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The FT's Understanding of Beggar Thy Neighbour

What does beggar thy neighbour mean?

After reading yesterday's Financial Times editorial, Fiscal fairness, not fiscal prudence, I was in serious doubt over that. I looked it up:

Beggar thy neighbour, or beggar-my-neighbour, policies are those that seek benefits for one country at the expense of others.
 

That is exactly what I thought it would mean. But somehow the FT has a different concept of that phrase.

According to the FT, you are a serious beggar-thy-neighbour case when you are unwilling to pay down the debt your neighbor made by spending too much. That is, if your neighbor can not live off your expense. Seriously:

Europe finds itself at a crossroads. The economic malaise will not only test institutions of the European Union, but more importantly the commitment of member states.
...
A substantial fiscal stimulus is needed across the continent and particularly in Germany, the EU’s largest economy, to counter an economic crisis. Announcements made so far by the European Commission and individual states do not go far enough.
...
EU officials should name and shame countries not pulling their weight, such such as Germany and the Netherlands.

Without serious contributions from these governments it is not obvious where more money could come from.

Maybe London and others should raise serious taxes on banker bonuses and FT editorial writer income? But no:

Most major member states entered the downturn with large budget deficits, ... Several, such as Italy and Greece, cannot afford much extra spending without risking concern about national solvency.

Yes, some countries have over-spend and under-taxed for far too long. But why are the countries who managed to achieve a positive balance of payment supposed to pay up for that?

Europe’s political institutions are not ideally suited to managing economic crises. They are useful platforms for exchanging views, but remain weak relative to individual countries. In negotiating monetary union, Germany advocated political union. That would have provided the eurozone with institutions equipped to push co-ordinated responses and burden-sharing.

Ironically, it is Germany that is effectively engaged in beggar-thy-neighbour policies, waiting for other less well-placed countries to do most of the work and reaping the benefits once exports pick up. But if Germany does not uphold ideals of European unity, who will?

Political union was pushed for by Germany and would have equipped the EU with some valuable institutions. But such institutions would then have regulated far stricter than was done without them. They would have prevented the big housing bubble in Spain and Ireland and the totally irresponsible borrowing and flat-tax lunacies in Eastern Europe. But unfortunately such European political institutions were opposed by the FT's editorial staff and there likes.

Still - political union is not what the FT is now calling for. The only 'ideal of European unity' the FT seems to knows, is that the Germans have to pay. If they do not, they beggars their neighbors.

Germans will be hit hard by this crisis. Others might get hit even more because they banked on the financial industry like Great Britain, bought overvalued London real estate like some FT editors, or did not take care of their deficits in better times.

Why should German taxpayer money now be invested in some more or less senseless spending programs? To pull the irresponsible people out of their mess?

I certainly do not like the German chancellor's policies, but once a while she has a thing right:

"Excessively cheap money in the US was a driver of today's crisis," the chancellor told the German parliament. "I am deeply concerned about whether we are now reinforcing this trend through measures being adopted in the US and elsewhere and whether we could find ourselves in five years facing the exact same crisis."

It does not make sense to simply throw money at the problem.

But for the sake of European unity, let me make an an offer to the FT.

Germany will pay $50 billion into a European alternative energy investment program if the FT and Britain support an all-mighty independent European Financial Regulator that will be headed by the most prudent German we can find.

Oh, and Germany will pay his/her earnings. If only to not get accused to beggar its neighbors.

Posted by b on November 27, 2008 at 14:28 UTC | Permalink

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