10. Conclusions

How to challenge BlackRock

In one word, transparency. 

BlackRock is blocking debt cancellation and rescheduling for countries facing the aftermath of the covid pandemic and the present, enormous challenge of climate change. Since BlackRock’s argument is to protect the interests of small savers in the North, one way to challenge it could be to increase transparency on the beneficial owners of BlackRock’s debt holding in countries at risk of default. Since vulture funds and institutional investors rely on moral hazard to pressure impoverished nations into paying their debt, the same moral pressure could be applied on bondholders if they could be identified. Transparency on beneficial ownership would finally hold vulture funds accountable.  

Mandatory transparency is also a necessary step for the ecological impact of investment. Even BlackRock called for it, in the report produced by the financier on sustainable financial regulation for the European Commission. Naturally, BlackRock would reduce intervention by public authorities to the minimum, and made no mention whatsoever of tax havens and tax avoidance.

True transparency on sustainable investing is a threat to BlackRock’s monopoly on finance in the Global North. If it wasn’t for BlackRock’s dominance on financial information, public authorities wouldn’t need the company to inform financial regulation and BlackRock wouldn’t be the keystone that it is now. BlackRock business is built on the intellectual property of the technology it deploys to connect investment with investors. As we have seen, these tools seem to be optimized for tax avoidance at every level, and pay little to no mind at all to environmental damage. I believe this is where BlackRock’s weakness lies. 

If information on fiscal optimization and environmental damage was legally made public where investments are materialized, public authorities and civil society organizations would be able to take appropriate action, and BlackRock wouldn’t be able to shape both investment and financial regulation. 

This proposition doesn’t differ from the one formulated by the FACTI panel, it only adds the note that a public, global arbiter of fair and sustainable financial flows goes precisely against the interest of BlackRock and the private financial sector. 

Tax Havens keep the Global South in debt

Tax havens and asset managers like BlackRock are obstacles to debt cancellation and to natural resource stewardship in the Global South.   

With regards to debt, BlackRock and offshore financial centers act as aggregators and facilitators of high-yield debt for private creditors willing to enrich themselves at the expense of impoverished nations. Tax havens offer fiscal advantages and secrecy on the identity of the investors and executives of vulture funds, while BlackRock provides creditors with conveniently structured debt instruments. BlackRock, being the largest private creditor of developing countries, also takes the brunt of the legal and reputational risk when it defends the interest of all private creditors in multilateral negotiations organized by the International Monetary Fund. 

With regards to the exploitation of natural resources in the Global South, when BlackRock routes investment capital from Northern investors to extractive groups domiciled in tax havens,  it allows investors, extractive groups and all middlemen involved to increase their income by avoiding taxes in the countries of exploitation, while also shielding them from accountability for the ecological and human consequences of the activities they control. 

On the side of the countries of exploitation, the conjugation of extractivism and tax haven financing is a deadly cocktail. 

Because the budgets of developing countries depend in large part on the fiscal income generated by the extraction of natural resources, the fiscal gap caused by corporate tax avoidance has a significant impact on the capacity of the state to maintain infrastructures, healthcare and other public services, which in turn has a negative impact on living conditions and the economy. 

Furthermore, tax havens provide incentive and legal pathways to corrupt individuals in developing countries to seek illegal revenue from natural resources, which widens the fiscal gap and contributes to an economic state of negative equilibrium where lawful behavior is punished and unlawful behavior is rewarded. 

Last but not least, tax havens are also a destination for capital that is borrowed by states as external debt in the first place. This means that corrupt politicians in debtor states funnel money borrowed from public and private international creditors to private offshore accounts. This was firmly demonstrated to be the case in Sub-Saharan Africa and implies the complicity of accountants, lawyers and bankers working in close partnership with said politicians.

BlackRock and the Big Three asset managers are central pieces of a double bind dilemma used by state treasuries and private investors in the Global North to strangle economies in the Global South and force them to extract more natural resources from their soil and shift more of the profits to the private financial sector of the Global North. 

The two prongs of this double bind are debt and tax havens. 

For public institutions of the Global South, external debt operates a shift of accountability away from their consituencies , undermining the fiscal contract tying a government to its taxpayers, while subjecting politicians and economic actors to the will of the country’s foreign creditors. 

Tax havens, on the other hand, minimize the accountability of corporations and financiers by providing legal domiciles in jurisdictions that are captive to the private sector, thus strengthening the control of foreign and/or corrupt investors over natural resources, while revoking accountability for the ecological, social and governmental consequences of the extraction of these resources.  

This article is the tenth and last in a series: Sink logic: how BlackRock and tax havens worsen the climate and debt crisis