Blackrock & the rise of corporatism.

The growing popularity of government- run industrial policy is one side of a bad economic coin that’s circulating through Canadian and American political circles. The other movement taking shape simultaneously in corporate circles proposes to install corporations as global arbiters and enforcers of environmental, social and governance (ESG) policies.

With the first, via industrial policy, the state takes a heavy hand in running the private economy. With the other, ESG, corporations play a large role in setting and controlling policies usually assigned in a constitutional democracy to the state.

Is this a fundamental clash of ideas between two different proposals for economic and political governance? They are, more likely, two sides of the same corporatist coin in which the state and corporations, the public and the private, the collective and the individual, converge to form some new variation on an old and historically troublesome model.

All this comes to mind following various news reports about Thursday’s annual meeting of Blackrock, the US$ 7.5- trillion investment giant whose CEO, Larry Fink, is the world’s leading corporate advocate for a major expansion of the role of Big Business into areas heretofore relegated to the state. Along with a bevy of U. S. CEOS — from 181 companies including Amazon, Apple and GM — Fink last year led a U. S. Business Roundtable call for an end to shareholder-driven capitalism.

Prior to Thursday’s shareholder meeting, which took place electronically, Fink had renewed his role as the leading voice promoting the idea that corporations should aim to satisfy “stakeholders” rather than shareholders. In a message to “clients” last January, Fink proposed a “fundamental reshaping of finance” to allow financial firms such as Blackrock to take on the role of setting corporate policies. A special target was climate change, which would require a “significant reallocation of capital.” Blackrock, he said, had already jumped into bed with assorted government-led organizations and had begun warning clients to get out of thermal coal and “screen fossil fuels.”

Fink’s aggressive attack on fossil fuels (which is just one part of ESG corporate advocacy) came before the COVID-19 global lockdown crisis, although it is clear that there are now glaring inconsistencies in Blackrock’s ideological, environmental and social policy positions and strategies. However, since it now looks like climate policies will take a back seat to a post- lockdown economic revival, green energy may prove to be less of a focus for the ESG movement.

Also prior to the meeting, critics from both the left and right were ganging up on the investment firm. The Union of Concerned Scientists, which frets about climate change, called on Blackrock to live up to its self-promoted policies. Among other things, the scientists want Blackrock to apply its anti- fossil fuel strategy in its role as adviser to the U. S. Federal Reserve on its massive COVID-19 financial bailout.

Another activist on the left presented a motion at the meeting calling for Blackrock to follow its own ESG advocacy. Fink responded: “We believe that Blackrock already operates in accordance with the principles and commitments consistent with the Business Roundtable’s New Purpose.”

Fink however did not respond to questions from Justin Danhof, legal counsel to the National Center for Public Policy Research. In a news release following the BlackRock meeting, Danhof said that “Fink consistently brags about his commitment to pushing environmental, social and governance (ESG) causes as part of a new ‘ stakeholder’ capitalism. Yet when I asked him about the two- faced nature of these hollow boasts against the backdrop of BlackRock’s promotion of Chinese investments that lack any ESG stewardship, he couldn’t answer the question. Today Fink showed extreme corporate cowardice.”

Blackrock’s China enthusiasm has become a key focus of the firm’s ESG critics. Rupert Darwall, a senior fellow at the Realclear Foundation, describes Blackrock and its fellow corporate travellers as fundamentally anti- democratic. “In a democracy, issues such as climate change and America’s relationship with China are decided at the ballot box. There is an election on Nov. 3, the day before America’s exit from the Paris Agreement takes effect. That is the proper way to decide the nation’s climate policy, not the annual meetings of the companies on which America depends for a swift recovery from the worst economic crisis in 90 years.”

A headline on a Bloomberg report Thursday accurately suggested where Blackrock and the ESG movement are heading. “In Fink We Trust: Blackrock Is Now ‘ Fourth Branch of Government’.” The analysis focused on BlackRock’s role as an adviser to the U. S. Federal Reserve’s massive Us$750-billion financial intervention to rescue corporations from the lockdown crisis. Blackrock is also an adviser to the Bank of Canada, which is soon to be led by a new governor who is an ESG proponent.

Fink’s political influence in the U. S. could expand. According to Bloomberg, “Fink was on the short list in 2012 to replace outgoing Treasury Secretary Tim Geithner. Now he’s widely viewed as a contender for that post in a possible Joe Biden administration. It isn’t clear how that would be received by the Democratic Party’s left flank. But Fink stands out for Wall Street- friendly members of the party who see value in the expertise of financiers.”

Fink’s move to the U. S. treasury seems unlikely, but the fact that such speculation exists around growing Wall Street influence suggests the creeping encroachment of corporations into the halls of government, whether in Canada or elsewhere, is likely to increase.

The democratic motto should be: The state has no business in the boardrooms of the nation. And corporations have no business in the staterooms of the nation.