In his annual letter to shareholders, Blackrock’s Larry Fink says that the response of the business community to Russia’s invasion of Ukraine signals “an end to globalization.” He’s wrong. It’s just the opposite. He writes:
The Russian invasion of Ukraine has put an end to the globalization we have experienced over the last three decades. We had already seen connectivity between nations, companies and even people strained by two years of the pandemic. It has left many communities and people feeling isolated and looking inward.
I believe this has exacerbated the polarization and extremist behavior we are seeing across society today. The invasion has catalyzed nations and governments to come together to sever financial and business ties with Russia. United in their steadfast commitment to support the Ukrainian people, they launched an “economic war” against Russia.
Governments across the world almost unanimously imposed sanctions, including taking the unprecedented step of barring the Russian central bank from deploying its hard currency reserves.Capital markets, financial institutions and companies have gone even further beyond government-imposed sanctions.
As I wrote in my letter to CEOs earlier this year, access to capital markets is a privilege, not a right. And following Russia’s invasion, we saw how the private sector quickly terminated longstanding business and investment relationships.
BlackRock has been committed to doing our part. Grounded in our fiduciary duty, we moved quickly to suspend the purchase of any Russian securities in our active or index portfolios. Over the past few weeks, I’ve spoken to countless stakeholders, including our clients and employees, who are all looking to understand what could be done to prevent capital from being deployed to Russia….These actions taken by the private sector demonstrate the power of the capital markets:how the markets can provide capital to those who constructively work within the system and how quickly they can deny it to those who operate outside of it. Russia has been essentially cut off from global capital markets, demonstrating the commitment of major companies to operate consistent with core values. This “economic war” shows what we can achieve when companies, supported by their stakeholders, come together in the face of violence and aggression. [Emphasis in the original]Larry Fink’s Chairman’s Letter to Shareholders | BlackRock
We believe that this response from the global markets is proof that globalization is fundamentally embedded in our geopolitical as well as economic bases of culture, government, and society. Multi-national corporations, including those with operations limited to one country but with suppliers and customers in other countries, play as important a role as governments in responding to outrageous affronts to international law. It is apparent that tanks and bombs are less important to resolving those conflicts than money and code.
Slate reported this week that home crafters were unhappy to learn that they were not able to purchase cross-stitch designs from their favorite sellers anymore. They were buying through Etsy and may have been only dimly aware that their digital purchases, some for just a few dollars, were from Russia. It is not just big corporations that are affected by sanctions. That impact adds to the pressure Russia is under, a vulnerable front Putin did not anticipate.