Whence Cometh Beggar-Thy-Neighbor?

February 10, 2009 1:00 PM

How did a children's card game played in the 1800s become a central concern of economists in the 21st century?

The phrase "Beggar-Thy-Neighbor" is everywhere these days in economic commentary, though many people may be unsure of its meaning. The phrase alludes to a country's attempt to cure its own economic problems at the expense of other countries, by such means as raising trade barriers (tariffs or quotas) or devaluing its currency to make the price of imports more expensive and the price of exports cheaper to its trading partners.

Trade barriers and devaluations come and go and are common practices among countries in economic trouble. The widespread concern now is that, with virtually every country experiencing a downturn, all may try the same protectionist practices. And if all try these practices at once, everyone ends worse off. "Beggar-Thy-Neighbor" on a global scale is thus a "me first" formula that can lead to "Beggar-the-Whole-World."

In November, the 20 leading economic powers of the world met in Washington and pledged to avoid new protectionist steps. The International Monetary Fund recently reported that they are mostly living up to that commitment. But there are also serious cracks in the commitment in the form of trade restrictions imposed by many countries, and the Buy American provisions in the stimulus bill before Congress. "Has Beggar Thy Neighbor Started?" a leading economic blog asked the other day.

I've been wondering how such a fussy and arcane—and yet evocative—way of describing an economic practice came to be. It appears to date from the 1930s, when the practice of competitive trade barriers and devaluations led to a collapse in global trade that aggravated the Great Depression. Joan Robinson, a distinguished Cambridge University economist and disciple of John Maynard Keynes, came up with the phrase to describe the restrictive trade and currency practices, symbolized by the Hawley-Smoot tariff approved by Congress in 1930. That notorious measure raised tariffs on thousands of goods. It also caused other countries to retaliate with their own tariffs. The result was an ever deeper spiral downward in the global economy.

Whence the term? Robinson was apparently inspired by a card game popular in the 19th century, known as "Beggar-My-Neighbor." One of the first literary appearances of the game was in the novel Great Expectations, published in 1861. Charles Dickens cited the game as the only one that Pip, the protagonist, seemed to know how to play. Hoyle's says that "Beggar-My-Neighbor," a kind of zero-sum game in which your opponent was not only defeated but left penniless, had such other names as "Beat Jack Out of Doors" and "Strip Jack Naked."

One authoritative source, "The New Palgrave: A Dictionary of Economics," explains that Ms. Robinson wrote how all countries imposing trade barriers could leave "both the intervening country and its trading partners as a whole worse off." The dictionary cited her "classic article" in 1937 and describes her argument this way: "Elaborating on Keynes's notes on mercantilism in the General Theory, she argued that in times of worldwide unemployment, it is indeed possible for one country to increase its employment and total output by increasing its trade balance at the expense of other countries. She coined the phrase 'beggar-thy-neighbor' to describe such policies."

Thank you for such a vivid phrase, Ms. Robinson. It's a lot more felicitous than warning against countries beating and stripping Jack (i.e. the world economy) naked.