Context: The term “Beggar-Thy-Neighbour” has gained renewed relevance amid growing trade tensions and currency devaluations, particularly between major economies like U.S. and China.

About Beggar-thy-neighbour 

• Beggar-thy-neighbour policies refer to protectionist economic measures that benefit one country’s economy at the expense of others.

• Such policies can include high tariffs, strict import quotas, and currency devaluations.

• Critics argue that global trade wars, often fueled by these policies, can cripple international commerce, leading to economic downturns like the Great Depression.

Economic Mechanism

• These policies are adopted to protect domestic industries but often result in economic retaliation from other countries.

The most common examples include:

• Trade Barriers: Imposing high tariffs and import quotas on foreign goods.

• Currency Wars: Central banks depreciate domestic currencies to boost exports and discourage imports.

Historical Origins 

• The term was first introduced by Scottish economist Adam Smith in 1776 in his book The Wealth of Nations.

• Smith criticized mercantilist policies, arguing that free trade benefits all nations, while protectionism only leads to economic decline.

Supporters’ Arguments

• Protecting Domestic Industries & Jobs:

• Some industries require government protection for national security or to survive in their nascent stage.

• Boosting Exports via Currency Depreciation:

• A weaker domestic currency makes exports cheaper and more competitive globally.

• Higher exports & lower imports can lead to a trade surplus, benefiting the domestic economy.

Critics’ Concerns & Global Impact

• Risk of Trade Wars & Economic Retaliation

• Tit-for-tat tariffs and devaluations often lead to a cycle of retaliation, reducing global trade.

• The interwar period (1918-1939) saw widespread trade barriers and currency devaluations, worsening the Great Depression.

Recent Examples

• China & Japan have faced accusations of currency devaluation to maintain trade surpluses.

• U.S.-China Trade War (2018-2020) saw heavy tariffs imposed by both countries, impacting global markets.

Impact on Consumers

• Higher tariffs may protect domestic producers but increase prices for consumers.

• Example: U.S. tariffs on Chinese goods helped American manufacturers but raised costs for U.S. consumers.

• Currency devaluations can reduce purchasing power, making domestic goods more expensive.

Alternative Approach: Unilateral Free Trade

• Some economists argue that retaliatory tariffs hurt the imposing country’s consumers.

• Example: If the U.S. imposes tariffs on Chinese goods, China retaliating with tariffs on U.S. goods will further harm its own consumers.

• Free trade proponents believe that avoiding retaliatory tariffs can allow one country to benefit from another’s protectionist mistakes.