Last week Larry Fink, the CEO of BlackRock, sent the firm’s stockholders a letter in which he bluntly stated: “The Russian invasion of Ukraine has put an end to the globalization we have experienced over the last three decades.” BlackRock is the world’s largest asset management firm — and with more than $10 trillion in assets, one might just guess they know a little something about globalization.
There’s no doubt that the war in Ukraine is an unmitigated tragedy — not just the horrific loss of lives and destruction of entire cities, but the return of a land war in Europe where, after thousands of years of wars, there was hope the world had seen the last of senseless invasions and the needless slaughter of innocents.
Fink posits that the Ukraine war will be the final straw that breaks the back of globalization due to the economic sanctions that have resulted in Russia’s isolation from the global marketplace. In turn, he says the resulting breakdown in global supply chains from the war, as well as the global pandemic, will “prompt companies and governments worldwide to reevaluate their dependencies and reanalyze their manufacturing and assembly footprints.”
In the case of Russia, Fink says the sanctions have disrupted international export markets and points to the skyrocketing price of oil as a sign that “energy security has now joined the energy transition as a top global priority.”
For many, the death of globalization “as we know it” will be a welcome outcome to the dark clouds of pandemic and war. After all, globalization is just a sanitized term to describe the ugly truth of the market system in which human and natural resources are exploited by wealthy nations that simply go to places with the fewest human rights and/or environmental regulations to obtain their goods — be it products of brutal sweatshops or oil, gas, and minerals. The resulting human and ecological disasters are then simply written off as the “price of doing business” in the global marketplace.
Child labor or the heartbreaking destruction of the Niger delta ecosystem by rapacious oil companies make the headlines for a short period of time, but in the end the march of globalization simply grinds the harsh reality of modern day colonialism under the wheels of so-called “progress” in which “buy low, sell high” is the mantra.
Nonetheless, the incredibly complex mechanism of globalization — buying, shipping, and selling a vast array of products and essential materials — has always had a fatal flaw those making huge profits were unwilling to address. In fact, they did just the opposite — moving to less-secure “as needed” delivery to replace warehousing parts and supplies.
But Entropy, the Third Law of Thermodynamics, holds that the universe continually moves toward chaos, not order, and that the bigger and more complex the system, the more energy it takes to maintain order and the more likely it is to break down. No need to debate the veracity of that conclusion, as recent world events have brutally proven.
Fink believes the breakdown of global supply chains will lead companies to rely more on domestic “onshore or nearshore” instead of less reliable long-distance supply chains. He says the good news is: “Longer-term, I believe that recent events will actually accelerate the shift toward greener sources of energy in many parts of the world.”
Given that our planet is now choking on human-caused fossil fuel pollution, if Fink is right, the decline of extremely energy intensive globalization would be a welcome turn to a sustainable future — and the long-overdue demise of human and resource colonization.