Discussion Issue 2: Key Understandings of Political Finance

The issue of what role money plays in the affairs of political parties and the conduct of election campaigns has received increasing attention, and much experience has been gathered through practical involvement, regulation or monitoring of political finance, and by scholarly attention and international assistance to such activities.

In their efforts to learn from experience, several organizations have developed lists of key understandings relating the issue of political finance. While each list reflects different experiences and approaches to the issue of political finance, there are common themes. In this document, the various key understandings have been categorized under common headings, and we have subsequently reached the following common understandings:

1. Money is necessary for democratic politics, and political parties must have access to funds to play their part in the political process. Regulation must not curb healthy competition.
2. Money is never an unproblematic part of the political system, and regulation is desirable.
3. The context and political culture must be taken into account when devising strategies for controlling money in politics.
4. Effective regulation and disclosure can help to control adverse effects of the role of money in politics, but only if well conceived and implemented.
5. Effective oversight depends on activities in interaction by several stakeholders (such as regulators, civil society and the media) and based on transparency.

IFES has attempted to compile and categorize existing lists of key understandings into one comprehensive chart, which can found by clicking here. This chart is by no means exhaustive, prompting us to present this information to the Advisory Group. In order to develop a global consensus among experts, we asked the advisory group to consider three guiding questions:

Do you agree that the synthesized key understandings give a good description of what we, collectively, know as the key points in political finance (allowing for the simplifications that must always be made in an enterprise of this kind)?

Disclaimer: The views expressed here are those of the individual authors and do not reflect the official policy or position of their respective organizations or institutions.

Edna Co, University of the Philippines

I find the synthesized key understandings a brilliant set, actually and these capture the essence of political finance.

Jared DeMarinis, Maryland State Board of Elections

Category 1

I agree in principle with the category. However, effective regulation of campaign finance can in fact increase competition. I would change the language from a negative to stressing the positive angle of regulation and its need. Additionally, I agree with the concept that political parties need to be stronger in their role in society. Nevertheless, political parties’ internal mechanics are usually run by unelected officials and sometimes by undemocratic means. Party officials and by-laws of the parties must be disclosed to prevent secret dealings or appearance of corruption. Furthermore, all too often political parties are formed around a single individual and not the coalescing of groups of people around a similar philosophic belief. Increasing the power of the political party would only increase that individual’s power of his or hers candidates for office. I would submit the need to regulate and define of role political parties to insure the independence of candidates.

Category 2

I’m not sure why it is a problem for the political parties to engage in purely partisan activities. Their role is to elect their candidates which is by nature a purely partisan activity. Even if the party did receive public funds, I would submit that a political party should be allow to use those funds in a partisan nature. Besides banning expenditures on vote-buying practices, the prohibition needs to include personal or non-electoral expenditures. It is a common occurrence that elected and party officials use campaign coffers for personal use, for example home renovations.

Category 3

While there is no one solution fits all for campaign finance regulation, the overall principles for political competition, ballot access, and elimination of corruption in politics are universal. Resources and legitimacy of the enforcement agency will drive the discussion of campaign finance regulations and policies.

Category 4

Regulation of campaign finance fluctuates depending on the time. Any regulation in place needs to have the ability to adapt and change with the current period and current technologies. Additionally, the enforcement agency must have the ability to help guide political parties in a prospective nature rather than always after the fact.

Category 5

In order to ensure the civil society and media oversight of the political activity of political parties and candidate, access to the records must be distributed in a manner without fear of reprisal. For example, in Maryland, we post all campaign finance reports on our website. Anyone with access to a computer can review and download reports by a committee in an anonymous nature. It is from these sources that provide us numerous complaint regarding impermissible contributions and expenditures.

Carl Dundas, IFES, Ethiopia

I subscribe to the common understandings reached. However, I would like to add for your consideration the inclusion of the following:

Accountability: in the form of periodic reporting to the oversight entities on income and expenses; and

Audit: of accounts periodically by an audit firm of good standing.

Amy Loprest, New York City Campaign Finance Board

Category 1

I would I agree that regulation must not curb healthy competition, but would add that done correctly regulation can actually enhance healthy competition.

In the key understandings, I agree that too much funding from either the private or public sector is unwise. In NYC, we provide public matching funds of individual contributions at a rate of $6 in public money to each $1 of private money, but limit the public funding to 55% of the overall spending limit. I would also note that when thinking about private funding, you should be careful not to consider it as a entire class, but limit the source of private money so that no single private source has too much influence. This can be done through careful contribution limits and regulations of the source of contributions.

I agree that trying public funding to party reform is a good idea. It is important that any public funding formula recognize the existence and importance of small political parties while at the same time maintaining appropriate thresholds for parties and/or candidates to demonstrate that they are serious contenders who have some public support.

I agree that an over emphasis on the punitive is distracting; however, I believe it is vital to have sanctions that are real and are applied. For example, in New York State Election Law, the campaign finance regulations are rarely enforced. This devalues the entire system because although the majority of candidates will comply without any sanction quality and regularity of disclosure and overall compliance slips over time. On the other hand in New York City, we rigorously enforce the law which in turn benefits the candidates and their opponents because all know that no one will get an advantage due to violating the law encouraging better compliance overall.

Category 2

I would make the general observation that appearance is often as important as actual problems in a political finance system. Appearance problems make the electorate lose faith in their elected officials and in the worst case scenario in the democratic process. I think this is even more important in emerging democracies where there is little traditional of individual political power.

I would not say that it is unfortunate that some activities of parties are purely partisan. It is this partisanship in the electoral process, as opposed to the legislative process, that makes parties important.

I question what you mean by "disreputable sources." In the United States, we ban or limit contributions from many different kinds of entities with the most obvious potential for conflicts or appearances of conflicts with the legitimate political process. These include corporations, labor unions, foreign individuals and entities, and those with business interests before the government, such as government contract holders. These could appear to corrupt the political process, but I would not say they are “disreputable sources.” Perhaps there should be two categories.

Category 3

I think that it is critical to keep in mind that political funding issues are subject to ongoing legal reforms. In fact, I believe review and change should be built into the legal framework. In New York City, we have built into our law a requirement that the law be reviewed after every election and recommendations for change be made. This is one of the reasons the NYC public financing system has flourished over its 21 year history and part of the reason the federal presidential public financing system has languished.

Category 4

I agree that disclosure of political accounts is necessary. I also believe that the timing of that disclosure and accessibility of it by the press, public and independent organizations is vital to making disclosure effective. Also, it is important that all disclosure is subject to some sort of independent auditing to ensure the accuracy and completeness of the disclosure.

Category 5

I agree that effective oversight is key. This oversight should also be linked to the flexibility of the system to change as discussed in Category 3 and some legally mandated periodic review of any system.

Alvis Vilks, Corruption Prevention and Combating Bureau, Latvia

I looked through the key understandings with a great interest and it seems to me that they are quite general, but there are few comments from me:

One of the most often mentioned word in the text is "money". On the one hand it is absolutely correct because the system of the financing of political parties mostly is connected with the flow of money. On the other hand we know that the support to the political parties very often is made not just by the money but also through other kinds of support, for example - in-kind donations, tax relief, etc. So - maybe it is reasonable to observe the use of this term (support) at least in some places in the text or add the comment that with the word "money" we also understand other kind of support.

The key understandings, as I mentioned, above are quite general and therefore there is nothing to object. Still, some of the understandings seems to me not very clear (maybe because they are drawn from the more comprehensive texts). For example, two of the key understandings in the first category - "Political parties must be part of the solution" (what kind of solution, in what meaning?) and "Public funding should be considered, but tied to party reform" (what reform, why?).

It seems to me that there are two issues which aren't covered by these key understandings:

1) One of the most important element in the democracy is freedom of media (as well - freedom of expression); this issue is also connected with the issue of the transparency of the owners of private media companies and political ideas which are supported by these companies and owners;

2) Very important in the process of the control is a question regarding the independence of controlling institution, because without adequate status, mandate and resources such an institution can turn into a signboard or into a dangerous weapon in the hands of governing parties.

As part of our attempt to highlight the key understandings of political finance, IFES has developed a list of universally accepted political finance terminology. We also asked the Advisory Group to review this short glossary (click here) and send us their thoughts.