Say this for Larry Fink: He thinks big.
The influential CEO of BlackRock, the asset manager that oversees almost $5 trillion in investments, Fink is known in financial circles for his hectoring letters of instruction to the companies he invests in. His name has also been floated as a possible Treasury secretary in a Clinton administration.
In his most recent letter, Fink tackled the problem of short-term thinking in management, and urged companies to take a longer view to enhance value.
At a conference Sept. 28 dedicated to longterm thinking in business, he expanded his vision, saying that governments, as well as businesses, need to focus on the long term.
Governments have abdicated the responsibility for growing their economies to central banks, and “central banks have run out of room to maneuver,” he said. For eight years, they have resorted to low, and even negative, interest rates to stimulate growth, and that has punished lower- and middle-income families who depend on bank deposits and government bonds to save.
While the rich have seen their wealth increase via the stock market and real estate investments, the middle class has been left behind. That’s led to unrest and electoral results like rightwing parties winning power in Austria and Germany, and the UK Brexit vote to leave the EU.
Governments should wrest control of their economies back from the banks and start spending on infrastructure, Fink said. Along with eventually driving up interest rates, that would create jobs on a large scale, helping employ the millions who are or will be displaced due to the digital transformation of the economy.
Public investment in infrastructure will also drive private investment, Fink said, as corporations are eager to put their billions of cash to use. He cited a new pedestrian river walk in Chicago built by the city with a federal loan, which has spurred millions in new real-estate development. “If the government focuses on long termism, corporations will follow,” he said.
It’s hard for business to think about the long term with so much uncertain until the presidential election, Fink said. Still, since the need for infrastructure spending may be one of the few policy areas where Clinton and Donald Trump agree, Fink’s theory might actually get tested.