In 1937 she wrote her influential essay on "Beggar thy neighbour policies," which made the concept associated with competitive devaluations widely known, although the term had appeared before previously, used once by Adam Smith and also by a British economist named Gower in 1932.Her critique is part of Part III of her Essays in the Theory of Employment. She goes beyond calling competitive devaluations a zero sum game by suggesting that they might raise interest rates, which would worsen a global depression. I’m not sure I entirely agree. Ben Bernanke recently noted:
Competitive depreciation became a contentious issue during the Great Depression. During the 1930s, the international gold standard collapsed, but it did so in a staggered way, with countries abandoning the gold standard at different times. The currencies of countries that left gold relatively early (like Great Britain, in 1931) depreciated relative to the currencies of countries that stuck with gold longer (like France, which left gold in 1936). The economies of countries that left gold earlier were also seen to recover more quickly from the ravages of the Depression. Some economists of the period, such as Joan Robinson of the University of Cambridge, argued that the recovering countries were doing so primarily through “beggar-thy-neighbor” policies of undercutting other nations in export markets. In modern lingo, they were saying that depreciation was a zero sum game; gains for one country came only at the expense of other countries. However, over time, the recovery from the Depression became global, even as nations’ export shares and currency values stabilized. What was not adequately appreciated by Robinson and her contemporaries was that a country’s abandonment of the gold standard did more than affect the value of its currency: It also freed the country to use more expansionary monetary policies, which increased demand and incomes at home. The increases in total demand, for both domestic and foreign goods, served to promote recovery in output and trade in all countries, ultimately proving far more important than the temporary trade diversions created by changes in exchange rates. In other words, the monetary easings that followed the collapse of the gold standard amounted to a positive sum game.Of course we are no longer on a gold standard even if Ted Cruz wants us to return to one. Bernanke had much more to say about these issues. Given that the 2016 campaign has revived populist notions of using trade protection in an attempt to shift the burden of weak aggregate demand from one nation upon another, we have another reason to consider the considerable contributions of Joan Robinson.