Threats To Democracy A Risk To U.S. Economic Growth: Yellen

Treasury Secretary Janet Yellen argues that a fractured democracy can have destructive effects on the economy — an indirect jab at Donald Trump.

Undercutting democracy undercuts a foundation of sustainable and inclusive growth, Yellen argues. I Photo: Federalreserve Flickr

Yellen, in an address prepared for delivery in Arizona, uses economic data to paint a picture of how disregard for America’s democratic processes and institutions can cause economic stagnation for decades, as reported by Fatima Hussein and Josh Boak for the Associated Press (AP).

Yellen, taking a rare step toward the political arena, never mentions Trump, the presumptive Republican presidential nominee, by name in her speech for the McCain Institute’s Sedona Forum, but she hints at the former president’s potential impact if he regains the White House.

Her remarks serve as a sort of warning for business leaders who may overlook Trump’s disregard for modern democratic norms because they prefer the former president’s vision of achieving growth by slashing taxes and stripping away regulations.

Yellen acknowledges that democracy “doesn’t seem like typical terrain for a treasury secretary,” but she adds that “democracy is critical to building and sustaining a strong economy.”

She adds: “The argument made by authoritarians and their defenders that chipping away at democracy is a fair or even necessary trade for economic gains is deeply flawed.”

Undercutting democracy undercuts a foundation of sustainable and inclusive growth, she argues, and points to a study suggesting that democratization increases gross domestic product (GDP) per capita by around 20% in the long run.