No Exit from Apartheid?

To The Editors of The Crimson:

At the May 1st meeting of the Faculty of Arts and Sciences, President Bok, purporting to add a new "strand of complexity" to the South Africa debate, read a letter from a prominent clerygman asserting that it is, in fact, virtually impossible for multinational firms to "withdraw" from South Africa. Presumably, we are to infer from this that the efforts of the international anti-apartheid movement are futile.

The issue of precisely how a firm goes about disentangling itself from the apartheid economy is perhaps the most arcane of all. South Africa, fearing the obvious consequences of foreign capital "heading for the exit," has evolved numerous laws and regulations designed to frustrate such moves; this is to be expected. But it does not require much training in the "dismal science" to realize that the more South Africa restricts the right of foreign investors to manage and dispose of their assets, the less attractive investment in that country becomes. To restrict unreasonably the freedom of investors to repatriate the profits of their existing operations constitutes expropriation and de facto nationalization of those operations. Multinational capital has never been known to view uncritically such actions, whether the offending government is headed by a Salvador Allende or a P.W. Botha.

In most cases, the manner of corporate withdrawal most likely to minimize loss to the parent company and maximize loss to the South African economy is the prohibition of all new investment coupled with the full repatriation of current earnings from existing operations, viz., allowing the South African affiliate to depreciate, or, in plain English, "run into the ground." Without new infusions of capital, either in the form of new investment or retained earnings, plants and equipment rapidly lose their economic value and become obsolete. Naturally, the tax code makes provision for the deprecation of assets, permitting the parent company to "write off," so to speak, their losses.

While President Bok's search for complexities is in the best intellectual tradition, there comes a time when even the most objective observer must wonder whether these ubiquitous complexities are real, or, at least in part, contrived. Luther M. Ragin, Jr. '76   Harvard Law School Class of '80   Kennedy School of Govt. Class of '80