October 14, 2022: Global News Roundup
Musk, Bourla, Fink raise hard questions about corporate power in global politics
The Global News Roundup collects news stories from entirely international (non-US) media sources on variety of pressing global political and economic issues and events.
World news about three American corporate titans—BlackRock CEO Larry Fink, SpaceX and Tesla CEO Elon Musk, and Pfizer CEO Albert Bourla—raised hard questions this week about corporate power and the proper role of unelected corporate elites in shaping politics and economies around the world. Over the past several decades of relatively open global markets, the size and influence of major multinational corporations has come to rival that of many nations and national governments. In 2015, for example, 69 of the world’s top-100 largest economic entities were corporations, while the remaining 31 were national economies.
Elon Musk, the richest person in the world, offered some controversial solutions to manage both the conflict in Ukraine and the simmering Taiwan conflict. There’s nothing new about celebrity CEOs intervening in political debates. What caught my eye, however, is the fact that so many politicians and government officials actually responded directly, and very seriously, to Musk’s suggestions. Chinese Foreign Ministry spokesperson Mao Ning responded to Musk’s proposals. Taiwanese Premier Su Tseng-chang also responded: “Musk is a businessman. He has a big car factory in Shanghai and he wants to promote his electric vehicles … a businessman may say this today and say that tomorrow. Musk only speaks for himself but he really doesn’t know much about Taiwan and he also doesn’t understand cross-strait relations.” And, in what might be one of the most bizarre episodes of international diplomacy I’ve read about in a newspaper in many years, Musk got into a “Twitter showdown” with Ukrainian President Zelensky.
Meanwhile, Pfizer has been tussling with the European Parliament, which convened a special committee in March 2022, “tasked with looking into the EU's pandemic response.” Late last month, Pfizer CEO Albert Bourla backed out of his prior agreement to testify before the committee, following revelations of possible impropriety in his vaccine contract negotiations with European Commission President Ursula von der Leyen. “In September, the European Court of Auditors published a report accusing the European Commission of refusing to reveal the details of Commission President Ursula von der Leyen's negotiations with Pfizer, including minutes, names of experts consulted, agreed terms, or any other evidence. Furthermore, most EU parliamentarians, including COVID committee members, have no idea how much the EU paid Pfizer for the shots and no way of finding out”, reported Israel National News.
Apparently Bourla and von der Leyen were sufficiently close that some of the negotiations were conducted between them personally, via text message. Reuters noted that the deal worked out last year was the “biggest ever sealed” for covid-19 vaccines, with a commitment to purchase 900 million shots, with an option for 900 million more. On October 10, senior Pfizer executive Janine Small, who took Bourla’s place in the hearings, admitted “that the drug company did not know whether its Covid vaccine prevented transmission of the virus when it began rolling out the shots globally”. European Parliament member Rob Roos’ stated after the hearing: “Millions of people worldwide felt forced to get vaccinated because of the myth that ‘you do it for others’.”
(Image: Ursula von der Leyen and Albert Bourla embrace at the Atlantic Council meeting in 2021 at which Bourla received a leadership award, in the original here).
Along similar lines, BlackRock CEO Larry Fink is struggling of late to legitimize the firm’s growing power over global climate change policy. The UK-based Economist ran a piece a couple of weeks ago highlighting the growing controversy in the US over BlackRock’s use and promotion of ESG investment standards (ESG = Environmental Social Governance), with affiliates of both major political parties in the US increasingly targeting Fink with “stinging missives”:
“Dear Mr Fink,” started one from 19 GOP state attorneys-general on August 4th, accusing BlackRock of selling its customers short by pursuing an “activist” agenda on climate change. “Dear Mr Fink,” began another on September 21st from the progressive head of New York City’s Office of the Comptroller, telling BlackRock it was shortchanging investors—and the planet—by “backtracking” on its climate commitments. The charges are mirror images of each other, making them all the harder to deal with. BlackRock cannot appease one set of government clients without upsetting the other.
(See also here for more international commentary, and here for more background on Fink’s climate change agenda).
BlackRock has also had to handle recent backlash from other “government clients”, including growing outrage about BlackRock’s role in the ongoing UK pension crisis. UK pension funds have been flirting with insolvency over the past few weeks, owing to bond market volatility. The investment strategy that left them exposed here—called “liability driven investing”—is one that BlackRock recommended, helped implement, and profited from. The Financial Times—which back in June tellingly referred to Fink as an “emperor”—reported that, “BlackRock, alongside the likes of Legal & General Investment Management, is a prominent player in the market for LDI funds, a strategy that helps pension fund clients match their liabilities with their assets, often using derivatives. The amount of liabilities held by UK pension funds that have been hedged with LDI strategies has tripled in size to £1.5 trillion in the 10 years to 2020, according to the Investment Association.”[1]
Its position as a major investor in emerging market sovereign debt has further called global attention to BlackRock’s power over developing countries, with activists and experts last month calling on BlackRock specifically to cancel Zambia’s debts: “Zambia became Africa's first pandemic-era sovereign default nearly two years ago and is seeking $8.4 billion of debt relief from 2022 to 2025 under a new restructuring framework backed by the Group of 20 major economies”. BlackRock holds about US$215 million in Zambian government bonds, about 7% of the total.
Things I’m keeping an eye on:
1. IMF/World Bank meetings are ongoing this week, and the IMF recently released a gloomy report on the global economic outlook.
2. The 20th CCP National Congress starts on Sunday. Xi Jinping is likely to be confirmed for an unprecedented third term.
3. Russia pummeled the Ukraine with missile strikes since my last post, in apparent retaliation for an explosion that took out parts of the Kerch Bridge to Crimea. Russia claims that Ukrainian “terrorists” are to blame, while Ukraine is lobbying its allies for increased support.
4. Financial markets. Wow. Just wow. This article is a great primer on what’s going on with liability driven investing by UK pension funds and how bond market volatility impacts pension fund liabilities. Crazy whipsaws this week, especially before and after the US CPI print on Thursday, which revealed higher than expected inflation in the US, indicating that a Fed pivot is likely not on the table at next month’s meeting (which is on Nov. 2, shortly before the US midterms). Stay tuned.
5. On Wednesday, Saudi Arabia released a statement in defense of its and OPEC’s sovereignty over their production decisions, and in which it said that US President Joe Biden had tried to pressure/beg/coerce the Kingdom and OPEC into not making production cuts until after the midterm elections. As I noted last week, OPEC defied the US President and went ahead and made those cuts. The implications of this ongoing geopolitical realignment are hard to overstate.
[1] The FT’s paywall is iron-clad, no way around. Sorry.