Political finance
Encyclopedia
Political finance covers all funds that are raised and spent for political purposes. Necessarily such purposes include all political contests for voting by citizens, especially the election campaigns for various public offices that are run by parties and candidates. Moreover all modern democracies operate a variety of permanent party organizations, e.g. the DNC
DNC
DNC may refer to:*Daigaku Nyūshi Center, a Japanese Independent Administrative Institution which administers the National Center Test for University Admissions...

 and the RNC
RNC
RNC may refer to:*Radio Network Controller, a governing element of a mobile phone network*Radio Nishinippon Broadcasting, a radio and television company in Kagawa Prefecture, Japan...

 in the U.S. or the Conservative Central Office and the Labour headquarters ("John Smith House
John Smith House
John Smith House is the former Labour Party headquarters at 144-152 Walworth Road in South London.It was renamed after John Smith, a former leader of the Labour Party who died in office in 1994....

", "Millbank Tower
Millbank Tower
Millbank Tower is a high skyscraper in the City of Westminster at Millbank, on the banks of the River Thames in London, in the United Kingdom. The Tower was constructed in 1963 for Vickers and was originally known as Vickers Tower. It was designed by Ronald Ward and Partners and built by John...

") in the U.K. The annual budgets of such organizations will have to be considered as costs of political competition as well. In Europe the allied term "party finance" is frequently used. It refers only to funds that are raised and spent in order to influence the outcome of some sort of party competition. Whether to include other political purposes, e.g. public relation campaigns by lobby groups, is still an unresolved issue. Even a limited range of political purposes (campaign and party activity) indicates that the term "campaign funds" (used as subject heading in Library of Congress
Library of Congress
The Library of Congress is the research library of the United States Congress, de facto national library of the United States, and the oldest federal cultural institution in the United States. Located in three buildings in Washington, D.C., it is the largest library in the world by shelf space and...

 cataloguing) is too narrow to cover all funds that are deployed in the political process. You may, however, also want to consult the Wikipedia page on campaign finance
Campaign finance
Campaign finance refers to all funds that are raised and spent in order to promote candidates, parties or policies in some sort of electoral contest. In modern democracies such funds are not necessarily devoted to election campaigns. Issue campaigns in referendums, party activities and party...

.

For details on selected countries see Campaign finance in the United States
Campaign finance in the United States
Campaign finance in the United States is the financing of electoral campaigns at the federal, state, and local levels.At the federal level, the primary source of campaign funds is individuals; political action committees are a distant second. Contributions from both are limited, and direct...

, Federal political financing in Canada
Federal political financing in Canada
The fair and transparent financing of political parties, candidates, and election campaigns is a key determinant in the health and proper functioning of a democracy...

, Party finance in Germany
Party finance in Germany
Party finance in Germany became an issue of political discourse, when in 1949 the concept of transparency was discussed in the constitional convention in connection with a new article to be entered into the constitution...

, Political donations in Australia
Political donations in Australia
The term political donations refers to gifts to a politician, a political party, or an election campaign.In Australia, the majority of political donations come in the form of financial gifts from corporations, which go towards the funding of the parties' election advertising campaigns. Donations...

, Political funding in Japan
Political funding in Japan
In Japan, the problem of political funding was intensely debated during the late 1980s and early 1990s, partly as a result of revelations following the Recruit scandal of 1988-89...

, Political funding in the United Kingdom
Political funding in the United Kingdom
Political funding in the United Kingdom has been a source of controversy for many years. There are three main ways a political party is funded. The first is through membership subs; the second is through donations; the third is through state funding.-History:...

.

Expenses for Politics

Political expenses can be caused by
  • election campaigns run by candidates, candidate committees, interest groups or political parties
    Political Parties
    Political Parties: A Sociological Study of the Oligarchical Tendencies of Modern Democracy is a book by sociologist Robert Michels, published in 1911 , and first introducing the concept of iron law of oligarchy...

    ,
  • contests for nomination
    Nomination
    Nomination is part of the process of selecting a candidate for either election to an office, or the bestowing of an honor or award.In the context of elections for public office, a candidate who has been selected by a political party is normally said to be the nominee of that party...

     or re-selection of parlamentary candidates,
  • training activities for party activists, officeholders or candidates,
  • policy development by parties or party related bodies,
  • current operations of party organizations at the national, regional or local level and
  • efforts to educate citizens with regard to popular initiatives, ballot issues or referendum
    Referendum
    A referendum is a direct vote in which an entire electorate is asked to either accept or reject a particular proposal. This may result in the adoption of a new constitution, a constitutional amendment, a law, the recall of an elected official or simply a specific government policy. It is a form of...

    s.


Most frequently and in most countries the organizations that (raise and) spend money for political purposes are parties (headquarters, branches and chapters). Party headquarters spend on public relations, mass media (including billboards), the expertise of consultants and(quite often glitzy) offices in the national capital. Local party chapters (e.g. constituency or riding associations), which rely on volunteers (party activists), cover telecommunication and mail charges as well as rent and heating for storefront offices, which they use as their centers of political activity.

Sources of Funds

Political revenue may be collected from individual citizens ("grassroots fundraising
Grassroots fundraising
Grassroots fundraising is a method of fundraising used by or for political candidates, which has grown in popularity with the emergence of the Internet and its use by US presidential candidates like Howard Dean and Ron Paul...

", e.g. in small donations or party membership dues), interested money (like contributions by businesses, lobby groups, professional organizations and trade unions), assessments of officeholders (called the "party tax"), public subsidies or - sometimes even - corrupt exchanges (like graft
Graft
Graft or grafting may refer to:*Grafting, where the tissues of one plant are affixed to the tissues of another*Medical grafting, a surgical procedure to transplant tissue without a blood supply**Bone grafting**Skin grafting...

, buying access to politicians, offices, honors or titles, extorsion of wealthy people and influence peddling
Influence peddling
Influence peddling is the illegal practice of using one's influence in government or connections with persons in authority to obtain favors or preferential treatment for another, usually in return for payment. Also called traffic of influence or trading in influence ...

). G.M. Gidlund has classified the available options of fundraising by three categories: Membership, plutocratic and public funding. As the relevance of signed-up party members and their dues can vary among the democracies the terms grassroots fundraising
Grassroots fundraising
Grassroots fundraising is a method of fundraising used by or for political candidates, which has grown in popularity with the emergence of the Internet and its use by US presidential candidates like Howard Dean and Ron Paul...

, plutocratic finance and public funding may offer a more adequate general framework.

Grassroots fundraising

As a normative concept popular government (vulgo democracy) would require that the people at large cover the costs of their democracy. However, this can only be done on a voluntary basis, because all forms of political participation in a democracy are voluntary in principle. At election times many people abstain from voting. Likewise at all times the majority of citizens also abstains from donating to political coffers. Nonetheless grassroots funding is a preferable source of political money. Political fundraisers should try "to exploit the latent giving power in the general population" and make every reasonable effort to raise "significant sums ... collected in small change." This is especially true for all democracies with a high standard of living for the majority of their citizens.

Popular financing of politics can be an important source of political revenue (as it is in the U.S. and Canada, the Netherlands and Switzerland). However, never and nowhere is it a constant and reliable source. Just like voters, party members and small donors are a volatile sort of citizens. The numbers of signed-up party members who pay their dues regularly fluctuate over time wherever democratic parties care to recruit them. Today even the traditional mass-membership parties of the democratic left (Social Democrats or workers' parties) raise less than a quarter of their funds from the grassroots. Collection of small donations depends very much on the current mood of people's emotions towards politics, policies and politicians and that means it is blowing with the wind. A variety of ways are available (nationwide lottteries, direct mail drives, peer, neighorhood or internet solitication, social events at the local level, even yard sales) for grassroots fundraising. Personal (door-to-door or peer group) solicitation was quite frequent in the fifties. Since the sixties it has been superseded by telethons and computerized mass mailings. Nowadays internet solitication has taken over.

Plutocratic Finance

In the old days landed aristocrats and successful entrepreneurs of the ruling classes supplied the funds necessary for democratic politics. Later on lobby groups and others provided interested money in a quid-pro-quo to keep issues of their concern untouched by politicians in need of funds. Although trade unions that funded left-of-center parties were among the suppliers of interested money, the principle was plutocratic still: All citizens voted, but money ruled, either on behalf of the wealthy or on behalf of those who were able and willing to collect millions of dollars, pounds, yens, francs or marks.

Feeling the pressure between the lack of funds and the risk of scandal the democratic politicians fought back: Governing parties started to abuse their powers for rent-seeking. Some demanded graft for a license or a favor, others ristournes (in Quebec) or tangenti (in Italy) for public procurement. Finally all officeholders (including MPs, legislators and councillors) had to pay an assessment on their salaries for political jobs. Politicians invented influence peddling and the extorsion of businessmen by the sale of access (e.g. via tickets to $1,000-a-plate dinners with leading politicians). Money still ruled, until some (like Luis Munoz Marin
Luis Muñoz Marín
Don José Luis Alberto Muñoz Marín was a Puerto Rican poet, journalist, and politician. Regarded as the "father of modern Puerto Rico," he was the first democratically elected Governor of Puerto Rico. Muñoz Marín was the son of Luis Muñoz Rivera, a renowned autonomist leader...

 in Puerto Rico, Gerhard Stoltenberg
Gerhard Stoltenberg
Gerhard Stoltenberg was a German politician and minister in the cabinets of Ludwig Erhard, Kurt Georg Kiesinger and Helmut Kohl. He served as minister-president of the German state of Schleswig-Holstein from 1971 to 1982 and as such as President of the Bundesrat in 1977/78.-Life:Stoltenberg was...

 in Germany, Jean Lesage
Jean Lesage
Jean Lesage, PC, CC, CD was a lawyer and politician in Quebec, Canada. He served as the 19th Premier of Quebec from 22 June 1960, to 16 August 1966...

 in Quebec and Tage Erlander
Tage Erlander
was a Swedish politician. He was the leader of the Swedish Social Democratic Party and Prime Minister of Sweden from 1946 to 1969...

 in Sweden) found a way to put "the costs of democracy" directly upon the taxpayer.

Public Subsidies

Most modern democracies (in one way or the other) provide public cash subsidies for party activity. India and Switzerland (not the U.S. which has the Presidential Campaign Fund, and the U.K., which pays a Policy Development Grant) are the most notable exceptions. Public subsidies can be relatively small (as in the U.K.) or quite generous (as in Sweden, Germany, Israel and Japan). Most likely they are neither a mere stop-gap nor an all-purpose solution to funding problems. Party organizations, parliamentary groups (party caucusses) and/ or candidates are the recipients of public support (in cash or kind).

In combination with rules that enforce fair access to and fair distribution of aid among the players of the political game, public subsidies are an acceptable policy option for democratic politics. Because matching funds and tax credits depend on financial contributions by individual citizens such support is more compatible with participatory democracy than flat grants that do not require specific efforts by the fundraising organizations.

Taxpayers in continental Europe and non-western democracies (like Israel and Japan) provide higher amounts towards party activity than their Anglo-Saxon counterparts. Many party headquarters in the high-subsidy countries cover between 40 and 60 per cent of their annual budget via public grants. Such heavy involvement of the taxpayer calls for a maximum of transparency for political funds.

Regulation (political finance regime)

Many countries have regulated the flow of political funds. Such regulation, the political finance regime, may include bans and limits on certain kinds of income and expenditure, level and distribution of as well as access to direct and indirect public subsidies, transparency of political funds by disclosure and reporting as well as enforcement of rules and sanctions for infringements.

Bans on political expenditure concern either campaign expenses by non-candidates ("independent expenditures", "third party advertising") or media time paid for by political contestants. Both types of bans have to strike an adequate balance between two constitutional principles, the equality of opportunities (fairness) and the freedom of expression. Britain applies a spending limit for constituency candidates since 1883. Canada was the first democracy to add campaign limits for national party organizations in 1974 and spending limits for constituency nomination contestants in 2004. The U.S. Supreme Court (in Buckley v. Valeo
Buckley v. Valeo
Buckley v. Valeo, 424 U.S. 1 , was a case in which the Supreme Court of the United States upheld a federal law which set limits on campaign contributions, but ruled that spending money to influence elections is a form of constitutionally protected free speech, and struck down portions of the law...

 424 U.S. 1 (1976) has struck down spending limits because they interfere with "free speech". In order to be effective all limits require careful monitoring and serious enforcement backed up by adequate sanctions.

Among the rules, which either restrict or favor speficic types of political revenue, incentives to stimulate specific fundraising activities (like tax benefits or matching grants) are still rare. More frequent are contribution limits or outright bans. Many countries ban anonymous donations or contributions from foreign sources. In some democracies even corporate donations for political purposes are illegal. Quite frequently political finance regimes include contribution limits. The maximum donation allowed may differ either by type of donor (individual citizens, legal entities), by recipient (candidate or party) or by purpose to be funded (nomination contest, election campaign, routine operation). In some countries (e.g. Germany) there is no statutory limit on the amount of political contributions, which a person or corporation may give to a party or candidate.

If rules for transparency of political funds stipulate the disclosure of donors' identity, the public's right to know about financial backers may interfere with the need to protect the privacy of political preferences, the principle of the secret ballot. The practical solution will distinguish between categories of donors and/ or define cut-off points for privacy, e.g. $100 or €10,000. Both ways serve to separate financial contributions as a means of participation from donations as means of buying access or peddling influence. Any disclosure regulation has to identify a person or an institution that is responsible for the transparent flow of funds to and from party coffers and the kind of information, which has to be disclosed timely and accessibly.

The reporting of political funds (to be submitted annually and/ or after elections) usually includes various sources of income and specified items of expenditure, e.g. staff and offices, advertisements in print media, radio and TV, campaign material, direct mailing, opinion polling. Effective reporting by parties and candidates depends on the definition of useful categories for the funds raised and spent, the inclusion of data for all spending units as well as the procedure for examination and publication of financial reports. Currently no democracy provides for full transparency of all political funds.

All political finance regimes require authorities and agencies that are responsible for monitoring, control and enforcement. Legislation has to strike a balance between practical independence of the agency in charge, effective enforcement of the rules for the funding of political competition and adeqate implementation of legal stipulations. Case studies show that highly sophisticated rules, over-regulation of some issues and lax implementation of such rules do not lead to best practice.

Study of Political Finance

The study of political finance was pioneered by James K. Pollock and Loise Overacker. Alexander Heard contributed a groundbreaking analysis for the U.S. International comparison started with Arnold J. Heidenheimer, who also introduced the term political finance to comprise campaign and and party funding. Thus he was bridgeing the gap of perception between North America and Western Europe.

Herbert E. Alexander studied the U.S. situation for many decades and edited a couple of comparative volumes. Arthur B. Gunlicks concluded this cycle of comparative studies. The most important early studies on non-US countries were written by Khayyam Z. Paltiel (Canada) and Michael Pinto-Duschinsky (Britain). More recent contributions to the literature include Marcin Walecki's monograph on Poland and Kevin Casas-Zamora's comparative analysis of public funding with two case studies from Latin America.

See also

  • Campaign finance
    Campaign finance
    Campaign finance refers to all funds that are raised and spent in order to promote candidates, parties or policies in some sort of electoral contest. In modern democracies such funds are not necessarily devoted to election campaigns. Issue campaigns in referendums, party activities and party...

  • Political donations in Australia
    Political donations in Australia
    The term political donations refers to gifts to a politician, a political party, or an election campaign.In Australia, the majority of political donations come in the form of financial gifts from corporations, which go towards the funding of the parties' election advertising campaigns. Donations...

  • Federal political financing in Canada
    Federal political financing in Canada
    The fair and transparent financing of political parties, candidates, and election campaigns is a key determinant in the health and proper functioning of a democracy...

  • Party finance in Germany
    Party finance in Germany
    Party finance in Germany became an issue of political discourse, when in 1949 the concept of transparency was discussed in the constitional convention in connection with a new article to be entered into the constitution...

  • Political funding in Japan
    Political funding in Japan
    In Japan, the problem of political funding was intensely debated during the late 1980s and early 1990s, partly as a result of revelations following the Recruit scandal of 1988-89...

  • Political funding in the United Kingdom
    Political funding in the United Kingdom
    Political funding in the United Kingdom has been a source of controversy for many years. There are three main ways a political party is funded. The first is through membership subs; the second is through donations; the third is through state funding.-History:...

  • Campaign finance in the United States
    Campaign finance in the United States
    Campaign finance in the United States is the financing of electoral campaigns at the federal, state, and local levels.At the federal level, the primary source of campaign funds is individuals; political action committees are a distant second. Contributions from both are limited, and direct...


Books

  • Heidenheimer, Arnold J. (ed.), Comparative political finance: the financing of party organizatuions and election campaigns. Lexington, MA: D.C. Heath, 1970. no ISBN
  • Alexander, Herbert E. (ed.), Comparative political finance in the 1980s. Cambridge, UK: Cambridge University Press: 1989 ISBN 0-521-36464-7.
  • Gunlicks, Arthur B., Campaign and party finance in North America and Western Europe. Boulder, CO: Westview Press, 1993.
  • Alexander, Herbert E., and Shiratori, Rei (eds.), Comparative political finance among the democracies. Boulder, CO: Westview Press, 1994 ISBN 0-8133-8852-X.
  • Austin, Reginald, and Maja Tjernström (eds.), Funding of political parties and election campaigns. Stockholm: International IDEA, 2003. (see http://www.idea.int/publications/funding_parties/upload/full.pdf)
  • Casas-Zamora, Kevin, Paying for democracy: political finance and state funding for parties. Colchester, UK: ECPR Press: 2005 ISBN 0-9547966-3-2.

Articles

  • Heard, Alexander, 'Political financing'. In: Sills, David I. (ed.) International Emcyclopedia of the Social Sciences, vol. 12. New York, NY: Free Press - Macmillan, 1968, pp. 235–241.

  • Paltiel, Khayyam Z., 'Campaign finance - contrasting practices and reforms'. In: Butler, David et al. (eds.), Democracy at the polls - a comparative study of competitive national elections. Washiongton, DC: AEI, 1981, pp. 138-172.

  • Paltiel, Khayyam Z., 'Political finance'. In: Bogdanor, Vernon (ed.), The Blackwell Encyclopedia of Political Institutions. Oxford, UK: Blackwell, 1987, pp. 454–456.

  • 'Campaign finance'. In: Kurian, George T. et al. (eds.) The encyclopedia of political science. vol 1, Washington, DC: CQ Press, 2011, pp. 179-181.

  • 'Party finance'. In: Kurian, George T. et al. (eds.) The encyclopedia of political science. vol 4, Washington, DC: CQ Press, 2011, pp. 1187-1189.

  • Pinto-Duschinsky, Michael, 'Party Finance'. In: Badie, Bertrand et al. (eds.) International Encyclopedia of Political Science. London: Sage, 2011. http://sage-ereference.com/view/politicalscience/n414.xml

External links

  • http://www.rc20.ipsa.org/
  • http://aceproject.org/epic-en/CDMap?question=PC12
  • http://www.idea.int/parties/finance/db/
  • http://www.thecanadianencyclopedia.com/index.cfm see Article "Party Financing" by K.Z. Paltiel and J.M. Wilson
The source of this article is wikipedia, the free encyclopedia.  The text of this article is licensed under the GFDL.
 
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