Funding of Political Parties and Election Campaigns

Funding of Political Parties and Election Campaigns

A Handbook on Political Finance

Funding of Political Parties

and Election Campaigns

A Handbook on Political Finance

Editors: Elin Falguera Samuel Jones Magnus Ohman

Contributors: Julie Ballington Elin Falguera Muriel Kahane Juan Fernando Londo?o Karl-Heinz Nassmacher Magnus Ohman Daniela R. Piccio Fredrik Sj?berg Daniel Smilov Andreas Ufen Daniel Zovatto

Political Parties, Participation and Representation

? International Institute for Democracy and Electoral Assistance 2014

International IDEA Str?msborg, SE-103 34, STOCKHOLM, SWEDEN Tel: +46 8 698 37 00, fax: +46 8 20 24 22 E-mail: info@idea.int, website: idea.int

The electronic version of this publication is available under a Creative Commons Licence (CCl) ? Creative Commons Attribute-NonCommercial-ShareAlike 3.0 Licence. You are free to copy, distribute and transmit the publication as well as to remix and adapt it provided it is only for non-commercial purposes, that you appropriately attribute the publication, and that you distribute it under an identical licence. For more information on this CCl, see: .

International IDEA publications are independent of specific national or political interests. Views expressed in this publication do not necessarily represent the views of International IDEA, its Board or its Council members.

Graphic design by: Turbo Design, Ramallah Cover illustration: ? Ellen Isaacs Printed in Sweden ISBN: 978-91-87729-24-9

Foreword

Over the course of my career, I have witnessed the negative impact of money on politics and governance. There is increasing evidence that corruption and unregulated donations are exercising undue influence on politics and undermining the integrity of elections. In some countries, money from organized crime has infiltrated politics to gain control over elected officials and public institutions. These threats to democratic politics help explain why large numbers of people around the world are losing faith in politicians and democratic processes. For example, recent research shows that more than two-thirds of Americans trust government less because of the influence of big donors.1

The need to regulate uncontrolled, undisclosed and opaque political finance was identified by the Global Commission on Elections, Democracy and Security2 as a major challenge to the integrity of elections in emerging and mature democracies alike. The Global Commission argued that poorly regulated political finance can diminish political equality, provide opportunities for organized crime to purchase political influence, and undermine public confidence in elections. Indeed, a failure to regulate political finance threatens to hollow out democracy and rob it of its unique strengths.

Citizens all over the world want political parties and governments to represent their views and be responsive to their needs. However, all too often parties are disproportionately representative of the interests of the donors who have largely financed them. If large corporations and rich individuals are able to buy greater influence through large campaign donations, then citizens can lose faith in, or be marginalized from, the political process. This is compounded by a lack of citizen participation in political parties, which further adds to people's alienation from politics.

Although the funding of electoral campaigns and political parties has an important role in the functioning of democracy, unregulated money in politics means that the political playing field is not level. The explosive growth in campaign expenditures fuels the perception that wealth buys political

1 Brennan Center for Justice Research referred to in the report of the Global Commission on Democracy, Elections and Security (2012, p. 34).

2 The Global Commission on Elections, Democracy and Security was established as a joint initiative of the Kofi Annan Foundation and the International Institute for Democracy and Electoral Assistance (International IDEA). The Commission's 2012 report, Deepening Democracy: A Strategy for Improving the Integrity of Elections Worldwide, can be downloaded at

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influence and threatens political equality. The abuse of state resources by the ruling party to put itself in an advantageous position also remains a problem in many countries. This lack of a level playing field prohibits the equal participation and representation of all citizens in democratic political processes. Recent years have seen a growing penetration of transnational organized crime and illicit funds into politics. In Latin America, West Africa and in many other parts of the world, opaque electoral finance and lack of transparency and oversight are providing opportunities for organized crime to gain influence over elected officials by financing their campaigns. This not only undermines democracy, good governance and the rule of law, but also has negative consequences for economic development and the alleviation of poverty. There is clearly an urgent need to better control political finance. Governments should regulate political donations and expenditures effectively. This will require full transparency and disclosure of donations, with penalties for noncompliance. Effective monitoring and enforcement of regulations are also crucial. This new publication from International IDEA on political finance around the world is a timely and much-needed contribution to the field of democracy support. It builds on International IDEA's previous work and provides a better understanding of the current state of political finance regulation. It also offers recommendations on reforms for a range of stakeholders and provides concrete suggestions for future research. Through sharing global practices in the field of political finance, this handbook is an important step in safeguarding the integrity of elections and of democratic politics.

Kofi A. Annan

Chair, Global Commission on Elections, Democracy and Security

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Preface

Democracy is a system in which the government is controlled by the people, and in which people are considered equals in the exercise of that control. However, unequal access to political finance contributes to an uneven political playing field. The rapid growth of campaign expenditure in many countries has exacerbated this problem. The huge amounts of money involved in some election campaigns makes it impossible for those without access to large private funds to compete on the same level as those who are well funded.

There is no doubt that political parties need access to funds in order to play their part in the political process. At the same time, the role of money in politics is arguably the biggest threat to democracy worldwide today. This threat is clear across all continents--from huge corporate campaign donations in the United States and drug money seeping into politics in Latin America, to corruption scandals throughout Asia and Europe. Evidence shows that large portions of the electorate around the world are left with the perception that their politicians are more concerned about money than about representing citizens' interests.

Recognizing the many challenges of money in politics and the gap in comparative knowledge, International IDEA has been focusing on the topic for over a decade and has worked on a broad range of activities, including stimulating national debates on legal reforms, building institutional capacity and producing global comparative knowledge. This handbook builds on the 2003 International IDEA handbook Funding of Political Parties and Election Campaigns and is unique in its global scope. By offering an overview of political finance around the world, its aim is to advance the debate and stimulate action to improve the role of money in politics.

There are a myriad of problems related to money in politics: financial scandals, the abuse of public funds, drug cartels' supply of illicit money to parties, and private corporations funnelling vast sums to party figures in order to garner favours.

Women candidates in particular suffer disproportionately from lack of access to campaign finance. In many countries, unfair allocation of public funds distorts the playing field in favour of ruling parties. This abuse of state resources is particularly problematic in former Soviet countries and Africa.

It is common for money in politics to operate behind closed doors and involve shadowy practices. The exact amounts and origins of donations to political parties or candidates are often unknown. This creates a system that is open to abuse by big business or organized crime, which contributes money in return for influence. Donations seen as an investment by corporate interests have been reported from virtually all regions, not least the older democracies of

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North America and Europe. The penetration of illicit funds into politics poses a particular danger to democracy and its institutions on all continents. This is especially so along the Latin American drug-trafficking corridor stretching from the Andean region to Mexico, where drugs money has infiltrated political life and elections.

In all regions of the world there is a deeply worrying trend of money in politics drowning out the voices of ordinary citizens. For a democracy to be healthy, it must revolve, first and foremost, around the citizen. And for a democracy to be sustainable, it requires transparent, accountable and inclusive political parties that can channel the demands of the people and truly represent them.

Attempts to tackle these challenges through political finance laws and regulations are often undermined by a lack of political will or capacity, as well as poorly designed and enforced measures.

This handbook addresses these and other problems of money in politics by analysing political finance regulations around the world and providing guidance for reform. The chapters are divided by region; each assesses the current state of regulations and challenges and offers a series of recommendations to tackle the identified shortcomings. This geographical approach has the benefit of revealing regional trends and patterns, and offers insights into what has (and has not) worked in different contexts. An additional chapter focuses on gender, reflecting the reality that women remain grossly under-represented in politics around the world, while the increasing influence of money in politics perpetuates this inequality. While context is a crucial component of any discussion on political finance, some general recommendations and messages are identified.

An important basis for this work has been International IDEA's Database on Political Finance3 which received a major revision and update in 2012. We hope that this database, which has become the leading and most exhaustive source on political finance regulation worldwide, will, together with this handbook, provide tools that will be useful to those actors and stakeholders in a position to undertake reforms that will address the numerous challenges of money in politics.

Yves Leterme

Secretary General, International IDEA

3 See

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