Inflation, this little princess refugee in Africa

    The African continent is the last economic frontier where inflation reigns without debate. Central banks in Morocco, Algeria, the CFA zone, Nigeria, Kenya and other currency areas are trying to keep this ratio within the bounds of usage and theory. However, apart from the orthodoxy of the monetary policy committees of African central bankers, the assumption of low inflation as a sign of good economic health no longer seems to be unanimous.

    Thus, dissenting voices call on central banks to put the cursor, not on inflation (intermediate parameter) but rather on full employment and guarantee universal employment. The idea is neither new nor revolutionary since it dates from Keynes * and, in some ways, implemented by Roosevelt in his Works Progress * Administration policy. The 60-year-old economist William Phillips *’s thesis that a high employment rate increases inflation no longer seems to apply in the case of Donald Trump * ‘s United States, which happily combines low unemployment and low unemployment. inflation.

    The calling into question of the virtue of low inflation is accompanied by a criticism of the management of the public debt, which is supposed to be limited to the fiscal solvency of the public authorities. Also, for a long time, there was talk of monitoring the debt ratio as milk on fire. A vision questioned by the economist William Mitchell of the University of Newcastle (Australia) who believes in his book « Macroeconomics » that he should have no limit to the debt contracted by a government in its currency. In other words, there is no limit to the domestic debt of a state as long as it is contracted in its national currency?

    Clearly, proponents of the new vision, « let go of the public deficit to create full employment. » As long as there are workers, infrastructure to build, the state can go into debt. The creation of goods and services will dampen inflation.

    This unconventional idea, which underpins the return to the printing press, is, of course, opposed by the classics including the Nobel Prize Paul Krugman * who estimates that, beyond a certain threshold, the public debt becomes counterproductive, source inflation, or even hyperinflation, because of exchange rate depreciation and, inevitably, a drag on growth. In the United States, this new theory (modern monetary theory, or MMT), championed by Stephanie Kelton *, professor of public policy and economics, who was one of the economic advisers of the former Democratic primary candidate, Bernie Sanders, meets many followers who believe that in addition to the liberalities granted to the States in their capacity of indebtedness, they should allow them to play on the modulation of tax rather than that of inflation.

    Clearly, the Modern Monetary Theory (TMM), an economic concept also defended by the emblematic New York Democrat Alexandria Ocasio-Cortez (who, at 30, is the youngest candidate ever elected to the US Congress), is based on the idea that any state that prints its own currency can never go bankrupt and is an alternative to a conventional theory based on fiscal management and inflation control. Hence his attempt to integrate the difficult goals of sustainable development (such as decarbonization) into the economy. Is it not, in a way, an attempt to moralize the economy, which Karl Marx and Friedrich Engels tried without success?

    In any case, the recourse by the US and then Europe to the quantitative easing policy, with injections of billions of dollars in the economy without it creating inflation calls for the revision of the classic monetarism. « Before the 2007 crisis, the total amount of ECB securities and loans was in the order of 1,000 billion euros. In 2019, this amount reaches € 4,700 billion, or 40% of the gross domestic product (GDP) of the euro area. This dynamic monetary policy has avoided the worsening of the crisis and it has not caused inflation, « wrote the economist Gilbert Blardone in the columns of Le Monde on August 8, 2019.

    African central banks looking for low-inflation targets in very high-unemployment environments need to seize and test this new economic theory that Bill Gates calls « anything » and Laurence Fink, the boss of the Black Rock fund, sums up in a « bullshit » with all the largesse of spirit that their experience and their academic and practical legitimacy conquers them.


    * John Maynard Keynes, General Theory of Employment, Interest and Money. (1936)

    * The Works Progress Administration, President Roosevelt’s New Deal central program of the 1930s, has resulted in the construction of, among other things, 1,500 kilometers of airstrips (new and reclaimed), one million kilometers of highways , 124,000 bridges, 8,000 parks and 18,000 sports fields, 135,000 kilometers of pipelines, 69,000 street lights and 125,000 public buildings built, rebuilt or expanded, including 41,300 schools. (Source:, Michael Hiltzik, The New Deal: A Modern History).

    * William Phillips, a New Zealand economist at the London School of Economics (LSE), published in 1958 his study on the relationship between inflation and unemployment, illustrated by the Phillips curve. This publication, which showed the impossibility of reconciling full-employment economy and low inflation, is still authoritative today.

    * Under Donald Trump, unemployment fell to 3.6% for inflation of 1.4%. Never seen since 1969.

    * William Francis Mitchell is Professor of Economics at Newcastle University. Defender of modern monetary theory, his latest book Macroeconomics (Macmillan, March 2019), co-authored with L. Randall Wray and Martin Watts, is a textbook that « encourages students to take a more critical approach to the assumptions prevalent around the subject. of macroeconomics, comparing heterodox and orthodox approaches to theory and politics … based on the principles of modern monetary theory (MMT).

    * Paul Robin Krugman, born February 28, 1953 in Long Island, New York, is an American economist who won the 2008 award from the Bank of Sweden in Economics (or « Nobel Prize for Economics ») 2008 for have shown « the effects of economies of scale on models of international trade and the location of economic activity ». He has been a tribune since 1999 in the New York Times which has allowed him to become a « maker of opinion (Wikipedia).


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