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Capitalism is Dead — The Rise of Asset Management Class

Capitalism is disappearing right before our eyes and no one knows it

The largest company in the world today is Apple with a net worth of close to 4 trillion dollars. To put that into perspective, that is greater than all but 4 countries’ annual GDP; it is 46 times the total value of all the diamonds in the world. Now let’s take a look at the largest asset management companies in the world: Vanguard, State Street, and Blackrock. In total, these companies manage over 20 trillion dollars!


But it is not just the total sum of money they manage that makes it a problem, it is the extent and reach that this money goes. Together, these 3 behemoth firms own an average of 20% share in each S&P500 company. They don’t just own shares in specific industries either, like most investment firms that specialise in a few key industries, they have a significant stake in every industry — not just hotels, but upstream and downstream in airlines, food & beverage, retail outlets, etc. Just between Blackrock and Vanguard, one or the other is the single largest shareholder in 84% of these companies. Blackrock alone cast 165,000 votes at shareholder meetings annually.


This image shows the top shareholders in some of the largest corporations in the world. (Column 4–8 shows the largest investors in descending order from left to right.) (Red — Blackrock; Orange — Vanguard; Yellow — State Street)

Here is the problem with having the same major shareholders in almost every large company in every industry: it creates what is known as ‘market socialism,’ as Matt Bruenig from People’s Policy Project puts it. Let’s put it this way, market socialism is collusion taken to the extreme. While OPEC, for example, is a collusion between countries to drive up the price of oil, asset managers, who have stakes in all industries, will reject this idea as higher oil prices might result in higher airline costs, which impacts the aviation industry.


ESG Movement

In essence, this is the type of centrally planned economy that capitalism sought to eliminate entirely. The best example of such an attempt at a centrally planned economy is the emergence of the ‘ESG’ — Environment, Social, Governance — movement championed by the Big Three.


The premise of the ESG movement is to put added agendas on private institutions and influence the way capital is allocated within these firms. On the surface of it, this seems like a good thing: money-loving companies have to divert a portion of their capital, otherwise allocated to making more money, to effect causes that benefit humanity. Yet, in practice, this form of corporate governance has turned out to be more fiduciary in nature than practical and effective.


As Presidential candidate Vivek Ramaswamy puts it on an interview on CNBC, ESG movement has a “deep seeded conflict of interest”. A prime example of this is the double standard applied to ExxonMobil and Petrol China.


In 2021, ExxonMobil was facing increasing pressure to improve its climate-consciousness strategy. New directors were pushed for at ExxonMobil and the Big Three, who owned 20% share of ExxonMobil, played a critical role in electing those new directors to cut oil production and improve climate stance. At the same time, Petrol China was expanding its reach with deals across Africa, the Middle East, and South America. A large portion of the deals that were dropped by ExxonMobil were picked up by none other than competitors like Petrol China. And who were the biggest shareholders of Petrol China? You guessed it, none other than


THE

BIG

THREE!


This is just one of the many examples of the hypocrisy and fiduciary nature of corporate governance by asset managers.


Wealth Inequality

The rise of this new kind of capitalism, one dominated by stakeholders, does not stop at crappy, ineffective corporate governance. No, it gets far worse than that. The real threat of this new kind of stakeholder capitalism is how it dangles a carrot on a stick to satisfy the masses through virtual signaling while silently making themselves rich through the backdoor at the expense of the common people. If you can’t already guess by now, what stakeholder capitalism aims to do is ultimately make stakeholders rich. Given the vast control that these mega firms have, it would explain the paradoxes of action undertaken.


For example, it is not rare to see low-income pensioners forced out of homes by rent-hikes driven by Real Estate Investment Trusts (REITs). What makes it laudable is that some of the biggest investors in REITs are pension funds which derive their money from pensioners like those who were evicted from their homes. When REITs profit, so do the pension funds that invest in them. And the people who ultimately benefit the most from this messy and perplexity chain of events are none other than the stakeholders at Blackrock, Vanguard, and State Street since they have stakes in both pension funds and REITs.


This is just one of many such schemes that benefit wealthy stakeholders at the expense of the poor. And to prevent people from noticing, they slap ESG promotion stickers on all the big well-known companies to divert attention to the positive causes they are championing.



 
 
 

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