ndongo states, “If you take also the level of competitiveness of African countries of the franc zone they fare the worst in the world. In West Africa, except Côte d’Ivoire all of the remaining countries are chronically in a state of trade deficit. Countries like Benin, Niger, Mali, Burkina Faso, they never recorded one year of trade surplus. They are structurally in a situation where they have to be indebted in foreign currencies. They will never be able to develop because the mechanism of the CFA franc will never allow them to be developed.”

Ndongo explains, “Because you have no monetary sovereignty. So this is the case of the CFA franc zone and that’s why there is no economic dynamism at all. Economic growth in the CFA franc zone is never triggered by internal dynamics, but just by external dynamics. For example, good terms of trade and cheaper interest rates … on international financial markets. So this is the sad story of the CFA franc. Somehow owing to these mechanisms when there are economic crises it’s much more difficult for CFA franc countries than others because the exchange rate cannot be used as a policy variable. As they follow the neoliberal rules, so public deficits are not really encouraged and the central banks generally in those circumstances follow an orthodox monetary policy, and that means that whenever there are economic crises, the main way of adjusting economically is what is called internal devaluation. That means lowering internal prices and limiting public deficits and letting the private sector enterprises go bankrupt. That is the main mechanism of adjustment in the CFA franc.”

As Landry Signe concludes, “The CFA franc zone as a whole has thus resulted in:

1. Limited intra-regional trade, especially in Central Africa.
2. High dependence on producing and exporting a limited number of primary commodities.
3. A narrow industrial base.
4. A high vulnerability to external shocks.

For example, In 1994, France devalued the CFA franc, raising the parity rate from 50 CFA francs per French franc to 100 CFA francs per French franc. CFA member countries’ governments imposed wage freezes and layoffs in the wake of the CFA devaluation, leading to widespread unrest over inaccessible goods for consumers and unmanageable price controls for suppliers.” African families lost of half their monetary savings.

Many African economists, including Senegalese economist, Demba Moussa Dembele and Togolese economist Kako Nubukpo explain that dependency on European monetary policies is a restriction to growth due to a hyper-fixation on inflation.

Protests against the secrecy, repression and use of the CFA and for its abolition has historically existed and is growing since 2015/2016. In 2018, seven artists from 10 countries released the rap song “7 minutes against the CFA franc” to drum up popular support for dumping the currency.

As Landry reports, “Large numbers of unemployed youth throughout sub-Saharan Africa—which may reach over 350 million over the next two decades—are often the loudest opponents of the CFA zone. Other pro-democracy movements, like Y’en a Marre in Senegal and Le Balai Citoyen in Burkina Faso, consider the dismantling of the CFA zone as essential to their campaigns to reform their countries’ respective governments. Other protests have included Kemi Seba, the Benin-born French activist who was charged with burning CFA notes in Senegal before being deported.”

In 2020, 66% of the Togolese people polled believed the CFA existed to benefit French interests and should be abolished. The Senegalese slogan “France Dégage” became a West African rallying cry for the French to be transparent and to withdraw, “walk” away from the West and Central African monetary system they enforced. Resentment has also been fueled by the presence of French military troops in the Sahel desert.

Chad’s President Idriss Debby said back in 2015 that the CFA was pulling African economies down and that the “time has come to cut the cordon that prevent Africa to develop.” He called for a restructuring of the currency in order to “enable African countries which are still using it to develop.”

Nigerian President, Muhammadu Buhari has been demanding, since 2017, a divorce plan from the French treasury of the eight West African countries that use the CFA franc. The recent protests are Pan-African and popular.

Abolition of the CFA and new currencies are necessary for financial sovereignty.

It is important to note that for five decades Senegalese & other Africans resisted the use of French currency and previously had mixed currencies including cowries from the Indian Ocean. The French utilized the military to force the use of the French currency only. They also imposed taxes to be paid in French currency which also forced the use of French currency.

Two years after independence, Guinea refused the French currency and produced their own currency. France launched a military operation, and the French secret service sabotaged the economy by flooding the market with counterfeit notes. Guinea still has not economically recovered since then.

Togo in the 60’s had a leader trained at the London School of Economics, Sylvanus Olympio, who was about to launch the country’s own currency and diversify trade partners when he was assassinated.

In 2011, France used the Central West African Bank to place a financial embargo against Ivory Coast and bombed the Presidential palace to install its candidate.There were also attempts to challenge France in the 1970’s and the 1990’s. France has engaged in over forty interventions in the CFA countries since “political independence”.

Solutions for change in currency

On December 22nd, 2019, due to political and grassroots pressure, it was announced jointly by France and the Ivory Coast that the CFA in West Africa , not Central Africa would be replaced by a currency to be called Eco.

The Eco has not been implemented due to legal, technical and political problems. It is tracked for implementation in 2027. The Eco would still be pegged to the Euro, and require European fiscal restraints. It would not require 50% of the reserves be kept with the French Treasury but France would keep its role as guarantor of convertibility of the Eco like the CFA. An indirect form of control by the Banque of France and the French treasury would exist with France requiring information about the management of reserves and if French government debt securities were purchased. MMT economists, like Djongo correctly point put that this “reform” or mutation does not represent significant social change to serve African people. It has been described as “window dressing”.

In 2019, the French Minister of Affairs issued a report that 49% of french companies operating in the CFA zone consider it a favorable place for profits now and in the future; and the same report predicted that even 60 years from now the CFA should not be abandoned but just reformed even under a different name.It should be noted that the announcement of the Eco was made after Italy criticized France for its monetary policies in Africa. Luigi Di Maio, Italy’s former deputy prime minister and minister of foreign affairs at the time, revived the controversy about the role of the CFA franc on Africa’s development with a statement, “France is one of those countries that by printing money for 14 African states prevents their economic development and contributes to the fact that the refugees leave and then die in the sea or arrive on our coasts.” In response, France expelled the Italian ambassador.

There are two macroeconomic proposals for change. The national exit and the pan-African exit. African nations as Ndongo clarifies, “could exit the CFA franc on a national basis. That means Senegal would say, ‘I want my own national currency’ and so I’m exiting the CFA franc. This is the path followed by Guinea, Mauritania, and Madagascar. And legally speaking, it [would be] very easy. The Senegalese government would just have to notify the West African monetary union of this decision, and in six months they could have their own national currency.”

But it’s difficult because if you go alone, you don’t know what consequences you could face from France. French sanctions, embargos, political isolation, military operations and assassinations have caused great disruptions and poverty to places like Guinea and Mali. Mali rejoined after exiting.

The Pan – African exit means “instead of African countries trying to initially have their own currency, they say, ‘we no longer need France’ France could [then leave] the CFA franc system.”

Ndongo continues, “With regard to the issue of how to get out of the monetary status quo, there are in my opinion, four different points of view. First, there is the perspective I call symbolic reformism, which consists [of] touching only the visible systems of monetary coloniality without touching the fundamentals of the CFA franc system. This includes proposals such as changing the name of the CFA franc, having banknotes and coins manufactured outside of France, and even further reducing the deposit rate of foreign exchange reserves at the French treasury. Emmanuel Macron, for example, made this type of proposal, and he even suggested that he was open to expanding the CFA franc zone to a country like Ghana.”

In other words, France is seeking to expand its empire by adding African countries not currently utilizing the CFA.

The approach most favored by Ndongo is: “sovereign abolitionism that is an exit from the CFA franc that breaks with the neoliberal model of economic integration and that strengthens the sovereignty of individual countries and also the sovereignty of [countries] collectively. If we put aside the political criticism of the CFA franc, the real economic criticism is that the CFA zone must not exist because it has no economic justification. It is not a so called ‘optimal monetary zone.’ Each country must have its own national currency because economic fundamentals, levels of development and productive dynamisms are not the same. But saying that does not mean that we cannot have systems of solidarity between African countries.”

Ndongo perceptively speaks of “solidarity national currencies. Concretely, that means that each country has its own national currency with its national central bank. The exchange rate parity is determined according to the fundamentals of each country, and countries have a common payment system. Their currencies are linked by a fixed but adjustable parity to a common unit of account, and also there is solidarity in the management of foreign currency reserves. Finally, there are common policies to ensure energy and food self-sufficiency, because in the ECOWAS zone energy and food products represent between 25-60% of the value of imports, depending on the country.”

Ndongo explains, “The advantage of this option… is that it makes it possible to reconcile macroeconomic flexibility at the national level, that means the possibility to use the exchange rate as an instrument of adjustment, and at the same time to have solidarity [between] African countries. This option also helps break the Anglophone, Francophone, and Lusophone divide, [which] is a legacy of colonialism. “

The other two viewpoints criticized by Ndongo include, a “proposal of [basing] the exchange rate of the CFA zone on a basket of currencies, but the problem with this perspective is that it is simply unrealistic because it ignores the functioning of the CFA zone. Exchange rate flexibility is not an option in the CFA system because the convertibility guarantee is offered at a fixed exchange rate and in the currency of the guaranteeing authority. Many people who claim to be experts and moderate [still don’t] understand that the demand for flexibility is incompatible with the maintenance of French guardianship; it is one or the other.”

“Neoliberalism abolitionism is an exit from the CFA franc that follows the neoliberal monetary integration model. It is a ‘eurozone model.’ There are countries in West Africa who want to be part of the single currency project of the ECOWAS (Economic Community of West African States), a single currency project for West Africa. Sharing the same currency is not justified among ECOWAS countries, owing to a number of factors, like for example Nigeria’s disproportionate weight. Nigeria accounts for at least 70% of West African GDP. [As well], there are differences in economic specialization. Nigeria is an oil producer and exporter, whereas, you will find in West Africa at least nine countries which are net oil importers. There is also the fact that economic cycles are not synchronous in West Africa and the level of inter-ECOWAS trade is very low. All of these elements point to the fact that a single currency is premature and not justified economically in West Africa. We have to also say that there is no planned federal fiscal mechanism, but rather, limitations on public debt and deficits… That means, in case of economic crisis, countries in this currency union would only have the option of so called internal devaluation [via] the lowering of internal prices, which often comes to austerity policies and the growth of unemployment.”

Digital currencies and the role of China are also two factors that may impact the future of the CFA zones. As reported by MERIC:

“China’s presence in countries like Senegal and Côte d’Ivoire is growing rapidly. …Where in 2000 France was the number one exporter to all of its African former colonies, by 2017 it retained this status in only three…Chinese lending to these countries increased 332 percent in 2010 – 2017 compared to 2000 – 2009, and contracts awarded to Chinese firms trebled in value in the same period – with Chinese contractors taking on high-profile projects like the Soubré dam in Côte d’Ivoire…This economic emergence is backed by a concerted Beijing push to deepen China’s footprint in Francophone West Africa, centring on Senegal as ‘the gateway to West Africa’ (西非门户). Xi visited the country in 2018, baptising it a Comprehensive Strategic Partner and the first West African state to join the BRI (all bar Benin have followed suit). Beijing has cultivated Senegal with gifts – including an arena for the national sport and a Museum of Black Civilisations – and selected it as the first Francophone and West African country to host the FOCAC Summit (to be held in Dakar in 2021). Chinese analysts expect this to pave the way for a deeper penetration of Francophone West Africa. Indeed, an important development is the number of Chinese migrants bypassing French altogether to conduct their business in Bambara, Wolof, and other African languages. With the Beijing Foreign Studies University expanding its range of African languages, this trend is not limited to the informal level – and may emerge as a valuable soft power tool…China’s emergence in West Africa directly challenges French economic interests. Chinese companies have moved into sectors long dominated by French players: civil engineering, extractives, telecoms, ports. French national champions – Vinci, Eiffage, Orange, Bouygues, Total, Areva, Alstom – must now go toe-to-toe with Beijing’s giants…”

As researched by doctorate Che, “In 2013, China launched the ‘One Belt One Road’ (also known as the ‘Belt and Road’ or ‘New Silk Road’) Initiative, the most ambitious infrastructure investment project in history, which is designed to facilitate ‘going global’ by connecting Asia, Europe, and Africa. Since the adoption of the ‘go out’ policy, even France’s historical sphere of influence in Africa, particularly the Franc Zone, has experienced a surge in Chinese trade, grants, loans, and investments. As of 2017, according to UN international trade data for goods (see table below), China had overtaken France as the number one source of imports for a number of Franc Zone countries, namely Burkina Faso, Cameroon, Côte d’Ivoire, and Togo, and occupied second spot behind France in Mali and Senegal.”

Fanny Pigeaud and Ndongo Samba Sylla conclude that, “in all of the countries where the CFA and Comoros francs circulate, the underdevelopment of human potential and productivities is the norm.” As understood by former President of Ghana, Kwame Nkrumah, assassinated former President of Burkina Faso, Thomas Sankara, and assasinated first Prime minister of the Republic of the Congo, Patrice Lumumba, independent financing and development can not take place without an independent currency.

Sources:

Africa’s Last Colonial Currency, the CFA Franc Story | Ndongo Samba Sylla & Fanny Pigeaud

Monetary imperialism in Francophone Africa – an interview with Ndongo Samba Sylla

Background Information Study Guide to the Fabric of Reform, International Monetary Fund (IMF)

Will the ‘ECO’ replace the CFA franc? | Al Jazeera

West Africa renames CFA franc but keeps it pegged to euro | Reuters

West African countries change currency, shed French ties | Cindi Cook

Africa Report: The Perilous Journey to a single West African Currency

West African CFA Franc Reform: What’s Changing in 2020 | Africa Report

How the France-backed African CFA franc works as an enabler and barrier to development | Landry Signe

Fighting Monetary Colonialism With Open Source Code | Alex Gladstein

The African Currency at the Center of a European Dispute | New York Times

China in Francophone West Africa: A challenge to Paris by Mercator Institute for China Studies (MERICS)

China’s Rise in the African Franc Zone and France’s Containment Policy | Afa’anwi Ma’abo Che

Watch 10/3 MMT Forum, Join 10/10 Follow-Up Discussion

Last Sunday, Voices for New Democracy hosted our latest monthly political forum discussing Modern Monetary Theory (MMT) and the insights it holds for today’s Left. The full forum is available to watch in two parts below.

We also invite you to join a follow-up discussion to carry the dialogue forward. Please join us on Sunday, October 10th at 7pm ET / 4pm PT. Use this link to join the conversation.

The follow-up discussion of MMT will be open for any points or comments that you have. For stimulation, below is a list of questions that the planners gathered after last Sunday’s session. Don’t see your question on this list? Add it here.

1. Why does this discussion of finance and MMT matter to me? 
2. How is positive, public investment in US funded or how could it be better funded?
3. What is the federal deficit and the accumulation of deficits (national debt), and what are their relevance?
4. What is the point of increasing taxes on the rich (and/or corporations)?
5. How is the general level of prices in the US set? What is inflation?
6. How are interest rates set and is there a seed/reap cycle?
7. What is the effect of US currency going abroad?
8. Why are taxes and government income the basis of bonds and Treasuries issued by the government?
9. Why are some government’s interest rates negative?
10. How does massive currency creation for imported goods create structural unemployment at home?

The discussion is set for 90 minutes. If you want to prepare and investigate further on your own, please see the resource list here.

THE US DOLLAR REGIME

A RESPONSE TO STEVE CLARK, TOM CLARK AND SIGNE WALLER FOXWORTH ON THE DOLLAR AS THE WORLD’S RESERVE CURRENCY

| Dennis Torigoe |

First of all, thank you Steve, Tom, Signe and others for responding to my recent article, The Dollar as the World’s Reserve Currency. This discussion will help activists grasp the issue’s importance as well as deepen our understanding of this issue.

Under US capitalism, policies pushed by MMT can help with partial solutions to some of the country’s problems. However, in practice, the continual debt-driven printing of money drives economic polarization and the country down the wrong path to the future. Under what we call the US dollar regime, the rich are getting much richer while structural unemployment, as shown in the labor participation rate and deindustrialization, is worsening.  While the prevailing narrative of unemployment is that the Chinese are taking our jobs away, this story is increasingly being contradicted by acknowledging that we can simply print money and get their manufacturing products. Why should we then bother to do the dirty work of investing and manufacturing at home in the first place? 

Under the Fed’s huge printing of money the assets of the rich, like stocks and desirable real estate, have been skyrocketing. Wages and salaries for most workers are stagnant. While it shields the middle class, who own their homes in the right places and stocks in retirement funds, from the ravages of inflation, the super-rich are getting richer and the poor are getting a lot poorer. The paradox is that economic polarization gets worse as more money is printed. Alongside that, the US has always used its ability to print money — a de facto use of what is described in MMT — to fund wars of aggression and expand its military dominance around the world.

Printing money to fund spending on infrastructure and human needs makes sense because they are a direct investment in our postindustrial future. Large budgetary spending on programs such as early childhood education, cleantech, and communications make sense because they will propel us into a highly productive, more equal and democratic postindustrial future. Federal support of research and development — whether through universities, national labs or private enterprises engaging in activities such as semiconductor chip development — is decades behind and should be vastly increased. Printing money for use in these endeavors enhances the sciences and productivity and will be paid back in time. Even when a direct payback is absent, such as for Covid vaccination and climate adaptation in developing economies (provided these are offered free of conditions and imperialist designs), these types of expenditures  are essential to further a just and fair society. 

We are not against the dollar as a reserve currency in principle if it was a result of superior US productivity and innovation or the use of deficit spending by the government to carry out crucial infrastructure, for human needs and in developing human capital that will propel us into a highly productive, more equal and democratic postindustrial future. What we are against is the dollar as a reserve currency used as a weapon of the US to rip off other countries and vastly overfund the US military to carry out wars of aggression and threaten other countries with economic sanctions. We are against the use of the US dollar regime as a means to push the US into gutting its real industries, creating greater structural unemployment and extreme polarization in society. 

Turn Swords into Plowshares

Military spending and adventures that serve and enrich a narrow part of US society and special interest groups, to further empower the US military industrial and intelligence complex, are the opposite of the positive expenditures enabled by printing money. They take away useful, value-added productivity and turn it into death, destruction, waste and decay.

Thus, as part of a progressive program, we call for swords to be beaten into plowshares.

All of us agree that spending money on wars of aggression and huge military budgets are wrong.  We also agree that spending on domestic programs to increase productive activities that increase social wealth and equality are positives. 

Here is where we disagree. We cannot do both: there has to be a choice between plowshares and swords. Swords have to be turned into plowshares. That’s an essential programmatic element for any progressive agenda.  As Signe has said, there is a challenge to our view of economics and ethics.

By saying that we can do both, we are following the narrative of neoliberal US imperialism, which indeed, always attempts to do both guns and butter, of war, with reform and repression. But their neoliberal narrative does not acknowledge that spending at least 750 billion dollars every year on war and the military, with its hundreds of bases in foreign countries, is the amount not spent creating the conditions for postindustrial development. 

Even from a perspective of national self- defense, should such an unlikely eventuality become a necessity, a vast and rigorous R&D culture and network with the aim to better humankind will form a strong scientific and technological basis for a new and innovative national defense. 

Moreover, the cost of sustaining the current vast war machine is not just reflected in the annual Federal budget. It is reflected in the oppression of people in other countries who are victims of that war machine and US imperialism and the lost opportunities to implement real positive change in the conditions of the American people and the world.   

The Nature of Fiat Currency

We would like to address Tom’s point on fiat currency. All currency serves two basic purposes: first as a unit of account and as a store of value within a legal jurisdiction (normally within a country). Secondly,  it is a medium of exchange. Gold and silver have often been used historically for these purposes. However due to the expansion of human production and civilization (roads, cities, productive tools, cultural products and services) both in scale and quality, there is no longer an adequate amount of these precious metals to perform these two functions. 

Store of Value

However, to understand the US dollar regime, we must study a national currency used in more than one jurisdiction, that is, internationally. The rise of mercantile capitalism, colonialism and imperialism meant that a dominant currency was used in multiple jurisdictions. So a fiat currency of a particular nation, say in the case of  the British Pound, particularly one that’s powerful militarily and, like the Bank of England, has a long tradition of honoring its currency and establishing its global value. It built trust in maintaining its currency’s value or for goods and services. The replacement of Great Britain by the US as the premier international power, allowed the US dollar to have a greater value as a fiat currency with global dominance.

Medium of Exchange

The other principal reason for the dominance of a currency is its value for the exchange of goods. The US dollar through its redeemability in gold and silver and even before OPEC became the ONLY currency permitted in buying oil. Since the value of the global oil trade at oil’s high points could constitute up to 60-70% of the total value of global trade, the US dollar became more valuable and desirable as a result of this linkage,( which by the way seems voluntary but is not. It’s decidedly by force or the threat of force). Almost all globally-traded commodities are priced in US dollars, including energy, precious metals, base metals, and agricultural commodities. 

The US dollar is the dominant global currency. As such, it is used as a reserve currency by other countries. Today the US dollar is about 50-69% of all currencies kept by other countries for trading and other reserve purposes, though this has declined since the 1990s, before the US invasion of Iraq. To show the relative strength of the US dollar, only 2% of the world’s reserve currency is in China’s renminbi, even though it is a dominant trading nation. The Euro is in the ballpark with 20-30% while the Japanese Yen is about 10%.The US dollar is dominant not just in trade. It is also used as the basis for other pegged currencies such as the Hong Kong dollar and other currencies around the world including China which has printed its RMB from 1980 to the present, but particularly in the early years, based on the amount of US dollar they owned.

Why Has US Inflation Been So Low Since the 1990s?

The US became a world reserve currency and relatively free from inflation, even though a  much larger amount is printed beyond its domestic economic needs, because a large amount of printed currency gets absorbed by other countries, free from US domestic circulation, which would be highly inflationary. MMT and some mainstream economists contend that we can print as much as we need since there is no inflation. For example, they set up a 2% inflation goal (which justifies printing 2% more US dollars as a neutral, non-inflationary act). Since this 2% US dollar inflation was never reached in recent years, they say that it shows that it’s okay to print even more. 

What they didn’t say is that this is only a temporary phenomenon. Many formerly colonial and developing countries have embarked on economic development and created a lot of savings in the last two or three decades.  Their savings were saved in US dollars due to the weakness of their own currencies.  Absorption of this large pool of global savings enabled the US dollar to be printed without inflation. 

But will this continue indefinitely? We don’t think so. There are no free lunches in the world. These developing world savings are finite and have been exhausted. There is no more coming. Furthermore, will manufacturing countries continue to accept the US dollar as good IOUs as the Federal Reserve engages in quantitative easing, again and again into infinity? 

The recent commodity inflation (PPI) index has reached 10% and the consumer price (CPI) index over 5% indicating a pivotal change in inflation. Many mainstream leaders in finance such as Jamie Dimon and Larry Summers challenge the Federal Reserve’s view that inflation is only temporary. They both said that we will be surprised by the persistence of this inflation.

The Nature of the Federal Reserve’s Interest Rate Cycles

As Prof. Salas stated in his recent immigration forum, the Mexico border issue is not just a Mexico-US problem. It’s a North-South or developing world-US problem as a result of the US neoliberal imperialist system. US neoliberal imperialism is an economic-industrial-military political order which reaps world wide profit from the massive expansion of low-interest debt. As the US raises interest rates in due time, it bankrupts those that borrowed massively for economic development. This interest rate cycle, often depicted as a boom and bust cycle, or a Federal Reserve interest rate cycle are global and omnipotent. It sweeps the world first with hope and then certain despair. The finest assets such as Korea’s Samsung were once almost taken over (which would be like taking over a country without firing a shot) by the same group of hedge funds such as Elliot Management, the same group that attacked the Thai Baht, the Malaysian and HK dollars in the Asian Financial Crisis. The force of US-led global capital pushed Latin American countries and Russia  into bankruptcies or debt traps like the Brady Bonds. This spreading of the fishing net and reaping by pulling it in is predictable in almost 10-12 year cycles. 

The Federal Reserve’s Interest Rate Cycle is the US Dollar Regime

The key point is that the Federal Reserve’s MMT-like currency cycle is the US dollar regime. It doesn’t separate military spending from lending to poorer nations. If the set up does not guarantee “reaping,” that is, the ability to enforce measures on those who default on loans or the  military capacity to enforce isolation of countries like Iran or Venezuela when they get out of line (which is the post World War II practice) they won’t lend their money until the country targeted capitulates or there is regime change. In the first place, the US dollar regime is a regime — an established system of monetary, political, military and organizational orders that doesn’t separate where the money goes. It prints because it’s set up. It is set up to reap. 

When we say Keynesian spending on human capital and needs is good, we are not saying that as a part of that system. We are against the US dollar regime as a system. We are just saying there is nothing wrong to borrow through legitimate commercial channels or even by government spending but without military, SWIFT and hedge fund enforcement — the way it is done today.

The Counter-Cyclical Nature of Interest Rate Cycles of the Former Victims of the US Dollar Regime 

The US Fed has lowered the interest rate to almost zero as Covid-19 hits. Now they are tapering and ready to raise the rate to reap. However, this time things may be different. Many countries learned this game and have raised their rate before the US raises its rate. They do so to be countercyclical to preempt US reaping by minimizing potential damage, by trying to get out of or lowering debt before the nets are pulled in. Countries from North to South, Turkey to Korea, China to Vietnam are all trying to raise interest rates and lighten their debt owed before it’s too late. This actually has forced Federal Reserve Chairman Powell to taper ahead of schedule! This is another reason that this round of US monetization of debt and QEs may not hurt others as much it hurts itself.

After the wakeup call from China reversing its buying of US Treasuries, this round of the interest rate cycle may be a reset for the US. The amount of US government debt of $29 trillion along with $5.6 trillion of Federal Reserve debt on its balance sheet is scaring the rest of the world and they are buying fewer US Treasuries fearing inflation. This is part of the counter-cyclical interest rate game to minimize their losses.

This makes the latest round of Fed Chairman Powell’s moves questionable. Inflation is widening from commodities to everyday consumer products, a rare global occurrence that may foreshadow the beginning of the end of the US dollar regime. Stanley Druckenmiller has stated that the US dollar regime could end in 15 years if we keep printing money like this. And, he says, that could be the end of the American way of life as we know it.

Massive Deficits a Burden? 

Tom states: “As Godley showed, this accounting is a fact, not a theory, and decisively exposes the myth that the national debt is somehow a burden to our descendants, any more than the massive deficits from WWII were a burden to us.”              

While it is not necessarily true that national debt is a burden, there are limits to a sovereign currency. One is that the fiat money supply (printing money)  must not continually vastly outstrip the amount of goods produced, services available or savings or the currency will devalue. This devaluation most often will show itself as inflation, where prices paid in that currency rise on goods and services, which will lower people’s buying power and if it grows higher and uncontrolled will devastate the economy. This happened, for instance, in the 1970s in the US during and after the Vietnam War and in Latin America during the 1980s and early 90s and most infamously in Weimar Germany in the 1920s. In fact, Modern Monetary Theory recognizes that the limit of currency creation by a sovereign country is the ability to keep inflation at a tolerable level. Thus, sovereign currency debt creation is in fact not unlimited, but constrained by the real economic conditions in which it functions.

The other limit is that the government has to service debt created by deficit financing, for instance the servicing of bond interest. As the US government continues to deficit finance its budgets, it has to be able to pay bondholders the promised interest on the bonds. Right now, the US government allocates about 7.9% of its budget to interest payments ($325 billion) and the 2021 Federal Budget Proposal projects this by 2030 to become 10% of the budget, or $665 billion. The Congressional Budget Office projects that federal debt payments could reach 27% of GDP (GDP, not the Federal Budget !) by 2050 from around 8% in 2021. No amount of raising taxes could save the day. Moreover, any problem that arises from this debt servicing, such as the Tea Party Republicans threatening to default on US interest payments in 2011 and 2013, or like the Republicans in the Senate are doing today, will cause US treasuries interest rates to rise because of perceived risk, slows economic growth and weakens the dollar’s value, increasing import costs.

This growing federal debt service eating up more of the federal budget is also both a lost opportunity to fully fund more productive postindustrial programs and an increase to the inflationary threat. As more dollars are printed to cover this debt service, more dollars are released into the economy, causing inflationary pressure. It can also cause asset bubbles as investors chase higher returns  than near 0% interest Treasuries,  bubbles which burst and cripple the economy as happened in the 1970s, the dotcom stock market bust in the 1990s and the Great Recession in 2009-2014. Today, leading investors like Stanley Druckenmiller (who along with George Soros broke the Bank of England by shorting the English pound in support of the US dollar as the rising reserve currency) see that as a real risk in the next year or two. As stated before, he also predicted that the US dollar reserve regime may end in 15 years, fundamentally changing the American way of life as we know it.

On the question of the US’s massive deficits after WWII, I think we have to look at the global economic picture after the war.  While the US was not invaded or devastated, the countries of Europe and Asia were. The fact is that the US won the war. The statement that the US didn’t feel the effects of its debt fails to take into account the widespread economic destruction in China, SE Asia, the Soviet Union and Europe. The outcome was that America felt it in lives lost in war but in fact profited economically. By taking the mantle of global superpower and imposing the post war international order on the non-socialist world, through means of the Marshall Plan, the reconstruction of Occupied Japan and the crushing of Communist-led rebellions in Greece, the Philippines, Vietnam and Malaya, the US enriched itself by reconstruction contracts, the control of third world commodities, the domination of global trade and commerce producing major profits for its capitalist class. With the Bretton Woods dollar regime, the US lorded over the rest of the world economically and militarily.

In fact, North America enjoyed the longest rise in the standard of living in history during the post WWII period, until we hit Vietnam, Iraq and the Middle East. The Vietnam War ended in 1975 with 55,000 American lives lost but millions of lives lost in SE Asia. The war cost a little less than $1 trillion then. But combined with the rebellion pacification money of the Great Society and Urban Renewal (the last big printing of money by the US government) it was less than 20% of what we spent in wars in the Middle East and Afghanistan. Even then the Volcker recession drove the US economy way down in the 1980s (see The Myth of American Deindustrialization) until we revived it through the digital revolution that went from the mid 1980s until it went bust in the stock market’s internet debacle in 2000.

Is US Dollar Hegemony a Product of, or Integral to US Imperialism?

Tom states that the “dollar’s status as reserve currency is a result, not a cause, of US imperialism.” That is untrue.  The key fact is that US dollar hegemony is an integral part of US imperialism, and is part and parcel of US domination of other countries. Iraq was invaded and Saddam Hussein was ousted mainly because of his attempt to decouple Iraqi oil from petrodollars (oil could only be bought and sold by using US dollars). This agreement  was imposed by the US and OPEC. It was not only due to his invasion of Kuwait, as the US claimed.

The forging of the petrodollar and other US dollar-denominated commodities took arm-twisting, and were a huge part of what formed the post Vietnam War US-led world order in the first place. The agreement to back Saudi Arabia with US weapons and the stationing of troops there was in exchange for the Saudis and OPEC’s willingness to couple oil transactions with the US dollar to the exclusion of all other currencies. 

The Brady Bond Debt Trap

Another example is the imposing of the Brady Bond solution to the massive debt crisis in Latin America of the 1970s and 1980s that became shackles on many Latin American countries. The Latin American debt crisis was in large part due to the large loans to third world countries by US and European banks when interest rates were low, and this became a crisis caused by the increased debt service on loans because of  the huge increase in oil prices in the 1970s and 1980s. Because all oil had to be paid for in dollars, those countries had to further borrow huge amounts of US dollars from US and European banks (who were getting petrodollars invested from OPEC) to pay for imported oil. Latin American countries, beginning with Mexico in 1982 started to default on US dollar loans.  The results were catastrophic. According to Wikipedia, “A massive process of capital outflow, particularly to the United States, served to depreciate the exchange rates, thereby raising the real interest rate. Real GDP growth rate for the region was only 2.3 percent between 1980 and 1985, but in per capita terms Latin America experienced negative growth of almost 9 percent. Between 1982 and 1985, Latin America paid back US$108 billion.^[4]”

The Brady Bonds were a way to restructure the Latin American loans to make it easier for them to be repaid, but also to recover as much as possible for US and European banks and investors, rather than lose all in defaults.  Even then, defaults occurred in Brady Bonds. Ecuador, for instance, defaulted on interest payments and faced immediate repayment demands. It ended up cut off from the world financial markets and suffered through years of deprivation, social and political unrest.

The US Dollar Regime is the Most Effective Part of US Imperialism

The use of sanctions against Cuba, Venezuela, Russia and Iran, were direct acts of imperialism through the control of the dollar regime. The US SWIFT sanctions became in fact far more effective than the US military, as US military ventures often stalled and became ineffective, costly and unpopular in the US. There are no protests against US economic sanctions since there are no American soldiers brought home in body-bags by such acts.

In fact, today US dollar hegemony is the most effective part of US imperialism. It allows the US to conquer and dominate countries without firing a shot. The US dollar regime is the highest development of Western imperialism, and represents the furthest development of Lenin’s thesis of imperialism and the export of capital.

Weakening of the SWIFT system Weakens the US Dollar Regime

The excessive use of economic sanctions by the US against Iran, Russia, Cuba, Venezuela and many others and even European countries that use the SWIFT currency settlement information system forced many countries into developing alternative currency systems such as the Chinese Union Pay or the European Interdex systems. Some stopped using the US dollar as a reserve currency, period — like Russia. Furthermore China has signed a 25- year agreement with Iran in trade and economic cooperation to bypass the US dollar based SWIFT system.  

The development of sovereign digital currencies that don’t require SWIFT or any settlement systems at all also weaken the US dollar as the required reserve currency. MMT accepts the logic of the US dollar as a reserve currency. But this logic is failing.

Conclusion

The money printing policies of the US dollar regime is an integral part of modern US imperialism. On the domestic front, it can partially finance needed postindustrial development and necessary social needs, but as practiced in the US over the last decades, overall it has caused deindustrialization and devastating economic polarization.  

Internationally, the policies call for indiscriminate printing of money and lending it out at low interest rates around the globe as the beginning of the “seeding” cycle. For the US to reap the maximum profits from the world, they must inject or “seed” the largest amount of capital to the most vulnerable or greedy developing countries, who most need economic development. This first cycle is justified by MMT.  Then interest rates are gradually raised and liquidity is withdrawn around the world. This reaping process leads to destruction of the seeded and a profit festival for the global banks and hedge funds. This repeated seeding and reaping process, along with economic sanctions, the use of military force and the control through the SWIFT system is the reign of neoliberal imperialism.  

In order for the US dollar regime to survive it must keep on reaping profits either through outright military victories or continuous reaping from other countries.  The actual human toll of the US dollar regime’s repeated seedings and reapings around the world can be seen in deforestation, waves of refugees, overcrowding of urban centers and the gutting of American industries and urban decay.  We now have the unprecedented divergence of extreme wealth and hopeless poverty driven by extreme financial crises like the Asian Financial Crisis in the 1990s and the Great Recession, sparked by the Lehman Brothers collapse in 2008.  

In response, we must work to end this destructive, imperialist US dollar regime. We must turn swords into plowshares, resist US imperialist wars and economic aggression while fighting for the desperate need of the American people to build a highly productive, more equal and just postindustrial future for the nation and the world.   

MMT Forum: Background Reading

In advance of our upcoming forum on Modern Monetary Theory (MMT) this Sunday, October 3rd, our panelists have assembled a helpful list of background materials to ground your understanding of MMT before our discussion. While Voices for New Democracy has published a number of pieces relating to MMT (here, here, here, and here), these additional resources offer further insight and breadth.

One week after our MMT forum, we will also host a follow-up discussion on Sunday, October 10th at 7pm ET / 4pm PT. Use this link to join the conversation.

Learning styles are different.  

MMT has resources for any style.

Videos

1. Stephanie Kelton’s TED Talk – (14 minutes – new as of Sept. ‘21, includes her recommended resources)
2. The Basics of Modern Money (6:30 minutes)
3. Demystifying Modern Monetary Theory with Bill Mitchell (22 minutes)
4. Kelton on NPR’s Marketplace – (2:30 minutes)

Articles

1. Learn to Love Trillion-Dollar Deficits, Stephanie Kelton, New York Times
2. MMT Basics, Real Progressives Collection

Podcasts

1. The MMT Podcast with Patricia Pino and Christian Reilly
2. Macro N Cheese with Steve Grumbine (Real Progressives)

Websites

1. Modern Money Network
2. Public Banking Institute
3. Wall St. On Parade
4. Democracy Collaborative

Books

1. The Deficit Myth by Stephanie Kelton
2. The Case for a Job Guarantee by Pavlina Tcherneva
3. Macroeconomics by William Mitchell, Randall Wray, Martin Watt
4. Debt: The First 5,000 Years by David Graeber

Forum: What’s The Hype Around Modern Monetary Theory (MMT)?

Join Voices for New Democracy on October 3 for our next forum discussing Modern Monetary Theory (MMT). Our panel will explore how governments pay for our needs; whether (and how) federal deficits and national debt matter; how the U.S. dollar affects the global economy. Ultimately, we will seek to answer whether MMT offers a path fo build a people’s economy, or if its insights represent a new form of imperialism.

Join us on Sunday, October 3, at 4pm PT / 7pm ET by clicking this link.