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

, 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 (baptised 1723 – 17 July 1790) was a Scottish economist and philosopher who was a pioneer in the field of political economy and key figure during the Scottish Enlightenment. Seen by some as the "father of economics"——— or ...

made reference to the term in claiming that

mercantilist Mercantilism is a nationalist economic policy that is designed to maximize the exports and minimize the imports of an economy. It seeks to maximize the accumulation of resources within the country and use those resources for one-sided trade. ...

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 cal ...

depression and

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

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

tariffs A tariff or import tax is a duty imposed by a national government, customs territory, or supranational union on imports of goods and is paid by the importer. Exceptionally, an export tax may be levied on exports of goods or raw materials and is ...

and

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

imports An importer is the receiving country in an export from the sending country. Importation and exportation are the defining financial transactions of international trade. Import is part of the International Trade which involves buying and receivin ...

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

mercantilism Mercantilism is a economic nationalism, nationalist economic policy that is designed to maximize the exports and minimize the imports of an economy. It seeks to maximize the accumulation of resources within the country and use those resources ...

and

neomercantilism Neomercantilism (also spelled 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 neomercantilis ...

and the resultant barriers to pan-national

single market A single market, sometimes called common market or internal market, is a type of trade bloc in which most trade barriers have been removed (for goods) with some common policies on product regulation, and freedom of movement of the factors of pr ...

s. According to economist

Joan Robinson Joan Violet Robinson ( Maurice; 31 October 1903 – 5 August 1983) was a British economist known for her wide-ranging contributions to economic theory. One of the most prominent economists of the century, Robinson incarnated the "Cambridge Sc ...

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

Great Depression The Great Depression was a severe global economic downturn from 1929 to 1939. The period was characterized by high rates of unemployment and poverty, drastic reductions in industrial production and international trade, and widespread bank and ...

of the 1930s.

Alan Deardorff Alan V. Deardorff (born 1944) is the John W. Sweetland Professor Emeritus of International Economics and a professor emeritus of Public Policy at the University of Michigan Gerald R. Ford School of Public Policy, Ann Arbor.

has analysed beggar-thy-neighbour policies as an instance of the

prisoner's dilemma The prisoner's dilemma is a game theory thought experiment involving two rational agents, each of whom can either cooperate for mutual benefit or betray their partner ("defect") for individual gain. The dilemma arises from the fact that while def ...

known from

game theory Game theory is the study of mathematical models of strategic interactions. It has applications in many fields of social science, and is used extensively in economics, logic, systems science and computer science. Initially, game theory addressed ...

: 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 model, mathematical representation in game theory and economic theory of a situation that involves two competition, competing entities, where the result is an advantage for one side and an equivalent loss for the o ...

, but rather the

comparative advantage Comparative advantage in an economic model is the advantage over others in producing a particular Goods (economics), good. A good can be produced at a lower relative opportunity cost or autarky price, i.e. at a lower relative marginal cost prior t ...

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 newspaper published weekly in printed magazine format and daily on Electronic publishing, digital platforms. It publishes stories on topics that include economics, business, geopolitics, technology and culture. M ...

'' 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 broad ...

''.

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 ...

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 The tragedy of the commons is the concept that, if many people enjoy unfettered access to a finite, valuable resource, such as a pasture, they will tend to overuse it and may end up destroying its value altogether. Even if some users exercised vo ...

" 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. * British national identity, the characteristics of British people and culture ...

economist William Forster Lloyd, though it appears as early as the works of

Plato Plato ( ; Greek language, Greek: , ; born BC, died 348/347 BC) was an ancient Greek philosopher of the Classical Greece, Classical period who is considered a foundational thinker in Western philosophy and an innovator of the writte ...

and

Aristotle Aristotle (; 384–322 BC) was an Ancient Greek philosophy, Ancient Greek philosopher and polymath. His writings cover a broad range of subjects spanning the natural sciences, philosophy, linguistics, economics, politics, psychology, a ...

. 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 implement tariffs or other trade barriers against each other as part of their commercial policies, in response to similar measures imposed ...

s between countries. These trade wars follow the

game theory analysis developed through

Nash equilibrium In game theory, the Nash equilibrium is the most commonly used solution concept for non-cooperative games. A Nash equilibrium is a situation where no player could gain by changing their own strategy (holding all other players' strategies fixed) ...

in which two countries are poised against each other to produce in the market. Production requires export subsidies for the domestic firm to capture the market, effectively deterring the competing entity. Imagine two companies:

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

and

Airbus Airbus SE ( ; ; ; ) is a Pan-European aerospace corporation. The company's primary business is the design and manufacturing of commercial aircraft but it also has separate Airbus Defence and Space, defence and space and Airbus Helicopters, he ...

, 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