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Beggar-my-neighbour, in economics, is a trade policy of competitive devaluation, where countries devalue their exchange rates in rapid succession in order to make export prices more competitive. This was prevalent in the 1930s. It is harder to achieve under floating rates, though the Japanese are often accused of trying to keep the yen artificially low to encourage their exports.
Although beggar-my-neighbour policies work for a short time to boost the domestic economy, there are several detrimental results: (1) the protected industry is inefficient, so consumers have to pay higher prices; (2) trading partners are forced to retaliate with their own protectionist policies; and (3) they earn less foreign exchange, so buy less of the first country\'s exports. In effect, everyone is beggared. This happened in the 1920s and 1930s, but was partly outlawed by GATT (the General Agreement on Tariffs and Trade) after 1947. The slow-growing 1970s and 1980s and early 1990s have rekindled beggar-my-neighbour instincts. TF
See also free trade. |
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