23 Jan PUBLIC PENSION CORNER, #28: At Davos, The Empire Strikes Back
NEWS:
I. Republican AG’s Target Ceres
A group of Republican Attorneys General has sent a letter to Ceres, one of the most prominent ESG-supporting climate groups, warning it that it may be violating state consumer and antitrust laws:
Florida Attorney General James Uthmeier warned the Boston-based nonprofit organization Ceres that it may be illegally pressuring companies to adopt net-zero policies. He said the organization was pursuing policies that were an “assault on American families and businesses.”
“Ceres’ efforts to artificially move entire markets and sectors — and in turn artificially change the output and quality of the goods and services produced by those sectors — toward Ceres’ own preferred policy goals bears all the trappings of the ‘adverse, anticompetitive effects’ that antitrust laws seek to prevent,” the attorneys general wrote in the letter.
Ceres is an advocacy group that says it is “working to accelerate the transition to a cleaner, more just, and resilient world.” In emails obtained by the House Judiciary Committee, it has described its work as “the Army ground troops” and “an ‘air cover’ strategic and silent bombing campaign by a newly funded division of the Air Force” fighting a war for net zero emissions.
II. ESG’s Co-Architect Fashions Himself the Leader of the New World Order
Mark Carney, the Prime Minister of Canada and one of the architects of the ESG global order, used this week’s Davos conference to declare the old order dead and position himself – again – as the new order’s “adult in the room.”
Canada’s prime minister delivered a blistering and remarkable speech at the World Economic Forum this week, essentially declaring the end of the world as you and I have known it.
Since World War II, Mark Carney told the crowd in Davos, Switzerland, global politics have largely adhered to a system of norms that prioritized shared prosperity and cooperation. But as President Donald Trump lays waste to those norms, long-time US allies — Canada included — are taking steps to counter America’s influence, even after Trump’s current term.
It’s hard to overstate just how new and strange that is: America’s nearest neighbor, and closest ally, calling for the development of a new world order that sidelines the US. “When historians look back at this era, this speech by Mark Carney will be seen as an inflection point,” wrote Lulu Garcia-Navarro, a New York Times journalist.
COMMENTARY
By Stephen R. Soukup, President and Publisher, The Political Forum
“At Davos, the Empire Strikes Back”
As readers of a certain age – male readers in particular – will recall, there is a scene in Star Wars (which is now ignominiously called Episode IV: A New Hope) in which Han Solo and Princess Leia, who have known each other for all of a couple of hours, have their fifth or sixth (or even seventh, who can keep up?) argument. It takes place just after the crew has escaped from the Death Star and starts with one of the greatest lines in all of movie history:
Solo: Not a bad bit of rescuing, huh? Sometimes I amaze even myself.
Leia: They let us go. It was the only reason for the ease of our escape.
Solo: Easy? You call that easy?
Leia: They’re tracking us.
Solo: Not this ship, sister.
I think about this scene a great deal when contemplating the victories of the anti-ESG coalition over the last few years. Sometimes, I’m Han Solo, and I think about how we even amazed ourselves. In 2020, the fight seemed not merely unwinnable but almost pointless. How could a ragtag bunch of rebels possibly hope to defeat the Galactic Empire – the Big Three, plus the CFA Institute, plus most business schools, plus the entire political and media establishments? Yet…somehow, we did. Somehow, we managed to push back hard enough and smart enough and resourcefully enough that we turned the tide and, as The New York Times put it last week, convinced Wall Street to “turn its back on Climate Change.”
Other times, I’m Princess Leia (a horrifying visual, for those of you who know me) and I get a bit conspiratorial-minded. I worry that the fight was “won” so easily because the other side – the Big Three, et al. – made it easy to win. They didn’t surrender or give in, necessarily. They just moved on to something else.
This past week – the week of the annual gathering of the glitterati at Davos – was one of those Princess Leia moments.
If you look past the headlines – President Trump’s historic and polarizing appearance, all the buzz about Greenland, and the rest of the West proclaiming the death of the post-War global order – you may notice that the official theme of this World Economic Forum event was a bit different from previous years. This year, the focus wasn’t the new, elite-sanctioned version of “capitalism” or the need to save the masses from disinformation through careful censorship or any of the other traditional WEF themes. Rather, the focus was on the world-changing potential of Artificial Intelligence and the risks it poses to civilized society.
Of course, in order for that shift in focus to make sense in my Star Wars metaphor, you have to know a couple of things. First, you have to know that AI is likely the most energy-intensive technology developed since the internal combustion engine. AI requires data centers; data centers require massive amounts of electricity; massive electricity generation requires the combustion of hydrocarbons. Solar, wind, and other renewables aren’t going to cut it in our new AI-dominated business environment. They may, possibly, theoretically, provide some of the electricity AI requires, but they can’t do it all – not even close. Therefore, the use of gas, coal, and nuclear – all ESG UN-friendly – has a new and powerful business case.
The second thing you need to know is that the World Economic Forum is no longer run by Klaus “May I touch you inappropriately?” Schwab, the organization’s founder and longtime chairman. Instead, the WEF is helmed – or, at least, co-helmed – by none other than Darth Vader….errr…Larry Fink, who, as you know, is also the CEO of BlackRock, the largest asset manager in the world and the erstwhile driving force behind ESG.
As you likely also know, Fink loves AI. He thinks it’s the most important thing in the history of ever and is radically going to change the world as we know it. And if all of that sounds familiar, it’s only because it is. Four years ago, Fink loved “sustainability” investment. He thought it was the most important thing in the history of ever and was radically going to change the world as we know it. Four years ago, Fink had the market cornered on ESG and, because of it, had even figured out a way to make money on management fees in the world of passive investment. Now, he’s hyping AI relentlessly because it’s likely an even bigger money maker than ESG. Fink changed his mind – and, in turn, his perspective on energy – because he had ulterior motives, because he found something better and likely far more profitable than saving the world. Or, to put it into our Star Wars analogy: he let us win our fight against ESG because he had bigger plans.
The analogy isn’t perfect, of course. The plucky anti-ESG forces did real damage and caused Fink real consternation. Nevertheless, the outcome is the same. Fink is managing $14-plus trillion, and BlackRock hasn’t missed a step. This is important for those of us who might otherwise amaze even ourselves to keep in mind.
It is also important for us to keep in mind that Fink’s fundamental Darth Vader-ness hasn’t changed and that, in his support of AI, he still has the ultimate goals he had with ESG: money and control (emphasis in original):
BlackRock Chief Executive Larry Fink…used the opening of the World Economic Forum this week to deliver an unusually stark warning to the global elite: Artificial intelligence, if left on its current trajectory, risks deepening inequality, hollowing out the professional class and becoming the next great failure of modern capitalism….
The billionaire head of the world’s largest asset manager warned that the early rewards of AI are flowing almost exclusively to those who own the technology’s foundations – models, data and infrastructure – while wage earners risk being left behind. He drew a direct parallel between the impact of AI on white-collar workers and the disruption globalization inflicted on manufacturing jobs in previous decades.
“The open question: What happens to everyone else if AI does to white-collar workers what globalization did to blue-collar workers?” Mr. Fink said. “We need to confront that today directly. It is not about the future. The future is now.”
In short, Fink wants to make all the money from AI but also wants global governments to concede to him the power to regulate it and to ensure that it works “for everyone” – as he defines it. This is very much the same spiel he presented in support of the sustainability agenda. And it’s the same spiel he’ll present in support of the next big thing, whatever it is. Fink’s view of the world is a slightly modified version of the old saying popularized by the 1960s leftist radicals, Students for a Democratic Society (SDS): “The issue is never the issue. The issue is always the Revolution.”
If you wonder why I obsess about the concentration of capital and the inexorable rise of passive investing, there you have it. The concentration of capital allowed Larry Fink and his compatriots to threaten radical changes to business and finance during the ESG phase. And it allows them to threaten radical changes to business and finance during the AI phase. And it will allow them to threaten radical changes to business and finance during the next phase. The investment issue is never the issue. The investment issue is always the Revolution.
We may have escaped from the Death Star, but we can’t get cocky, kid. The Galactic Empire is always on the move.
