Poverty and the Transition to Instability: The Italian Lira in Eritrean History

This chapter uses a study of the lira in colonial Eritrea to propose an alternate understanding of the monetary history of Africa that acknowledges that imperial currencies were weak institutions. It begins from the position that levying taxes in a specific currency alone is not enough to ensure the functioning of a currency system. To take hold, imperial currencies needed the support of a new colonial state infrastructure that, in the Eritrean case, was only ever partially developed. Underinvestment in the colonial state allowed Eritrean communities to retain a significant level of control over the infrastructure that undergirded their currency system. In the first half of the twentieth century, these communities used this control to selectively engage with imperial currencies and to develop new modes of utilizing traditional ones. However, there were limits to their agency. Like many communities in Africa living under colonial rule, Eritreans became trapped in a cycle of poverty and food insecurity that limited their choices. By the end of the interwar period, they could no longer depend on traditional economic activities to survive. They needed a supplemental cash income and, often, the only employer was the colonial state. Unfortunately, the lira proved to be a faulty tool because its value was unstable, further trapping Eritrean communities in poverty.