A story from the daily broadcast of the Alaska Public Radio Network's "Alaska News Nightly" for 29 Jan 09
( http://media.aprn.org/2009/ann-20090129-02.mp3 ),
cites the introduction in the Alaska State House of Representatives of three similar bills to consider divestiture of Permanent and Retirement Funds "in foreign companies doing genocide-related business in Sudan". These would be companies providing military supplies and services to Sudan and companies that pay oil and mineral royalties to the Sudanese government, for example. Governor Sarah Palin, whose administration last year opposed a similar bill for being too broad, says now that "...investment in companies with ties to the repressive regime in Sudan is inconsistent with the moral and political values of the people of Alaska."
Present State of Alaska law, under the Prudent Investor Rule, forbids divestiture of assets for any reasons other than those which strive to maximize return on investment. In other words, Permanent and Retirement Fund investors cannot consider issues outside economic gain or loss. Permanent Fund Executive Director Mike Burns dismisses consideration of any other factors as "social investing" which "carries the risk" of "expanding non-financial goals" for the Fund.
The case is often made that corporate organizations dedicated to business should base their decisions exclusively upon financial considerations. No surprise there. Of course, not a few observers would question that this must be necessarily so. Any debate between the two positions is likely to be heated, but that is not the question to be addressed in this entry, nor are related matters pertaining to the private and public roles of large corporations and companies in a world where the effects of doing business globally impinges upon the lives of people in so many non-economic ways. Those issues would be grist for a different discussion than this one.
No, I wish to take the discussion in a different direction--toward the role of a state in managing the investment of its liquid assets--assuming we are going to continue to affirm a necessity for states, for governance in economic and social affairs, and the ownership of economic assets by states. The goals of governments are very different than those of businesses. This key insight begs for emphasis: The goals and purposes of government organizations are very different than those of business organizations. (This is why it makes almost no sense at all to hear a candidate for elective public office--often coming to politics from a business career of sufficient success to afford the candidate scope to seek a second career in politics--tell us he or she intends to "run the government like a business." This sort of thing sounds earnest and impressive, but fails to understand that governments are very distinct entities from businesses.)
Governments, by their very nature, are commissioned to concern themselves with the well-being of people. Looking beyond the relatively narrow question of economics, government decision-makers and planners must necessarily take into account a wide range of social, environmental and legal issues, pertaining to the most local to the national--and even international. Surprisingly to some, this wide geographical scope for thinking is not limited only to nation states, but often must enter the awareness of even the most local of governing bodies.
Governments, unlike businesses, must be more concerned with the effects of competition upon the less fortunate than with successfully prosecuting strategies for successful competition. Governments must provide for commonly accessible infrastructure available for use by businesses as well as people. Governments must consider the direct and indirect effects of business activity—externalization, transportation and communication bottlenecks, land use, waste disposal and the like. The “business” of government is NOT the business of business. Governments (at least wise and enviable ones) are (and ought to be) concerned with the wide-ranging and complex issues of peoples’ well-being rather than the narrow goal of profit.
Accordingly, it makes complete sense for a government to proactively consider the effects upon peoples’ well-being of its investments, even if to do so demands significant financial sacrifice. Certainly, when the consideration of non-financial goals results in a reduction in return on investment amounting to fractions of a percent, the case in favor of embracing what Permanent Fund Executive Director criticizes as “social investing” should be open and shut. (Having asserted this, I should hasten to point to the observation that each of the present bills supported by the Palin Administration are written to narrowly constrain the basis for Permanent and Retirement Fund divestiture, and that a former bill was not supported because it was construed to be too broad.)
During the discussion of the bills now before the Alaska State House, Democrat Les Gara of Anchorage said, “... we should draw the line at genocide.” (“Genocide” has been a designation attached to the activities of the Sudanese government by the UN and the US Congress, and affirmed by both Presidents Bush and Obama.) State of Alaska Revenue Commissioner Pat Galvin said, “... the State has a moral imperative to act.” Granting that there is at least one kind of action at which we are committed to “draw the line”, and against which we have a “moral imperative to act", the question naturally arises: having admitted the necessity for divestiture in concept, are there any other sorts of actions from which we might flinch?
I suggest there are. This may not be the moment to attempt a comprehensive list, but certainly any designation of actions worthy of divestiture would include actions on the parts of governments and corporate entities that seriously impinge upon the social and economic well-being of a region’s people. If nothing else, to understand this is to understand that the label “genocide” often comes late to a conflict between unequal opponents, and is often preceded by decisions and manufactured events, though falling somewhat short of the definition of overt genocide, nevertheless have profoundly negative (even deadly) consequences for the people involved. I am ashamed to admit that history tells us of instances when US corporations were instrumental to just these sorts of events.
Putting a “tight fence” around the “risk of expanding non-financial goals,” upon closer inspection, turns out to be the opposite of what a government should do, whether or not it seeks a place of prominence in world affairs.
(Some might argue that though the case for “social investing” can be made, people far away in Sudan shouldn't concern us here in Alaska—that “social investing” must necessarily strive to be local. Such a declaration--if sincere--of allegiance to locality in a world of increasing globalization is laudable. In a world where money rapidly flows from continent to continent in an eyeblink, though, it makes little sense to understand multi-billion-dollar fund investments and divestitures in terms of any particular locale. The locus of concern for those devoted to relocalization presently lies in other directions.)
It's a wonder that something which has been determined as genocide has no other response than diplomatic discussions and economic sanctions including investment divestitures. While the goal of investment divestitures are worthy the tool is ineffective and nearly worthless. Likely even now much of the economic activity with Sudan is via straw agents or countries such as China that don't care. For example say Microsoft indicates they are not doing business in Sudan. Microsoft could even have a good policy in place with active review of its global business dealings. Yet you can be sure most of the PC in Sudan will have windows running on their computers.
ReplyDeleteMcDonalds shouldn't serve coffee to child abusers but the difficulty is how do they even enforce the policy? Crimes, even committed by nation states needs to be prosecuted by direct means or effective economic isolation.
I would agree with you, anonymous, that much more needs to be done to confront the genocide in the Sudan than divestment. (Too bad the Sudan doesn't sit on huge known reserves of petroleum. Then nations like the US might become interested.)
ReplyDeleteI would distinguish, though, between actions on the part of governments and investors against nations and companies, and actions against individuals, for the latter certainly would bring with them weighty questions of due process.