Given the country’s deep political divisions today, some state and local politicians on both sides of the aisle are using their government’s purchasing power to send messages to Corporate America, and in doing so strengthen their base. It’s the public’s money, not their own, after all, so why not use political power to further a partisan stance?
The most common manifestations of these impulses to make political statements through public funds historically began in South Africa in the 1960s, Sudan in the early 2000s, and this year’s Russian divestment. It was a public pension withdrawal campaign that lasted until the end of the wave. Critics will say that pension policies that focus on the environmental, social and governance (ESG) profile of companies are a liberal strategy to pressure companies to yield to political will. The same is true for pension funds that avoid investing in firearms manufacturers.
The complaint, and in my opinion it’s justified, has always been that these political statements rarely benefit pension funds and employer taxpayers ultimately bear the cost of poor investment. That complaint is now popular among the 19 Republican Attorneys General. But many ESG advocates would argue that more sustainable and forward-looking corporate policies produce better investment returns over the long term. This controversy in pension land isn’t likely to end anytime soon. It is really impossible for him to accurately assess the effectiveness of an investment in less than 10, or even 20 years.
However, what is notable in recent years is that some states and local governments have tended to apply the same strategies to general government funds rather than pension assets. A prime example of this is the Texas law that blacklists underwriters of municipal bonds that support ESG principles. This certainly goes against the oil-rich state’s “drill, baby, drill” politics and its oil-dependent revenue structure. Whether you view this as a purely partisan exercise of power or an economically selfish act by state governments who know where the butter is in their bread, the result is the same. It is the axiomatic view of free market economists that this will limit competition and ultimately increase borrowing costs for Texas taxpayers.
The West Virginia Legislature has followed suit with similar legislation. Kentucky, Oklahoma, and Tennessee have similar legislation, all focused on ESG and fossil fuel extraction. Notably, Kentucky ranks him 21st and Tennessee his 27th in oil production among states, so we conclude that their blackball actions are primarily political, not budgetary. must be attached.
The magnitude of the fiscal impact on the cost of debt service in Texas is a matter of empirical research already begun at Wharton. This topic will probably make for a great PhD thesis one day, but we won’t know concrete numbers anytime soon.
Placing the base
Evidently, the position has shifted from liberal favorite policy to social conservative policy that, just a decade ago, would have accused opponents of interfering in corporate policy and the efficiency of the free market. It makes my head spin for days. Apparently, love affairs, wars, and politics these days are all playing their fair share.
In Florida, the state government decided to punish Walt Disney World for its public opposition to the state’s so-called “don’t say gay” laws (in favor of employees). There is now notorious meddling in public finances by politicians. Strip five boroughs of their financial power to condemn America’s most beloved family theme park.
Even local governments, including the left side of the political spectrum, are springing into action. In Pennsylvania, Lehigh County could become the first entity to sell assets and businesses from Wells Fargo.
Some of these retaliatory measures, in particular the Supreme Court’s citizens united This decision equated corporate freedom of speech with personal freedom of speech. But given the deepening divisions in America’s political body in recent times, it doesn’t take much imagination to expect similar political blacklists and financial boycotts to continue to proliferate.
For example, some abortion rights-sympathetic local governments adopt policies that prohibit travel reimbursement for attending professional conferences and training events in states that prohibit or severely restrict abortion procedures. is certain. Meanwhile, other governments may ban employees from traveling to conferences in states that provide sanctuary for abortion seekers. How can we prevent similar internal policies from emerging regarding visits to states with open-carry gun laws? and some of these events now include virtual attendance options in this pandemic era. A competitive marketplace has no such workaround.
meet at public expense
The retaliatory impulse to punish enemies is hardly new. But doing so at the expense of one’s own voters is new to most modern pluralist democracies. , is punitive and even wasteful. at public expense.
I do not claim to have all the answers or universal solutions to the dilemmas these examples present. But I am convinced that taxpayers will ultimately suffer if public sector investments and financial transactions are subject to political bias. The problem, of course, is that in the short term, these interventions have little political downside, and the financial costs are diffuse and initially imperceptible.
The Big Seven state and local government policy associations and their financial affiliates have issued policy recommendations highlighting how senseless and likely ultimately costly these culture war retaliations are. Standing up to the partisan grandstand can do us all a favor. It’s already done.
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