(Bloomberg View) -- If you think a boycott is wrong, should you boycott those who engage in it? That’s up to consumers and investors to decide -- but for governments, the answer is no.
The question arises in the context of the movement to punish and isolate Israel -- called Boycott, Divestment and Sanctions, or BDS. Governor Chris Christie of New Jersey signed a bill last week barring the state’s pension fund from investing in any company that supports the BDS movement. Illinois and Florida have also passed such laws, and other states have banned these companies from receiving state contracts.
Anti-BDS laws are an understandable reaction to a movement that is wrong on both moral and geopolitical grounds. Israel is a democratic nation in a region dominated by autocrats, and it is committed to protecting freedoms -- including religious expression and equal rights for women -- that its neighbors do not recognize. Israel is also America’s strongest regional ally in the fight against terrorist groups that strike at liberal democracies wherever they find them. Attempting to wage war on its people through economic deprivation is as foolish as it is dangerous.
But the best way to combat and marginalize wrong-headed political movements such as BDS is through popular opposition, not state law. Pension fund trustees, along with state legislators and governors, have a fiduciary responsibility to taxpayers. When political considerations displace financial ones in selecting investments or awarding contracts, taxpayers lose.
The Israeli economy is expected to grow at a rate of 2.8 percent this year, faster than is projected for both the U.S. and European Union. That’s one reason why, even as BDS has won new followers, foreign capital flows into Israel have increased sharply. Pension fund trustees ought to look askance at any firm that categorically rules out reaping such returns. But officials should not bar investment in those firms. That would lead governments down a slippery slope.
Governments may choose to divest from certain companies whose products harm citizens, or from certain countries with especially abhorrent governments. And elected officials are of course free to object to the policies or viewpoints of any company or nation.
But public officials should not discriminate against companies because of their political views or policies. Attempting to do so will become increasingly problematic as more and more companies engage in social investing and take positions on politically controversial issues. Consider a company that supports expanding abortion rights or gay rights. Should a conservative legislature prohibit that company from winning state business?
Government contracting and politics do not mix well. By all means, oppose the BDS movement vociferously. But do it without putting public dollars at stake.
--Francis Barry, Michael Newman
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