The global economy rolls along more smoothly when it’s not riding a unicycle. It needs additional wheels for momentum and stability.
That is, in effect, what Treasury Secretary Jack Lew is telling leaders of other advanced nations.
In a get rolling speech Wednesday to the World Affairs Council, Lew said the U.S. economy is moving at a good pace these days but needs support from the flat economies of Japan and the European Union.
Other countries cannot “rely on the United States to grow fast enough to make up for weak growth in major world economies,” he said.
When Europe and Japan get too weak, demand drops for made-in-America products and services, and the U.S. dollar gets too valuable, making life tougher for U.S. exporters.
“The world is stronger if we all take steps to bolster domestic demand,” Lew said.
He spoke in Seattle, where he was doing a warm-up act ahead of the main event this weekend in Australia. In Brisbane, he will join President Obama and other world leaders for a G-20 summit, focused on spurring global growth.
Lew says the United States has a huge stake in the success of its first-world trading partners.
“The United States exports more than $2 trillion of goods and services to the world,” he said. “It is very much in our economic and national interest when the rest of the global economy is growing.”
The Obama administration is in a strange position. Just last week, it suffered big political setbacks in domestic elections. But on the world stage, Obama leads the most impressive economy. In the most recent quarter, this country grew at 3.5 percent — a very robust pace for a mature economy.
In the United States, the stock market is booming, budget deficits are melting away, corporate profits are breaking records and the unemployment rate is falling, down to nearly half the level set five years ago.
U.S. success shows “the resilience and determination of the American people,” Lew said. “It also reflects the ease of starting businesses, our highly competitive product markets, and the ability to reap rewards from entrepreneurship.”
Meanwhile, Japan’s economy is stuck, with its inflation-adjusted growth rate running at less than 1 percent over the past decade. Europe may be on the brink of its third recession in six years.
Lew says that to grow, countries need a “comprehensive policy approach” that involves not only better fiscal and monetary decisions, but “structural” changes. When he talks about “structure,” he’s referring to the policy frameworks that hold back growth.
So, for example, in Japan, structural reform would mean changing laws that prevent young immigrants from replacing retired workers; helping women with children stay in the workforce and allowing more competition among companies. In Europe, it would mean making the banking sector less secretive.
In addition to speaking in Seattle, Lew talked with NPR’s Robert Siegel, host of All Things Considered. Lew said that while he is offering advice to other countries, he knows this country still has many of its own problems to solve.
For one thing, “wages are not growing,” he said. To help fix that, Congress should raise the federal minimum wage of $7.25 an hour, he said. For low-income families, “the minimum wage makes a big difference,” he said.
In addition, Congress should start spending more on rebuilding infrastructure, which would boost construction jobs, and pass laws to reform the tax code and increase trade, he said. “We still have work to do,” he said.