Lester Thurow is all about thinking big. In his new book, Fortune Favors the Bold: What We Must Do to Build a New and Lasting Prosperity, the economics professor at MIT's Sloan School of Management argues that the United States is in danger of being left behind as the global economy trudges forward. He postulates that we must take a few big gambles if we want to maintain our leadership role. Perhaps the boldest of his predictions is that the CFO will become obsolete.
Why is globalization an increasing concern?
The problem is that globalization is being created by business firms, not governments. Business firms are so small that they put one brick in the wall at a time, and don't think about where the wall is going.
What should the U.S. role in globalization be?
We're the world's political, economic, and military leader, and we would be right to take some leadership and say, "Let's sit down and figure out how the global economy should work." But at the moment, we're the last people who could do it, because our government doesn't believe in it. Our role now, I think, is basically to sit back and gripe about the international agencies like the World Trade Organization, the Immigration and Naturalization Service, the World Bank, the United Nations. These agencies understand that you can't run a global economy without a few rules and regulations and a little bit of enforcement. But the Bush Administration has been very inconsistent.
Did we miss an opportunity in the Cancun trade talks?
We had a huge disaster in Cancun, and most people don't even know it. The deal in Cancun was supposed to be that the First World would give the Third World something on agriculture, and the Third World would give the First World something on intellectual-property rights. What we lost on the intellectual-property rights [issue] is much bigger than [what we gained in] our continued ability to subsidize farmers, who represent only 1 percent of the economy.
Why are intellectual-property rights so important?
They're important to us because if you're in a knowledge economy, you've got to have something to sell. If I can take your idea free of charge, you can't sell it.
Where does a country like China fit in?
If you ask who's the biggest winner in globalization in the past 10 years, it's mainland China (with the U.S. second).
What is your stance on the ever-growing trade deficit?
We know that the dollar will fall enough—about 40 percent—to cure the American trade deficit. And we know with equal certainty that the timing is completely unpredictable. It could happen tomorrow, or it could be in 10 or 20 years.
What is your view of the recent income tax cuts enacted by President Bush?
I think that the tax cuts really should have been backloaded much more in 2002, '03, and '04, and then [structured to allow] some clear path back to a balanced budget by 2008.
How do you explain what happened in the late '90s with the bubble economy?
Why would anybody work 100 hours a week, save their money, then risk it all on a start-up where there's a 90 to 95 percent probability of failure? Only one reason: "I want to get rich." That's greed. The problem is, greed also causes financial collapse. At the end of every boom there's this incredible incentive to keep it going, and people do irrational things. But you can't get rid of the greed, because if you did, capitalism wouldn't do the good things either.
What is your take on the financial scandals and accounting problems of the past few years?
Financial scandals are part of capitalism. It is perfectly appropriate to throw people in jail and change the laws, but don't think for a minute that it is going to stop the next scandal.
What is the role of the modern CFO?
The CFO is the second-most-important person in most American firms. When capitalism started, no one knew how to manipulate capital. The CEO didn't have time to think about it. The CFO, if you had the right one, was the person who figured it out. But that's becoming a commodity. The person who will replace the CFO in importance is the chief knowledge officer. Bill Gates is a good example of this: he is now the CKO at Microsoft.
Interview by Joseph McCafferty