Chan Chung has penned an op-ed in The Triangle titled: “You can rest now. Give Up on Divestment.” The article proposes creative alternatives to the strategy of demanding American universities divest from Israel, including that student protestors demand that “their universities…use the leverage they have from being shareholders to steer companies away from Israel.” Chung’s proposal that university endowments cease purchasing corporate bonds from entities directly supporting the Israeli war on Gaza, toward the end of restricting the flow of capital to the arms industry, is thoughtful and ought to be seriously considered by protesters. Yet, their dismissal of divestment as an effective or legitimate political strategy misses the economic and moral argument underpinning the American student movement for Palestine.
Chung’s understanding of public equity markets betrays a basic misunderstanding of how a corporation’s publicly traded value affects its actual finances. “I am also confused,” they write, “at what harms there are [sic] in owning certain stocks.” They argue further: “In order for the endowment to rid itself of stocks, someone else must buy. The harms of owning the stocks have not disappeared; they have merely shifted from one institution to another.”
What the piece neglects to mention is that the laws of supply and demand dictate that selling a large quantity of stocks spontaneously depresses share price. This, in turn, depresses a company’s valuation, making it more difficult for said group to attract further investment.
Moreover, companies often use their stock as a sort of currency; in many cases, companies do not sell their entire ownership during an Initial Public Offering (IPO), and instead retain equities for sale at a later date. If said company’s fortunes are good, it can sell these additional shares of stock to raise cash for various purposes at higher rates than initially specified in its IPO. When a stock price falls, the company must sell more shares to break even.
Likewise, the personal fortunes of company executives are often tied to the company’s stock price: Executives’ pay is often linked, at least in part, to the stock’s price. If a stock price is falling, they may miss out on bonuses or even suddenly find their jobs on the line. In the event of a sudden sell-off by university endowments, many Israeli corporations would find it increasingly difficult to conduct business as usual in the midst of a 56-year-long illegal occupation and a plausible genocide.
Regardless, the economic effect would be marginal compared to the real object of divestment, which the article elides completely. As Columbia University economist Adam Tooze explains, the real object of divestment is not to harm the Israeli economy: it is to make a statement by saying that American universities will not put the force of their internationally recognized brands behind Israeli apartheid and plausible genocide. This is in hopes of breaching a broader bipartisan consensus around support for Israel, which, protestors hope, might translate to the end of American support for Israeli crimes against humanity. Contrary to Chung’s assertion that “previous divestment efforts from things like South African apartheid have failed,” it is precisely this chain of events—university divestment breaking a political stalemate, and forcing a national reckoning on complicity with crimes against humanity—which sparked the passage of stiff economic sanctions against South Africa in 1986.
It is true that selling Israel-linked equities requires universities to find buyers. Yet the point is, again, to send a political message. From an activist’s perspective, the political value of internationally recognized universities divesting from Israel, citing human rights concerns, would be tremendous. American universities play an enormous role in networks of international knowledge production, political influence, and elite formation. They are internationally recognized and internationally influential. Pension funds, mutual funds, and asset managers may manage billions in capital, but are not.
The piece’s final contention is that the potential costs of divestment to university finances would reduce Drexel’s ability to benefit from its endowment. “Endowment funds pay for many things, and a loss of endowment income would mean tuition increases,” writes Chung, helpfully adding: “No one wants that to happen!” These assumptions are deeply questionable.
First, the assumption that divestment would financially harm Drexel rests on seemingly nonexistent evidence. The limited evidence that does exist suggests, in fact, to the contrary: Israel’s economy has shrunk an incredible 20 percent since the beginning of the offensive against Gaza, and shows few signs of recovery. Israel’s civilian labor force has been redeployed toward combat in a seemingly endless war perpetrated by a government of extremists; at the very minimum, Israel expects this state of affairs to continue throughout 2024, and lacks even the semblance of an exit strategy.
A summative financial judgment of the Israeli economy is not just an abstract exercise; one must hardly rely on the analysis here. Ratings agencies that evaluate the bonds issued by governments make precisely such assessments all the time. Despite Chung’s extraordinary confidence in Drexel’s Israeli investments, their judgments of the Israeli economy’s long-term position, in light of the Gaza forever war, inspire very little confidence. On Feb. 9, explicitly citing economic damage caused by Israel’s war on Gaza, Moody’s Investors Service downgraded Israel’s credit rating from A1 to A2. It is the first time the company has done so.
Likewise, Chris Marsicano, an assistant professor of education studies at Davidson College, told PBS that research has shown that divestment in the fossil fuel context had “at worst, a negligible effect for institutions like Stanford and Dayton and Syracuse and, in many cases, may have had a positive effect.”
Such evidence is, admittedly, provisional, and students are demanding Drexel divest from far more than its Israeli holdings. Yet even granting the premise that divestment would harm Drexel financially, as Oliver Hart, an economics professor at Harvard, and Luigi Zingales, a professor of finance at the University of Chicago, write in Compact, “Students need to be confronted with moral questions, such as whether…being associated with defense contractors is worth the tuition discount.” There is no definite answer to how Drexel ought to balance its commitment to domestic and international forms of social justice—American college students ought to have these debates openly, rather than being met with suspension and police violence. “We must create spaces,” Drexel’s President John Fry writes, “to listen to one another and learn from one another.” But divestment is, contra Chung, politically effective, economically consequential, and likely financially inconsequential for Drexel itself. It is therefore seen by protestors both as an effective political strategy and a moral responsibility.