S+B: But does it make the poorer countries richer in the long run — or does it just make the rich countries richer?
KAY: I think it makes the poorer countries richer. One of the points I emphasize at the end of the book is that the reason rich countries are rich is not because poor countries are poor.
S+B: What about globalization in terms of the opening of global markets?
KAY: I don’t think the globalization of finance has been particularly helpful, but I don’t think it’s stoppable even if one felt that to be desirable. What I think we really have to do is recognize that active securities markets are not as important in the development of a market economy as people seem to think.
S+B: You mean stock markets aren’t the engine of economic growth?
S+B: Management is still regarded by many as a pseudoscience. It seems to occupy the position occupied by economics a century ago.
KAY: That’s right. One very good test of that is if you do an introductory physics course, the basic course will be much the same wherever you do it. That’s the sign of a subject that is mature — to have an agreed-upon, understood, recognized body of knowledge that anyone who is serious recognizes as being the basis of the subject. Economics has now basically got there in these terms. But I don’t think management has.
S+B: But economists still get bad press.
KAY: A lot of the bad reputation of economics is because most people, especially businesspeople, think that what economists do is macroeconomic forecasting. Since they don’t do that very well — not primarily because economists aren’t good, but because it’s impossible to answer those sorts of questions — they have a correspondingly low reputation.
S+B: Even though many business theories are adapted from economic theory?
KAY: Yes, but they have to be adapted to be accepted. The best translation of standard economics into business language is what Michael Porter did, but it involved cutting off all the laundry labels. If you look at Porter’s books, there’s very little indication that he was trained as an economist, or that the ideas he’s using are basically drawn from economics. And that, I’m sure, is because people thought it would be less appealing if it was presented as economic theory.
S+B: Perhaps it’s human nature to seek simple answers. We want to believe in a visionary leader. We want to have management gurus to hand us down the solution. Do you see that ever changing?
KAY: People have a psychological need for simple explanations.
Reprint No. 03310
Des Dearlove (email@example.com) is a business writer based in the U.K. Mr. Dearlove is the author of several management books and a contributing editor to strategy+business and The (London) Times.