Divestment Works.
When finance is accountable to the people, elites get scared.
The White House’s furious response to the decision by Norway’s Sovereign Wealth Fund (SWF) to divest from Caterpillar tells us something important: divestment works. And it works even more effectively in a democratic financial system.
That the President felt compelled to weigh in on the decision of Norway’s SWF underscores how significant that decision is. When the largest SWF in the world moves to divest from a major US corporation because of its role in supporting Israel’s war crimes, it sends a signal powerful enough to reach the very top of the American political establishment.
Norway’s Divestment Fund
Norway’s sovereign wealth fund has long been a target of campaigns for divestment, whether from fossil fuels, arms manufacturers, or companies complicit in the occupation of Palestine. It has not acted because it is an inherently ethical institution; it has acted because of sustained public pressure. Citizens have demanded that the money accrued from their shared natural resource wealth should be deployed in ways that reflect their values.
Way back in 2009, the company decided to divest from Elbit Systems over its production of surveillance systems used by the Israeli state in the West Bank. This is the same Elbit Systems targeted by Palestine Action activists – our own government responded by banning Palestine Action as a terrorist organisation. Then, in 2014, the SWF made the decision to divest from coal mining companies, selling off its holdings in 53 coal producers. Significantly, the decision was mirrored by a number of private pension funds in Norway.
The fund has divested from the tobacco industry; from a number of arms manufacturers; from mining companies causing environmental damage across the global South; and from Canadian oil sands producers. More recently, the fund has opted to divest from 5 Israeli banks, and 11 Israeli companies. Parliament voted down a proposal to divest from all companies active in the occupied Palestinian territories – but the fight is ongoing.
Campaigners argue that the fund still retains many harmful investments – and they’re right. No one is arguing that Norway’s SWF is an inherently ethical institution. The point is that it’s a political institution subject to democratic pressure, so it can be targeted by public divestment campaigns. Not all of these campaigns will succeed, but many already have.
Private Finance vs Democracy
The actions taken by Norway’s Sovereign Wealth Fund show the potential of democratised finance. When the allocation of investment in a society is subject to democratic control, people consistently opt for ethical, sustainable, long-term investment decisions – in stark contrast to the short-termist, unethical, and unsustainable decisions made by many of the powerful private institutions that invest peoples’ savings on their behalf.
Blackrock, one of the world’s largest asset managers, which probably controls at least some of your savings, has talked a big game about sustainability. But, in reality, the company will go wherever the political wind blows. As soon as Trump signalled a shift in US climate policy to ‘drill baby, drill’, Blackrock withdrew from the Net Zero Asset Managers Initiative. Even before Trump, the company was failing to vote in favour of shareholder motions to promote sustainability in the companies in which it had investments.
Norway’s SWF hasn’t made all the right calls. But at least it can be held accountable in the court of public opinion when it fails. As I argued in Vulture Capitalism, the state – including all the associated quasi-public institutions like Norway’s SWF – is a social relation. What happens within formal state institutions reflects the balance of power in society.
There is, of course, something of a contradiction when it comes to Norway’s SWF. The cash in the fund comes largely from sales of Norway’s oil wealth, which will have contributed significantly to climate breakdown. Nevertheless, the fact that these funds can now be used to tackle the issue – as well as signalling the anger that the Norwegian people feel over Israel’s genocide – is significant.
Giving people control over the investment decisions ordinarily taken by large financial institutions, monopolistic corporations, and unaccountable politicians threatens the foundations of the capitalist world system: the ownership and governance of our most important resources by a tiny elite.
Finance for the People
This is why Trump, and the wider political establishment, are so worried. What terrifies them is not just the precedent of Caterpillar being cut off, but the broader principle: that ordinary people might be able to exert real influence over how financial resources are allocated.
Today, the allocation of capital – the single most powerful determinant of what kinds of economies we build – lies mostly in the hands of private institutions and unacountable politicians. When the public begins to exercise democratic control over this system, forcing divestment from companies implicated in genocide, climate collapse, or exploitation, it becomes much clearer that finance is political.
And that is precisely what politicians like Trump are determined to deny. Their mission is to protect Israel at all costs – a project opposed by the vast majority of people on the planet, including their own citizens. If they want to protect Israel, western regimes need to deny political reality, which means undermining the influence ordinary people have over policymaking.
From Washington to London, our political leaders have made clear that they will use their power to suppress any expression of popular solidarity with the Palestinian people. From the decision by former Home Secretary Yvetter Cooper to ban Palestine Action as a terrorist organisation, to Trump’s attempts to silence Palestinian activist Mahmoud Khalil.
But the divestment campaign spearheaded by the Norwegian people shows there is another way. It demonstrates that coordinated divestment campaigns can work – not as symbolic gestures, but as instruments of real political pressure, especially when tied to institutions with real financial power. When a country’s wealth is socialised and subject to democratic influence, people can force governments and institutions to take meaningful action against rogue states like Israel.
The lesson is clear: democratise finance, and the possibilities for solidarity explode. And solidarity is exactly what scares our political elites the most.
The answer is to abolish capitalism.
A great article. A key theme at the Center for Capitalism & Society at Columbia is separating politics from economics. They put their ‘best Nobel Prize minds’ to the task of making sure we believe economics is natural and voting is politics. And divestment is fluff with no impact.