Speaker 1: (00:00)
… economic recovery ahead of this week’s International Monetary Fund annual spring meeting. After the secretary’s remarks, I’ll introduce a number of our council members to pose questions to Secretary Yellen. But right now it is my honor and privilege to introduce today’s speaker. Janet Yellen is the 78th US secretary of the treasury. She’s an economist by training and took office after almost 50 years in the Academy and public service. She is the first and only person to have served both as the head of the Council on Economic Advisers, the head of the Federal Reserve, and now as secretary of the treasury. Secretary Yellen, thank you so much for joining us, we look forward to hearing your remarks.
Janet Yellen: (00:44)
Thanks so much [Evo 00:00:45], and thank you to the Council for this invitation. America is strongest when we engage with the world. When I was born, the United States was still recovering from the great depression and World War II. These tragedies cost countless lives, too many families lost nearly everything. But from devastation we learned an invaluable lesson, the United States must not go it alone. In the aftermath of the destruction the United States built strong political and security alliances that have helped keep our country safe and helped our economies flourish. We created global institutions such as the United Nations, and financial institutions such as the International Monetary Fund and World Bank to reduce economic conflict and address global poverty. With strong US leadership, and working together with our allies, we contained communism and created a dynamic world economy and growing markets for US exports. America’s middle class prospered, millions across the world were lifted out of poverty.
Janet Yellen: (02:11)
But over the years, new problems developed that were not properly addressed. In the push to grow our economies we neglected our environment. As we embrace new technologies, we didn’t do enough to prepare our workers and our education systems for the changes underway. While we embraced trade as an engine for growth, we neglected those who did not benefit. And in the most recent period, when we might’ve adopted policies at home to face these issues, and joined with our allies to address issues abroad, we isolated ourselves and retreated from the international order that we created. Over the last four years we have seen firsthand what happens when America steps back from the global stage. America First must never mean America alone. For in today’s world no country alone can suitably provide a strong and sustainable economy for its people. Over time a lack of global leadership and engagement makes our institutions and economy vulnerable.
Janet Yellen: (03:35)
To make matters worse, COVID-19 struck. The virus has taken over 550,000 American lives, our family members, our friends, our neighbors, and millions more around the world. We did not respond sufficiently last year to address the devastating health crisis at home, and failed to engage early to address the crisis beyond our borders. And with the health crisis came the economic crisis. We sought to protect those most vulnerable, but millions of workers lost their jobs, and all too many small businesses shuttered. Women and people of color bore the brunt of the economic hardship, exacerbating century long inequalities that plague our society. We can do better. We must do better.
Janet Yellen: (04:38)
The American people elected President Biden and Vice President Harris to tackle these challenges, the pandemic, the economic crisis, a hollowing of the middle-class, systemic racism, deepening inequality, and climate change. To not just return us to life as it was before the pandemic, but to build back better, creating a prosperous economy for all. Credibility abroad begins with credibility at home. How can America help lead the world out of the dual crises of pandemic and economic recession if we can’t lead ourselves out of it? It’s a fair question. And it’s why last month President Biden’s signed the American Rescue Plan into law. The Rescue Plan is easily the largest relief package since the great depression, it includes powerful measures, rental assistance, unemployment insurance, direct payments to help Americans make it to the other side of this crisis. And this package is designed not only to help our economy survive the scars of the pandemic, but to create a foundation for our economy to thrive.
Janet Yellen: (06:08)
The work has already begun. In less than four weeks this administration issued more than 130 million vital relief payments to individuals and families. We provided more than 100 million vaccine shots in just 58 days. But we have more to do. Last week President Biden outlined a plan to rebuild America, creating a more sustainable and more resilient economy with a 21st century infrastructure. The plan will fix America’s crumpling highways and bridges, upgrade ports, airports, and transit systems, build a renewed electric grid, deliver high-speed broadband to all Americans, and invest in basic research and science. It proposes affordable and accessible caretaking options for older Americans and our nation’s children. And an education system that trains our workers to thrive in the modern global economy.
Janet Yellen: (07:23)
Beyond our borders, as the pandemic has made clearer than ever before, the global community is in this together. We will fare better if we work together and support each other. The Biden-Harris administration is committed to restoring US leadership in the multilateral system to help make the world economy stronger and advance American interests. The United States needs to have a strong presence in global markets on a level playing field. We will cooperate with willing partners to protect and enforce a rules-based order. Our economic relationship with China, like our broader relationship with China, will be competitive where it should be, collaborative where it can be, and adversarial where it must be. We will defend democracy and the human rights of all people, of women and girls, LGBTQ+ individuals, and people of every race, ethnic background, and religion to help ensure that those rights are protected at home and abroad.
Janet Yellen: (08:46)
In all our international engagements, President Biden and I will stand up for the American people and American business, as well as these core values that define America. I’d like to spend time today discussing three key objectives that guide our economic engagement with the rest of the world, which I believe are necessary to help realize the vision of our nation. The first objective is a stable and growing world economy that benefits the US economy. For the United States to prosper, our neighbors too much prosper. In the modern world recession, instability, and crime abroad find ways to wash upon our shore. Strong and stable economies abroad make us safer. We will benefit if countries can maintain or create economic, social, and political conditions favorable to an open society. We will benefit if individuals around the world can pursue their aspirations regardless of conditions of birth, and if women have truly equal rights and opportunity to be included in the economy. We will benefit if people, while retaining cultural differences, share core values of free speech, free exercise of religion, and respect for diversity.
Janet Yellen: (10:27)
Of course, stronger growth abroad also means a stronger economy here at home. As other economies prosper, demand for US exports of goods and services increase, creating jobs. In developing countries are economically successful, they’re growing populations and rising living standards mean a higher consumer base for the United States. In 1990, 40% of US exports went to emerging economies. By 2020, it was 60%. This demand for American products creates US jobs that pay better. Studies have shown that women, in particular, could earn as much as 20% more in these export-based jobs. At the time of the global financial crisis in 2008, we learned that an interconnected economy brings vulnerabilities. Post-crisis reforms have strengthened global banks and reduced systemic risks. But vulnerabilities, particularly in the non-bank financial sector, remain. So as we pursue a stronger world economy, we must also pay attention to existing financial stability risks, and new risks that may arise. To do so, rather than retreat, we must close-
Janet Yellen: (12:03)
Rather than retreat, we must closely coordinate with our partners. We should aim to mitigate risks and promote a sound financial system at home and abroad, so that Americans have steady access to the finance needed to build back, but better money to start a new business, to buy a home, and to create wealth for themselves and their children. The second objective is to fight poverty and promote a more inclusive global economy that aligns with our values. Unless we act now, the world is susceptible to the emergence of a deepening global divergence between rich and poor countries. This thread, which has never been more pressing, will likely result from divergent capabilities to contain the crisis and bring a bad economic recovery.
Janet Yellen: (13:05)
Like the United States, rich countries and some larger emerging markets have had the means to support their economies while they pursue a health solution. And like the United States, they have gained access to vaccination. Of course, it’s too early for advanced economies to declare victory. I’m urging our partners to continue a strong fiscal effort and avoid withdrawing support too early to promote a strong recovery, and help avoid the emergence of global imbalances.
Janet Yellen: (13:43)
Many middle and low-income countries are in a different place, lacking the finance to support their economies and people during COVID-19, and constrained in their wherewithal to obtain vaccines. The result will likely be a deeper and longer-lasting crisis with mounting problems of indebtedness, more entrenched poverty, and growing inequality. Their crises will push as many as 150 million into extreme poverty this year, reversing the trends of the last two decades, with women, youth, low-skilled and informal workers, particularly hard hit. Moreover, an additional 120 million people became acutely food insecure in 2020, and that trend could worsen. This would be a profound economic tragedy for those countries, one we should care about, but that’s obvious.
Janet Yellen: (14:57)
What’s less obvious, but equally true is that this divergence would also be a problem for America. With few exceptions, stable and prosperous economies tend to be less of a security threat to the United States. And the human crisis of refugees and migrants will only be solved if we have stable and secure growth in the rest of the world. How do we help the poorest countries get through this crisis? Our first task must clearly be stopping the virus by ensuring that vaccinations, testing, and therapeutics are available as widely as possible.
Janet Yellen: (15:44)
Low-income countries risk falling to the back of the line. It may not achieve widespread vaccine coverage until 2023 or 2024 at the current pace. More work and funding are needed to secure vaccine purchases, address manufacturing shortages, and finance and facilitate the domestic rollout in low-income countries. We also need to help lessen the economic pain in low-income countries during a protracted recovery period, and use this opportunity, as we’re doing in the United States, to facilitate structural transformations to more inclusive and sustainable economies.
Janet Yellen: (16:36)
The IMF and the World Bank have already played an important role on this front. And we’re working to strengthen their ability to support the poorest countries. We’ve created a new multilateral framework to help low-income countries address unsustainable debt burdens. And at the IMF, we’re working to issue $650 billion in new special drawing rights, an international reserve asset that will increase buffers for all IMF members, and give low-income countries the additional liquidity for greater spending on vaccines and healthcare. Embedded in recovery efforts, we have an interest in helping countries pursue sustainable and inclusive growth and strengthen long-term resilience. Our response will not be successful if we end up just where we were before.
Janet Yellen: (17:42)
A personal objective of mine is to focus our international engagements on fostering full legal rights and greater economic and education opportunities for women and girls, given the clear evidence that this will support inclusive economic growth more broadly. Speaking from my own experience, we need to do better at reducing barriers for women’s economic empowerment, even unconscious ones, in nearly every country in the world, including the United States.
Janet Yellen: (18:21)
Finally, there are certain matters where we are in it together, where the challenges are global, and no one country will be successful if it goes at it in isolation. The most evident immediate example is the need to address global health risks. COVID-19 has clearly shown that pandemic responses require a global cooperation. We’re working with our partners to enhance pandemic preparedness against future shocks. We need to learn lessons from this pandemic to be better prepared to stop future contagious diseases before they become full-scale pandemics.
Janet Yellen: (19:10)
Another global challenge we face is, how do we adapt to technological change? Which has brought significant benefits, but contributed to greater inequality. Digitalization is the latest technological advance that provides an opportunity to raise productivity and increase connectivity, both at home and globally. Even just a year ago, I never thought that I would be regularly joining meetings with colleagues in London, Delhi, Sydney, and everywhere in between from the comfort of my office in Treasury. But the digital divide has also exacerbated inequality. And digitalization has raised concerns about privacy, illicit activity, and threats of surveillance, and cybersecurity attacks from our adversaries.
Janet Yellen: (20:10)
I will be working domestically and closely with our allies to promote innovation in digital finance, in the interest of cheap, instantaneous, and reliable commercial and financial transactions, but also to ensure that we modernize our legal and regulatory frameworks to take account of the risks and threats inherent in the use of these new technologies.
Janet Yellen: (20:41)
Another consequence of an interconnected world has been a 30-year race to the bottom on corporate tax rates. Competitiveness is about more than how US headquartered companies fare against other companies in global merger and acquisition bids. It’s about making sure the governments have stable tax systems that raise sufficient revenue to invest in the central public goods and respond to crises, and that all citizens fairly share the burden of financing government.
Janet Yellen: (21:21)
President Biden’s proposals, announced last week, call for bold domestic action, including to raise the US minimum tax rate, and renewed international engagement, recognizing that it’s important to work with other countries to end the pressures of tax competition and corporate tax-base erosion.
Janet Yellen: (21:46)
We’re working with G20 nations to agree to a global minimum corporate tax rate that can stop the race to the bottom. Together, we can use a global minimum tax to make sure that the global economy thrives based on a more leveled playing field in the taxation of multinational corporations, and spurs innovation, growth and prosperity.
Janet Yellen: (22:16)
Let me end by discussing the biggest long-term threat the world faces, climate change. After sitting on the sidelines for four years, the United States is committed to doing its part. We have a narrow moment to pursue action at home and abroad to avoid the most catastrophic impacts of that crisis, and to seize the opportunity to tackling climate change presents. President Biden has released a plan to combat climate change, including through rejoining the Paris Agreement, investing in sustainable infrastructure, and creating new green jobs. He’s committed to release an ambitious strategy this year to outline US domestic greenhouse gas targets that are consistent with our work internationally.
Janet Yellen: (23:15)
Domestic action must go hand in hand with US international leadership, aimed at significantly enhancing global action. To this end, Treasury is working closely with our international partners and international organizations to implement ambitious submissions reduction measures, protect critical ecosystems, build resilience against the impacts of climate change, and promote the flow of capital toward climate-aligned investments and away from carbon-intensive investments.
Janet Yellen: (23:54)
We’re also working to ensure that climate risk is integrated into the financial system, so that financial institutions regularly…
Janet Yellen: (24:03)
… so that financial institutions, regulators, and investors can make informed decisions. I’m pleased The Treasury is co-chairing a newly launched G20 Sustainable Finance Working Group, where finance ministries and central banks will work together to identify mechanisms for promoting green investments and accelerating transition to a net zero economy. As I prepare to meet with my colleagues from around the world this week at the IMF and World Bank Spring Meetings, I find myself thinking back to the policymakers who gathered in Bretton Woods a year before I was born to define our post-war order. Though it was a different time, I empathize with the enormous weight they faced. The pressure to come together after a global catastrophe in building and enduring an interconnected system aimed at promoting peace and prosperity throughout the world. Our current [inaudible 00:01:18] is no less significant. What we do in the coming months in years will have profound impacts on the trajectory of our country and on the global economic order. Of course, there are key differences from the post-war era. Maybe most noticeably, it will be joined later this week by other female finance ministers, central bank governors and heads of international financial institutions, not enough, but a start, as well as diverse representatives from all corners of the globe. In our interconnected and digital world, and considering the pandemic, I will be logging on to a computer to join these meetings, not trekking to a mountain resort in New Hampshire. Yet the most important difference today is a fundamental recognition that our policies at home and abroad must be designed to be inclusive, tackle in quality and respect our environment. In this context, I will use the Spring Meetings this week to advance discussions on climate change, press our partners to do their part to support a strong global economic recovery, strengthen tools to improve vaccine access and financing for the world’s poorest economies and increase the focus on inequality, including for vulnerable populations and women and girls.
Janet Yellen: (27:01)
I’m honored to serve the American people once again, to listen to the underrepresented, to be bold in action, and to cooperate with our global partners to solve the challenges we face together in building the next century of prosperity. Thank you.
Speaker 1: (27:26)
Thank you, Secretary Yellen for that really insightful speech, and a reminder of how, what is happening around the world affects and impacts us here at home, as well as how, as we move forward together with our partners, we need to find a world that is more inclusive as well as more sustainable. I really appreciate your comments. We would now like to turn to some of the members of the council and the first person joining us is Dorri McWhorter, she is a member of our board and the CEO of the YWCA in Metropolitan Chicago, Dorri.
Dorri McWhorter: (28:04)
Thank you, Ivo. And thank you, Secretary Yellen, it is an honor to have you here with us today. I want to also thank you for acknowledging the importance of gender equality for economic prosperity. And I know you know that many studies, including the IMF and the World Bank reference achieving gender parity and how it can add trillions of dollars to the global economy. But how do we actually get countries to prioritize gender parity as part of their economic recovery agendas and not just see them as women’s issues?
Janet Yellen: (28:35)
Well, I think there’s wide range of steps that we need to take to promote gender equality in our own economy. Increased involvement of women in the labor force has, as you indicated, really promoted advances overall for the United States and certainly serve to raise family income, but female labor force participation has leveled off at a rate that’s lower than we see in many advanced economies. And in looking for the reasons, it looks as though our failure to provide affordable childcare and paid leave is important. And so, as we think about our own policies in the United States moving forward, I would say that it makes sense to focus on enhancing benefits in those areas, particularly to promote a more inclusive environment for women to participate in the labor market. And the IMF and world bank have prioritized similar kinds of steps around the world, improving legal rights and equality for women in many countries where they’re hindered by legal barriers and social barriers to participate, and also supporting them, their participation through greater education for women and other programs.
Speaker 1: (30:30)
Thank you, Secretary Yellen. Our next question comes from Alex Loo, who is a young professional at the Chicago Council on Global Affairs, Alex.
Alex Loo: (30:40)
Thanks, Ivo. And Secretary Yellen, thank you for taking the time to speak with us this morning. As you mentioned earlier, the pandemic has a significant impact on students, as well as younger people in the workforce. From your perspective, I guess, do you have any advice or suggestions for us to become, not only thrive in the global and digital economy, but also become more fluent in the global issues?
Janet Yellen: (31:02)
Well, I think it’s very important for young people to study about the global economy and the ways in which we’re interconnected with our neighbors, and to appreciate the importance of the multilateral system that we’ve developed in the post-war period and the need for cooperation to share global responsibilities and work cooperatively on mutual problems like climate change. So I hope that young people will focus on and study about the global economy and its importance.
Janet Yellen: (31:52)
This pandemic has been particularly tough on young people who were in school and have had to study remotely. I’m very hopeful that because of the steps that we’re taking, including speeding vaccinations, dealing with the pandemic and the economic support that we are providing, that the job market is going to become far more robust in the months ahead, and that young people will in coming months find a job market where they can find good opportunities to get ahead and get on the ladder to success.
Speaker 1: (32:43)
Thank you, Secretary Yellen. And the next question comes from Regina Cross. Regina is a Vice President at Goldman Sachs, as well as an alumni of our emerging leadership program, Regina.
Regina Cross: (32:57)
Thank you, Ivo. And thank you, Secretary Yellen for your leadership. The proposed SDR allocation seeks to stabilize and support lower income and developing nations in the wake of the more than 3.5% global economic contraction. How can the US collaborate with other nations to ensure equitable distributions for the most vulnerable populations, and accountability and support of democracy for all?
Janet Yellen: (33:25)
Thanks so much for that question. We are very supportive of an allocation of SDR at this time, particularly because of its potential to help low income countries that are burdened by debt and lack the fiscal space to deal with the pandemic and its economic consequences. When special drawing rights are allocated by the IMF, they go to countries in proportion to their quotas in the IMF, and so they’re broadly distributed and a large share ended up going to advanced and developed and middle-income countries. But a substantial share will go, significant resources will go to the poorest countries that are most in need. And importantly, many advanced countries have indicated a desire and willingness to channel portions of their own allocations back to provide further support to these low-income countries. For example, the IMF has a poverty reduction and growth fund that many countries are likely to either land or donate portions of their own SDR allocations, and that will really multiply the impact of an SDR allocation on the poorest countries in the world.
Janet Yellen: (35:09)
You mentioned accountability, we do want to make sure that the SDR allocation goes to support relief and economic support in the lowest income countries. And we’re working with other countries and the IMF to design a disclosure and reporting framework that would enable us to see how the SDRs that have been allocated have been used and to monitor the ways in which they’ve supported the purposes that we have in mind.
Speaker 1: (35:54)
Wonderful. The next question comes from the President and CEO of William Blair, but more importantly, the chair…
Speaker 1: (36:03)
… and CEO of William Blair, but more importantly, the chair of the board of directors and Chicago Council On Global Affairs, John Ettelson.
John Ettelson: (36:10)
Thank you, Ivo. And thank you Secretary Yellen for being here today. In your letter to the G20 about six weeks ago, you urged the G20 to go big and take significant fiscal and monetary policy actions and avoid withdrawing support too early in order to foster economic growth. So a couple kind of related questions to that. How big is big when you encourage them to go big? Is there a limit to how much debt either the US or the G20 can incur? And at what point does it become inflationary? And if we and they go big, how do we withdraw support without causing another recession?
Janet Yellen: (36:54)
Well, those are great questions. Congress recently passed a $1.9 trillion package, the American Rescue Plan, to address the pandemic and its economic consequences. And I would describe that as going big. The purpose of the package is to address the needs of American households, families, companies that have been adversely effected by the pandemic to avoid scarring, to avoid damage that could permanently impact the ability of individuals and families to get to the other side of the pandemic and get back on track with their lives and to avoid the failure of small businesses that are the lifeblood of their communities and that provide so many jobs to Americans.
Janet Yellen: (38:11)
So we’ve designed the package to direct support, to make sure that people, and especially the minority and low wage workers who’ve been so adversely affected by this crisis to make sure that they have income during the time that they are jobless to make sure that they have enough food to eat, to make sure that they can keep a roof over their head and don’t lose a family home. It provides money to state and local governments for a variety of programs to address the burdens of the pandemic to get their local economies on track, and to begin to address infrastructure needs that were highlighted by the pandemic, such as the absence of broadband that penalized so many rural families and families in low-income areas when their children needed that in order to participate in school. Can we afford this? Well, I believe that we do have fiscal space to be able to afford it, in part because we’ve been in a low interest rate environment in the United States, and that’s been true among developed countries generally in recent decades. And for reasons that I believe are not just transitory, but reflect longer term structural problems. So in spite of the fact that US debt has risen quite a bit relative to the economy, if you go back as far as 2007, when US debt to GDP ratio was 35%, it’s now risen to around 100%, but the interest burden on the debt because of these interest rate trends has been completely unchanged changed.
Janet Yellen: (40:29)
Will it be inflationary? I strongly doubt that it’s going to cause inflationary pressures. We’re in a deep hole where the US economy is still down around 9 million jobs. And if we were to count individuals who have dropped out of the labor force to take care of children and because of health concerns, the true US unemployment rate is close to 9%. The Congressional Budget Office estimated that without the American Rescue Plan, the economy would probably take until 2024 to get back to full employment. But I’m hopeful that if the vaccination program proceeds as it has been in is successful, that we can get back to full employment next year.
Janet Yellen: (41:32)
We had, before the pandemic, an unemployment rate of 3.5%. And the problem for a very long time has been inflation that’s too low, not inflation that’s too high. If the package did prove to be inflationary, we have the tools to address it. So I see the risk as asymmetric that I worry much more about long-term adverse consequences from not doing enough than problems that would result from doing too much.
Janet Yellen: (42:10)
So I do believe we have the fiscal space to act boldly I think it’s important in mitigating the suffering of the pandemic and the long-term adverse consequences to US potential output if we fail to do so. It’s important for us to learn the lessons from the 2008 financial and economic crisis. We had a very slow recovery after that crisis. It took us almost a decade to get the economy fully back on track and it’s important that we not repeat that experience. So I think that we’re doing the right thing.
Janet Yellen: (42:57)
And longer term, President Biden and Vice President Harris have proposed now a recovery plan that’s addressed at dealing with longer term challenges facing the US economy. Slow growth, this is a package that will over a decade invest in our crumbling infrastructure and our roads, bridges, highways, broadband structures, the electric grid, invest in people, giving them the tools and training they need to be productive in research and development. Over the long-term, these investments are the cornerstone of making our economy competitive.
Speaker 1: (43:52)
Secretary Yellen, I know you have a hard stop at quarter to the hour, so thank you so much for joining us today, honoring us with your virtual presence for your first big international speech. We appreciate you being part of our council family now. We hope to see you in person in Chicago in the not too distant future. In the meantime, I join everyone here in thanking you for your remarks and for being with us. Thank you so much.
Janet Yellen: (44:23)
Thank you so much, Ivo. And thank you for hosting me. Much appreciated.