News Column

EDITORIAL: This is what's wrong with university divestment

May 27, 2014

Chicago Tribune



May 27--Universities have often been the places for investigating, analyzing and debating important issues of the day. But they sometimes end up being pushed to do more than think and talk about such matters. Increasingly, administrators are being pushed to take action as well.

The demand lately has been for divestment -- getting colleges to sell the stocks of companies allegedly engaged in one disfavored activity or another. Last week, students at DePaul voted to approve a recommendation that the university should sell its stock in corporations that, in the loaded language of the ballot measure, "profit from Israel's discrimination and human rights violations." Recently, Stanford trustees voted to divest from coal mining companies.

There are divestment campaigns on Israel and fossil fuels at dozens of campuses around the country. They are modeled on the anti-apartheid movement of the 1970s and '80s, which persuaded some 155 universities to sever ties with firms doing business in South Africa.

On these new issues, though, most schools have rejected the divestment option, and with good reason. One is that the issues are far less clear-cut than white supremacy in South Africa was.

Divest or not, universities and their students will continue using fossil fuels, which are practically indispensable, at least for the time being. If Israel bears some of the blame for the plight of Palestinians and the failure of peace negotiations, so does the Palestinian Authority and the people living under it.

In April, the president of the student government at Loyola vetoed a resolution to divest from companies operating in Israel. The Rev. Michael Garanzini, the president of Loyola, said the measure would be impossible to implement because most of the school's investments are in funds, not individual corporations. Worse, he said: "It is one-sided, it is focused on one party in a complex international situation. It is felt as extremely unfair by our Jewish faculty, staff and students."

Coal and other carbon fuels present another tangled problem that divestment advocates treat as black-and-white. If schools want to demonstrate their distaste for energy that produces greenhouse gases, they could convert to all-renewables for their own operations. But it's safe to say most students would not want to pay higher tuition to rely exclusively on alternative sources of power.

Divestment also impedes the core mission of universities by depriving them of money they need to pursue it. Harvard President Drew Faust said last year, "significantly constraining investment options risks significantly constraining investment returns." Universities are better off safeguarding their financial health so they can perform the valuable educational and research tasks for which they were created.

Nor is it likely that spurning targeted companies would make much difference. The government of Israel has plenty of experience at rebuffing outside pressure to take steps it sees as dangerous. If Stanford unloads its coal stocks, other investors will be happy to buy them.

UCLA economist Ivo Welch says the vaunted success of the South Africa divestment program is mostly a myth. His research indicates that divestment by universities and state pension funds "had no discernible effect on the valuation of companies that were being divested, either short-term or long-term." He also found no effect on the South African economy. "Individual divestments, either as economic or symbolic pressure, have never succeeded in getting companies or countries to change," he writes.

University divestment is offered as a proven path to forcing needed change. This time around, though, it looks like a blind alley.

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(c)2014 the Chicago Tribune

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Source: Chicago Tribune (IL)


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