BlackRock, a major investment company based in the US, has reached a stunning milestone: it now manages over $11.48 trillion! This amount is comparable to the total economic output (GDP) of countries like Japan, India, and the UK combined. Over the past year, its value has jumped by nearly $2.4 trillion—which is as much as the GDP of countries like Italy or Brazil. But how does BlackRock make its money? Let’s take a closer look.
A Powerful Force in Finance
BlackRock has often been compared to a modern-day East India Company because of its enormous economic power and relentless pursuit of profit. Some people even call it a vulture fund, which means it looks for profits without much concern for ethics. Larry Fink, BlackRock’s CEO, famously said in a letter to clients that the company wouldn’t support policies that are good for society if they hurt BlackRock’s bottom line.
Founded by Larry Fink and a group of finance executives in the late 1980s, BlackRock started by selling financial services to investment banks and was a pioneer in the risky world of mortgage-backed securities. These investments involve pools of mortgage loans, and they became a significant part of BlackRock’s business.
When the company went public in 1999, it managed about $165 billion in assets. Through strong relationships with global institutions, BlackRock steadily increased its holdings. Its big break came during the 2007-2008 financial crisis, which devastated many economies worldwide but allowed BlackRock to thrive. In just one year, its assets jumped from $1.31 trillion to $3.35 trillion—a staggering increase of over 250%!
Rapid Growth
By 2014, BlackRock had become the largest asset manager globally, surpassing the $4 trillion mark. Its growth didn’t stop there; by 2020, its assets had more than doubled to $8.68 trillion as the COVID-19 pandemic reshaped the economy.
Controversial Practices
Despite its success, BlackRock has faced criticism for many of its business practices, which some people view as damaging. Here are a few troubling activities:
- Lobbying Against Regulations: BlackRock has lobbied against rules that would limit its ability to profit from countries in debt. For example, it has invested heavily in countries like Ethiopia, Ghana, and Sri Lanka, charging them high interest rates on loans while refusing to cancel their debts. This means these countries end up paying back much more than they borrowed.
- Buying Up Homes: Since 2008, BlackRock has purchased many homes in the US, working with other investment firms to turn whole generations of Americans into renters. This has made it much harder for many people to afford their own homes.
- Market Manipulation: BlackRock has faced allegations of manipulating markets to benefit its investments. In one notable incident in 2014, the Italian market watchdog found that BlackRock had acted unethically by dumping a stake in a bank, which it called a “technical error.”
- Political Influence: The company has spent millions on lobbying to ensure favorable regulations and tax laws for itself. In 2022, it reported nearly $2.4 million in lobbying expenses in the US.
- Profiting During Crises: BlackRock took advantage of the COVID-19 pandemic by investing in technology and healthcare companies, including major vaccine manufacturers. This helped boost its assets from $7.43 trillion in 2019 to over $10 trillion in 2021.
- Funding the War Machine: BlackRock has invested in defense companies like Raytheon and Boeing, profiting from the ongoing conflicts in places like Ukraine and Gaza. Critics have pointed out that this makes BlackRock complicit in war and suffering.
The Bottom Line
BlackRock is not just another investment firm; it is a powerful player that wields enormous influence in the global economy. As Larry Fink has said, if they can rebuild countries like Ukraine, it could showcase the power of capitalism. However, this ambition comes with serious ethical questions about the consequences of its actions on people and nations worldwide.
In a world where money talks, BlackRock’s rise serves as a stark reminder of how financial giants can impact economies and lives, often prioritizing profit over the greater good.
