This chapter summarizes the content of the book, with some key questions in mind: Can money change radically as a result of digitalization? Can digital money make life better for the ordinary citizen? What are the risks involved? How should the boundaries between private sector and government be designed?

A new economic model begins to emerge. After the turn of the century, the worldview made of free markets, globalization, and liberal democracy met multiple crises. While the political pendulum swings back toward government control, economists and independent agencies should promote balance, mitigating the tendency toward the extremes of public opinions divided into opposite camps. The tendency toward a stronger presence of the government in the economy must be controlled; the perimeter of open and competitive markets should not be restricted to the point at which they lose their creative force. In this book we reflect on these developments through the prism of one of the most ancient and fundamental societal institutions: money. Money is a mirror of society; it reveals the drivers, contradictions, strengths, weaknesses, and failures of society at large. We build on two convictions. The first is the value of history, to tell us what money is, what purpose should it serve, and how best it should be designed and governed. The second is that the fundamental purpose and requirements of money do not change through time or space. What changes are the manifestations of money. Technology is part of this process and should be used to serve money’s purposes better.

This chapter starts with the standard economic classification of the functions of money, then broadens the analysis to consider other related functions. In economics textbooks, money is said to serve three purposes: as a means of payment, unit of account, and store of value. After briefly explaining these functions, we revisit five monetary reforms enacted in Europe in the last century, showing how the monetary functions have been affected by those reforms: Reichsmark stabilization of 1923; Deutschmark introduction in 1948; German monetary reunification of 1990; and the introduction of the euro in 1999 and euro banknotes in 2002. These examples show that when the continuity of these functions is severed, monetary instability may result. Next we consider the requirements necessary to a successful money. Among them are portability; indestructibility; homogeneity; divisibility; stability in value, and cognizability. After considering the relationship between money and the state, we discuss supranational monies and the extreme ideal proposed by early philosophers and some modern economists: a single money for the world. We conclude that disconnecting money from the state (or from polity in a broader sense) is technically possible but difficult in practice. Money without states and monies with a less-than-complete political entities attached are more likely to be fragile and subject to confidence crises.

This chapter and Chapter 9 deal with crypto assets: first cryptocurrencies specifically (this chapter) and then stablecoins (Chapter 9). We look at the structures underpinning cryptocurrencies to see whether they can fulfil the classical attributes of money, that is, as a means of transactions, store of value, and unit of account, plus the other more complex functions discussed earlier. This chapter offers a complete overview of how cryptocurrencies work: blockchains, miners, distributed ledgers, and so on. It recaps the history of Bitcoin and details the structure of the transactions and its informational characteristics. Then we rate the performance of Bitcoin: transaction speed, user costs, mining rewards, privacy, environmental cost. We also consider variants of the Bitcoin scheme, such as Ethereum, with the potential advantages of “proof of stake” as opposed to “proof of work,” from the point of view of private users and social costs. Finally, we deal with security aspects: fraud, technical failures, scalability, and so on. The real-world case of El Salvador, the only country that attempted an official use of Bitcoin, with disastrous results, is mentioned. The conclusion is that Bitcoin and its peers are unlikely to be used broadly either as means of payment or as stores of value. However, they may eventually establish an interesting niche as part of diversified portfolios.

Introduction

At the beginning of the twenty-first century, when the first commodity supercycle of the century began, Francis Ng and Alexander Yeast from the World Bank, asked what Africa should expect from its traditional exports – primary commodities (Ng and Yeast, 2002). They argued that if Africa continued to export primary commodities and raw materials, as it had done in the past, the continent could anticipate five major trends: declining or low global demand for commodities, falling real prices of commodities, volatile prices leading to unstable export earnings, further marginalisation of the continent in world trade, and diminishing economic growth and industrialisation prospects. Contrary to Ng and Yeast's prediction, the demand for commodities in almost all categories grew sharply and remained high for more than a decade from 2003 right up to mid-2014, producing the longest commodity supercycle since the golden age of resource-based development (Findlay and Lundahl, 1999; Radetzki, 2011). Demand for commodities, though it declined slightly during the 2008/2009 Great Recession leading to sharp price correction, it rebound quickly by the end of 2009, with commodity prices recovering to pre-recession levels in less than a year, largely boosted by persistently strong demand for commodities from a growing number of emerging markets, particularly Chine.

The growing and resilient demand for commodities was buoyed not only by China's rapid economic expansion which by the mid-2000s was consuming almost half of the world commodities, but also by other emerging economies particularly in Asia including Thailand, Vietnam, India, etc., which were relatively less affected by the 2008/2009 Great Recession (UNCTAD, 2016). What the Ng and Yeast study rightly predicted was the low momentum for economic structural transformation and industrial growth in Africa, with economic growth on the continent slowing down considerably after 2014 when the commodity prices on the global market tumbled (AEO, 2018).

The bigger issue of the African economic growth story that comes from the analysis of any period since the European encounter, points to the deepening African dependence over time. There are different types and levels of dependence which have emerged over time including technological, industrial, digital, market, monetary, aid, financial, military, cultural, and legal dependence, all of which, as noted in Chapter Three, play a part in weakening the continent's economic sovereignty. These different forms of dependence influence the levels of economic sovereignty African countries are able to muster.

Introduction

There is wide agreement that while most African countries achieved political independence during the 1960s, the continent is yet to realise economic sovereignty. The concept of economic sovereignty derives its meaning from the core principle of sovereignty, which is discussed in Chapter Two. As argued in Chapter Two, economic sovereignty gives meaning and substance to political sovereignty, such that political sovereignty without economic sovereignty means little in real terms (Bedjaoui, 1979). This is the view expressed by African nationalist leaders during the 1960s when most African countries were granted political independence. Kwame Nkrumah, during the speech at the launch of the Organisation of African Unity (OAU) in 1963 in Addis Ababa, made this point, arguing that ‘we are fast learning that political independence is not enough to rid us of the consequences of colonial rule’ (Nkrumah, 1963). Many African leaders, immediately after independence realised that political freedom without economic sovereignty amounts to only superficial control over the country's affairs. Kenya's first president, Jomo Kenyatta, also made the observation that until the country was able to reduce its dependence on foreign control of economic activities, its economic and political sovereignty would continue to be undermined. To increase the country's economic sovereignty, he argued:

It is interesting that dependence on foreign capital is cited as an indication of the lack of sovereignty. As argued in this chapter, weak economic sovereignty is manifested by a country's degree of dependence on other countries. Higher levels of dependence weaken a country's economic sovereignty because a highly dependent country is not in control of its own destiny – a country in such a situation has not fully liberated itself. While countries today are interdependent on each other in such a way that there is no single country that can exist on its own, it is the level of dependence which determines the degree of autonomy a country enjoys.

Introduction

Sovereignty is a slippery concept which can mean different things in different contexts. This is partly because the concept has evolved from different conceptual backgrounds, straddling different disciplinary traditions including international public law, history, international political economy, political philosophy and international relations. But what has dominated the discussion on sovereignty is the field of international law where the emphasis has been on the sovereign rights of states and how this is exercised within a given territory, between sovereigns and between sovereigns and non-sovereign external entities. However, international law which has dominated the debates on sovereignty has defined it in conventional ways that focus on the formalistic aspects at the expense of the real dimensions of sovereignty, paying little attention to the challenges many states in developing countries face in terms of exercising the real power and control over their territories, including public policy. In other words, formal sovereignty does not protect states from imperialist and neocolonial forces which undermine the real sovereignty in developing countries. This chapter stresses the importance of going beyond the formalistic rendition of sovereignty to examine the challenges states and peoples in the former colonised states experience with regard to exercising the real sovereignty, including sovereignty over natural resources.

In modern international law, the official view and formulation of sovereignty is provided by the United Nations Charter, which has entirely focussed on the formalistic aspects of sovereignty. One of the major weaknesses of the UN Charter when it comes to matters of sovereignty is that it has only dealt with the political dimensions and has largely ignored the economic implications of sovereignty. As Mohammed Bedjaoui rightly observes, in the context of former colonial states,

Introduction

The preceding chapter has highlighted the fact that natural resources play a central role in the economic growth of countries during their early stages of development. Without downplaying the challenges of resource-based development strategies, many analysts now believe that natural resource endowment provides an opportunity for countries to construct diversified and resilient economies (Watkins, 1963, Blomstrom and Kokko, 2007; Kaplinski, 2011; Morris and Fessehaie, 2014). This chapter focuses on strategies natural resource-rich countries can use to take advantage of their natural wealth. The chapter argues that natural resource-rich countries can adopt a natural resourcebased industrialisation strategy to make the most out of their natural wealth, and in the process build productive capabilities and reduce dependence on export of primary commodities. If successfully implemented, this strategy can contribute to strengthening economic sovereignty. It is argued in this chapter that where industrial development has occurred to a significant level, it has contributed to reducing dependence on natural resources, reducing dependence on foreign capital, reducing dependence on imported capital goods, and reducing dependence on imported technologies.

A natural resource-based industrial strategy creates opportunities for countries rich in natural capital to gradually build productive capabilities, and in the long run, reduce the different forms of dependence which weaken a country's economic sovereignty. Drawing from the experience of other advanced economies which manage to industrialise based on their natural wealth, the chapter shows that natural resources are a strategic stock of capital which can be mobilised to promote economic and social transformation in society. The focus of this chapter is on the role of natural resources in promoting industrialisation in resource-rich countries. The chapter outlines the challenges of a resource-based industrialisation (RBI) strategy in the current global context. It deals with the question of whether natural resources can be exploited in a way that enables countries endowed with natural resources to industrialise, transform and diversify the structure of their economies.

The chapter focuses on an RBI strategy and argues that for the African continent, RBI, to the extent that it contributes to reducing the various forms of dependence in African economies, is an act of reclaiming the continent's economic sovereignty.

Introduction

The African continent is widely known to be endowed with a wide range of natural resources, from minerals under the soil to breathtaking landscapes and heritage sites. Although it is Africa's mineral resources which often feature in the headlines of major global media and international relations news, the continent is richly endowed with numerous natural resources including wildlife, marine resources and a large variety of f lora. Apart from this, the continent has many spectacular landscapes and several wonders of the world from the less-known Sossusvlei Dunes in Namibia, the Omo River in Ethiopia and the Lake Retba (also known as Lac Rose) in Senegal, to the well-known Kilimanjaro mountain in Kenya and Tanzania, the Victoria Falls in Zambia and Zimbabwe, the Table Mountain in South Africa, the Ngorongoro Reserve in Tanzania and the Massai Mara in Kenya, the Pyramids of Giza in Egypt, Okavango Delta in Botswana, etc. To be clear, Africa is not the only place on the planet endowed with different natural resources; there are resources and scenic landscapes in other countries and continents of the world. What makes the African natural resources interesting is that African people have not made the most out of these gifts of nature compared to other places where similar resources are found, especially in the last five centuries.

The main reason for this is that the continent's exercise of real sovereignty over its natural resources has progressively been diminishing, even after the continent was granted nominal independence during the 1960s and 1970s. This is because, so far, the principle of sovereignty has been defined in political (nominal) terms and has completely ignored the economic dimensions of sovereignty which is the foundation of real sovereignty. The book makes the argument that sovereignty without economic independence is only fictitious. Many of Africa's liberation leaders such Kwame Nkrumah, Julius Nyerere, Leopold Senghor, Gamal Abdel Nasser, Seko Toure, Jomo Kenyata, Patrice Lumumba and others, during the 1960s were very much aware that political independence was only the first and easiest phase of reclaiming the continent's real sovereignty – a nominal event.