I want to start with some basic concepts in history, since we’ll need those to understand what’s happening now and why the institutions that we’re going to spend all this time talking about are so important. So my first question is about history. Both of you take up economic issues on a multinational, sometimes even planetary scale, talking about things like the Wall Street Consensus, global international developments, or huge regions across multiple countries, like whatever this thing is that’s called the “franc zone” or the “sterling zone.”

That’s different from how a lot of policy conversations go in the United States, where we more often think about national governments, individual countries, or central banks, even when we’re thinking about countries that aren’t the global hegemon. What do we gain from thinking about economics and politics at this scale that we might miss if we’re only looking at the national level?

It’s imperative to start from the global scale in trying to understand domestic politics or domestic macro-financial developments, simply because the countries we come from and the countries we study. I’m Romanian; Ndongo is from Senegal. Countries in the Global South have been involved in and part of the global economic system or the global financial system in different ways historically. We cannot understand domestic developments without understanding what is happening globally and without understanding patterns of integration into either international trade or financial globalization.

Even if you study the United States, you have to study it as the global hegemon in terms of providing the international reserve currency, in terms of providing or supporting or driving certain patterns of colonialism and postcolonialism. Nothing can be understood, as far as I’m concerned, at national scale.

When you come from an economics background in dependency theory and world-systems theory, you know that you cannot understand the specificity of underdevelopment by narrowly focusing on the national level. For example, to understand the economics of the Global South, you have to put it in the context of the global deployment of capitalist logic. That means necessarily you have to have a global approach. And that has been the kind of methodology followed by most thinkers from the from the Global South interested in the issue of development.

What has been called the globalization of the 1990s and 2000s, like China joining the World Trade Organization, allowed most people to see that countries depend on each other, that they have financial links, trade links, and so on with one another. All of these things have made people aware that we live in one economic system, a global economic system. At the national level, you may have different ways of adapting this global framework, but you cannot understand what is happening domestically if you don’t have an idea about who is trading what with whom.

Over the course of the last forty years, the scope for autonomous or national institutional development has been reduced quite significantly. Most countries share the same institutional structures when it comes to the macroeconomy, and those increasingly replicate US-based institutional structures. We cannot even understand our own institutions without understanding the way they are influenced by what is happening abroad.

That makes sense, especially this last point about a kind of institutional mirroring that happens in different countries, maybe based on the United States or perhaps other places. I want to follow up on a couple kinds of theory that Ndongo mentioned: dependency theory, world-systems theory. What are those kinds of theories, and how do they defend themselves against challenges from more mainstream economics?

After World War II, there emerged a specific way of understanding underdevelopment that was heavily influenced by Walt Whitman Rostow’s idea of stages of economic growth. According to Rostow, each society had stages that it went through on its path to becoming developed.

There was a reaction against this type of intellectual perspective on development and underdevelopment. It came from the Third World and argued that we should think about the specificities of the economic problems of the Third World. This structuralist approach was not saying the Global South is facing deteriorating terms of trade. Instead, it argued that in fact the prices that countries in the Global South pay for their imports tend to be relatively appreciating. That is, they tend to be higher than the prices for the part of what those countries export, and this is not something sustainable.

After that, you have a much more radical perspective like dependency theory, which argued that even if you want to do import-substitution policies, which means producing domestically some products that generally are imported, that would only increase the dependency because you need the technologies from the West, you need the finance from the West, and so on. Sometimes the conclusion was that if you don’t commit to making an exit from capitalism, it could not work.

You have a large strand with world-system theory, which has been developed mostly by Immanuel Wallerstein, who was an American sociologist who argued that we have to understand capitalism as a kind of a world system. That means that there are a number of elements that are united, and you have to see how this world system evolves historically through different periods, starting, for example, from the fifteenth century. It’s a historical system, and also it has immanent laws, which means that at one point there would be financial crises.

So you have all those kind of radical perspectives on what could help explain the global coexistence of wealth and poverty. But those perspectives, whatever criticism we might make against them, they started from the idea that we have one world economy and you have to start at this scale to understand what is happening domestically. That was a very powerful insight.

They became increasingly marginalized, for a variety of reasons, mostly because they lost the battle of ideas as the Washington Consensus came to define what it meant to “develop.” This was simply because the Washington Consensus had powerful institutions behind it. The end result was that radical ideas about development were increasingly marginalized except for in specialized niche approaches to development studies.

I think now there is a push to revive these schools of thought and to try to update them for the present. This is in part because of the failure of the Washington Consensus as a hegemonic project of capital.

One thing I want to think about in general, but maybe first in a historical sense, is what the connection is between the kind of colonial aspects of the world system — imperial conquest and markets forged by those kinds of conquests — and these high intellectual questions that we’re asking about the kinds of economic theory or theories of development or theories of stages of development that are dependency theory and world-systems theory.

This is something that Ndongo’s book Africa’s Last Colonial Currency takes up. It begins with this history of currencies and banking throughout much of West and Central Africa. In the book, a number of monetary systems get described that had been in place in African economic networks that predated and overlapped with European conquests, including what amounted to a cowrie zone, a community-regulated but regionally large money system in West Africa based on the exchange of cowrie shells.

How did these older monetary systems work? And how were the community relationships maintained by cowrie-based commerce different from what became possible as the French empire expanded its economic influence?

In fact, most of those currencies were commodity currencies, and they were not used in a capitalist sense that commenced with a purpose of accumulating capital endlessly. They were social institutions helping organize the community, and so they had beyond their use as instrument of payments other uses, for example, religious uses and associated uses. That means that they didn’t have this, I would say, capitalistic approach to money and currency. The currency itself was not an object of accumulation, but rather an institution that had as its aim organizing ways that people could live together.

But with colonialism emerged another approach to money and currency issues. Because the objective of colonial administrations was to restructure those territories so that they could produce the raw materials needed for the industries in the metropolis.

It was not possible to dominate those territories without having control over their currency system and their banking system. The legacy of this lives on in some parts of Africa, for example, in the CFA Fund countries.

The focus of the book kicks in after 1795, which is when revolutionary France adopts the franc as its national currency. As you were just explaining, there’s a tight connection between regulating currency and regulating the economy more broadly. As you put it in the book:

One of the main objectives of the European powers, colonial enterprise in Africa was the appropriation of most of the continent’s riches. The colonial powers had to control the circuits of production and exchange, which in turn requires controlling the currency.

We know the default story about colonialism is about expropriation of resources, land, and oil. Why does colonial control and wealth draining require control over currency?

Because if you had the control over your currency, you have the control over what you produce, what you consume, and what you exchange. For example, when the French came into West Africa, the first thing they did was to prohibit the imports of cowries, because cowries are shells, which you could find in the Indian Ocean. So, they stopped that. The second measure they took is to say, well, you have to pay us taxes in the currency of the metropole.

Colonial authorities wanted this tax policy to create a demand for their own currency. Creating this demand for the common currency was a way of restructuring the economy of colonized areas. For example, it became important whether you produced a fruit that was not in demand in the metropole versus cotton, cocoa or mining products. Colonial authorities imposed their currency system as a way of making the people produce products desired by the metropole.

In some ways, you could see that because the currency system was also linked with the fiscal system, you could not separate them. Both the currency system and the fiscal system had as outcomes that most people would leave their places to go to other places where they could find a cash provider to pay their taxes. That means that the colonial system is a particular way of mobilizing domestic resources. People tend to forget that. But the colonial system was a particular way of mobilizing domestic resources — for the benefit of the metropolis.

But you needed to have the fiscal and monetary instruments. The banking system also played a very important role because it allows the financial flows to finance some particular activities and to acquire the financing of these activities that would, for example, create a competition with capital from the metropolis.

One of the things I’ve thought most about when preparing for this interview was the kind of contrast between the early development of French banking policy throughout Africa and the global system we have now with international institutions like the European Central Bank.

Daniela, would you say the same thing about the present moment: that maybe neocolonial control and wealth draining involves control over currency? Or are things too different now from the more explicitly colonial era? Is this kind of control over how resources get used impossible for modern countries in 2022?

That’s a very interesting question. In Mali, for instance, the legacy of the colonial monetary and banking structures are so evident and so politically expedient for [French president] Emmanuel Macron and for France to use in order to prevent or to try to take control of the explosive political situation there.

Mali is a very interesting illustration of how there are the countries in Africa but elsewhere as well that continue to struggle against this past dependency on institutional structures from imperial or colonial times that can be very quickly mobilized when it’s necessary by the by the former metropolis for a variety of reasons.

In terms of countries that are not part of the CFA franc, or of countries that are not still using a currency very closely pegged to their former colonizer’s currency, there is, nominally, a lot more independence. The countries all over the Global South — and I’m including here countries in in the former Soviet Union in some ways and even my own country — are only nominally part of the European Union, but we have a sort of nominal independence. There are only some institutional structures that we can change, that we can adapt to our own sort-of autonomous developmental pathway.

But in practice, there is very little scope. If you push me to think of countries that are trying to move away from the hegemonic economic and institutional model, Argentina has tried to do that over the last couple of years, but it struggled very seriously. There are great heterodox economist minds who are in government there, and they illustrate very clearly how difficult it is to try to carve out a different developmental model, one that tries to resuscitate that developmental state that structuralism and the dependency school tried to think through. In practice, countries across the Global South are still very significantly constrained.

We are constrained through a variety of mechanisms: not only do we have to institutionally mirror the United States and other high-income countries but we also face constraints in terms of financing. For example, if you see countries in Africa or countries in Latin America that have tried to at least experiment with different developmental models, the first question that is on the table is, how will international investors react to this, and will these proposals risk their access to markets? It’s very interesting to listen to United Nations agencies; they used to be part of what we thought as structures that supported the development of states. Nowadays they all talk about the question of market access and how you have to sacrifice particular choices and how you have to put market access first.

That’s a very powerful constraint in many ways, because even if you are a government that has a more heterodox inclination, if you are told, “Tomorrow you will lose access to international finance,” then that’s a very difficult question to deal with. If this happens, what do you do next? Unless you close down your borders and you’re prepared to do the political work of convincing your domestic constituencies that they have to take the heat now for a brighter future, sometime, who knows when. . . .

So there are two different mechanisms of subordination, one that has to do with market access, the other that has to do with institutional mirroring. It takes a lot of political and ideological and institutional work to challenge them.

So control over market access and the structure of institutions is something that cuts across these eras, even though the forms are quite different in the formal colonial era and now.

I want to go back to the tail end of the formal colonial era for just a moment, just so we can set up the creation of the kind of global system of economic regulation that we have now. This is also something discussed in Ndongo’s book, the 1939 creation of the franc zone and eventually the CFA franc.

So what’s the franc zone? What’s the CFA franc? And how have they functioned to control the economies of African countries?

At one point the world monetary system was governed by the gold standard. That meant that central bank reserves had to be backed by an amount of stock of gold. That’s the way the international monetary organization functioned from the last twenty-five years of the nineteenth century.

Between the two world wars, this system collapsed. It was resuscitated just after World War II, but it collapsed again. And Britain got rid of the gold-backed system and started forming the sterling zone. A sterling zone became possible because countries and also territories under British domination accepted having their reserves controlled in London and also their currencies backed by sterling. France did the same in 1939, when they created the franc zone after leaving the gold standard in 1936.

The franc zone, like the sterling zone, was a kind of monetary and trade empire. That means territories, sovereign or nonsovereign, whose currencies were pegged to the franc had the same exchange rate legislation. So that organized a monetary system as a shield against challengers. For example, if a given territory wanted to import things, let’s say outside the empire, those imports were subject to controls. The main difference between the two economic areas was that the franc zone was composed of territories and countries less wealthy than the sterling zone.

In 1945, just after World War II, the French economy was in ruins, there were many shortages, and the stock of gold was depleted. You had huge inflation — a rate of inflation that was higher compared to the colonies and to Britain and the United States. France recognized that it had to devalue the French franc, and their main issue was whether they should have a uniform rate of devaluation for the whole empire. The reason for this was that the economic situations of different parts of the empire varied.

France decided on a policy of different rates of devaluation, weakening the CFA franc, which was, at that time, the franc of the French colonies in Africa. The new currency was created on December 26, 1945, just after the ratification of the Bretton Woods agreements by France. It was the French provisional government that declared to the newly formed IMF [International Monetary Fund] the parity of the CFA franc in terms of gold, but also in terms of the French franc and US dollar.

The objective for France was to reconquer the French shares it lost during the war, because during the war, economic relationships between France and its African empire had frayed somewhat. Looking at this period, you can see that the French share in the trade of East Africa declined significantly, in some cases by more than 50 percent. So France wished to reconquer this lost share of the African market. But at the same time, the French economy was not so competitive. The CFA franc provided France with a mechanism with which it could seek to compete with stronger economies like the United States for economic influence in Africa.

It needed to have access to raw materials, but without using its own currency for an exchange. The CFA franc allowed it to weaken those structures to have access to African raw materials by credit without using its foreign exchange reserves and also having the possibility to export products in the territories under control so as to help with France’s defense, industrialization, and reconstruction process.

One of the things you mentioned was the huge impact of World War II and the waste that it led to across much of Europe. But in particular, the conference in Bretton Woods, New Hampshire, in 1944 created a lot of the global institutions that we have now. What are the important takeaways about that moment in 1944 that France was reacting to in 1945?

About that conference: Is it the creation of the IMF that was so important? Is it the creation of specific rules, like the placing of foreign currencies in adjustable but fixed exchange rates to the US dollar? What strikes you both as important aspects of that moment from a world-systems perspective?

Currently, it is really fashionable to talk about the new Bretton Woods. That’s so funny because there were no Africans at the Bretton Woods conference. It was a colonial world. If you didn’t speak English, you wouldn’t be heard. Even countries from Latin America, they would not have been heard.

So Bretton Woods was a very special gathering. The three decades that followed the Bretton Woods conference were a relatively economically good period for capitalism. We could say that’s why many people are nostalgic about Bretton Woods. But the Bretton Woods conference was not designed for people of the Global South. There’s a story to unearth there.

When I take the perspective of francophone countries, the Bretton Woods monetary regime or trade regime was a US regime. It was a regime that cemented the global hegemony of the United States, because after World War II, most of the gold stock was held by the US, and the US at that time was a creditor country. So the United States dominated the world economy. When the World Bank and the IMF were created, they were created also to enforce the hegemony of former colonizers and above all the United States.

For instance, the managing director of the IMF is a European and the vice president is an American. This has been a kind of pact between hegemons. Most of the Europeans have been French. And when it comes to the francophone countries, the IMF and France are the same. That means that most decisions that are of interest to France generally are backed by the IMF. So the French could use the IMF as their instrument to discipline francophone countries, especially those using the CFA franc. That’s why you often see a kind of doublespeak when it comes to francophone countries.

You may read reports of the IMF that are really critical of the external trade policies of countries from the Global South. Normally they would advocate the lack of capital controls and also flexible exchange rates. But when it comes from francophone countries of the CFA franc, they would say these nations have monetary stability: the peg is wonderful because the French treasury is supporting this currency. So in practice you have a different type of IMF when it comes to the countries from the CFA zone.

People might say we need a new Bretton Woods. I would say that we need a new Bandung Woods. When I say Bandung Woods, that is a mix of Bretton Woods and Bandung. Because Bandung was a summit where the people from the Third World came with the aim of organizing a new world order. As well as a new Bandung, we need also a more international perspective that means uniting all the countries. That means we don’t need a new Bretton Woods, but Bandung Woods. That’s something that, for now, we don’t have.

I would add a point about the nostalgia for Bretton Woods that Ndongo has discussed. Sometimes I also am a little bit guilty of forgetting that, indeed, African countries were not at the table. The way that we remember the history of Bretton Woods is of the United States overtaking the UK and becoming the new hegemon in the world system. I also think that part of the nostalgia for Bretton Woods comes from trying to recover some of the most progressive aspects of Keynesian thinking and trying to divorce them from John Maynard Keynes’s defense of empire and of the British Empire.

Nostalgia also stems from an attempt to deal with some disappointments that are, in a sense, quite Keynesian disappointments about the outcome of the Bretton Woods. Because what Keynes wanted for the IMF is very different from what we now think the IMF stands for. The IMF stands for an institution that pushes deflationary forces into a country where it goes to “help to lend” when nobody else wants to lend to this country. What the IMF says is that we will force you into deflationary economic policy to make sure that you can repay your debts to both the international and domestic creditors and that you can deal with your balance-of-payment crises.

So there is a need for some rethinking of the institutions behind Bretton Woods in the kind of logic that Ndongo highlighted. But also there is a need to rethink the economics behind the functioning of the Bretton Woods institutions at the moment.

It was a progressive regime. There are many tools from Bretton Woods that we have to recover for the benefit of people worldwide. But the problem is that there had been a contradiction identified by some economists in the Bretton Woods system, because the system was working on the assumption of equilibrium in the current account, in the trade balance, and so on. So countries would have fixed and adjustable parities to the US dollar, but it was assumed that there would not be such great trade imbalances and current account imbalances.

But at the same time, the logic of the UN was that there should be a net transfer of all these resources to the developing countries. That means, for example, when you assume net transfer, capital should be leaving the rich countries to go to the Global South. So there should be imbalances in the financial and trade flows. This remains a contradiction in thinking about the Bretton Woods regime. Despite the best will, we did not see a net transfer of resources from the Global North to the Global South. It is in fact the reverse; the Global South has been transferring net resources to the Global North.

What Ndongo has just described is a symptom of the fact that that Keynesianism did not win the debate in 1945, because Keynes precisely wanted to create international institutions that could create an international currency beyond the limited supply of US dollars and gold that could lend generously and that could lend automatically without conditionality.

What we have now, even if you look at what’s happened with $650 billion of IMF special drawing rights (SDR) funds created last year, is very significant amounts of conditionality, very limited possibilities to create international or global currency in the form of SDRs. There is also very little generosity in lending, unless you are a conservative government in Argentina and your best friend is Christine Lagarde at the helm of the IMF. Then there is some generosity. But if you are a left-wing government in power, you are not going to see the same generosity from the IMF.

One of the things that is coming out of what you’re both saying is that after World War II, the old European empires didn’t quite mean what they once did. But through Bretton Woods, there were institutions like the IMF and the World Bank. And these former empires were able to exert discipline through these institutions. France did this with the IMF, for example.

At the same time, the postwar period is a boom for capitalism on some measures, but an era of crisis for colonialism. The colonial system that continues to exist post–Bretton Woods has to struggle to contain a wave of revolutions throughout the world from 1945 to the 1970s, which is when much of Asia and Africa wins national independence from the imperial allies who were present at the Bretton Woods conference speaking English to each other.

Following these national independence movements, the number of countries more than tripled. This led to a new push for economic policies to be run through these Bretton Woods institutions. And that leads to something that Daniela has written about, which is the Washington Consensus, a kind of technocratic consensus around good economic policy that is especially important for these newly independent countries.

What’s the Washington Consensus, and how did it affect things like social safety nets and government spending in newly independent countries and the rest of the world? What are the people who are trying to defend it these days getting wrong? Do we still have this same Washington Consensus dominating today, or is it something different?

The Washington Consensus is in a sense a marker of who makes the rules in the global economic system, and that was Washington. Its intellectual father was John Williamson. He was quite reluctant to recognize himself as an intellectual father, because very quickly, the Washington Consensus was dubbed as a neoliberal consensus. I think it’s best described as a holy trinity of economic policies that were prescribed to countries, particularly in Latin America. This was a “what’s-happening-in-our-backyard” type of arrangement for the United States.

The three pillars of the Washington Consensus were economic stabilization, privatization, and liberalization. Economic stabilization basically meant the central banks have to target inflation and to keep prices stable; privatization meant trying to reduce the footprint of the developmental state in the economy by preventing the state from allocating capital or getting involved in production through state-owned companies or enterprises; and liberalization of international trade meant removing trade barriers, but also liberalization of prices domestically by not using price controls and removing subsidies as much as possible.

This is interpreted as an attempt to change the balance between the state and the market. Of course the states vs. markets framework is a crude description because the state had to construct certain markets. But it is true that the Washington Consensus was a policy paradigm and a political project to kill off the developmental state. In the 1950s and ’60s, the developmental state, under what we describe now as heterodox economic ideas, attempted to design a national development strategy in a context of  deteriorating terms of trade.

For developing nations, the question was, how do we make sure that we will get paid better for our exports than what we have to pay for our inputs? That typically meant industrial upgrading. That typically meant having a good industrial policy. It typically meant having some form of financial repression, which subordinated the domestic banking system to the needs of the industrial policy. It meant some form of a social contract with domestic capital and also with foreign capital, but mostly domestic capital, to make sure that domestic capital worked together with the state for industrial policy purposes.

The Washington Consensus is basically a political project to dismantle this developmental state and instead to bring in the market as the mechanism to allocate resources. The state doesn’t disappear of course. But what we know is that the state that is useful for citizens in a sense disappears because you have an increasing removal of the state from the provision of public goods, one way or another, under the idea that the market can do things better than the state.

In the postwar era, you have the Bretton Woods institutions that are pushing this Washington Consensus all over the world. Wherever the IMF or the World Bank go, they leave a trail of structural adjustment programs. You have the IMF pushing for stability and particular forms of monetary and fiscal austerity under the Washington Consensus. There is an increasing recognition toward the end of the 1990s that this has meant a lost decade for Latin American countries, that it produced a lot of poverty across African countries that were forced to adopt them. Of course there are certain domestic political constituencies that preferred the Washington Consensus rules simply because they align well with the aims of right-wing politics.

By the early 2000s, Bretton Woods institutions become a bit more unwilling to promote the more radical elements of the Washington Consensus. This leads to what is called now the Post–Washington Consensus, which is a recognition that there are market failures. The idea is that if there are market failures, then of course the state is necessary. So you don’t have the resurrection of the developmental state, but you have the resurrection of the state as a regulator that tries to correct market failures but doesn’t allocate capital or doesn’t interfere with market signals. It corrects the signals if those have gone wrong one way or another.

In some ways we still have that now, because all discussions about carbon prices, for example, have to do with how to achieve the low-carbon transition; they rest on the idea that the state doesn’t need to do a lot more than just correct the failure of the market to price the climate crisis.

I am from the generation whose parents suffered the consequences of the IMF and World Bank austerity policies. You could see concrete impacts because many people were fired from their jobs, for example, because one of the ways to implement these structural adjustment policies was for the state to clean up its own budget. That means limiting its spending, and one way to limit the spending is to cut health expenditures and education expenditures and also to get rid of some civil servants.

Reduced state budgets also meant less investment and less open-door immigration policies. That has been the impact. That’s why if you look at the development trajectory of Africa and compare that to Asia, you would see that the most significant difference came after the 1980s. This is because Asian countries were not subject to IMF and World Bank policies in the 1980s and 2000s.

Some countries, for example, Cote d’Ivoire, Senegal, and Niger — their real GDP per capita in, say, 2015 was lower than their best level of real GDP per capita before implementing the IMF and World Bank’s policies.

That’s a clear indicator of the failure of these kinds of policies. But their primary aim was to prevent the emergence of the developmental state. There are many things people say about Africa, but the first two decades were developmental decades, despite all the shortcomings and despite the many proxy wars. But the leaders were really committed to creating some development, and you can see that in the work by the African economist Thandika Mkandawire.

Economists have not quite mounted a full-throated defense of the Washington Consensus. We’re in something of a post–Washington Consensus era, given the challenges that both of you have talked about. But the Washington Consensus does still seem to get kind of muted support. I was struck in particular by something Daniela has said in coauthored work with Carolina Alves and Ingrid Kvangraven. We’re told that countries like Nicaragua would have done better under the Washington Consensus than under left-wing populist leader Daniel Ortega’s presidency. I’m of course not referring to his current presidency, but his tenure during the Sandinista revolution from 1979 to 1990.

But papers that analyzed Nicaragua’s economic performance during this period don’t tend to mention the CIA-funded Contras: paramilitaries that the Sandinistas had to devote resources to fighting. They also use an interesting method to test the hypothesis that, Daniela, you and your coauthors describe as building a synthetic Nicaragua: composed of 23 percent Chile, 54 percent Honduras, 9 percent Mexico, 8 percent Norway, 7 percent the United States.

What did these economists seek to accomplish in fabricating this synthetic Nicaragua, and what does that obscure about the reality of Washington Consensus policies?

There is this idea that you can create synthetic countries or fictitious countries who could have chosen different policy trajectories than the ones they have. We found an example of Nicaragua, because I know Nicaragua quite well.

We examined the argument that Nicaragua would have done better if it had adopted Washington Consensus policies during the 1980s when it had the first Sandinista regime, from 1979 until Ortega loses the election in 1990. That’s a rather desperate attempt to whitewash the record of the Washington Consensus by choosing a country that gets bombed by the CIA, the Iran-Contra scandal. It’s quite incredible to me that they would use the example of Nicaragua, when it’s such an insightful example of what happens when the United States is trying to derail a socialist project in backing the Right. So I don’t think it’s a very serious or credible method.

The Washington Consensus as we know it is dead. I’ve worked quite a bit on what I call now the Wall Street Consensus. It’s in many ways a very different political animal. But the kind of logic is the same. The underlying political logic is still that the market is better placed to deliver on whatever public policy outcomes you might want to have, but doing so requires partnerships.

Maybe we get to talk about the letter from Larry Fink, the head of BlackRock, the world’s largest financial institution, and in a sense the leader of financial capital — if you want somebody who is the embodiment of the elite of financial capital, then look at Larry Fink. He always speaks about partnerships between stakeholder capital and the state. That’s a very different language than the language we had in the Washington Consensus, and I think that matters substantively.

The Washington Consensus was of course not the end of attempts to regulate the international economy by the powers that be. That’s why we’re in a Post–Washington Consensus. This is where both of your pasts have converged in an article that really shifted how I think about today’s economies and power players. You both cowrote this article “Planting Budgetary Time Bombs in Africa.” Daniela has also written about this new Wall Street consensus. You’ve both written about the so-called Paris Consensus.

What are these new consensuses after Washington, and how do the Wall Street and Paris consensuses differ from the earlier Washington Consensus?

The Paris Consensus and the Wall Street Consensus are the same. It is just that Emmanuel Macron in France has been articulating what he claims to be a critique of the outcomes and the doctrine of the Washington Consensus.

If you read Macron’s speech, the way that that speech critiques the economics of the Washington Consensus — it’s quite fascinating. I actually couldn’t believe it the first time I read it; I couldn’t believe the tone and the critique. It talks about the financialized economy. It talks about the adverse consequences of privatization, of liberalization, about poverty, about inequality, about distribution. I, for one, had not known this side of Macron, being able to deploy the language of a critical political economist in trying to frame his alternative to the Washington Consensus.

If we were to make a joke, we would say, with the Wall Street Consensus, we have a new Bretton Woods, but a new Bretton Woods existing for the benefit of global finance and asset managers.

But this is done with the diplomacy of EU countries like France, which are saying that we want to change things. We want to go beyond the Washington Consensus. We want to provide infrastructure, because we know that you need it and you don’t have the capital; you don’t have the financing for that. And we are here. What we want is you to provide the right conditions so that everything you need will be financed and you’ll have your infrastructure. You’ll have all the public services, and the investors will have their returns, and everybody will be happy.

That’s the kind of fairy tale that you could hear from Mr Macron. That’s why we tried to write this article — to show what is behind this Paris Consensus, this Wall Street Consensus, by giving some concrete examples. The expression “planetary budgetary time bombs” in fact came from the French themselves, the French Parliament. The drive to so-called public-private partnerships will create a situation that is not really beneficial to the users of public infrastructures.

The idea of the Wall Street and Paris Consensus as a de facto Bretton Woods for asset managers — that’s really clarifying for me. So, there’s a new relationship between the state, private capital, and risk. And this public-private-partnerships language and investment strategy is both a kind of ideological tool and an actual practical financial tool.

You’ve connected this to a point that you’ve raised theoretically in your work, Daniela. You have this article, “Critical Macro Finance,” and you argue there that market-based finance structurally requires a de-risking state. It’s not just helpful or a strategy that could work, but it’s actually a structural requirement based on how capitalism has developed up until now.

So what’s the structural part here? You say a little bit about why market-based finance requires the state to play this role as a de-risking state and say a little bit more about how we’ve seen that structural necessity play out. You gave the example of Ghana, but if you have any other examples that would help.

I’m going to rely here on the insights of another dead white man in the metropolis, which is Hyman Minsky. I think from the scholarship of Minsky, who was in many ways . . . I wouldn’t call him a radical, but a critical heterodox economist. As early as the late 1950s or early 1960s, he argued that we have to think about the institutions of macroeconomic management as evolving with financial market structure. What he meant by this is what “Critical Macro Finance” tries to do conceptually: to theorize this idea that the institutions of the state, the monetary arm of the state and the fiscal arm of the state, in a sense respond to changes in the financial system and have to adjust to structural changes in the financial system, if they want to preserve capitalism — or in this case, if they want to preserve financial capitalism.

So far we’ve only talked about the fiscal commitments that you have through public-private partnerships because it’s the fiscal arm of the state that signs these contracts. But the first arm of the state to do the rescuing is the central bank. If we look, for example, at the new forms of money that are created under financial capitalism, this is what I call shadow money. It’s kind of an IOU or promise to pay that preserves value, that preserves parity between the promise to pay and traditional forms of money that come under a lot of pressure during times of financial crises, and the state has to step in and take the risks.

In that paper, I give the example of government bonds — the fact that the central bank in high-income countries but also in middle-income countries have started purchasing government bonds on a scale unprecedented even by Keynesian standards, although nominally or formally still under the banner of central bank independence, has revealed a paradox. Central banks are nominally independent, operationally independent, but at the same time, they print money, or they monetize government debt. They have absorbed government debt on their balance sheet, at least over the last two years, on a scale that is unprecedented.

Some people would argue this is just the contingencies of the COVID pandemic. Some people would argue this is the political culture in the United States in particular. Some people would argue this is the political capture of the central bank. But what the critical macro finance perspective tells us is that it’s structurally required by the nature of the financial system. We live in a macro-financial order, where government bonds are very important for new forms of money. If their value falls a lot, then you can have a financial crisis. So the central bank, for financial stability purposes, has to de-risk that. It has to step in and buy, that is, put a floor on the price of government bonds, so that financial stability is preserved.

If you read the public speeches of, for example, the governor of the Bank of England, Andrew Bailey, who is much more conservative than the previous one, he makes it very explicit that the Bank of England buys government bonds for financial stability purposes. The European Central Bank buys government bonds for financial stability purposes, which is a form of de-risking. In other jurisdictions or in the Global South countries, you have interventions in currency markets. It’s a form of currency de-risking that basically makes sure that institutional investors don’t have to absorb or don’t run away because you have a lot of currency volatility.

So the practices of de-risking were first normalized by central banks. This is very paradoxical because they were supposed to be independent. They were able to politically undertake what they call unconventional measures: that is, really going against the logic of independence and somehow continuing with those measures, although coming under significant political contestation.

All of these things that we’re talking about are ways that central banks manage to de-risk portfolios but functionally shift risk as well. The demand to keep stable, predictable returns to portfolios turns into user fees for Africans who are trying to access roads.

So more generally than particular public-private partnerships and shadow capital, what’s the role of risk and securitization in securing political power and control, and who is it being secured for? Is it asset managers? Is it the shareholders themselves?

And how does that structure of patterns of investment, of returns to shareholders’ portfolios, tell us this larger story about who wields power over whom, and what does the Left need to learn about that larger story?

I would say first that, if you want a very striking statistic . . . it was striking to me for a variety of reasons. But even better, two striking statistics. Twenty twenty-one was the best year for private equity firms ever, particularly Blackstone. It was the best year ever for BlackRock. In fact, BlackRock just passed the $10-trillion-in-assets-under-management mark. In 2015 it had $5 trillion US dollars under management; it now has $10 trillion. In five years time, it’s basically doubled the amount of capital that it manages on behalf of institutional investors like US pension funds or US insurance companies.

Twenty fifteen is also kind of interesting because it was the year that BlackRock managed to defeat attempts by the Financial Stability Board to regulate it as a globally systemic shadow bank. They argued, we are asset managers. We only manage on behalf of our investors. We are not systemic. Leave us alone. Five years later they have doubled in size. Now BlackRock is probably five times larger than the largest global bank that we have.

If we just take the simple statistic of how quickly BlackRock managed to double its balance sheet and to what scale, then $10 trillion is a lot of money. It’s probably the size of the European area GDP for one year. It’s very significant capital to have, to be able to mobilize. That explains why you had, for example, its head Larry Fink invited on the stage on at COP26 on finance day. He was there, and he’s viewed as the interlocutor on behalf of financial capital for government.

There is something that Ben Brown called the infrastructural power of finance, which is that governments are increasingly reliant on private financial institutions, on institutional capital, to implement monetary and fiscal policy, and with the advent of the Wall Street Consensus, increasingly social policy. The moment that this partnership exists in practice . . . you’re right, it’s not only ideological, but it’s also in practice that de-risking today has real-world applications. It occurs beyond the discursive level.

The moment that you are so reliant on private finance for your monetary, fiscal, and social policies, reform of the system or a changing the status quo is much more difficult politically. Because it means you somehow have to not only roll back the power of financial capital to influence the backroom conversations or to do lobbying, but you have to radically change the way in which you design and implement your own set of policies that are part of the social contract with your citizens. That requires much, much more significant changes — not only politically, but mechanically at the level of policy implementation.

So there is this part of the infrastructure of power, and then there is the obvious part of structural power. If you have $10 trillion in assets under management and you have governments in the Global South, particularly on the African continent, in Latin America, in Asia — you go to them, and they are worried about market access, and you say, “I can bring you $500 billion in capital tomorrow. The condition is that we agree on a set of de-risking measures that buys you that amount of resources, buys you a seat at the table anywhere, and buys you a lot of voice.”

I want to mention here that I’ve done some research on the Liquidity and Stability Fund. This is a proposal of the UN Economic Commission for Africa (UNECA) that is trying to create these market-based structures that I’ve described in my work on critical macro finance; it is trying to create them for government bonds on the African continent. If you look at who’s designing these measures for the for UNECA, it’s private finance. It’s people from systemic asset managers who have been purchasing their government bonds for a long time and who now have innovative measures of how to do more shadow banking under the promise of more liquidity and better access to markets.

There are many different mechanisms through which this power, both infrastructural and structural, operates. The consequences are very clear the level of distribution. At a distribution level, if you have to impose user fees and if you read very carefully, the arguments are for user fees on social infrastructure but also a removal of subsidies on fossil fuels, removal of subsidies on any public goods. The argument is, to change risk-return profiles, you can subsidize your state enterprises and then tell institutional investors, “Come in and finance my private infrastructure.” You can’t do that because it’s unfair competition.

So it’s not only that you de-risk or you subsidize your institutional investors, and they don’t need to be global. It’s not just BlackRock. You can also do the same for your private pension funds that exist locally. If you’re Senegal or even if you’re South Africa, you are never going to be able to compete with Aberdeen Asset Management or BlackRock if they are in the same room, because they simply mobilize very different scales of resources.

But the distribution of consequences is very clear in the sense that it changes the nature of the social contract between the state and its citizens further and further away from a collective provisioning of public goods. The collective provisioning of public goods disappears, but also the space for designing alternative development strategies, in which you would argue in favor of reviving the developmental state and doing industrial policy under the low-carbon transition.

Think of Uganda: Uganda is building domestic capacity to manufacture electric buses. To do so, it’s taking know-how from China. It’s using its own universities, and it’s trying to manufacture domestic buses nationally instead of importing them from Germany. This is very important. But you will not find the report of the World Bank describing this. For Uganda to scale this up in other areas, it requires financing ,and it requires a technocratic and bureaucratic elite that will say, “Instead of trying to work through de-risking contacts with German renewable energy companies, we will work through planning industrial policy strategy on electric buses.”

How do you mobilize your local bureaucratic capacity, your local institutional capacity in the state, to do things when you don’t have a lot of resources? And I’m speaking as a Romanian who understands how difficult it is to have to do industrial policy in Romania, although we are in the European Union, even when we have the scope to do so, and over the last two years, we didn’t have the people capable of implementing such a policy because of thirty years of the Washington Consensus. I wanted to say to Ndongo . . . his parents grew up under structural adjustment in the IMF. Well, I grew up under structural adjustment in the IMF, Ndongo. My entire adolescence in childhood was one IMF program after another.

It’s not just that you’re subsidizing financial capital. It is that you are redirecting resources from the welfare state toward the de-risking state. As a trade union member, as a progressive economist, I want to think of ways in which the welfare state can be improved, in which the industrial state can be revived — not the ways in which my pension fund can give money to BlackRock to invest in some SDG [Sustainable Development Goals] project in some African country from which my pension fund will not see much return but BlackRock managers probably will.

You have the logic of private finance needing de-risking from the state. But next to the logic of private finance, you have also the territorial logic of the states: for example, the imperial states, dominant states, hegemonic states like France and the US.

So in the case of Africa, one of the ambitions of Western hegemons is to compete with China on the continent. That means, for example, you have a blending of different types of capitals, public capital and private capital, but also capital coming from many different places. The aim of this competition is to show that the West can provide financing, which will be better for you compared to what you receive from China. This is because China is now the biggest lender to the continent, but also the first trade partner of the continent.

These new flows feed into the Wall Street Consensus as part of the diplomatic territorial ambitions of the of the West. I’m not saying that China is exempt of any form of de-risking. But its way of thinking about development is part of a broader state agenda that is very important to factor in.

The Wall Street Consensus is reshaping the older technocratic structure. The multilateral development banks and so on only want to talk with people who understand economics and finance. That means not people like us because we are “ideologues.”

A larger proportion of political leadership ends up coming from people who came from this background, working in, let’s say, a financial institution. It is not uncommon for you to have a prime minister, a president, or minister of finance coming from the World Bank or the African Development Bank because they know the language. If you look also at domestic institutions, their primary focus is on dealing with investors. The people that work in these institutions generally come from this kind of background.

You could say of these people that generally they are not nationalist. By this I do not mean not xenophobic. What I mean is that they would prefer to serve the interests of those first investors instead of the development needs of the countries in which they are based. This is because they know that one day they will leave their position in Africa to go, for example, to the World Bank or to the IMF and so on.

I see many people like that who generally handle the economic policy, the investment policy, of countries. This means that all the policy-making institutions are reshaped to fit the desires of foreign investors. There are many different power dynamics.

Speaking of these different power dynamics, I think they also alter the power dynamics between the government and local capital. I’m thinking of the example of Nigeria and the Dangote Group. The Dangote Group in Nigeria is now, from my reading of the UNECA document, embracing the de-risking approach, at least in health when it comes to the production of PPE.

If the successful developmental state of the 1950s and 1960s managed to create alliances with domestic capital in order to go up value chains, if your domestic capital is playing the de-risking game now, it would be quite difficult to reorient toward a traditional developmental strategy that doesn’t emphasize de-risking but instead emphasizes increasing domestic industrial capacity.

One particularly ominous thing that Daniela has written about is this securitization of sustainability. So big private investors are arguing that private capital can be an effective partner in the pursuit of the so-called Sustainable Development Goals, or SDGs, that are a major part of global collaboration on climate crisis.

But Daniela has suggested this will instead lead to “SDG washing.” Capital is going to exploit the ambiguities between different definitions of sustainability to secure returns to investors without any guarantees about environmental progress or genuine provision of public services.

I wanted to ask both of you the question that Daniela herself asked in the concluding section of Securitization for Sustainability. What kind of development would securitization finance and why?

Securitization is a particular instrument or a particular mechanism to create the kind of assets that institutional investors prefer. People know of it because of the role that securitization played in the global financial crisis when there was the securitization of subprime mortgages. I would argue that securitization is both a part of the vocabulary and the instruments of the Wall Street Consensus. And there is a lot of both greenwashing and SDG washing in there.

This is probably what grates me or irritates me most about the rhetoric of the Wall Street Consensus. It is also this kind of self-righteous, morally superior rhetoric of, “If we align through these partnerships with you, align private capital with a de-risking state, then we will deliver on the Sustainable Development Goals.” Then we will have the low-carbon transition; then we will green our financial system and our economy. For a progressive agenda, it’s both irritating and challenging — because what do you do when your class enemy uses the same rhetoric that you do?

At least during the Washington Consensus, your enemies spoke a different language than you did. And then you would say either, “We want more state,” or “We don’t think that capitalism works, and we need a different kind of political system.” You had a different language. Now for people who — and I count myself among those — for people who are not overtly anti-capitalist — and I cannot be because I grew up under central planning and I have limits on my imagination as to what an alternative would be . . . the difficulty of being a progressive economist within a capitalist logic is that your class enemy speaks the same language as you do.

So in order to make clear the differences, you have to do an hour and a half of a podcast where you expose the technicalities behind the rhetoric and behind the discourse; to say when they talk about partnerships, what they mean is Bretton Woods; what asset managers mean is less access to free public services. What they mean is the same monetary and fiscal austerity, except for ordinary people. The asset managers get support, they get monetary abundance, they get fiscal abundance.

That raises some very significant rhetorical and political or discursive challenges for progressives. There are also even more complicated structural challenges. To change the status quo, we need to change how finance works. To go to at least some of the Keynesian ideas that were behind the negotiations of Bretton Woods, you need to repress finance, as the United States did repress this market-based financial system in the 1930s. It did it through what may be a historical accident that might never repeat itself.

Nevertheless, what needs to happen for this political project of the Wall Street Consensus to be derailed is that we need to change the structures of globalized finance. I had expected the global pandemic to provide some impetus for a change in the status quo. This was because governments across the world suddenly had to stop things and to close things down. If they could stop society from going to work — that is to basically de-risk society for everybody — they could do the same thing in other areas. In many ways, economic policy in the COVID 19 pandemic was de-risking for capitalism, for capitalism and for workers.

But now I think I was very optimistic. A political change is not going to happen in the way that we would like to now, because it would mean nationalizing pension funds. It would mean nationalizing insurance companies; it would mean nationalizing the $10 trillion asset manager. From where does the politics come for that? I don’t know. But maybe countries in the Global South could do it differently. I am speaking here as somebody who lives in a former metropolis, and I’m not very optimistic.

When we see what happened during this pandemic, we should not be too hopeful about the possibility of a coalition between the Global North and South. Because if the Global South wanted to tackle this pandemic, it would have needed access to the vaccines. The vaccines have been freely made available to the manufacturers by the states because it has been subsidized a lot by the states. For example, Moderna did not pay anything for the research and so on. I am exaggerating a bit, but it received a lot of subsidies to create the vaccines. Most of the initial research was public research. Despite that, those vaccines have not been made available to the Global South — at least not in the quantities needed to be effective and also at affordable prices, even though doing so would have been affordable.

And this pandemic is really a small thing compared to climate change. If you just look at what happened during the last two years, you can have a glimpse of what we could realistically expect from the Global North. That means that the Global South has to try to unite into and to cope with something else. Bandung Woods? I don’t know, but to propose something else, because the vested powers we have in the Global North are so impotent that what can exist in the Global North is only political paralysis, but not any change.

Ironically, Francis Fukuyama, I think in 2010 or 2011, wrote an article in the Financial Times saying that the United States has no lessons to give to China about democracy and so on. This guy who was talking about the end of history, liberal democracy, and so on — he was saying basically that American democracy can only function in one direction. That means for the oligarchy; that means for the 1 percent. If US democracy functions, it functions for the 1 percent. If it doesn’t function for the 1 percent, it’s the political paralysis you see.

One thing I like a lot about modern monetary theory (MMT) is the idea that what is technically possible could be financed domestically. This is a very empowering message because that means you have to conceive of your development differently. That means that those old debates about appropriate technologies have to be revived, because we are not obliged to use the technology coming from the Global North. Maybe they are much more efficient, etc., but maybe that would expose us in terms of financial dependency, technological dependency, and so on.

In this area, what we need is a form of critical imagination. Imagine eating things differently; because I believe that the kind of prosperity we need in the Global South has to be something different from what has been achieved in the Global North. What has been achieved in the Global North is based on very particular historical conditions but also an ecological exceptionalism. So we could not emulate that, because it’s not possible — because the destruction of the natural environment that it would cause would only bring a civilization collapse. That means that we have to think differently.

One of the things that the G7 and G8 do not say is that we are seeing a worldwide transfer of net monetary flows from the Global South to the Global North and net flows of physical resources from the Global South to the Global North. So whatever they take as a policy measure that does not address these structural phenomena will not allow us to get to a world where we collectively will be able to tackle climate change and create prosperity for everybody.

There are structural issues that are never addressed, and that is really important, because part of the solutions should come from within the Global South. Alternative financing structures, alternative technologies, and alternative ways of defining prosperity and development must come from the Global South.

MMT is a very important ally. I fully subscribe to the optimistic message that countries in the Global South should not take lessons from countries in the Global North. I would just say we shouldn’t underestimate the challenges of designing alternatives and having an economic theory that tells you that regaining monetary sovereignty is a first step. But many other steps need to be taken for us to be able to do that.

I wanted to ask you, Femi, whether you are more confident than we are, because I’ve read your recent coauthored piece in the Guardian, and it sounded optimistic. You argue that we could just reorient the SDRs, the surplus SDRs that the rich countries got, to the developing world. I think I am possibly more pessimistic on that issue than you.

I don’t know if I would think of my take as optimistic, but I think something similar to what Ndongo said earlier, which is it would be good for there to be something like a Bandung Woods conference. Things like MMT, the discussions about development, have taken their cues from a really historically exceptional path of development and ongoing ideologies of ecological exceptionalism. If we were going to design something different, what would be the material conditions, the financial conditions, that would make it possible to execute that vision?

The SDRs seem like one potential answer to it. Maybe there are better ones; I don’t know better ones myself. But I’m more thinking about what would need to be in place rather than betting on what will be in place. Maybe MMT is the answer; maybe something else is the answer.

This constituent idea of economic sovereignty and monetary sovereignty — what does that look like in a world that would have a Bandung Woods conference? If we had ideas about maybe a developmental state instead of the de-risking state, or somehow using some set of institutions to pursue the kind of developmental and ecological goals that are compatible with continued life on this planet, on anything like just terms — maybe even terms of solidarity — what kinds of economic thoughts would be foundational to a conference like that? And Ndongo, why do you think MMT gives us tools for thinking about that? Daniela, why don’t you think it does?

Daniela is sympathetic to MMT. She is not an enemy of MMT, but maybe she has much more nuanced arguments about it. I would say that two authors have influenced me a lot: Celso Furtado, the Brazilian economist, and Samir Amin. Furtado wrote a book in 1974 called The Myth of Economic Development. It was translated into English two years ago, and it’s a really important book.

His argument in this book is that if we try to emulate the West, in fact this will lead to civilizational collapse, because the development of the West has been based on the net appropriation of resources of the Global South. The type of industrialization we had in the Global North, we could not have it in the Global South.

Furtado took the example of of Brazil, because Brazil had a very important period of industrialization between 1920 and 1980. It was a small period of industrial development. But this industrialization did not create prosperity in the West because it was the kind of industrialization based on import substitution, but also the creation of products that would be luxury products, in the sense that they would be consumed only by a minority of the population. That created a very skewed pattern of industrialization with a lot of inequalities and a lack of homogeneity in the population. In the West you have some kind of homogeneity, because most people are wage earners.

So that was the argument saying that we have to have something else because obviously we could not emulate the West. That was also a type of argument used by Amin; I think that is the most important argument made by dependency theory. Amin would say if someone in Niger or in the Republic of South Africa wants to have the same income as someone in Europe or in New York, we would need five new Americas — five. That means that the idea of economic catching up is not realistic. It’s not possible.

But that does not mean that people are doomed to poverty and inequality. That means they have to find something else, because the model of the West is based on ecological exceptionalism, but it’s also based on a waste of resources. That means if you want to catch up with the average New Yorker, you have also to catch up in terms of waste of resources. But you can’t. So that means that you have to find something else. That is the idea behind delinking.

Delinking is not a way of saying that we are preaching autarky. It is a way of insisting that we have to redefine the relationships between the domestic economy and the world economy. So, for example, one aspect of delinking is that to tame global finance, we have to have domestic finance. If we have free finance, that should help improve domestic capacities and so on. But we know that this is not easy, because you have to find the right alliances inside the country to get behind an agenda of delinking similar to that of China in the time between World War II and the 1980s.

You need those kinds of political alliances to have such a program. MMT for me is not a theory about monetary sovereignty. It only talks of monetary sovereignty as the capacity of the sovereign issuer of the currency to pay its obligations in its own currency. But there are other aspects of monetary sovereignty, for example, which are not taken into account in the monetary literature.

While Amin was advising governments in West Africa, he argued that if you have your own national currency and you do not control the banking sector and the financial sector, you don’t have a national currency. It is not a national currency. This is because you can’t delink. So that means that you have to take into account the banking sector; you have to look at financial reregulation. I know the neoclassicals used to say that’s bad, but you have to have some kind of financial regulation. You have to be able to say, “We are going to create credit. We are going to allocate savings to some particular industries, and so on.”

You have this additional layer, which is beyond MMT. You have also the technical layer that means, for example, if you want domestic monetary sovereignty, you have to have the technical capacities. For example, you need to have one way of controlling all the electronic devices you use, all the payment systems you have, the weight of building all those capacities.

There’s also another layer that is important when we discuss SDRs. This is that the monetary system we have internationally is a nonsystem because it doesn’t work for the Global South. And one aspect of this pathology is what Keynes called the transfer problem. If you have your local currency — let’s say in Guinea — you have your Guinean franc and you want to buy goods abroad, normally you need US dollars or euros. But in this international monetary system, there is not a free mechanism of converting sovereign currencies. So those who are at the bottom of the monetary hierarchy, they tend to suffer from that situation.

The proposals made by Keynes, [E. F.] Schumacher, and many other people aimed at finding a good international payment system that would improve trade relationships between countries and also create the conditions for full employment. This is another layer of sovereignty. But that means that this kind of layer is so much more complicated, because you have to have a new Bandung Woods that would help create the conditions where the developing countries, the Global South, will not suffer from this transfer problem.

So monetary sovereignty could refer to many different things. And the ability of the sovereign to pay its own domestic currency is important. It is important to see that technical constraints are much more constraining than financial constraints. There are many possibilities that people have already reflected on through a number of progressive policy measures, but it is important to have this MMT lens as a way of going against some myths about deficits and so on.

For a second, Ndongo, I thought you were adding an M to MMT — turning it into Modern Maoist Monetary Theory. I thought what you suggested was an interesting proposal. I still have not worked out by the end of our interview whether you’re going to stick with capitalism or not in your alternative system. But I’m guessing you would stay within some form of capitalist organization.

Well, it depends what you mean by capitalism. . . . But that is a subject for another time maybe.

Just to clarify, I am not taking a stance against MMT. When people criticize MMT for not being relevant for low- and middle-income countries, I think, in many ways it could be much more powerful there than in high-income countries, for the reasons that Ndongo explained very well. I’d add also that MMT is not associated with tax-evading billionaires in those countries.

But I’m not sure that either Ndongo or I have made clear what an alternative system would be. Maybe it’s not up to us to design that in advance. It’s quite difficult to imagine it, because living in a different system that does not benefit from ecological exceptionalism is quite difficult to imagine, after having grown up in and lived with some of the benefits that we have. So maybe it is my privileged position as an academic in a high-income country that stops me from thinking about what the alternative would look like.

But for me, the one thing that is very clear is that the state must be involved. I cannot imagine alternatives that give up the state as the entity that can organize the alternative. But I don’t know whether that’s a limit. I would say MMT, the MMT with the Maoist characteristics that Ndongo has in part advocated for, won’t give up the role of the state as a coordinator of economic activity.

But how do you create domestic political consensus? I am more skeptical now after two years of COVID, because in so many ways the political differences have sharpened so much. It has made me more skeptical than I was before the pandemic about our ability to sell alternative political projects to the population. And I think it requires governments that are very competent. We don’t seem to have that now.

And I think the Left is never prepared for the strategic moment when it takes power. This reminds me of reading a speech by [Vladimir] Lenin when he tried to work out, “So now we are in power, what do we do?” And he said, “Let’s look at social democracy and have the bureaucrats of capitalism, but put them under the control of the workers’ committees.” Maybe for the next revolution, we will be better prepared with alternatives.

We have to think about alternatives. That’s important, because that could grow the space of what is possible; what will happen will depend on the social struggles, political struggles. That’s how it works. A story is not made through the thinking of big thinkers, but through struggles. So that means that some people will think about wonderful alternatives, but those alternatives will never happen. But people could arrive at compromises that are progressive for the majority.

For me, the most important example is the abolition of slavery in the United States. You had very, very radical people, but at one point people would never have accepted abolition. But because there was this radical alternative saying that we have to abolish slavery, this became possible. At one point, even people who opposed abolition were obliged somehow to trust somebody like Abraham Lincoln. But at one point, even Lincoln could not do anything against this movement to abolish slavery.

That means the role of critical thinkers is to provide political alternatives. And generally, those critical alternatives could not be applied in the present. It will be only through struggles that that will happen. But struggles will be progressive in their outcomes if those critical alternatives are already present.