End of an era… According to Wall Street’s $10T man, Larry Fink, three decades of globalization is ending. Refresher: globalization is the movement of products, tech, and jobs across borders through free trade. Yesterday the BlackRock boss told investors he believes Russia’s invasion of Ukraine will halt globalization and cause countries to “decouple” from the global economy.
- Fink’s words echoed across the business world because BlackRock manages $10T in assets (think: pension funds and retirement accounts). That’s more than the GDP of every country except the US and China.
The big breakup… Many countries cut financial ties with Russia after its invasion: the US halted Russian oil imports, and major corporations stopped doing biz there. Meanwhile, the EU is scrambling to phase out Russian energy by 2027. But Fink says Russia’s aggression will also push countries to reduce dependence on each other and boost domestic production.
- The cons: Fink expects that companies will bring supply chains closer to home, which could drive up prices as businesses rebuild operations and hire domestic workers. “Onshoring” is already happening in the US’s EV industry and in the chip biz.
- The pros: Blue-collar workers in the US, Mexico, Brazil, and Southeast Asia could benefit from more local manufacturing jobs. Green-energy adoption could accelerate as countries invest in renewables to limit reliance on imported fossil fuels.
Globalization is a mixed bag… and deglobalization could have pros and cons too. In the past three decades, globalization helped US companies by driving down production costs and boosting profits. It also benefited American consumers by lowering prices (think: $100 4K flat screens from China). But globalization hurt blue-collar Americans by outsourcing their jobs to cheaper labor markets. Now deglobalization could reverse those effects by shifting production stateside (think: TVs made in the US by American workers — but they cost $600).