Larry Fink, CEO of BlackRock, the world's largest asset manager, thinks we are now seeing the beginning of the end of globalization. Now, it’s no longer relevant when the Globalization started. Instead, the new question is whether Russian President Vladimir Putin will end it.
KEY INSIGHTS
- Globalization was under attack on some level prior to Putin’s invasion of Ukraine. Most significantly, the global pandemic let us all see very clearly the vulnerabilities, especially with supply chains and our dependence on their global nature.
- Aside from oil and gas, Russia is one of the world's largest suppliers of metals. Currently, governments and large corporations that imposed sanctions on Russia are now scrambling to obtain alternative supplies. Supplies in turn are tightening, resulting in dramatic upward price swings and costs that are passed on to consumers.
- The pandemic, along with geopolitical tensions with China and a US-China trade battle, had already driven many businesses to explore bringing their operations and relevant input materials closer to home,everyone is desperately calling for “independence”, whether it is of energy or other resources.
- In Q2 2020, at the dramatic start of the pandemic, global trade was down 18.5%, compared to the same period the previous year.
- BlackRock, which oversees more than $10 trillion, has already suspended the purchase of any Russian securities in its active or index portfolios.
BOTTOMLINE
Three decades ago, the US produced about 37% of the world's semiconductors, compared to 12 percent nowadays. Profit got in the way of strategic planning here. Cheap costs were chosen over independence, and that is the sacrifice of globalization. Today, rather than the cheapest, easiest and greenest sources, there’ll probably be more of a premium on the safest and surest,