Globalization as we know it is over, according to Larry Fink, CEO of the world’s largest asset manager, BlackRock. The head of the company that manages over $10 trillion in assets says the Russian invasion of Ukraine spells doom to three decades of shifting to an interlocked global system.
The process was already set in motion by the pandemic and its effects on supply chains, Fink says. Couple that with Russia’s severance from the global economy, and now both governments and corporations have to think twice about their reliance on other countries.
Fink says he is still a proponent of globalization “and the power of global capital markets.” The BlackRock CEO adds that having access to international capital helps companies grow, countries develop, and more people rise out of poverty.
Globalization is the linking of financial markets and reduction of trade barriers between nations, resulting in more cooperation but also more exposure to negative consequences from world events.
That is the essential point made by Fink, who says the downside of global financial connectivity is the exposure to catastrophic events outside of individual nations and alliances. The Russian invasion of Ukraine added to two years of pandemic-fueled strain on connectivity between nations, companies, and even people.
The worry, Fink believes, is that world communities feel isolated and are looking inward, which leads to more polarization. He noted that countries have put aside differences to unite in “economic war” against Russia.
But while restrictions and supply chain issues along with rising inflation were fueled by COVID-19, many had already begun looking at the depth of their international ties. Putin’s invasion, Fink says, is the tipping point that will spur nations to attempt to be more self-reliant and develop domestic production of necessities.
Fink is hardly alone in this sentiment. Howard Marks, the billionaire co-founder and co-chair of Oaktree Capital Management, a company with $166 billion in alternative investment assets, agrees. In a recent letter to investors, Marks cites the realization of “negative aspects of globalization” as pushing countries and companies back towards “local sourcing.”
While pulling back into more self-reliance may lead to higher prices in some sectors, there are positives to be found in the trend. A reversal of exporting U.S. manufacturing jobs and renewal of domestic production is desirable for better paying jobs. It also lessens complicated global entanglements that expose countries to fallout from events beyond their control.