Excerpts from Grace Blakeley's Vulture Capitalism book:
BlackRock, the world’s largest asset manager, controls more than $10trn worth of assets. One or another of the Big Three asset managers – BlackRock, Vanguard or State Street – is the largestshareholder in around 88 per cent of S&P500 companies.119 BlackRock alone is the largest investor in thirty-eight such companies, and has a 3.7 per cent stake in Amazon. Together, the big three oversee $22trn worth of assets, and hold about a fifth of all the shares in the S&P500....
But BlackRock can’t punish managers because it can’t sell its shares. The firm’s stakes in companies like Walmart and Amazon are too large to offload without wrecking the whole market and, in any case, BlackRock’s market-tracking funds are always going to be heavily invested in the largest corporations in those markets. Almost regardless of how these firms perform, they can rely on the fact that BlackRock, Vanguard and State Street aren’t going to sell up.123.......
Economists have found consistent evidence of anti-competitive effects of common ownership – the ownership of multiple firms within a sector by one shareholder.125 Where a few powerful asset managers have a stake in most big firms, why would those investors want these firms to compete with each other? It’s better for BlackRock when the corporations they own collude – and perhaps merge – with one another....
BlackRock has close relationships with governments and central bankers all over the world and has been described as a global ‘fourth branch of government’.132
In the US, President Biden brought several former BlackRock executives into his cabinet.133 The Federal Reserve has given the company responsibility for managing the corporate debt it bought through QE.134 The Fed’s interventions over the last few years have benefited BlackRock – for example, by providing bailouts for corporations in which the company has substantial stakes. And this isn’t the first time BlackRock has benefited from a bailout. The firm was brought in to manage the assets of Bear Stearns and AIG when these firms were effectively nationalised during the financial crisis.135
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It’s not simply the case that asset managers have extraordinary control over the financial system; massive firms like BlackRock ‘own, and extract income from, things – schools, bridges, wind farms and homes – that are nothing less than foundational to our daily being’. Their control over these assets is, of course, used to maximise their returns. And this requires them to ‘relentlessly squeeze’ profits out of their holdings – whether that means hiking rents for vulnerable tenants, or charging for the use of common infrastructure.
Rather than efficient financial markets that allocate investment based on the best available information, we have a few giant, unwieldy organisations that act as the ‘new permanent owners’ of the world’s largest corporations and the infrastructure upon which we all depend.139 In fact, it is possible to observe the centralisation of global capitalism empirically.
The authors of one paper show that ‘three-quarters of the world’s 205 largest firms by sales are linked to a single global company network of concentrated (5 percent) ownership ties.’140 The network they observe is hierarchical, with control centralised in the hands of a few US fund managers (one of which is BlackRock) ‘ringed by a more geographically diverse state capitalist periphery’.
..............leads the authors to question ‘whether global finance can still be characterised, fundamentally, as a marketplace’.
In a truly free market society, pervasive private power of the kind exposed in the last several chapters should not exist. All capitalist institutions should be – to a greater or lesser extent – subject to the overwhelming power of the market mechanism. Instead, we find a world in which private institutions are able to dominate and control markets, while also dominating and controlling workers and manipulating entire states. Capitalism means rule by capital – not free markets.
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