Can divestment free refugees?

Can divestment free refugees?

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The issue of refugees detained on Manus Island (PNG) and Nauru is again attracting resistance. Anti-deportation actions have had some partial successes, while #LetThemStay trended following the refusal of Brisbane doctors’ to sign off on the deportation of sick children. In late April, the Papua New Guinean Supreme Court ruled that the Manus Island detention centre was unconstitutional.

Living in appalling conditions, the plight of refugees has attracted public sympathy in Australia from diverse groups ranging from churches to the far left. Each implicitly or explicitly holds some view on the best method to help refugees. Their solutions range from bringing the refugees to Australia – sometimes leaving the question of detention itself unanswered – to unconditionally releasing these asylum seekers into the Australian community with full legal and economic rights.

One strategy that has been put forward by a layer of activists is that of divestment, largely out of frustration that other strategies do not appear to be working. Divestment is the opposite of investment: the withdrawal of capital (raised by share sales or loans) from companies that profit from the government-created detention market.

These companies include Broadspectrum (Transfield Services renamed themselves following unwanted attention), Serco, International Health and Medical Services, Wilson Security and Decmil. Usually, the aim of divestment is to force indirect investors – generally large institutional investors such as superannuation funds – to withdraw all funds from companies that make profits from the detention industry. Implicitly, the aim is to make direct profiteering from detention impossible by indirectly driving up the cost of acquiring the capital necessary to achieve this.

Some divestment activists have suggested that the example of HESTA is one to follow. HESTA, the industry superannuation fund for health and community services workers, withdrew its 3.5% stake – worth $23 million – in Transfield Services on 18 August 2015. NGS Super (the fund for private school teachers) also sold its $5.5 million stake on 25 August, while some smaller retail funds (First State and Christian Super) also agreed to divest.

While most would agree that no company should profit from prolonged state-sponsored torture, a simple examination of stock prices shows the uphill battle that divestment strategies represent.

On 19 August 2015, Broadspectrum shares were worth $1.16, up one cent on the previous day when HESTA divested. On 24 August, the day before NGS divested, the share price bottomed at 93.5 cents, but rocketed to $1.035 the following day. It continued to climb to a peak of $1.17 on 31 August. After dipping to low of 85 cents in early December, from early 2016 the price hovered around $1.25. In the last few months the price has risen even further to around $1.50.

Divestment has, at best, a very limited indirect impact on companies that invest in the misery of refugees. The Broadspectrum story shows that other speculators simply step into the vacuum – and sometimes make windfall profits in the process!

That is to say, unless banned (an unlikely proposition!), all such detention investments will simply shift sideways to another profiteer. In this sense, divestment strategies are only viable if such industries are fundamentally unprofitable. Yet profitability is essentially underwritten by the government policy of mandatory detention. And there will never be a shortage of willing profiteers under capitalism – all the more during a global crisis characterised precisely by a shortage of profit-making opportunities.

While most of those who promote divestment strategies are extremely well meaning, their energies are unfortunately misplaced. Primarily what is needed is a political alternative to the parties that support mandatory detention. Such an alternative could win widespread support if it explained that there is more than enough wealth in society to provide jobs, homes and services for all, including refugees. The issue is merely how and where that wealth is distributed.

Mass protests and direct action are the best ways to both pressure the government and have an impact on companies in the detention industry. These actions can be made all the more powerful with the participation of workers in the public sector and the detention industry themselves.

Divestment strategies can sometimes inadvertently give the impression that change can be made if only the system is managed better. It is actually the profit driven system itself that’s at the heart of the reason refugees are forced to flee war and persecution in the first place.

By Thiago d’Leones