In recognition of the virtual unanimity of anti-apartheid forces on this issue, many prominent American organizations have endorsed corporate withdrawal. They include the National Association for the Advancement of Colored People, the Congressional Black Caucus, the AFL-CIO Executive Council, the New York Times, and the National Council of Churches.

Supporters of the Corporation's position hope to diminish support for divestiture by arousing fears over the cost of such action to the University. We have analyzed Harvard's estimates and have found them grossly exaggerated.

There are two types of costs associated with divestiture: one-time costs (brokerage commissions and short-run price effects) and recurring annual costs. Harvard estimates the one-time costs at $5-15 million. But even the "low" estimate of $5 is based on inflated brokerage commissions. Moreover, no one is calling for instantaneous divestiture; if the stocks were sold over a period of a year or so, the cost would be considerably less. In any case, Harvard normally turns over 20-30 per cent of the portfolio each year. More realistic estimates, based on Stanford University's figures for one-time costs, lead to a sum under $1 million.

The primary recurring expense involves so-called "opportunity costs." This is the potential lower profit which comes from avoiding stocks of companies which operate in South Africa. Of course, this cost is highly speculative--Stanford did not even venture to estimate it. Harvard's estimates of $1.8-6.8 million annually for recurring costs are based on a Princeton study of the stock market in the years 1953-1968. This study demonstrated the overall greater profitability of investment in the large multinational corporations, which comprise the bulk of U.S. business interests. However, in the ten years since 1968 the multinationals have not fared nearly so well. Many investors now prefer to invest in other stocks, or in real estate, government bonds, etc. It is far from clear that a carefully thoughout investment strategy motivated by non-investment in apartheid would reduce Harvard's income at all, let alone by the amounts Harvard cites.

The other recurring expense is the possible detrimental effect on gifts. Again, this is highly speculative. In the past, Harvard has adopted policies which were not popular with conservative corporate executives--for example, abolishing ROTC during the Vietnam War, or refusing to fire a tenured faculty member and former communist during the McCarthy period. In short, we think the financial harm from taking aprincipled stand has been greatly exaggerated.

The Corporation has consistently refused to adopt a general policy favoring corporate withdrawal or, for the matter, non-expansion of existing business operations. Instead, it has chosen to evaluate the record of each corporation separately, weighing the individual benefits to certain black South African employees (in the form of desegregated facilities, opportunites for promotion, etc.) against the overall social burden to the wider black population. This has been both in theory and practice a woefully inadequate response.

While a case-by-case approach may appear on its face to be a fair and rational one, in practice it has been a prescription for obfuscation and delay. First, the entire process is dependent on data and information the corporations themselves provide. While most major companies provide information on employment practice, few (if any) are willing to provide information on taxes paid to the South African government, sales of strategic products and services, etc. In fact, corporations are precluded under South African law from disclosing sales to military and law enforcement agencies.

The Corporation in its April 1978 report promised to support corporate withdrawal resolutions where companies fail substantially to disclose material facts. Now, however, the Advisory Committee on Shareholder Responsibility appears content to proceed with the case-by-case review on the basis of employment practices data alone. This belies a conservative and deferential attitude toward corporate management.

The fundamental flaw underlying the Corporation's analysis is its failure to recognize that multinational corporate activity in South Africa provides the economic base and technology upon which the apartheid system depends. American firms in particular dominate the automobile, energy and computer industries, providing a substantial share of the military and police vehicles, refined petroleum, and data processing equipment essential to the efficient administration of apartheid. Furthermore, it has been estimated that American companies pay three times as much in taxes to the South African government as they do total wages to their African employees.

It is perhaps difficult for many Americans to understand that corporations in South Africa have not been, and will not be, a force for fundamental change. First, it must not be overlooked that multinational corporations locate in South Africa in large part because of the opportunity to earn a rate of return far in excess of that available in their home countries. These extra profits are in turn made possible by the existence of a large, non-union, underpayed non-white labor force deprived of elemental civic, political and legal rights and protections.

Second, South African laws, customs, and trade union work rules restrain whatever initiatives U.S. corporations may undertake to implement reform.

While U.S. corporations cannot bring about significant change, their presence actually strengthens apartheid. For instance, American and European multinationals provide the South African government with valuable political protection, insulating the regime from the threat of credible trade sanctions. As long as American firms maintain substantial South African interests, the Congress and the President will be unable and unwilling to invoke economic sanctions.

It seems clear that without internal and external pressure, the Nationalist regime will not find it in its interest to make substantive concessions to the black majority. By threatening the very foundation of white prosperity, continuous and substantial capital outflow is one of our best hopes for inducing the white population, or at least certain critical factions within that population, to begin good faith negotiations with the leaders of the African, "colored" and Asian majority. But in the event that accommodation is not achieved, at the very least the scaling down of multinational corporate presence would put the regime in a weaker position to resist the organized oppositon of the majority.

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In conclusion, Harvard has not made a sincere effort to come to grips with this important international issue. It has yet to make an examination in good faith of alternative investment strategies, ones not predicated on the bitter harvest of apartheid.