The biggest money managers in the world are beginning to think the world is a scary place.
So I spend a little bit of time reading what the hedge fund leaders are saying. Sometimes it’s a good insight into what’s driving the flows of money around the world. Sometimes it’s a good insight into where they plan to be eating babies next.
Anyway, Larry Fink was trotting it out last week. He’s the CEO of BlackRock. With US$10 trillion under management – a number so big its impossible to wrap your head around – they are the largest fund manager in the world.
They have their fingers in so many pies its kind of impossible to get away from them. They’re into everything.
Anyway, every year Fink writes his annual chairman’s letter to shareholders.
And what’s he reckon?
Globalisation is ded. It’s cactus. Gone.
Not in those words exactly. More like these words:
“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.”
… A large-scale reorientation of supply chains will inherently be inflationary…”
That is, the 40-year process of globalisation has come to an end. Or at the very least, 2020 will be its high-water mark.
Remember what we’re talking about with globalisation. It’s a process of all the nations get more inter-connected through trade.
We used to live in a world where each nation had to produce most of the stuff it used and consumed. Nations also had high tariffs walls up to stop other nations selling stuff to their citizens.
That made local stuff more expensive, but we thought it was worth it.
And then we didn’t. Then we decided that the way to wealth and prosperity was to tear down all those barriers to trade. It was more efficient to let people in Asia manufacture most of our stuff.
It made that stuff cheaper and it freed up local labour to work on other, more useful things.
That’s the theory, although it was never neat in practice.
All of this was built on the idea that history had “ended” with the collapse of the iron curtain. We didn’t have to worry about other nation states because we were all connected like one big economic family.
Turns out, that was maybe a little naïve.
Or at least it was something that asset managers like Blackrock were willing to ignore because there were some fat arse profits on offer.
And now Covid has shown us that we’re a bit exposed when our supply chains are spread all over the world and running on a just-in-time ethos. Even small disruptions have big impacts.
And the war in Ukraine has shown us that it’s a bit silly to be sourcing half of your energy from a single nation, when that nation doesn’t’ even like you that much.
And so now people are talking about “Commodity Nationalism” – making sure your domestic needs are sorted first, before you jump into bed with any other trading bloc.
And I think this probably is the way of the near future.
We were probably a bit naïve to think it could work any other way. But we lived the dream for 40 years, and many people, like Larry Fink, got incredibly rich along the way.
But the tide is reversing. Globalisation is dead. Nationalism is the new black.
And the wheel of history keeps on turning.
JG.