“Disclose. Divest.”
The rallying cry, echoing on many large campuses in the United States in recent weeks, represents a powerful new voice in a two-decade international movement to protest Israel’s occupation of Palestinian territories. As a purely economic lever, however, divestment appears likely to disappoint.
Why We Wrote This
Universities are starting to make deals with student groups that advocate divestment from Israel-linked corporations. Yet the current activism differs from the 1980s model of divestment from South Africa.
Such grassroots economic movements have a tenuous record of success. And economists say modern Israel represents a tougher target for protesters than South Africa’s apartheid government in the 1970s and ’80s or corporate fossil fuel polluters today.
Pro-Palestinian demonstrators have notched some gains at various American campuses in recent days, reaching compromises with university administrators that begin to address their concerns about disclosure of the school’s investment holdings. For U.S. universities, these are the first and easiest steps in a long road.
“These protesters are going to be really disappointed because I think they’re going to find that there’s really nothing much to divest from,” says Dany Bahar, an Israeli economics professor at Brown University. “Let’s invest instead of divest,” he adds, suggesting investment in Palestinian schools and infrastructure.
“Disclose. Divest.”
The rallying cry, echoing on many large campuses in the United States in recent weeks, represents a powerful new voice in a two-decade international movement to protest Israel’s occupation of Palestinian territories through economic means. As a purely economic lever, however, divestment appears likely to disappoint.
Such grassroots economic movements have a tenuous record of success. And economists say modern Israel represents a tougher target for protesters than South Africa’s apartheid government in the 1970s and 1980s or corporate fossil fuel polluters today.
Why We Wrote This
Universities are starting to make deals with student groups that advocate divestment from Israel-linked corporations. Yet the current activism differs from the 1980s model of divestment from South Africa.
Still, pro-Palestinian demonstrators have notched some gains at various American campuses in recent days. They have reached compromises with university administrators that at least begin to address their concerns about disclosure of the school’s investment holdings. The deals may also offer a hopeful alternative to the violent clashes that have occurred at universities from Columbia University in New York to the University of California, Los Angeles.
“People are witnessing the horrors of war,” says Audie Klotz, professor of international relations at Syracuse University and author of a 1995 book on the struggle against apartheid. “They’re outraged, and they want to do something.”
The protests are a way to meet that urge, she adds.
Here at an encampment on the campus of the University of Vermont, amid signs reading “Divest Now” and chants of “UVM, it ain’t funny, show us where you hide our money,” James, a junior at the school, is feeling optimistic. (He declined to have his last name published because of privacy concerns.)
“Who knows how it all ends,” he says, motioning to the encampment behind him on the Burlington, Vermont, campus. “But this right here has given me so much hope and filled me with so much love about the collective power of students to meaningfully fight back against what is happening.”
A member of Students for Justice in Palestine, he says a group of students met earlier this week with university officials to request disclosure of the school’s investment and divestment from Israeli companies.
Hopes for a peaceful settlement to campus protests were raised Monday, when officials at Northwestern University struck a deal with protesting students and faculty. Protesters agreed to remove all but one tent pitched on the suburban Chicago campus in exchange for the reactivation of an advisory committee on university investment that will include students, faculty, and staff. The school also agreed to various steps to support Palestinian faculty and its Muslim students from throughout the Middle East.
On Tuesday, administrators and students at the Evergreen State College reached a similar agreement to remove their protest tents on the Olympia, Washington, campus in return for the school publicly endorsing a cease-fire in the Israel-Hamas war and considering divestment from companies profiting from Israel’s occupation of Palestinian land.
The same day, protesters at Brown University achieved a more far-reaching deal. Administrators agreed to meet this month with a student committee to reconsider a 2020 proposal that would drop from the university portfolio Boeing, Airbus, Raytheon, and eight other companies with ties to Israel’s defense establishment. Brown committed its corporate board to a vote on divestment in the fall. Rutgers and the University of Minnesota have also struck deals with protesting students.
Why divestment from Israel is difficult
For those advocating divestment, these are the first and easiest steps in what is likely to prove a long and difficult road, economists say. From there the issues get more complicated.
Divestment is a simple idea. Individuals or institutions rid their portfolios of holdings they believe are problematic, often for moral or ethical reasons. Health advocates might drop alcohol- or tobacco-related stocks. Pacifists would shun the defense sector. But when it comes to forcing political change in a nation, a big question is whom to target economically.
The Brown proposal has the advantage that it is narrowly focused on 11 stocks. Protesters at some other schools want the administration to divest from all Israeli companies.
“These protesters are going to be really disappointed because I think they’re going to find that there’s really nothing much to divest from,” says Dany Bahar, an Israeli economics professor at Brown. By his count, of the roughly 9,000 companies traded on the major U.S. stock exchanges, only about 120 are Israeli. Thus, universities are likely to hold few, if any, Israeli stocks directly, he adds.
Some protesters want universities to divest from all companies doing business in Israel, an even more difficult proposition given the global spread of many corporations.
Another complication: Whereas schools tended to own stocks in the 1970s and ’80s, when the South Africa divestment movement was active, many now own mutual funds. These allow universities to easily diversify their holdings and, in some cases, offer donors ways to support the school in line with their principles. For example, universities might pledge to those worried about climate change that their money would be invested in a fund designed to avoid fossil fuel companies.
Rebecca Cook/Reuters
Here in Burlington, for example, the University of Vermont released this week a list of nearly 90 mutual funds it’s invested in. Some of these funds hold dozens, even hundreds of companies. So if a Vanguard stock fund owns shares of Alphabet (Google’s parent company), which has come under fire for supplying the Israeli government with computing services, should the university divest from the entire fund?
Another big hurdle is legal. Thirty-eight states have laws, executive orders, or resolutions banning or discouraging economic boycotts against Israel, according to the American-Israel Cooperative Enterprise. That might discourage Brown, a private university, from taking an economic stand against Israel when Rhode Island law forbids companies that engage in economic warfare against Israel from doing business with the state. It may prove doubly difficult for public universities to divest in states with similar pro-Israel laws.
To the degree that universities make moves that placate protesters, they also may risk alienating other students, alumni, and donors – many of whom oppose the anti-Zionist views of groups like Students for Justice in Palestine. Already some donors have pulled back from universities like Harvard due to an alleged failure to clamp down on antisemitism.
Israel is not South Africa
Today’s Israel divestment movement contains echoes of the South Africa divestment movement. But there are key differences, too.
For one, the anti-apartheid protests did not spark the violent clashes with police and counterprotesters the way today’s demonstrations have. For another, the issues were more cut-and-dried four decades ago. Critics called the divestment movement unfeasible, but few supported the racist ideology of the white South African government. Today’s conflict is far more fraught, with pro-Palestinian and pro-Israeli supporters both able to claim they are victims in the current war.
Another difference: Israel’s advanced, high-tech economy is far more resistant to boycotts and divestment than South Africa’s was. Over the past 40 years, Israel has built itself into a high-tech hub. It makes complex products that companies would find much harder to substitute than South Africa’s more basic products were. Israel’s high-tech sector saw a severe slump in foreign direct investment last year, but that was because proposed judicial reforms, which could weaken foreigners’ property rights, and the war have made outside investors hesitant to pour money in, says Assaf Razin, an economics professor at Tel Aviv University.
The impact of the divestment movement? “I don’t think it’s a serious threat,” he says.
Even the South Africa divestment movement was not nearly as consequential as many believe, says Professor Klotz of Syracuse. Far more important to apartheid’s overthrow, in her view, was that nation’s own internal protest movement and the international finance community’s reluctance to refinance South Africa’s debt.
“Let’s invest instead of divest,” argues Professor Bahar of Brown. “Let’s ask the universities to invest in [Palestinian] schools and infrastructure, in scholarships to students and faculty to come. … Let’s be active in trying to do something that is going to take us closer to a future of two states – Israel, next to Palestine – living side by side in peace and security, and also in economic prosperity.”