Divestiture: The Corporation Breaks Its Promise
Two years as a graduate student representative to the Advisory Committee on Shareholder Responsibility (ACSR) has given me ample opportunity to observe the willingness of the Harvard Corporation to rise above principle when the occasion demands. I hope the following account will provide the Harvard community with greater insight into the politics behind the proposed change in University investment policy, and move some to make their opposition known at the ACSR open meeting scheduled for Thursday, March 4, at 7:30 p.m. in Emerson 105.
Putting the matter bluntly, the Corporation is attempting to bread a commitment made four years ago to the Harvard community and the Black majority in South Africa. In response to sustained mass student protest, the University agreed in 1978 to automatically divest its debt securities in banks making direct loans to the South African government. At the time, anti-apartheid activists, including myself, viewed this reform as a disappointing minimalist concession.
But some concession was made, and the reasoning advanced for making this change was invincible. The South African government has declared itself inalterably opposed to the dismantling of apartheid--a system of institutionalized segregation systematically stripping the country's million Blacks of their land and birthright, herding them like cattle into desolate reservations called bantustans and permitting them to emerge only as temporary migrant labor. Bank loans to the South African government therefore constitute a form of direct aid to state committed to the consolidation of apartheid rather than the desegregation and democratization of the existing white supremacist system. Accordingly, no loan to the South African government could be deemed humanitarian because its ultimate purpose served to reinforce or refine what is by far the world's most inhumane social system.
The Corporation first moved to retract this concession after being forced to divest $50 million in Citibank debt securities following the announcement of the bank's participation in a consortium loan to South Africa in September 1980. Much to the Corporation's dismay, Harvard's commendable action received unexpectedly widespread press coverage and proved highly embarrassing to Citibank and the South African regime. Soon after, Citibank dispatched a representative to consult with the Corporation and lobby University officials to relax their present policy. The Corporation responded by applying pressure on the ACSR to approve the repeal of the 1978 concession, but the ACSR proved itself more than an ornamental rubber-stamp and voted down the proposal in May 1981. The ACSR majority concluded that the University had made a commitment and must honor it.
The issue surfaced again in January of this year when the Corporation reintroduced the old proposal to a new and generally inexperienced ACSR. A Corporation official began the January meeting with a homily on the evils of apartheid and the great weight he placed on ethical criteria in investment policy. Then, almost as a casual afterthought, he asked the ACSR to rectify a "minor flaw" in the University's current bank policy which would force it to divest from banks trying to make "good loans" to the South African government. He gave as an example the Citibank loan which he claimed South African Blacks actually solicited.
The Corporation representatives employed specious arguments and unscrupulous tactics in asking the ACSR to ratify a major policy departure presented in the guise of a minor modification, and without the benefit of a detailed discussion either within the ACSR or among the Harvard community as a whole. The proposed alteration was not a minor technical matter but the effective abrogation of the University's South African policy. Second, the Citibank loan was not solicited by South African Blacks. The Wall Street Journal of Sept. 26. 1980 quotes South African Finance Minister Owen Horwood, who was exultant over the case with which his government obtained a major loan designed to test its "creditworthiness" on the international money market. On Oct. 1. 1980, the Financial Guardian also discounted the South African government's altruistic pretensions in soliciting the loan, and pointed to a long-term strategy designed to increase the stake of Western banks and governments in the preservation of the status quo in South Africa. Both journals agreed that the South African government was the sole initiator of the loan and its motives were purely self-interested.
The Corporation not only rehabilitated the theoretical possibility of a "good loan" to the South African government, but interpreted the term in its broadest possible sense. Over half the money of the Citibank loan went directly to finance "whitening" projects--the forced eviction and relocation of Blacks and coloureds living in or around white residential areas. The remainder would go to finance a few strtictly segregated hospitals and schools. These latter projects can do little to alleviate the catastrophic conditions in which apartheid has placed millions of Blacks. The Black infant mortality rate is six times greater than that for whites: two million bantustan inhabitants live in constant danger of starvation. In the face of all this, anyone attempting to represent the Citibank loan as a positive step must be woefully misinformed or willfully ignorant.
The Corporation's formal reform proposal contains a postscript noting that under the new guidelines, the Citibank loan would probably not be considered humanitarian. It should be emphasized that a sub-committee of the ACSR and not the Corporation reached this conclusion was directly contradicted by Corporation member Hugh Calkins '45 both in his much publicized letter to the ACSR where he claimed the Citibank loan served a "worthy purpose," and in a recent Harvard Crimsoninterview where he invoked the opinion of "some" Blacks to justify the loan. If the Corporation dares to mention the Citibank loan in the same breath with humanitarians they will surely use the proposed reform as a screen for the return to a policy of "anything goes" in investment matters.
The impact of the Citibank divestiture was evident in the fact that other institutions followed Harvard's lead and divested 57 million from the bank in 1981 as a protest against the consortium loan. The divestiture program has been effective in spotlighting the singularly oppressive nature of the South African regime and the key role played by American business in making apartheid economically viable. A decision by Harvard to weaken its ethical investment policy would be a signal t the South African government, and to transnational banks, that gilding a simple business loan to the South African government with humanitarian verbiage would be sufficient to legitimize direct subsidies to the state architects of apartheid. We should not overlook the domestic consequences of such a decision because retrenchment al Harvard will encourage a similar retreat at other universities. More ominously, over racism threatens once again to become a respectable feature of American politics and Harvard's capitulation on the South Africa issue can only feed the backlash against our own civil rights movement.
The corporation evidently thought it could pull off a power play in rescinding the present South Africa policy without provoking resistance from within the ACSR or the Harvard community as a whole. Fortunately, objections by committee members and a large student demonstration convinced the entire ACSR membership to postpone a decision on the back policy well after an open meeting. In the past, only mass student protest forced the Harvard Corporation to do the right thing. Perhaps this time, reason will suffice. I doubt it.
Patrick Flaherty is a student of the Graduate School of Arts and Science.