The CEOs of two of the largest US funds, BlackRock and Oaktree, have issued open letters to their shareholders on the occasion of the war in Ukraine in which they pronounced the end of "globalization" and set out broad guidelines for the world's corporate giants. These encyclicals have enormous prescriptive power among the corporate bourgeoisie. The global turn to the War Economy is happening too fast and the "Gospel of post-globalization" can hardly wait.
...according to BlackRock
Larry Fink. Chairman of BlackRock
In his message, Larry Fink, chairman of BlackRock, cannot but acknowledge that "the tensions of two years of pandemic", which he blames for "the polarization and extremist behavior we are seeing in today's society", already called into question the international division of labor. And he reaffirms the globalizing credo of the 1990s, "I still believe in the long-term benefits of globalization and the power of global capital markets," he declares, "but the Russian invasion of Ukraine has put an end to the globalization we have lived through for the past three decades."
Why? Because seen from the US "corporate governments", it is time to accelerate the exit from China and to foresee an environment of high domestic inflation "at home" in which workers will be left with lower real incomes to spend on their products.
Russia's aggression in Ukraine and its subsequent disengagement from the global economy will prompt companies and governments around the world to re-evaluate their dependencies and re-analyze their manufacturing and assembly footprints, something Covid had already prompted many to begin doing. ...
from some countries
Other countries, such as Mexico, Brazil, the United States or some manufacturing centers in Southeast Asia, could benefit. This decoupling will inevitably create challenges for companies, including higher costs and margin pressures.
While corporate and consumer balance sheets are strong today, giving them more protection to weather these difficulties, a large-scale realignment of supply chains will be inherently inflationary.
Even before the outbreak of the war, the economic effects of the pandemic, including the shift in consumer demand from services to household goods, labor shortages and supply chain bottlenecks, drove inflation in the U.S. to its highest level in forty years.
Across the European Union, Canada and the United Kingdom, inflation is above 5%. Wages have not kept pace and consumers are feeling the pinch as they face lower real wages, rising energy bills and higher costs at the grocery checkout. This is especially true for lower paid workers who spend a higher proportion of their wages on essentials such as gas, electricity and food..
Fink also realizes that by now the power of the dollar to transfer crisis costs from the US to its allies is beginning to be eroded and that, before it' s too late, the time has come to propose a traceable, i.e. digital, alternative so as not to lose the power to exclude or penalize imperialist rivals.
A carefully designed global digital payment system can improve the settlement of international transactions while reducing the risk of money laundering and corruption.
according to OakTree
Howard MarksHoward Marks, Oaktree
Oaktree's Howard Marks looks back a year in his "memo" to recall how "weaknesses in our U.S. global supply chain have been exposed," leading "many companies to look to shorten their supply lines and make them more reliable, primarily by bringing back production on domestic soil" and pushing up inflation.
Marks insists that the key to understanding what lies ahead lies in the parallels between Europe's energy dependence and the US's supply chain dependence on Asia. Both phenomena contributed to the low level of inflation in recent decades and to containing or reducing CO2 emissions on the domestic ground, paving the way for the Green Deal.
But both are marked by an inadequate supply of an essential good demanded by countries or companies that allowed themselves to become dependent on others. And considering how critical electronic devices are to U.S. national security, what today in terms of surveillance, communications, analysis and transportation is not dependent on electronic devices? - this vulnerability could, at some point, come back to bite the US in the same way that dependence on Russian energy resources has the European Union. ...
The invasion of Ukraine has demonstrated that Europe's import of oil and gas from Russia has left it vulnerable in a hostile environment to an unprincipled nation at the same time that the reduction of nuclear power generation has increased the region's need to import oil and gas. Similarly, the practice of foreign procurement makes countries and companies dependent on their positive relationships with foreign nations and the efficiency of our transportation system.
As a result he foresees a "pendulum swing" in the opposite direction of globalization, i.e. towards the formation of economic-military blocs, at the expense of world GDP, semi-colonial countries developing off shore industries and a serious inflationary upswing in the US and Europe. So it recommends its partners to focus on finding "investment opportunities in the turn towards reliable supply."
The differences: Europe and the Green Deal
Biden announces a ban on the purchase of Russian oil and gas with Theodore Roosevelt behind him, a reference to America's first imperialist wars.
But perhaps, the most interesting thing is the differences which separate the outlook projected by the two funds because they reflect the doubts and dilemmas of the US bourgeoisie on at least two important issues.
1 Fink welcomes the way in which large multinationals have amplified the effect of sanctions on Russia, shutting it out of the global capital market. "This economic war shows what we can achieve," he proclaims. Marks, by contrast, acknowledges that while "we are determined to influence Russia through sanctions, it is simply not the most potentially effective way, because it would require substantial sacrifice from Europe."
Neither doubts the damage that sanctions will do to Russian capital. The debate really is what to do with the EU: drive it to the precipice of a gas import ban, as Biden urges, or breath air into it and thus treat it as a supplier or customer to be taken care of.
2 But the bottom line, as the New York Times highlights, is whether or not it will be possible to develop the Green Deal. Fink sees acceleration. Marks says the issue, once a general "decoupling" is in place, is accessibility. Put another way: Fink looks at Brussels while Marks looks at European countries and finds that in this dynamic the Green Deal contradicts the survival of more than one "coal-based" national capital - such as Poland - while at the same time incentivizing more hydrocarbon production in "green" countries such as Norway.
What is left unsaid
Smoke from a fire covers the charioteer of the old Bank of Bilbao which symbolizes financial capital guiding the country's four major industries.
Both funds refer to the "growing interest on the part of our clients" in cryptocurrencies. The fact that large investors with large long-term portfolios who go to a BlackRock or an Oaktree are interested in cryptos can only mean one thing: they fear a financial crisis, a sovereign crisis or a combination of both (like a decade ago) in the medium term; and like Russian companies now surrounded by sanctions, they want to prepare exit doors in case of a possible currency run on their currencies.
It is obvious from the tone with which Fink handles the matter that he is not amused by this interest of his clients and that he wants to lead them to the discussion of an international payment system over which the US can still exert control. But the fear of a financial crisis is there. And it cannot but send a shiver down our spine.
The workers in the wake of "globalization"
Russia. Yandex workers on strike.
What big capital is recognizing and preparing CEOs for with this letter goes beyond the obvious warnings of inflation and the need to find new destinations for old off shore investments. What they are saying is that a new international division of labor is underway, which in turn will shape large economic-military blocs for the next global war escalation.
And this cannot but give us workers a sense of urgency. Because right now we are in the midst of a capitalist crisis without capitalism itself being in crisis, that is, called into question by a universal and rising class struggle. On the contrary, we find ourselves with a new war in Europe; and the main national capitals all over the world are throwing themselves into militarism and reorganizing themselves with the logic of war economy.
This is going to go faster than the analysts thought. And only workers can stand up to it. We have to start organizing.