economics Economics () is the social science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services. Economics focuses on the behaviour and intera ...

, 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 Adam Smith (baptized 1723 – 17 July 1790) was a Scottish economist and philosopher who was a pioneer in the thinking of political economy and key figure during the Scottish Enlightenment. Seen by some as "The Father of Economics"——— ...

made reference to the term in claiming that

mercantilist Mercantilism is an economic policy that is designed to maximize the exports and minimize the imports for an economy. It promotes imperialism, colonialism, tariffs and subsidies on traded goods to achieve that goal. The policy aims to reduce a ...

economic doctrine taught nations "that their interest lies in beggaring all their neighbours". The term was originally devised to characterise policies of trying to cure

domestic Domestic may refer to: In the home * Anything relating to the human home or family ** A domestic animal, one that has undergone domestication ** A domestic appliance, or home appliance ** A domestic partnership ** Domestic science, sometimes c ...

depression and

unemployment Unemployment, according to the OECD (Organisation for Economic Co-operation and Development), is people above a specified age (usually 15) not being in paid employment or self-employment but currently available for Work (human activity), w ...

by shifting effective demand away from imports onto domestically produced goods, either through

tariffs A tariff is a tax imposed by the government of a country or by a supranational union on imports or exports of goods. Besides being a source of revenue for the government, import duties can also be a form of regulation of foreign trade and polic ...

and

quotas Quota may refer to: Economics * Import quota, a trade restriction on the quantity of goods imported into a country * Market Sharing Quota, an economic system used in Canadian agriculture * Milk quota, a quota on milk production in Europe * Indi ...

imports An import is the receiving country in an export from the sending country. Importation and exportation are the defining financial transactions of international trade. In international trade, the importation and exportation of goods are limited ...

, or by competitive devaluation. The policy can be associated with

mercantilism Mercantilism is an economic policy that is designed to maximize the exports and minimize the imports for an economy. It promotes imperialism, colonialism, tariffs and subsidies on traded goods to achieve that goal. The policy aims to reduce a ...

and

neomercantilism Neomercantilism (also spelt as neo-mercantilism) is a policy regime that encourages exports, discourages imports, controls capital movement, and centralizes currency decisions in the hands of a central government. The objective of neomercantili ...

and the resultant barriers to pan-national single markets. According to economist

Joan Robinson Joan Violet Robinson (''née'' Maurice; 31 October 1903 – 5 August 1983) was a British economist well known for her wide-ranging contributions to economic theory. She was a central figure in what became known as post-Keynesian economics. B ...

beggar-thy-neighbour policies were widely adopted by major economies during the

Great Depression The Great Depression (19291939) was an economic shock that impacted most countries across the world. It was a period of economic depression that became evident after a major fall in stock prices in the United States. The economic contagio ...

of the 1930s.

Alan Deardorff Alan V. Deardorff (born 1944) is the John W. Sweetland Professor of International Economics and a Professor of Economics and Public Policy at the University of Michigan Gerald R. Ford School of Public Policy, Ann Arbor.prisoner's dilemma The Prisoner's Dilemma is an example of a game analyzed in game theory. It is also a thought experiment that challenges two completely rational agents to a dilemma: cooperate with their partner for mutual reward, or betray their partner ("defe ...

known from

game theory Game theory is the study of mathematical models of strategic interactions among rational agents. Myerson, Roger B. (1991). ''Game Theory: Analysis of Conflict,'' Harvard University Press, p.&nbs1 Chapter-preview links, ppvii–xi It has appli ...

: each country individually has an incentive to follow such a policy, thereby making everyone (including themselves) worse off. Reconciling the dilemma of beggar-thy-neighbor policies involves realizing that trade is not a

zero-sum game Zero-sum game is a mathematical representation in game theory and economic theory of a situation which involves two sides, where the result is an advantage for one side and an equivalent loss for the other. In other words, player one's gain is e ...

, but rather the

comparative advantage In an economic model, agents have a comparative advantage over others in producing a particular good if they can produce that good at a lower relative opportunity cost or autarky price, i.e. at a lower relative marginal cost prior to trade. Comp ...

of each economy offers real

gains from trade In economics, gains from trade are the net benefits to economic agents from being allowed an increase in voluntary trading with each other. In technical terms, they are the increase of consumer surplus plus producer surplus from lower tariffs ...

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

: * 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 ''The Economist'' is a British weekly newspaper printed in demitab format and published digitally. It focuses on current affairs, international business, politics, technology, and culture. Based in London, the newspaper is owned by The Econo ...

'' and ''

BBC News BBC News is an operational business division of the British Broadcasting Corporation (BBC) responsible for the gathering and broadcasting of news and current affairs in the UK and around the world. The department is the world's largest broadca ...

''.

Extended application

"Beggar thy neighbour" strategies of this kind are not limited to countries:

overgrazing Overgrazing occurs when plants are exposed to intensive grazing for extended periods of time, or without sufficient recovery periods. It can be caused by either livestock in poorly managed agricultural applications, game reserves, or nature res ...

provides another example, where the pursuit by individuals or groups of their own interests leads to problems. This dynamic was dubbed the "

tragedy of the commons Tragedy (from the grc-gre, τραγῳδία, ''tragōidia'', ''tragōidia'') is a genre of drama based on human suffering and, mainly, the terrible or sorrowful events that befall a main character. Traditionally, the intention of tragedy ...

" in an 1833 essay by

British British may refer to: Peoples, culture, and language * British people, nationals or natives of the United Kingdom, British Overseas Territories, and Crown Dependencies. ** Britishness, the British identity and common culture * British English, ...

economist

William Forster Lloyd William Forster Lloyd FRS (1794 – 2 June 1852) was a British writer on economics. He is best known today for one of his 1833 lectures on population control which have influenced writers in modern economic theory. Life Born in 1794 at Bradenh ...

, though it appears as early as the works of

Plato Plato ( ; grc-gre, Πλάτων ; 428/427 or 424/423 – 348/347 BC) was a Greek philosopher born in Athens during the Classical period in Ancient Greece. He founded the Platonist school of thought and the Academy, the first institution ...

and

Aristotle Aristotle (; grc-gre, Ἀριστοτέλης ''Aristotélēs'', ; 384–322 BC) was a Greek philosopher and polymath during the Classical period in Ancient Greece. Taught by Plato, he was the founder of the Peripatetic school of phil ...

. These trade policies can lead to

trade war A trade war is an economic conflict often resulting from extreme protectionism in which states raise or create tariffs or other trade barriers against each other in response to trade barriers created by the other party. If tariffs are the exclus ...

s between countries. These trade wars follow the

prisoner's dilemma The Prisoner's Dilemma is an example of a game analyzed in game theory. It is also a thought experiment that challenges two completely rational agents to a dilemma: cooperate with their partner for mutual reward, or betray their partner ("defe ...

game theory analysis developed through

Nash equilibrium In game theory, the Nash equilibrium, named after the mathematician John Nash, is the most common way to define the solution of a non-cooperative game involving two or more players. In a Nash equilibrium, each player is assumed to know the equili ...

in which two countries are poised against each other to produce in the market. Production requires

export subsidies Export subsidy is a government policy to encourage export of goods and discourage sale of goods on the domestic market through direct payments, low-cost loans, tax relief for exporters, or government-financed international advertising. An export ...

for the domestic firm to capture the market, effectively deterring the competing entity. Imagine two companies:

Boeing The Boeing Company () is an American multinational corporation that designs, manufactures, and sells airplanes, rotorcraft, rockets, satellites, telecommunications equipment, and missiles worldwide. The company also provides leasing and product ...

and

Airbus Airbus SE (; ; ; ) is a European Multinational corporation, multinational aerospace corporation. Airbus designs, manufactures and sells civil and military aerospace manufacturer, aerospace products worldwide and manufactures aircraft througho ...

, one American, one European firm. They can either choose to ''produce'' or to ''not produce''. The matrix follows that if both produce both will lose market share (−5,−5) as they compete in the industry. If they both do not produce (0,0) nobody benefits. If one produces whilst the other does not (100,0) the producing company will capture the industry and have 100% share (0,100). Game theory states that the first mover, or the initial firm in the industry, will always win. The competing firm will have no incentive to enter the market once the competitor has the advantage and thus will be deterred. However, with a strategic trade policy of an export subsidy, the matrix changes as the protecting government covers some of the costs. The matrix now changes from (−5,−5) to (−5,20) in favour of the domestic firm with the subsidy. This will see the protected firm "win" in the game and capture more of the market share as the subsidies burden the costs, which would otherwise deter the company. The game does not finish here, as the other company, being usurped on the second move, will then itself become protected through export subsidies, leading to a trade war between countries. Ergo, beggar-thy-neighbour is evident in trade wars as it increases the domestic welfare at the expense of the competing country.

Other uses

The term has also been used as the title of a number of literary works: * Gerard, Emily and Gerard, Dorothea, ''Beggar My Neighbour: A Novel'', W. Blackwood and Sons (Edinburgh), 1882. * Drew, Sarah, ''Beggar My Neighbour'', J. M. Ousley & Son (London), 1922. * Fielden, Lionel, ''Beggar My Neighbour'', Secker and Warburg (London), 1943. * Ridley, Arnold, ''Beggar My Neighbour: A Comedy in Three Acts'', Evans Bros. (London), 1953. * Macelwee, Patience, ''Beggar My Neighbour'', Hodder and Stoughton (London), 1956.

References

{{DEFAULTSORT:Beggar Thy Neighbour Commercial policy Preclassical economics International trade

Extended application

Other uses

See also

References