Beggar thy neighbour

This article is about the economic policy. For the card game, see Beggar-My-Neighbour.

In economics, a beggar-thy-neighbour policy is an economic policy through which one country attempts to remedy its economic problems by means that tend to worsen the economic problems of other countries.

Adam Smith made reference to the term in claiming that mercantilist economic doctrine taught nations "that their interest lies in beggaring all their neighbours".[1] The term was originally devised to characterise policies of trying to cure domestic depression and unemployment by shifting effective demand away from imports onto domestically produced goods, either through tariffs and quotas on imports, or by competitive devaluation. The policy can be associated with mercantilism and neomercantilism and the resultant barriers to pan-national single markets. According to economist Joan Robinson beggar-thy-neighbour policies were widely adopted by major economies during the Great Depression of the 1930s.[2]

Alan Deardorff has analysed beggar-thy-neighbour policies as an instance of the prisoner's dilemma known from game theory: each country individually has an incentive to follow such a policy, thereby making everyone (including themselves) worse off.[3]

Reconciling the dilemma of beggar-thy-neighbor policies involves realizing that trade is not a zero-sum game, but rather the comparative advantage of each economy offers real gains from trade for all.

An early 20th-century appearance of the term is seen in the title of a work on economics from the early period of the Great Depression:

  • Gower, E. A., Beggar My Neighbour!: The Reply to the Rate Economy Ramp, Manchester: Assurance Agents' Press, 1932.

The phrase is in widespread use, as seen in such publications as The Economist[4] and BBC News.[5]

  1. ^ Adam Smith: An Inquiry into the Nature and Causes of the Wealth of Nations, Book IV, Chapter III (part II): "The sneaking arts of underling tradesmen are thus erected into political maxims for the conduct of a great empire ... . By such maxims as these, however, nations have been taught that their interest consisted in beggaring all their neighbours. Each nation has been made to look with an invidious eye upon the prosperity of all the nations with which it trades, and to consider their gain as its own loss. Commerce, which ought naturally to be, among nations, as among individuals, a bond of union and friendship, has become the most fertile source of discord and animosity."
  2. ^ Rothermund, Dietmar (1996). The Global impact of the Great Depression 1929–1939. Routledge. pp. 6–7. ISBN 0-415-11819-0.
  3. ^ Deardorff, Alan V. (November 4, 1996). "An Economist's Overview of the World Trade Organization". The Emerging WTO System and Perspectives from East Asia (PDF). Joint U.S.-Korea Academic Studies. Vol. 7. Korea Economic Institute.
  4. ^ "Beggar thy neighbour". The Economist. 25 January 2007.
  5. ^ "CAP: Beggar thy neighbour". BBC News. 26 February 1999.