Video Transcript: (use scroll bar as required)

OK, so today I've got a conversation with Ndongo Sylla, who's a Development Economist from Senegal in Africa and his latest book is Africa's Last Colonial Currency. The CFA Franc Story, published by Pluto and co-authored with Fanny Pigeaud. And I wrote the introduction to this book, and it's an excellent book. And I recommend everybody reading it, talking about the colonial relics in West Africa. So welcome, Ndongo. Thanks for joining us.

(Thank you Bill, for the invitation.)

Yeah, so a couple of questions. How did you encounter Modern Monetary Theory and why do you think that the work of Modern Monetary Theory is relevant to developing countries where you working as a professional Economist?

Well, the first time I heard about what Modern Monetary Theory was during the summer of 2017. I had a conversation with one of my colleagues at Rosa Luxemburg Foundation - colleagues based in Tunis and she told me about MMT and about the relevance of this approach. And I started very soon to read the literature, especially during the Christmas break that year. And it provided me many insights. I was really, let's say, had a lot of pleasure to read that literature.

At that time, I was doing some research on the CFA Franc, which is a colonial currency still circulating in 14 African countries, mostly Francophone ones. And in this context, I was really happy to find, I would say for the first time, an academic research program saying clearly and convincingly that monetary sovereignty matters. For the critics of the CFA Franc like myself, the defence of monetary sovereignty provided by MMT is an additional theoretical weapon.

Most people who defend this colonial currency tend to say that money is just an instrument facilitating economic transactions. It's a kind of a veil and the monetary policy has no lasting impact on economic performances. And even some of them continue to say that we should not speak about money.

So what are the merits of MMT is that it helps destroy many myths around money and in the same way, MMT shows why monetary sovereignty is essential to any nation that aims to create prosperity for its citizens. But I was also interested in MMT for other reasons beyond my interest in the CFA Franc, because when reading the literature, I also come to the conclusion that MMT is a relevant analytical approach to issues concerning developing countries and that it also provides a new way of thinking about development in this later context.

First of all, MMT for me, is the best approach that helps understand the fiscal and monetary dimensions of colonialism, which is the situation under which most of the countries we now call developing countries lived. In the MMT literature, we find is counter-intuitive view that taxes do not finance the spending of a sovereign currency issuer.

They have other functions like addressing economic inequalities, controlling inflation, and chiefly creating a demand for the currency issued by the government. The relevance of this Japanese view could be better appreciated. So the historical process called monetary transition, that is, replacement of African indigenous currencies with colonial currencies. To re-orient African economies according to the imperial needs, European colonial powers tried first to ban African currencies and impose their own currency.

To that end, they used direct taxes. Those taxes were to be paid by Africans in the new use of account defined by the colonial administration. In order to obtain the colonial currency or to pay their taxes, African workers had to be active in the sectors favoured by the colonial economy.

Sometimes this involved mass migration to areas where the cash economy was more developed. So looking at African colonial history in this particular way helps to make 2 points about MMT.

First, there is no basis at all to claim that MMT is a research program relevant only to developed countries. Actually, MMT offers the best description of the fiscal and monetary dimensions of colonialism, which is certainly relevant to the former colonies now called developing countries. Second, as MMT is a descriptive approach, there are many possible and contradictory ways of using MMT insights at the policy level. Those who opposed colonialism or those who are committed to the welfare of their citizens could also build on MMT in a progressive way.

In contrast to mainstream Economics, which is a veiled defence of the economic powers that be, MMT is first and foremost, an apolitical analysis. Factual claims and value judgments are not mixed within the MMT framework.

But beyond is descriptive aspect, MMT opens in policy terms, a new way of thinking about development in so-called developing countries. Indeed, MMT rejects the monetary and fiscal foundations of the policies that are usually recommended to peripheral countries. These are generally based on the assumption that peripheral countries are not able to contribute significantly to the financing of their development because they would lack money owing to low tax incomes and a lack of savings. So to finance their development, they have only 2 options - first, reduce their consumption in order to accommodate prior savings that re-finance long term investment.

Second option, rely on finance - in other words, starve your poor or rely on external generosity and interest. MMT adds that the governments of peripheral countries have no intrinsic financial constraint on the resources they command in their currency. MMT offers, like Bill Mitchell acknowledged, that in a Fiat monetary system, fiscal space cannot be defined in financial terms.

This implies, on the one hand, that a sovereign government is not really constrained and on the other hand, that the capacity of the sovereign government to mobilise resources depends only on the real resources available to the nation.

In other words, even governments with limited monetary sovereignty have the possibility to finance in the national currency projects that require mostly locally available resources. Unless they impose constraint on themselves voluntarily, they could not become insolvent in their own currency.

They can afford anything that can be bought in the currency they issue without being financially constrained by the amount of tax collected.

Anything that is technically feasible domestically can be financed in national currency. As peripheral countries, mostly currency issuers, they have no intrinsic financial constraint in their own currency.

Instead, they face a real resource constraint. MMT maintains that developing countries will have more domestic policy space if their development is oriented primarily towards the resources at their disposal or that they can develop locally. This is the reason why MMT recommends a development strategy based on the mobilisation of their domestic resources and in particular on full employment.

To avoid any misunderstanding, let's stress that MMT does not say that the developed and developing countries have similar levels of fiscal space. Usually, they don't. MMT does not say either that developing countries don't face resource constraints. They do. And the so-called external constraint facing developing countries is also a resource constraint. So adapting an MMT lens brings an empowering news for developing countries.

If they are creative enough in basing their development on resource locally available or that could be developed locally, financing their development in their local currency should not be a constraint provided the monetary, fiscal and financial frameworks are designed carefully.

In other words, for MMT, austerity should be rejected while recourse to international finance is not always needed.

To sum up for me, MMT provides not only a powerful understanding of how colonialism worked on fiscal and monetary matters, it also advocates for peripheral countries, a development orientation much more sustainable and equalitarian in its outcomes compared to the mainstream approaches followed by the international development community.

You know, thanks very much. That's a that's a great insight into these - to address the statements that it's just about the US, I think that's very comprehensive.

Thanks very much for that.

End of Transcript