Those Divesting Presbyterians

So the Presbyterian bureaucracy is divesting the denomination's funds from Israel. This is precisely the sort of whacked-out PC lunacy that contributed to my conversion from Presbyterianism to Catholicism. On the other hand, it seems a bit over-the-top to play the anti-semitism card as a couple of bloggers (including the big guy) have done. It ought to be possible to criticize - even severely - Israeli policy without being labelled an anti-semite. Anyway, that's neither here nor there as far as I'm concerned. As a corporate law guy, what interests me is whether divestment campaigns work (in the sense of achieving their proponent's goals). The answer seems to be no.

The Effect Of Socially Activist Investment Policies On The Financial Markets: Evidence From The South African Boycott concludes:

We find that the announcement of legislative/shareholder pressure of voluntary divestment from South Africa had little discernible effect either on the valuation of banks and corporations with South African operations or on the South African financial markets. There is weak evidence that institutional shareholdings increased when corporations divested. In sum, despite the public significance of the boycott and the multitude of divesting companies, financial markets seem to have perceived the boycott to be merely a "sideshow."

The Stock Market Impact of Social Pressure: The South African Divestment Case in fact found:

Using the South African divestment case, this study tests the hypothesis that social pressure affects stock returns. Both short-run (3-, 11-, and 77-day periods) and long-run (13-month periods) tests of stock returns surrounding U.S. corporate announcements of decisions to stay or leave South Africa were performed. Tests of the impact of institutional portfolio managers to divest stocks of U.S. firms staying in South Africa were also performed. Results indicate there was a negative wealth impact of social pressure: stock prices of firms announcing plans to stay in South Africa fared better relative to stock prices of firms announcing plans to leave.

In sum, divestment may make activists feel all warm and fuzzy, but the evidence is that (1) it has no significant effect on the target of the divestment campaign but (2) likely does harm the activists' portfolios. My take? I don't want Presbyterians managing my portfolio.

Update: When the PC(USA)'s General Assembly voted to divest the denomination's funds from corporations doing business with Israel, many folks in the blogosphere jumped to condemn the action as anti-Semitic (including the big guy). At the time, it struck me that people were being too quick to play the anti-Semitism card. Playing that card whenever Israel comes into criticism is a problem for two reasons. First, it tends to silence legitimate criticism of Israel, which is no more perfect and no more immune from constructive criticism than any other polity. Second, over time, playing the anti-Semitism card every time somebody criticizes Israel tends devalue the moral authority of that card. (Remember the story of the boy who cried wolf?)

In an Opinion Journal column, however, Jay Lefkowitz suggests:

A more nuanced standard, and one that properly recognizes that legitimate criticism of Israel is perfectly appropriate, was articulated last year by Natan Sharansky. A member of the Israeli cabinet who for years had been a prisoner of conscience in the Soviet gulag, Mr. Sharansky defined one current expression of anti-Semitism by three features: the application of double standards to Israel, the demonization of Israel and the delegitimization of Israel.

Fair enough. A nuanced standard indeed. Applying it, Lefkowitz goes on to make a persuasive case that the Presbyterian divestment was anti-Semitic:

The recent action by the Presbyterian Church sadly satisfies Mr. Sharansky's test. The church has singled out Israel, alone among all the nations of the world, for divestment. It has demonized Israel's treatment of the Palestinians, and it has delegitimized Israel's right to self-defense.

The church is not calling for divestment of its $7 billion portfolio from China, despite China's denial of the most basic political and religious rights and its particularly harsh treatment of followers of Falun Gong. It is not condemning Russia, even though Russia's policies in Chechnya are by any human-rights standard atrocious. It is not even calling for economic sanctions against Syria or Iran, whose human-rights records for their own people are egregious and whose Jewish citizens are denied the basic civil rights and liberties afforded to all Israelis, including its Arab citizens, some of whom even serve in the Knesset.

Lefkowitz also notes:

In contrast to the action taken by the Presbyterian Church this month, the Roman Catholic Church has recognized that one-sided criticism of Israel can at times be so grotesque that there is no name to describe it other than anti-Semitism. And in a document ironically signed the same week as the Presbyterian General Assembly, the Catholic Church equated anti-Zionism with anti-Semitism.

As regular readers know, I left the Presbyterian Church several years ago and converted to Catholicism. These events are just one more reason I'm glad I changed teams.