September 21, 2022

For a currency at the service of the peoples

Rémy Herrera

In our current societies, monetary issues are among the most difficult to address. Money is not a neutral tool, as most mainstream economists claim. It is, on the contrary, a complex social reality. A socio-political institution based on the trust of a community and requiring the guarantee of the State, money is power. It is an attribute of national sovereignty, and the degree of control a government chooses to exercise over it reflects the extent of the sovereignty of its people.[1]

There are currently more than 160 distinct official currencies in the world, for 195 countries recognised by the UN. Some of them circulate in several economies at the same time, while other countries tolerate the simultaneous circulation of various currencies. Despite this heterogeneity, it must be admitted that today, most states no longer have control over their currency – with the striking exception of the United States, which has arrogated to itself the “exorbitant privilege” of having the world’s key currency, which is used internationally as a store of value, unit of account on the external credit market or as an invoicing currency for trade and commodity price quotations (foodstuffs, energy resources, etc.). This loss of control over the currency applies, of course, to countries that have chosen a foreign currency as their national currency, such as Ecuador, which substituted the sucre for the dollar starting in the year 2000, or many countries of Oceania – or the tax havens in which the greenback is king. But this is also the case, although in a less radical way, of many countries of the South, and even, to a lesser extent, of the North.

Some governments have therefore decided to give up their national currency in order to adopt a single currency in a larger regional monetary area that they have integrated. We think of several African countries whose states are prevented from determining their own monetary policy – ​​and economic policy, on a larger scale. For years, the economies of the CFA franc zones have been disadvantaged by the appreciation of the euro both because their commodity exports are denominated in dollars, at the time devalued, and because the anchoring of the CFA on the much stronger euro affects the competitiveness and margins of their businesses. These African states were therefore deprived of revenue likely to finance development projects, while local entrepreneurs encountered difficulties in investing and recruiting. Today, the governments participating in the franc zones see the autonomy of their monetary policy considerably reduced. Concretely, they no longer have monetary sovereignty: the instruments of devaluation or foreign exchange reserves, among other things, are beyond their control. Monetary decisions concerning them are still currently the responsibility of the French Treasury and the European Central Bank, which dictate to them what they must do in the matter. Therefore, should it not be recognised that the CFA franc (now called “eco”) is a neocolonial currency that survived formal independence and prolongs relations of subordination vis-à-vis the former colonial metropolis that conceals its true nature, and which, as such, turns out to be totally unsuited to the real needs of African societies?

But we could add here the member states of the eurozone themselves. By construction, countries that have adopted the euro are prohibited from adjusting the exchange rate in such a way as to reduce their trade deficits. This rebalancing then involves another form of devaluation, no longer external, but internal, namely: the compression of domestic wages. It is most often achieved through wage austerity, accompanied by the permanent reduction of the purchasing power of indirect income (social benefits, retirement pensions, etc.). And the height of absurdity, or cynicism, is reached when, instead of being reinjected into Europe – where, despite relatively high average living standards, social needs are obvious – the surplus savings generated by Germany is placed on the international financial markets, mainly in the United States to cover their colossal deficits. This is a losing strategy for Europe.

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We have also observed how minute increases in interest rates in the United States, followed by slight appreciations of the dollar on the foreign exchange market, can lead to the downfall of economies with their own national currency, but whose developments are statutorily linked to the rate of the dollar. This is what happened in Thailand, Indonesia and the Philippines, in particular, during the 1997-1998 “Asian crisis”- a crisis whose origin was not in Asia, but in the US money market. This shock also hit South Korea, the most industrialised country among those affected in the region, but whose GDP fell the most under the impact of the crisis, and no doubt also because its government preferred to maintain the neoliberal orthodoxy – the South Korean people paid dearly for this choice. On the other hand, experiments in the reappropriation by the State of political decision-making power over the currency, carried out, not without a certain courage, by governments of very different orientations, have nevertheless helped economies to emerge from the quagmire in which they found themselves. As such, Malaysia deserves attention. Vietnam resisted well; and China did even better.

However, regaining monetary sovereignty would allow the State to meet the conditions for the realisation of the right to development[2]. The serious disorders of the international monetary system call for the modification of the rules of its operation. This should involve the challenging of the hegemony of the dollar and the supremacy of “free”” currencies. It is not up to the currencies to be free, but to the peoples, who must be able to determine themselves, sovereignly, their path of development.

Among the fiscal and monetary transformations needed to build a more balanced and just world order, let us mention: i) the international taxation of large fortunes, profits of transnational corporations and financial capital; ii) the abolition of tax havens; and iii) the audit, renegotiation and (massive) cancellation of foreign public debts.

But it is at the national level that the changes must initially be driven, which should tend towards the objective of making money a public good, that is to say whose production and management would be public. It would then be possible to orientate the monetary policy towards the satisfaction of the interests of the whole of society, not of a minority of the dominant classes. Let us focus here on three measures without which a government cannot consider implementing its right to development:

  • First, the country will have to protect itself through limitations on the international mobility of capital flows, i.e. establish exchange controls, necessary to avoid being destabilised by sudden capital outflows.
  • It will then be necessary for the political decision-makers representing the popular will to regain control of the Central Bank from the financial oligopolies and restructure its role to respond to social and environmental emergencies. To put the orientations of the development strategy into practice, the State must be able to finance itself, prudently and at a lower cost, from its central bank, without resorting to printing money (to minimise inflation), nor to international markets (so as not to depend on them).
  • Finally, it will be necessary to set up a fully public national banking sector, by integrating credit, insurance and finance activities. This process will have to go beyond state ownership (limited to a majority participation of the State, but in a society still dominated by finance) or nationalisation (which retains capitalist management criteria) to become a real socialisation (expropriation of the largest shareholders of banking and financial oligopolies, full transfer to the collective sector and establishment of citizen control). If we take seriously the imperatives of stopping the destructive logic of finance by putting an end to the dictatorship it imposes and of regaining control of the tools of monetary policy, this is the only effective, reasonable and , come to think of it, democratic solution.

The democratic imperative requires that the peoples be involved in these discussions, as well as in the decision-making that will follow. The future will not have the face of the much desired better world as long as we are not able to impose on the banking and financial oligopolies the obligation of public and participatory control. No social progress, no democratic progress, no ecological transition will be possible unless the people manage to wrest their money from the hands of global finance and place it under their sovereign control. The common appropriation of their currency by the people is a condition for the control of their collective future as well as the success of their development strategy.

It is on the condition of daring to challenge the power of finance, by reaffirming the primacy of politics over the economy, by socialising the banking system and by making money a public good, that it is conceivable to reopen room for manoeuvre for economic policy, to rebuild an effective development strategy and to include the latter in the perspective of building credible and unifying alternatives, carrying a productive dynamism, job creation, income distribution , social progress, democratic participation, international cooperation, fair trade, food and energy sovereignty, ecological transition, sustainable development, and therefore concrete prospects that allow peoples to realise their right to development.

Rémy Herrera is a researcher at the National Centre for Scientific Research (Centre d’Économie de la Sorbonne, Paris), regular collaborator of the CETIM and author of the book La Monnaie : du pouvoir de la finance à la souveraineté des peuples, ed. CETIM, Geneva, February 2022. The English version of this book has just been published under the title “Money: From the power of Finance to the Sovereignty of the Peoples” by Palgrave Macmillan. Its German version will be published soon by Springer.

[1] This article follows the written statement submitted by the CETIM to the 51st session of the Human Rights Council.

[2] Recognised by the United Nations as a human right and enshrined in General Assembly resolution 41/128 of 4 December 1986, the right to development provides for the participation and contribution of everyone and all peoples “in an economic, social, cultural and political development in which all human rights and fundamental freedoms can be fully realised”.