Beggar Thy Neighbour Policy

The recession of late 1920s in the United States had become the Great Depression, due to three factors.
  1. Overly tight monetary policy
  2. Overly cautious fiscal policy especially under Franklin D Roosevelt in 1936 when tighter fiscal policy led to another sharp downturn in the US economy)
  3. Dramatic recourse to beggar-thy-neighbour policies, including competitive devaluations because countries went off the gold standard in the 1930s and increases in trade barriers worldwide.

Beggar thy neighbour policy refers to benefits for one country at the expense of others. This means that to remedy one country’s problem at the cost of other country and thus tend to worsen the problems of other countries. This involved country’s trying to cure domestic depression and unemployment by shifting effective demand away from imports onto domestically produced goods, either through tariffs and quotas on imports, or by competitive devaluation.

When there is a tough time, the government of a country enacts such policies that aim to boost its own domestic rate of growth. But these policies involve that negatively impact other countries. Some of the examples of these policies are hiking up import tariffs or other trade restrictions, devaluing currencies, imposing controls on the outward flow of capital, and subsidizing exports.

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