In a discipline dominated by cautious intellectuality, Lester Thurow, the Lemelson professor of management and economics at MIT in Cambridge, Mass., enjoys an international reputation as a social and economic provocateur. He has written more than a dozen books about economics and politics, in which he challenges mainstream views about America’s ability to foster international economic cooperation and narrow the economic gap that divides us from the rest of the world. His most recent book, Fortune Favors the Bold, calls on American business and political leaders to step up and help shape the inevitable world event of globalization. In this interview with CIO, Thurow tells us how the United States routinely fails in economic negotiations and why President Bush may not be returning to the White House in 2004.


CIO: Outsourcing is on everyone’s minds these days, and it’s an issue that places CIOs in the middle of a painful conflict. The CEO wants the CIO to save money, and CIOs know that they may be able to save money by outsourcing, but their IT staffs live in fear that their jobs will be shipped overseas. What’s a CIO to do?
Lester Thurow: Well, I think they should do two things. One, they should sit back and ask, What is the long-term strategy compared with the short-term strategy? Because while you can cut costs now, you may not have the ability to do that in the future. The other thing is CIOs need help. They need governments to get the different currencies to a value that will seem rational in the long run. Right now you can move some of your work to India or China, but the value of currencies can change radically. Right now those countries are an inexpensive place to go, but when that changes you just have to move the work back.

How long will it take for the cost of labor in India or China to approach the cost of labor in the United States?

The problem is, we don’t know. I don’t think it could take another 20 years, but this [discrepancy in labor costs] has already gone on for 20 years without much change. Still, you have to consider that part of the reason the value of the dollar doesn’t change is you’ve got the Japanese government out there preventing it from changing.


What can we do about that?
We can offset it. If the Japanese government buys dollars to hold down the value of the yen, we can simply sell more dollars. For every dollar Japan buys, we will sell a dollar, and damn it, we are going to have market exchange rates, and we are not going to let the Japanese control the value of the dollar to the yen.


If we can do that, why haven’t we?
Partly for the same reason we haven’t done that with China: We want their help on North Korea. And one of the reasons why the United States is a very poor negotiator on these economic things is we have other fish to fry, and the rest of the world doesn’t care about North Korea. The rest of the world bargains about economics. India doesn’t care about North Korea. So what typically happens in the American government is the economic dimension in a negotiation is well down the importance list. So if you want China to help you on North Korea, you can’t beat up China [for keeping the yuan low in relation to] the dollar.