Divestment: Yes We Should

In an earlier blog post, Kyle Klavetter wrote, ”There is a good reason why the Dartmouth Review and, among other intellectual conservatives, Mr. Buckley argued against the divestment of South Africa and it is the same reason why most liberal ideas are opposed: such ideas appeal nicely to emotion but, upon evaluation of their real world consequences, are seen to have unintended and regrettable consequences”.

With all due respect (sorry, Kyle):  Divestment can and should be an important options for individuals who want their portfolios to reflect their beliefs. This is one issue that the left has right.

First, a little background on the history of the South African divestment movement (which my alma mater, the University of Michigan, played a  role):

After the South African government institutionalized apartheid in 1948, the United Nations took over a decade to respond. In 1962, the General Assembly passed Resolution 1761 which condemned apartheid, invited member countries to participate in a voluntary boycott, and established the UN Special Committee on Apartheid. But governments, particular in Britain, failed to see apartheid as a threat to security and continued to provide economic and social backing to the South African government. It wasn’t until the late 1970s when American companies and concerned citizens, citing the Sullivan Principles, began to act and formed the Interfaith Center on Corporate Responsibility. The Sullivan Principles were based on the writings of Reverend Leon Sullivan, a black preacher and board member at General Motors (at the time one of the largest employers of African-Americans in the country). He believed that equal treatment and racial integration should be key elements of doing business and because of South Africa’s segregationist policies, doing business with the country was impossible. In 1985, anti-apartheid activists and others had convinced enough American and British institutions (including Michigan State University and Harvard University, to an extent) to divest from South African that the estimated toll on the economy was nearly ten billion dollars. Pop icons such as U2, Run DMC, and Keith Richards all promised to refuse to play in South African establishments (particularly Sun City, a casino run by whites in a nominally black-controlled region of the country). The political and financial pressure eventually became too much for the Botha government and F.W.  de Klerk’s reforms led to the release of Nelson Mandela and multiracial elections in 1994. Isolation of the South African government limited its options and prevented it from acting freely within the global political sphere, making apartheid an expensive liability.

Back to the point:

Divestment represents a means by which individuals can speak out against corporations and entities that support causes with which they disagree. There now exist specific investment groups that refuse to work with corporations that support abortion and funds that put more money in companies that use environmentally sustainable practices. Yes, I agree that putting American dollars into certain countries can push them towards a more pro-Western political and cultural viewpoint. But we need not sell out our values and beliefs in order to do so. For instance, my family refused to buy Nestle products because of some of their business practices in the third world. Divestment “unfairly demonizes” American companies? Perhaps those companies should be “demonized” for working with countries whose practices fly in the face of human decency.If a company supports working with governments that spy on, kidnap, and murder their own citizens, than I want nothing to do with that company.  Disney pulled out of sweatshops that forced Bangladeshi women into virtual slavery as a result of consumer protest(including an ugly incident in which I got thrown out of a Cincinnati mall). Coca Cola reanalyzed their business practices in South America after investors criticized the treatment of union workers in Columbia, including the outright murder of organizers. Segregationist practices in the United States didn’t end because of Southern companies having a change of heart. They changed because of concerns about the American image in Soviet satellite countries and large companies pulling out of Alabama and Mississippi. Money changes minds; in fact, in many cases, its the only thing that can. Why else has the United States refused to offer monetary support for family planning in third world countries during the Bush years, or funds for Cuba since Kennedy? American dollars symbolize American support.

I understand the problems with the Robinson model. It’s almost impossible to encourage countries that put business first to follow more humane practices. Even if Western countries pull out of Sudan, for instance, China will fill some of the gap and continue to use Sudanese oil pipelines. But the thesis behind encouraging corporate responsiblity is sound. Corporations are run by their boardmembers and their stockholders, and either group can act to influence the actions of that corporation. This is not “stoning the rebellious child”, its limiting the options of the child in order to encourage better behavior- same reason why I wasn’t allowed to watch commercial television until I was in grade school.   Working with companies that refuse to help to fund or support terror is a small means of keeping the voice of the individual in the economic discussion. And if divestment is supported by “liberal radicals”, then sign me up. Working to improve corporate culture and increase the visibility of important causes is one issue that doesn’t need to be polarizing.