Ethical Considerations of an East African Community Monetary Union
Rahim Daya
Abstract: An East African Community Monetary Union would see six nations form an advanced economic integration unit in an increasingly divided world. This paper explores the history behind economic integration in East Africa and weighs the ethical implications of a regional monetary union, including the effects of asymmetric shocks and the prevalence of corruption.
Introduction
Despite Brexit, the push towards regional economic integration across the world continues to gather momentum. Increasingly, countries look towards working with neighbors to promote economic growth in a competitive world. The formation of a monetary union among members of the East African Community has long been discussed. At the end of 2013, the signing of the East African Monetary Union Protocol called for a monetary union to be established within ten years. Years of cooperation stretching back to colonial times have led to this union among nations. This paper considers the worrying ethical implications from the formation of an East African Community Monetary Union.
What are Monetary Unions?
Economic and monetary unions, where nations unite to share a single market and currency, are a way to achieve collective growth in an interconnected world. The unions represent advanced stages of economic integration that stop short of a political union where countries unite to form a single entity with a parliament that represents all countries within the union. The Eurozone is a prime example of how a monetary union among 19 of the 28 European Union members has had successes including maintaining low inflation and interest rates to promote investment. Admittedly, the Greek debt crisis is a pointedly obvious disappointment. Yet the Eurozone endures and countries such as Poland are keen to join the monetary union.
History of the East African Community
The East African Community consists of six member states namely Kenya, Tanzania, Uganda, Rwanda, Burundi and most recently South Sudan, which was granted membership earlier this year. The beginnings of collaboration among East African nations dates back to the customs union established in 1917 between Kenya and Uganda with Tanganyika joining 10 years later (Oluoch). The establishment of the East African High Commission followed from 1948 to 1961. The Commission built on the foundations of the customs unions by cementing a common external tariff on goods and services and extending the union to common social services including education and healthcare (Oluoch). As Kenya, Tanzania and Uganda gained independence, the East African Common Services Organization replaced the High Commission in 1961. Many assumed this would lead to a political union between the nations. The union did not transpire due to a lack of economic and political policy planning between the nations. Leaders sought to install legacies rather than work with their neighbors. In 1967, there was renewed effort among the nations to work together and a monetary union was established among the nations. As a consequence, each country retained its respective currency (the Kenyan, Tanzanian and Ugandan shillings) but with a provision for currency parity. However, the East African Currency Board in charge of establishing the monetary union collapsed just a year later and each nation established its own central bank. In 1977, collaboration among the three nations came to an end. Ideological differences between the nations were pivotal in the breakdown. Tanzania embraced the socialist ideas of its President Julius Nyerere in the form of ujamaa, and Jomo Kenyatta went about molding Kenya into a capitalist state (Oluoch). Meanwhile, the destructive rule of Idi Amin in Uganda was fiercely opposed by Tanzania as it granted asylum to overthrown leader Milton Obote (Oluoch). It was not until 1993 that the new heads of state reconvened to begin cooperation efforts once more.
Rahim Daya studies Political Economy with a Concentration in Politics and Development in Africa at the University of California, Berkeley. He cares deeply about ethics in rural economics and refugee rights.
