Beggar-thy-Neighbor Policy

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Beggar-thy-neighbor politics (English: "to make your neighbor a beggar"; literally: ruin your neighbor ) is an economic, mercantilistic strategy of maximizing the national trade surplus and thus the domestic gold reserves. The term goes back to Adam Smith , who used it in " Wealth of Nations ". What is meant are economic policy measures of a country that are intended to increase income and / or employment by increasing exports while at the same time inhibiting increases in imports . Increasing exports result in additional income for private households; experience shows that part of this additional income is spent on buying goods or services, which creates new income ( export multiplier ). Since the increase in exports from one country leads to an increase in imports for other countries, this policy can have a contractionary effect in the other countries (e.g. higher unemployment ).

Examples

Classic measures of a beggar-thy-neighbor policy can e.g. B. be:

In the 1930s, competitive devaluations resulted in a currency war in the wake of the global economic crisis . To prevent further currency wars, John Maynard Keynes developed the idea of ​​an international clearing union (Bancor Plan), which he proposed at the Bretton Woods Conference in 1944. Instead, however, the plan of the US delegation under Harry Dexter White was implemented, the dollar made world money and the Bretton Woods system founded. However, this failed in the 1970s.

Since then, competitive devaluations have occasionally occurred again or have been prevented under international pressure, which were viewed as beggar-thy-neighbor policies. The German export surpluses vis-à-vis the euro zone are also classified by some as a beggar-thy-neighbor problem. Others assume that the export surpluses, which arise from the international division of labor and the different economic structures of the states, also have a positive effect on the deficit countries and that measures to reduce them would reduce the overall volume of trade and thus the economic strength in all countries involved ( lose-lose situation). The German export surplus secures 3.5 million jobs in other European countries because of the European trade links.

Other experts criticize that the debate about trade imbalances is still being conducted at a purely national level, as it was in the era of mercantilism, although the world economy is now enormously integrated. Because of the global value chains, the supposed deficit countries also benefit greatly from the export surplus of other countries, and goods and services can no longer be clearly assigned to an individual country. In addition, it is questionable to what extent trade imbalances between states can be influenced by state measures (especially of the surplus country), since they usually arise simply from the fact that the goods of one economy are in greater demand than those of the other. For example, US President Donald Trump's attempt to reduce the US's current account deficit with China failed . The Bundesbank , which regularly records the German current account, assumes that government measures only have a minor influence on the trade balance. Most economists do not classify surpluses and deficits per se as good or bad; there are not automatically “winners” and “losers”. Some economists even assume that bilateral trade imbalances have no economic significance.

criticism

Adam Smith already assumed in his “ Wealth of Nations ” (1776) that the mercantilists' beggar-thy-neighbor strategy would lead to international tensions, and therefore criticized this practice.

John Maynard Keynes also saw this danger after the experience of the devaluation races of the 1930s and developed a systematic strategy with the Bancor Plan to avoid such beggar-thy-neighbor spirals that endanger peace: an international clearing union. It is true that Keynes failed at the Bretton Woods Conference in 1944 to implement this plan on a global level. The idea was tried out at the European level between 1950 and 1958 with the European payment union.

Also in the 1930s, Wilhelm Lautenbach formulated the zero-sum game structure of beggar-thy-neigbour strategies.

The economist Heiner Flassbeck assumes that the concept of the “competition of nations” also amounts to beggar-thy-neighbor and leads to overall economic prosperity losses through a deflationary spiral and to the deterioration of international relations.

Joseph Stiglitz points out that a protectionist beggar-thy-neighbor policy, i.e. a policy that aims to increase the current account surpluses by reducing imports, ultimately leads to a decline in exports. If, however, foreign trade declines overall, integration into the international division of labor would no longer exist, which would lead to losses in efficiency and thus in welfare losses.

See also

Individual evidence

  1. ↑ English to beggar = ruin, drive into ruin, run down, beggar. beggar is the beggar.
  2. ↑ thy = thy, to the old, obsolete English thou form thou . Adam Smith wrote in 1776: "Beggaring all their neighbors". The formulation with thy is evidently a polemical allusion to the biblical commandment Love thy neighbor (German: love your neighbor ); a command that turns this economic policy into the opposite.
  3. ↑ American English neighbor , British English: neighbor = the neighbor - also alluding to the use of neighbor in the biblical sense of "the next" (= the person closest to you) in the King James Bible .
  4. ^ Adam Smith: An Inquiry into the Nature and Causes of the Wealth of Nations, Book IV, Chapter III (part II) : "The sneaking arts of underling tradesmen are thus erected into political maxims for the conduct of a great empire…. By such maxims as these, however, nations have been taught that their interest consisted in beggaring all their neighbors. Each nation has been made to look with an invidious eye upon the prosperity of all the nations with which it trades, and to consider their gain as its own loss. Commerce, which ought naturally to be, among nations, as among individuals, a bond of union and friendship, has become the most fertile source of discord and animosity. "
  5. ^ Duden Wirtschaft from A to Z: Basic knowledge for school and study, work and everyday life, 5th edition, Mannheim, Bibliographisches Institut, 2013, license edition Bonn: Federal Agency for Civic Education 2013, keyword export multiplier .
  6. ^ Gabler Wirtschaftslexikon, keyword: Beggar-my-Neighbor-Politics , Springer Gabler Verlag
  7. ↑ Cédric Tille, Beggar-thy-neighbor or beggar-thyself? The income effect of exchange rate fluctuations , Staff Report, Federal Reserve Bank of New York 112, 2000
  8. ^ Paul Patrick Streeten, Thinking about Development, Cambridge University Press, 1997, ISBN 978-0-521-59973-3 , p. 291
  9. ^ Gabler Wirtschaftslexikon, keyword: Beggar-my-Neighbor-Politics , Springer Gabler Verlag
  10. ↑ Kenneth A. Reinert, Ramkishen S. Rajan, Amy Joycelyn Glass, Lewis S. Davis, The Princeton Encyclopedia of the World Economy. , Princeton University Press, 2009, ISBN 978-0-691-12812-2 , p. 127
  11. ↑ Massimo Amato, Luca Fantacci: Back to Which Bretton Woods? Liquidity and clearing as alternative principles for reforming international finance. in: Maria Cristina Marcuzzo (Ed.): Speculation and Regulation in Commodity Markets: The Keynesian Approach in Theory and Practice. Rome 2010, pp. 225–242 ( full text online )
  12. ↑ Georg Zoche: WeltMacht Geld. Munich 2009 ( online ), pp. 101–157
  13. ↑ Kenneth A. Reinert, Ramkishen S. Rajan, Amy Joycelyn Glass, Lewis S. Davis, The Princeton Encyclopedia of the World Economy. , Princeton University Press, 2009, ISBN 978-0-691-12812-2 , p. 127
  14. ↑ Ambrose Evans-Pritchard: Bullying Germany gets a free ride with its beggar-thy-neighbor policy . The Telegraph, December 14, 2008
  15. ↑ US government criticizes German export policy , Kölner Stadtanzeiger, October 31, 2013
  16. ^ "Export dispute: IMF urges Germany to be modest" , Spiegel Online from November 3, 2013
  17. ↑ "EU reprimands Germany for export surplus" , Die Welt of March 5, 2014
  18. ^ The importance of the German economy for Europe. (PDF) Prognos , April 2, 2019 .;
  19. ↑ Europe lives from German industry. In: FAZ.NET . April 18, 2014 .;
  20. ↑ "Germany is not at all unfair". Deutschlandfunk , June 12, 2018 .;
  21. ^ Economic problems of the German current account. (PDF) Scientific Advisory Board at the Federal Ministry of Economics , February 7, 2019, p. 20 .;
  22. ↑ American trade deficit climbs to its highest level in ten years. In: FAZ.NET . December 6, 2018 .;
  23. ↑ The German balance of payments for 2018. (PDF) In: Deutsche Bundesbank Monthly Report March 2019. pp. 19–21 .;
  24. ^ What Donald Trump Doesn't Understand About the Trade Deficit. In: New York Times . July 21, 2016 .;
  25. ↑ Barry Eichengreen : What Trump really doesn't get about trade "A particular bilateral trade deficit or surplus is totally devoid of economic meaning", in: Foreign Policy , February 24, 2020
  26. ↑ Adam Smith: An Inquiry into the Nature and Causes of the Wealth of Nations, Book IV, Chapter III (part II) : “By such maxims as these, however, nations have been taught that their interest consisted in beggaring all their neighbors. Each nation has been made to look with an invidious eye upon the prosperity of all the nations with which it trades, and to consider their gain as its own loss. Commerce, which ought naturally to be, among nations, as among individuals, a bond of union and friendship, has become the most fertile source of discord and animosity. "
  27. ↑ John Maynard Keynes (1936): The General Theory of Employment, Interest and Money . Chapter 23 : Notes on Mercantilism, The Usury Laws, Stamped Money and Theories of Under-Consumption.
  28. ↑ s. a. Nikolaus Kowall (2011): Neoclassical competitive state and Keynesian cooperation state.
  29. ^ Wilhelm Lautenbach: interest / credit and production (ed. By W. Stützel) , JCB Mohr (Paul Siebeck) Tübingen 1952, p. 9: "All countries want ... to export more than import. It is clear from the start that they will not achieve their goal. In principle, there are two possibilities here. Either all states actively promote exports and release imports: in a frenzy of international exchange, the total volume of exports will increase without anyone exporting more than they have imported. Or else - and that is the more probable and unfortunately always historically given: One will try to limit imports in order to gain an active current account balance. This means that no country can increase its exports any more. On the contrary. The general pursuit of a difference between export and import will cumulatively decrease the total exchange volume. The result is a struggle for sales markets, international envy of competition, war first of all against all and finally perhaps «imperialism as the highest stage of capitalism»! "
  30. ↑ Heiner Flaßbeck: Macroeconomic paradoxes and modern economic policy. In: Eberhart Ketzel, Hartmut Schmidt, Stefan Prigge: Wolfgang Stützel - modern concepts for financial markets, employment and the economic constitution. Tübingen: Mohr Siebeck 2001, pp. 409-426.
  31. ^ Joseph E Stiglitz, Carl E Walsh, Microeconomics: Volume 1 for Economics , Oldenbourg Verlag, 2010, ISBN 978-3-486-58477-6 , p. 508.