Question

Why is “beggar thy neighbor” policy is a dangerous one to pursue? Explain the underlying process that leads to self-destruction.

Answer 1

Ans. Beggar thy neighor policy: Beggar thy neighor policy means that country is restricting foreign goods and services to maximize the domestic production of its country.

Beggar thy neighor policy is a dangerous to pursue because it reduce the competitiveness among the domestic prodicers and create a monopoly over the market. Demand and supply of the goods and services are very fluctuating. It also devalue the currency of its country. This protectionist policy leads to self destruction.

The Underlying process that lead to self-destruction:

1. Impose trade tarrifs: The pursuing country impose trade tarrifs on goods and services from goods and services from other countries.

2. Unexpected events: The pursuing country anticipated that it will protect the domestic producers and increased employment oppotunities to the local youths but the result is vice-versa, hike in prices, loss of jobs etc.

3. Economic Recession: Due to this protectionist policy, the pursuing country is likely to fall in economic recession, as it heavily damages each and every sectors of the country.

4. Fall in Gross domestic Product: After the economic recession, the pursuing country is likely to fall in gross domestic product from every front like shutdown of industries, low productivity etc.