Kalven and mobs

The logic behind pressuring the University to divest from controversial firms is flawed.

By Jeremy Rozansky

I initially regarded the Senior Class Gift (SCG) with suspicion. I’m not sure my four years have been worth the more than $200,000 this will end up costing my family and me, so why voluntarily spend another $20.12? We will never actually know how much positive peer pressure it would have taken for me to give, because I did, inspired by the recent theatrics of the Students for a Socially Responsible Investment Committee (SSRIC).

With posters and a petition, SSRIC is trying to get the Class of 2012 to boycott the annual SCG and withhold all giving until the University changes its investment policy to one that is “socially responsible.” Some have pointed out that the SCG doesn’t actually fund the endowment and in fact yields immediately expendable proceeds. SSRIC counters that the SCG is meant to inspire a lifetime of giving to the endowment—which is true.

The problem is not that SSRIC has not confused their target with the SCG, the problem is that “socially responsible” investment is a horrible target, an issue that could obliterate the Kalven Report—our institution’s second most salutary innovation, behind only the Core—for no real gain.

I approach this issue with two assumptions, which some might find altogether too radical. First, investment is more strategic and thoughtful than rolling dice. Second, those people who invest for the University of Chicago are not wicked.

If one combines these two assumptions, one must assume that the reason the U of C invests in HEI Hospitality, a company that avoids hiring unionized labor and pays lower wages than some advocates think the minimum should be, is not that the group who manages the investments picked HEI out of a hat or gets some satisfaction from the low wages of others. Rather, they invest in HEI because they think HEI will yield better returns than other investments. They reason that if the University were to invest in, say, an organic farm, the return would be worse. (And they tend to be pretty good, outdoing Harvard and Yale by five percentage points in the recession year of 2009).

The question, then, is what would we gain as a university in exchange for the potential cost to the endowment with a new policy. The most obvious possibility is that the company or nation we divest from will see that their policy is costing it investors and will make changes accordingly. Assuming the questionable policy was unjust, this would have social benefit.

That, however, is a major assumption. What is the level of health insurance that an employer must provide without violating the laws of cosmic justice? How much pollution is worth the reduction in heating expenses for families in poverty?

These are tough controversies, but fortunately society has a way of dealing with them. Our system of popular government makes and enforces laws concerning work environment and pollution. The two companies that SSRIC mentions, HEI and Arch Coal, have, as SSRIC actually notes in its petition, lost court cases and been forced to alter their practices, or have been directly fined by the federal government. Our deliberative systems have declared certain policies unjust, and have allotted and enforced what they feel are sufficient penalties. Perhaps those penalties should be more severe. If so, SSRIC has every right to lobby for that, but to hijack the University’s endowment to punish the business practices of others amounts to a mobocracy of the bleeding hearts.

A university, however, is designed to educate its attendees, not to decide which business practices are just and unjust and then mete out carrots and sticks. And how exactly will the U of C decide what is just and unjust? There are people on campus who oppose any minimum wage and those who support one several times larger than the current one. Someone’s opinion is always going to be marginalized.

A committee of administrators, faculty, and students formed to address University investments would merely draw the most gung-ho activists, who have the time and passion to regulate them. Combining power and passion often causes restraint to dissipate. One can imagine a situation in which the empowered body chooses to divest from Israel as, for example, Evergreen State College has done. SSRIC would like to conceive of a Socially Responsible Investment Committee as only targeting issues with a clear moral consensus. But the U of C should have taught them that more things are contentious than they realize.

Removing the Kalven Report and investing in companies and nations that a group of “socially conscious” people have blessed would cause campus political fights to be fought with much higher stakes, thereby increasing their ferociousness—a particularly unpleasant result.

But this line of argument is, in a way, secondary. As my two assumptions instruct, the University of Chicago invests in what it invests in because it expects from them the best possible return. I am a fundamentals major, not a finance guy, but it seems likely that if the University chooses to divest from a worthwhile investment, another investor will merely replace that investment—little penalty will be felt by the company. In the end, all we will have done is created a campus brouhaha, lost resources, and made a small group of activist students feel purified of the taint of benefitting from business practices they detest. That is hardly a trade I’m willing to make.

Jeremy Rozansky is a fourth-year in the College majoring in fundamentals and political science.