Power Relations Between States and Trans-National Economic Institutions: A Case Study of the CFA Franc

Abstract: The CFA Franc – which stands for Communauté Financiaire Africaine – refers to the West African CFA franc and the Central African CFA franc, two currencies that, although separate, are in practice interchangeable and have a fixed exchange rate to the euro. The CFA franc is used in 14 countries, 12 of which are former French colonies. The currency has been criticized for its impact on the economic sovereignty of these countries, making economic planning all but impossible since the CFA's value is pegged to the euro – whose monetary policy is set by the European Central Bank – thereby outsourcing their monetary policy. By using the CFA franc as a case study, and with the help of Acemoglu and Robinson’s theory of institutions, the present study seeks to analyze how power relations between countries affect the construction of trans-national economic institutions. I argue that the CFA franc acts as an extractive economic and monetary institution, leading to rent seeking behaviors antithetical to economic growth. I conclude that the former serves as a neocolonial domination tool, used by France to maintain its influence over its former colonies.