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US Secretary of the Treasury nominee Janet Yellen speaks during an event to name President-elect Joe Biden’s economic team. Photo: AFP
Opinion
Editorial
by SCMP Editorial
Editorial
by SCMP Editorial

Janet Yellen the right choice to put world back on road to recovery

  • Former US Federal Reserve chairwoman has the qualities needed to be Treasury chief having tackled economic crises, supported free trade and warned of climate change – all of which should please China
SCMP Editorial
SCMP Editorial
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There is perhaps no better symbol of the proverbial safe pair of hands than Janet Yellen. That’s why the announcement of the former Federal Reserve chairwoman’s appointment as the next Treasury chief has been greeted positively in the United States and around the world. Global capital markets feel comfortable with someone who showed accommodation during the last worldwide financial crisis, but was ready to end the era of cheap money when the time came. If it had not been for outgoing US President Donald Trump’s erratic and unorthodox approach to filling key positions, she was widely expected to have been given a second term as Fed chief. With bipartisan support, her confirmation at the Senate is expected to be a shoo-in.
Even China may favour her as Treasury chief. She supports free trade and has been critical of Trump’s policy on high tariffs and protectionism. Though she may not be any less tough on Beijing than her predecessor, at least the world’s two biggest economies won’t be actively decoupling, something that will boost the world economy’s recovery from the Covid-19 pandemic. As a professional economist, she also understands the rising economic costs of climate change, one of many areas where China and the US may work together.

Yellen will be the second central banker since Tim Geithner – an Obama hire – to serve as Treasury secretary, and the second former Fed chairman since president Jimmy Carter’s appointment of William Miller to the Treasury. Her new job will be very different from her previous one, which was in charge of the monetary policy of the most powerful central bank in the world and entailed working closely with bankers. It will be much more political.

It also comes at a fortuitous time. The world may be seeing light at the end of the tunnel following the economic devastations wrought by the pandemic. The Organisation for Economic Cooperation and Development expects the global economy to build momentum for recovery over the next two years, with growth in real gross domestic product projected to reach pre-pandemic levels by the end of 2021.

Just as it did with the last global economic crisis, the OECD expects China to drive recovery by contributing more than one-third of global economic growth next year. However, the contributions of Europe and North America will be smaller.

Yellen’s experience in fighting the last global financial crisis and the Great Recession will put her in good stead. She and her boss, president-elect Joe Biden, may hopefully spend less time fighting China and put more effort into promoting economic stimulus to kick-start domestic growth. In doing so, her government will have followed China’s path in helping the world economy recover.

This article appeared in the South China Morning Post print edition as: Yellen the right choice to put world back on road to recovery
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