Divestmentgate, Ctd.

This may be the first time Perlblog has inspired real ire on campus, and the heat is coming from the left (which is ironic if you’ve read most of the other items in this space).

To backtrack, earlier this week I wrote a post about how Wash U’s nascent “divestment” movement — which seeks to lobby the university to rid its investment portfolio of fossil fuels — is, to put it bluntly, silly.

My argument was basically A) divesting the endowment of fossil fuels would cost the school money, so if you want to do that, you need to recognize that the school may not continue to spend money on things you do like and B) good cause or otherwise, students shouldn’t have any mandate on the school’s investment portfolio.

I simply argue that the endowment allows the university to have stuff — top professors, the DUC, robust financial aid packages, etc. Stuff that costs money, and our tuition dollars do not cover it all. We spend time asking alumni and parents to donate, and we also have a diverse investment portfolio for our endowment so that we can earn some money to buy that stuff (we are a non-profit). We all like buying nice stuff because it makes the university more attractive to other people, thus increasing the chances we’ll get more money to buy nicer stuff.

The green movement on campus, while well-intentioned, doesn’t seem to be able to grapple with notions of cost. That is, if you think divestment is a good idea, you need to be willing to recognize that the university is going to potentially have less money to spend on things you may enjoy on a daily basis, such as your financial aid.

Bonnie Frieden’s response to my post confirms my analysis. She spends the bulk of her response outlining climate change’s wrath instead of engaging with my argument, which really has nothing to do with the environment but everything to do with economics. Global warming is very bad — no disagreement there. In fact, I wrote about this in the last issue of WUPR. In my divestment piece, I even advocate for a carbon tax that would level the playing field and diminish Exxon’s profitability, reducing Wash U’s financial incentive to invest in things that are destroying the earth.

But those tasked with managing the endowment’s investments have a fiduciary responsibility to its shareholders, so they invest in a lot of different things — including fossil fuels — in order to maximize financial returns. Unfortunately, fossil fuels are decidedly bad for human kind. But as it stands, profit margins are pretty good, and it helps grow the university’s endowment to the point where they can buy us things like the brilliant contraption that allows the DUC soda machine to make perfectly textured ice.

I am speaking in generalities here, because our interest in, say, Exxon doesn’t make the university all that rich just by itself, but if you think that Wash U’s advisers know what they’re doing, fossil fuels clearly have some monetary benefit — or else they just wouldn’t be in our portfolio. If, on the other hand, you think the fossil fuels are not profitable, then you also think Wash U’s financial advisers are bad at their jobs.

But let’s assume for a second that they are good at investing, certainly better than me and ” Fossil Free Wash U.”

The ire seems to come from the fact that Fossil Free Wash U believes that I have improperly characterized their proposal in my original post. I use some pretty colorful language about Dutch wind turbines, obviously hitting a nerve. They argue that the movement doesn’t necessarily want Wash U to invest in green energy, only that it should divest from fossil fuels and find other profitable enterprises (and there are many).

Fossil Free Wash U likely recognizes that fossil fuels are profitable, but advocates that we shouldn’t invest in them because of moral/environmental reasons. This is really the thrust of Frieden’s post. We should instead invest in other things that don’t make us feel bad about ourselves or hurt humanity. What other things? Frieden doesn’t tell us. My point about green energy was only meant to illustrate that the movement may want to try and bolster other technologies or push for a carbon tax to reduce fossil fuel profitability instead of this divestment business. But at least the school of thought about the ethics of investing entertains the idea that the university might in fact lose a little bit of money through a decision based on morality over economics.

Fine, you say. That’s fine. We shouldn’t make money off of fossil fuels because it is wrong, and I don’t care if the university loses some money. In fact, we’ll be better off in the long term because the decision will bring good PR, encourage other universities to divest, and we can sleep better at night.

This is an OK opinion to have yourself, but I’m still unconvinced about signing your petition.

My follow-up question is simply: What are the consequences? If we have less money, that means less stuff. We agree there, I hope. So what stuff would go? DUC smoothies? Your financial aid? Cut half-and-halfs in half? These questions remain unanswered in Frieden’s polemic.

Here’s the only sentence of Frieden’s well-written post that actually engages with my original argument:

If divestment would necessitate budget cuts, which is certainly not a given, we would never support that those cuts come from financial aid.

Not a given? You are asking students of this university to petition the school to divest money from a profitable enterprise, thereby risking that the university may have to sacrifice other things it wants to buy. This is how money works! Rather than it’s “not a given,” I’d prefer Frieden say something along the lines of: “Hey, we’ve done our research and divesting is going to cost the university, say, $10 million. We think that, regardless of that fact, this is super important, so we’re advising the university to cease construction on the east wing of the new business school. It was a cool idea, but that section is going to have to go.”

At least then something is on the table, and we understand that actions have consequences.

If you think that the endowment and things like financial aid are not intrinsically connected, you are playing an accounting game. Harvard is able to give away better financial aid packages than most schools because they have a $31 billion endowment. We have a $5.3 billion endowment (not too shabby), and so we can offer pretty great aid too. To be sure, if we had a $0 endowment, financial aid packages would be different. I’m not saying the university is writing you a check straight from the endowment, and I recognize that certain scholarships and grants are endowed in a financially protective manner, but like anything else, money comes in and money goes out. More money = nicer things. That’s just how it works.

So, if the first main point of my article is that A) things cost money and B) the decision to divest may mean Wash U has less of that money, meaning C) that things we enjoy may have to go — Frieden doesn’t address this quandary at all. She just says she doesn’t support those cuts coming from financial aid. Well, neither do I, but if they’re asking the university to potentially earn less money, don’t you think it’s a little funny that in the same breath, they would say, “don’t take it away from our financial aid!”?

The second main point of my article was that it is incorrect to think that students should have any mandate on Wash U’s investment portfolio.

The underlying rationale of their movement is that if a student disagrees with the morality of a certain stock in Wash U’s book, she should lobby the university to divest from said stock (e.g., the vegetarian club, opposed to the egregious sale of meat, should tell Wash U to divest from Schnucks).

That’s pretty much the same argument that the pro-life movement uses against Planned Parenthood. Planned Parenthood offers an array of medical services, including abortion. The pro-life movement often petitions the government to stop funding Planned Parenthood because it provides that service, the thought being the government shouldn’t indirectly fund abortions.

It’s the same logical connection Frieden makes, but I’m not so sure Fossil Free Wash U would advocate that the university divest its portfolio of health care companies that offer abortion coverage for their enrollees. Health care companies make money, offer lots of different services, and we have no problem investing in them even if one of those services ignites moral opposition among some of the beneficiaries of this endowment fund. Why? Because we recognize that not everyone has to agree with every stock in Wash U’s portfolio to benefit from its growth. Moreover, we recognize that if everyone got some say in the investment portfolio, we would have significantly fewer investment options because everyone is pissed off with something, some industry, somewhere.

Fossil Free Wash U seems to think divestment would be efficacious — symbolically, environmentally, or both. I don’t really know.

But if my snarky, colorful language offended Fossil Free Wash U, I apologize. Snarky, colorful language is kind of my thing, but it’s something I’m working on. Also, if my blogging about something I’m interested in without interviewing the Fossil Free Wash U cadre upset readers, I am sorry. This is Perlblog, where I blog about things I am thinking about. I didn’t write a news item, so I didn’t interview anyone other than my own brain.

Thus, here is my recommendation to Fossil Free Wash U, whose cause they seem to feel I have undermined by having the audacity to blog about a campus political issue on a campus political blog: Get very specific. Don’t tell me divestment isn’t going to cost money. Don’t even tell me that it’s “not a given.” Tell me what it is going to cost, but then tell me that it’s well worth it. Tell me what I’m going to have to give up, but then tell me why it’s important that I give that up. Frieden does a better job with the latter than the former.

So until they break the cost issue down — which, I suspect they now will — and then convince me that it’s a good idea for students to hold sway over Wash U’s investment portfolio, I’m not signing any petition.