New York City has pledged to divest its pension holdings from companies involved in the private prison industry. But the ultimate goal is to help build a mass movement against the White House.
On June 8, the GEO group, a prison investment company, issued a press release announcing that the federal prison population is forecast to expand by roughly two percent by 2018, reversing the decarceration trends experienced under President Barack Obama.
GEO attributed the growth to a new budget proposed by Donald Trump’s White House and Attorney General Jeff Sessions that will increase federal prosecution and pursuit of drug dealers and suspected immigrants. The investment company also recently acquired a $110 million contract with U.S. Immigration and Customs Enforcement to build a new 1,000-bed detention facility in Texas. Its share prices have doubled since Trump was elected. In the statement, Canaccord Genuity financial analyst Michael Kodesch observed, “This is an opportunity for private prisons, absolutely.”
But not if cities can help it. On that same day, June 8, New York City comptroller Scott M. Stringer announced that the city had fully divested its pension funds from all private prison companies. This was the completion of a process that began in mid-May, when pension funds trustees approved this maneuver in response to several reports exposing the cruel and inhumane treatment of inmates and detained immigrants in private corrections facilities. Since then, the city has sold off nearly $48 million in stocks and bonds from several prison companies, including the GEO Group.
This divestment action wasn’t just a rebuke of the private prison industry—it was also aimed at the federal administration that’s fueling its rebound.
“With Donald Trump in the White House, we’re seeing more and more industries try to profit from backwards policies at the expense of immigrants and communities of color,” New York City comptroller Stringer in a press statement. “As President Trump ratchets up hateful rhetoric and steps up deportations, private prison companies are going to see enormous reputational harm—and that means they’ll become even riskier investments. Morally, the industry wants to turn back the clock on years of progress on criminal justice, and we can’t sit idly by and watch that happen. Divesting is simply the right thing to do—financially and morally.”
Other cities are taking the same strategy. That same week of June, Tucson’s city council voted to divest from any company involved in building a border wall. Back in March, Berkeley became the first city to divest from companies attached to Trump’s border wall, but before that, Seattle elected to pull its banking account from Wells Fargo, citing the bank’s financing of fossil fuel companies and the controversial Dakota Access Pipeline project, which Trump approved just weeks into office.
“Cities across this country are recognizing that we can no longer simply work on policies and laws that reflect our values while we're simultaneously investing billions of dollars in businesses that are actively trying to undermine the very values that we stand for,” said Seattle city council member Michael O’Brien on a recent press call organized by the organizations Make the Road New York and Center for Popular Democracy, which are pushing cities to deploy divestment strategies.
The blueprint for this was created back the 1980s, when anti-apartheid activists convinced dozens of cities to join with hundreds of universities and businesses in pulling funds from companies tied to South Africa’s apartheid government. According to a number of studies on the topic, mass divestment didn’t necessarily hurt those South Africa-affiliated companies’ bottom lines. Writing for The New Yorker, Andrew MacAskill pointed to a study from a group of economists that found little impact on companies aligned with the apartheid government:
The economists Siew Hong Teoh, Ivo Welch, and C. Paul Wazzan studied how U.S. divestment movements affected the South African financial market and the share prices of U.S. companies with South African operations. Divestments were expected, on average, to decrease share prices, but the study found that, in fact, political pressure turned out to have no discernible effect on the shares’ public market valuations. According to the authors, a possible explanation of this finding is that “the boycott primarily reallocated shares and operations from ‘socially responsible’ to more indifferent investors and countries.”
Meaning, as cities and other institutions stopped buying shares in the companies in question, those shares were just purchased by other investors who didn’t care about all that social and racial justice stuff. Markets are funny like that.
However, while divestment may not had as much bottom-line impact as activists hoped, it did play a critical role not only in stigmatizing those companies, but also in sending a clear signal to the U.S. government.
As CityLab reported in May, the Reagan administration was furious about cities’ participation in the anti-apartheid divestment movement of the 1980s, to the point it was willing to withhold federal funding from the cities involved. The national nonprofit Jobs to Move America is releasing a report on June 27 that details this fight between Reagan and cities over apartheid and how it mirrors current battles with the Trump administration over issues like sanctuary status for immigrants. Two cities in particular tested Reagan back then—Baltimore and New York City—to somewhat mixed results.
When New York City passed a law in 1984 that imposed sanctions any business with financial interests in South Africa, Reagan stepped in and threatened to yank U.S. Department of Transportation funds. That led the city to back off from enforcing the ordinance. However, when Baltimore passed an ordinance in 1986 pledging to pull all funds tied to South Africa-linked companies from its city pension fund, it survived a number of court challenges and ultimately prevailed. Business leaders and Reagan officials in the National Security Council and State Department were unable to persuade the U.S. Justice Department to mount a proper attack of Baltimore’s divestment ordinance. According to the Jobs to Move America report, DOJ lawyers were unable or unwilling to find a legal reason why Baltimore couldn’t enact such an ordinance.
Trump will likely find more eager partners in the DOJ today. So far, Attorney General Sessions has indulged every Trump command, no matter how legally dubious or incoherent. That’s why it matters that cities are taking divestment stands, especially in a country where much of their political power has been constrained via gerrymandering.
“While shifting billions of dollars in business investments might make a modest difference,” said Seattle council member Michael O’Brien in the press call about city divestment strategies, “we can amplify those changes through collective action across cities so that citizens understand that there is a movement taking place that they can participate in. That’s when I believe we will get the attention of those companies. They will either have to respond and adapt to this new environment, or they will go out of business and new ones will replace them.”