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Home > Economics FAQs Blogs > What is a 'beggar-thy-neighbour' policy?

What is a 'beggar-thy-neighbour' policy?

Relevant Topics

This question pertains to topics in Macroeconomics, such as Trade Policy, and Currency Depreciation

Definitions:

Beggar-thy-neighbour policy: 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.

Detailed Explanation:

Beggar-thy-neighbour policies became notable during the 1930s in response to the Great Depression. Countries tried to combat their economic hardships by imposing protectionist trade policies, such as tariffs and quotas, and by competitively devaluing their currencies. These measures were designed to boost domestic industries and discourage imports. However, they often lead to retaliatory actions by other nations, thus leading to a decrease in overall global trade.

Recent:

The Smoot-Hawley Tariff Act of 1930: The United States raised tariffs on over 20,000 imported goods to record levels to protect its industries during the Great Depression. However, many countries retaliated with their tariffs, leading to a severe decline in international trade.

Currency Wars:
In the past, countries like China have been accused of artificially devaluing their currency to make their exports more competitive, a policy that could be considered as a beggar-thy-neighbour policy.

Summary:

In conclusion, a beggar-thy-neighbour policy is a strategy where a country tries to solve its economic difficulties at the expense of other nations, often leading to retaliatory actions and a reduction in global trade. Real-world examples include protectionist tariffs and competitive currency devaluations.

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