What does 'Beggar-Thy-Neighbor' mean

Beggar thy neighbor is a term for policies that a country enacts to address its economic woes that, in turn, actually worsens the economic problems of other countries. The term comes from the policy's impact, as it makes a beggar out of neighboring countries. 

BREAKING DOWN 'Beggar-Thy-Neighbor'

Beggar thy neighbor often refers to international trade policy that benefits the country that enacted it, while harming its neighbors or trade partners.

Beggar thy neighbor policies came about, originally, as a policy solution to domestic depression and high unemployment rates. The basic idea is to  to increase the demand for a nation's exports, while reducing reliance on imports.

This means driving consumption of domestic goods up, as opposed to consumption of imports. This is usually achieved with some kind of trade barrier—tariffs or quotas—, or competitive devaluation, in order to lower the price of exports and drive employment and the price of imports up.

Beggar-Thy-Neighbor: A Brief History

The term is widely credited to the philosopher and economist Adam Smith, who used the term in The Wealth of Nationsin a critique of mercantilism and protectionist trade policies. Smith saw mercantilism, and its zero-sum understanding of the market, encouraging nations to beggar each other in order to increase economic gain, as misguided; instead, he believed that free trade would lead to long-term economic growth that was not zero-sum, but would actually increase the wealth of—you guessed it—all nations.

Still though, many country's have deployed mercantilist and protectionist economic policies through the years. A number of countries did so during the Great Depression, Japan did after WWII, and China did after the Cold War. With the rise of globalization in the 90s, beggar-thy-neighbor fell by the wayside—for the most part. Recently, though, protectionist policies have been making a comeback, at least in visibility, with the rise of Trumpnomics and Trump's 'America First' rhetoric. 

 

 

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