Why Ivo Welch Will Fail

After reading Ivo Welch’s op-ed, “Why Divestment Fails,” in Saturday’s New York Times, I sat down to write a response called “Why Divestment Works.”  Welch is an economics professor at UCLA, and he was writing about why the victory of Stanford students last week, convincing the school to divest from fossil fuels, would not help to promote cleaner energy or stop climate change.

His contention is based on “an academic study, [in which] my co-authors and I found that the announcement of divestment from South Africa, not only by universities but also by state pension funds, had no discernible effect on the valuation of companies that were being divested, either short-term or long-term.”

So first of all, even if that’s true, something caused Polaroid to leave South Africa in 1977 (only seven years after African American employees made it the first major target of a disinvestment campaign in the U.S.), Chase Manhattan to end loans to the country in 1985, GM and IBM to pull out in 1986, etc., etc.  That something may have been the general instability of the country by that time, but the timing was suspiciously close to the wave of college and university divestments triggered by campus activism between 1984 and 1987.

“The wide ostracism may well have weighed on President F. W. de Klerk’s mind. But it was not the economic effect of the boycott that forced him to the table,” Welch writes.

The fact is, we all know, that the impact of divestment is not primarily economic, either on the companies or on the governments that are its targets.  Divestment and boycott campaigns largely work through “shaming and blaming” and they are very good at it.  Take, for instance, the recent short-lived campaign against Mozilla, after they appointed a CEO linked to anti-gay activism.  It goes without saying that the threat to Mozilla of people boycotting its free service was not economic in the immediate sense.  Companies generally don’t want a bad image, and if their image gets bad enough, it’s worth it to them to try to distance from whatever the bad behavior is.  Anyone who has watched “Have You Heard from Johannesburg” (and if you haven’t, you have to) knows that South African officials were worried enough about the boycott/divestment threat to spend quite a bit of their own money bringing business leaders on junkets to South Africa so they would go home and tell their buddies how “complex” the situation was.

Now admittedly, it’s going to be a bigger deal to get oil companies to stop producing oil than to get them to pull out of South Africa, which was hard enough.  But that does not mean that the student activists are wrong to demand that the money they’re giving their schools (often at great cost to themselves) not be invested in technologies that are killing their futures.

As I delved into the 1999 research which now makes Ivo Welch a sought-after debunker of the fossil fuel divestment movement, I discovered a small cottage industry of social scientists using graphs and regressions to prove that student protest is ineffective, and they’re specifically targeting the anti-apartheid movement because it’s the most recent successful, large-scale campus-based social movement.  A lot of this research is done by a Stanford business professor named Sarah Soule, whose 1995 doctoral thesis argues that student protest was not effective because “Educational institutions which hosted shantytown protests had slower rates of divestment policy adoption than did those institutions without shantytowns.”  

Ten years later, Soule tempers her dismissal of the movement, concluding, “certain kinds of divestment policies were, in fact, impacted by the presence of a student movement. In particular, universities appear to have responded to shantytowns by adopting partial divestment policies, however full divestment policies were driven by entirely different factors, most notably a higher proportion of black students and the presence of Black Studies program or department.”

Her conclusion, I think, points to a fundamental flaw in this kind of research.  While it’s certainly useful to try to determine whether protest has a verifiable effect on policy, political decision-making is not a virus in a test tube.  You can’t simply introduce protest to a naïve mouse and see how it responds.  I would assume that campuses with a lot of Black students and Black Studies departments were probably for a lot of reasons more likely to be open to the arguments for total divestment.  This is borne out by the details of Soule’s research, which finds that smaller liberal arts colleges were more likely to pursue total divestment based on moral suasion (although I can attest that it did not happen without student activism), while larger schools with larger portfolios tended to be more motivated by concerns about the cost of divestment and enacted partial divestment only in response to student protest.  Thus, it’s clear that the only way to really measure the efficacy of protest would be to measure the pace of divestment at schools which had protests with similar ones that did not.  That could prove harder to do because protest was viral (even though protest is not a virus either), so similar campuses probably had similar protests.

My first question when I saw Ivo Welch’s piece was, “Who’s paying him to discredit divestment?”  I couldn’t find an answer to that; his old website from Brown says “there are almost no grants available for academic finance research.”  That doesn’t mean no one is, but at least in Sarah Soule’s case, I have the nagging sense that she’s genuinely trying to shed light on the process of social change.  Nonetheless, when Welch writes in the New York Times, “Morals matter. Would I have divested from South Africa? Yes, but I would have had no illusion that doing so would have made a difference,” he is basically a softer version of George Will, who wrote in 1985, “the current campaigning against South Africa is a fad, a moral Hula Hoop, fun for a while.”

But the students should take heart.  Those who try to stem a rising tide of campus activism with calls for a modulated inside strategy usually fail.