BlackRock chief on globalisation

BlackRock CEO Larry Fink thinks the Ukraine conflict marks the end of globalisation. You may have seen my post on the subject earlier.

The Russian invasion of Ukraine has put an end to the globalisation we have experienced over the last three decades,” Fink wrote in his annual letter to shareholders of BlackRock, which oversees $10tn as the world’s largest asset manager. While the immediate result had been Russia’s total isolation from capital markets, Fink predicted “companies and governments will also be looking more broadly at their dependencies on other nations. This may lead companies to onshore or nearshore more of their operations, resulting in a faster pull back from some countries.

FT has another article   that cites other corporate chieftains as echoing these sentiments.

 The Ukraine war is part of a pattern of supply chain disruptions getting more frequent and more severe,” said Dan Swan, co-lead of McKinsey’s operations practice, pointing to the trade war between the US and China, the blockage of the Suez Canal last year, and the coronavirus pandemic.

Nations and companies will want greater control over their supply chains. They will want to minimise dependence on fossil fuels by focusing more on renewable energy sources. They will want to accelerate indigenisation of defence production because they would not want to be at the mercy of outsiders for the supply of spare parts and ammunition in a crunch.

It is back to the much-derided Nehruvian focus on self-reliance with a bang. The approach has been derided in recent years by those who contrast the faster growth of outward-looking economies with that of India post independence. They overlook the fact that India, unlike small nations, will have to have a voice in world affairs. It will have to make sure its foreign policy and policy towards neighbours is not vulnerable to external pressure. Self-reliance is needed to give ourselves what is now called 'strategic autonomy'. That necessarily entails a sacrifice of growth.  

Democracy may involve a sacrifice of growth in the medium term when compared to authoritarian regimes. But we in India value freedom of expression and are willing to sacrifice growth. Similarly, we value the freedom to conduct an independent foreign policy. That too may require us to sacrifice growth.

This realisation is dawning on others as well. The more you integrate with the global economy, the greater is your susceptible to outside pressures and the greater the compromise of national sovereignty.