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On Divestment

Mustafa G. Dafalla

MIT’s Advisory Committee on Shareholder Responsibility is currently considering the issue of whether MIT should divest from Sudan or not.

This column is not intended to be a history lesson on the people of Sudan or an in depth account of the conflict. Its purpose is much more narrow in scope and addresses the issue of divestment specifically. When discussing divestment, there are two cases we must explore: first, the issue of divestment in general, and second the narrow nature of the divestment policy which only targets “offending” companies.

To begin with, let us look at divestment in general. Some may argue that divestment would send the government of Sudan a strong humanitarian message and thus aid in influencing their policies. The only historical divestment campaign that proponents use as an example in favor of divestment from Sudan is the campaign aimed at ending apartheid in South Africa.

However, after closer inspection we see that even in this case such measures had primarily negative effects. In his speech, on behalf of the former South African President F.W. de Klerk, to the Institut Choiseul, David Steward outlines how sanctions and divestiture not only harmed the people it was intended to help, but also strengthened the oppressive regime’s hold on the government. The entire speech can be found at: http://www.fwdklerk.org.za/download_speech/
04_06_14_DWS_Institut_Choiseul_S_PDF.pdf.

Further, examples of the negative effects of divestment — which are similar to economic sanctions — are plentiful. For example, in Iraq after the first gulf war, UNICEF reported that economic sanctions were directly responsible for the deaths of up to half a million children. In addition, the United States has had an embargo on Cuba since 1962, yet Cuban policies have not changed. If anything, they have been less favorable. Sudan faced sanctions during the 1990’s and still faces limited economic sanctions. The sanctions have done nothing to allay the civil war between the north and south or the subsequent Darfur conflict.

This demonstrates the overall negative effect of divestment. Let us look more closely at the concept of a targeted divestment supported this past Monday by the Undergraduate Association. We will ignore the fact that the proponents of this policy have never actually been presented with a list of what companies MIT currently invests in, nor what companies MIT ought to avoid investing in — we don’t even have a definition for what “targeted” means. Does it mean that we should divest from companies that include genocide in their business model? Of course. We should not be investing in these companies in the first place. Such a position is not unique to Sudan. Clearly MIT shouldn’t do business with arms companies, whether they are Chinese arms companies operating in Sudan or US arms companies that supported the warlords of Somalia. If, however, “targeted” means that we should broaden the scope of divestment to include oil companies operating inside the country, then we are entertaining a proposition that will potentially destabilize the already very fragile economy, as the oil sector is primarily responsible for halting inflation in the country.

In conclusion, although well intentioned, the proposal will either have deleterious effects on the people of Sudan, or will be so narrow that it will have no effect at all. In either case, the campaign for divestment is seriously flawed.

If you agree with the foundation of this column, please demonstrate your support by signing an online petition that can be found at http://www.petitiononline.com/invest/petition.html.

Dafalla is a member of the class of 2009.