With a price tag of six billion dollars, the recent United States election season set a record for the most expensive election of all times, and re-launched the global debate on campaign finance. The complex relationship between money and democracy has sparked controversy since the beginnings of democracy in ancient Greece, when the first incidents of vote buying were reported, and has continued to do so ever since. Are private money and democracy fundamentally incompatible, or does private finance have a role to play in fostering political engagement? Although arguments can be made for both sides, several key reforms can be implemented across the globe.

Public vs. Private Finance: The Ongoing Debate

The concept of “one person, one vote” is one of the fundamental tenets of democracy, if not the most important one. However, as University of Missouri professor Jeff Milyo points out in his study of campaign finance, this concept does not always ensure perfect representation of each individual’s stake in a certain political issue. The protection of water resources, for example, may be of particular concern to a certain minority; but if the issue is brought to general election, the concerned minority will not receive a share of the vote that reflects its direct interest in the issue. In this context, campaign financing by individuals can be viewed not as a form of vote-buying, but instead as a way for concerned minorities to voice their opinion on a topic of direct interest to them.

This was to a large extent the rationale behind the well-publicized US Supreme Court decision in Citizens United vs. Federal Election Commission. In 2010, Citizens United attempted to publicize a video critical of Hillary Clinton, which the Federal Election Commission declared a violation of legislature restricting corporate financing of political elections. The case was taken to the Supreme Court, which decided in a 5-4 ruling that Citizens United and other corporations were entitled to independent political spending under the freedom of expression protections provided in the First Amendment. Although US president Barack Obama called the decision, “a green light to a new stampede of special interest money in our politics,” proponents of the decision argued that it was more compatible with democracy than the public funding alternative.

In Europe, government funds are provided to political parties in exchange for full disclosure of campaign expenditures, which has been flaunted as the best way to level the playing field between incumbents and challengers. However, a recent study by the think tank IDEA revealed that most citizens were opposed to using government funds to subsidize political parties. Although no extensive study has been conducted on the topic, there is evidently potential for the incumbent government to restrict funding in order to maintain its advantage. In Russia, for example, the incumbent party is allowed to campaign on state-sponsored official tours, whereas spending caps for other parties place a limit on the amount of campaigning they are able to undertake.

As a last argument in favor of private financing, a recent study published by Policy Analysis indicated a strong correlation between restrictions on private funding and lower levels of political competition. Limiting the amount of money that can be donated to a political party is often more harmful to the challenger than the incumbent, as the challenger typically needs more funds to increase its public prevalence. Looser financial regulations could therefore have a positive impact on the number of political options available to citizens. On the other hand, the large funds amassed by the incumbent government through private financing over several elections may also create a deterrent effect, preventing the creation of new parties. In the United States, the funds that would be necessary for a third-party to challenge the Democratic or Republican parties arguably contribute to the maintenance of the bipartisan system.

The main argument against private financing directly compares individual contributions to bribing. Can a donator as generous as Sheldon Adelson, the business magnate who contributed over $34 million USD to the Romney campaign, really expect nothing in return for his large expenses? It may simply be that legislators and private contributors have similar ideological positions and interests. The concept of bribery implies that politicians change their policies to suit contributors, but it may be that politicians’ positions attract donors, not vice versa.

Overall, a closer look at the importance of campaign financing, reveals that private money may not actually influence political outcomes to the extent envisaged by the public. The Sunlight Foundation reported very low rates of returns for many of the major contributors to the US election season in 2012. For example, American Crossroads, the super PAC backing the Republicans, only saw 1.29% of its spending result in the desired political outcome. Smaller funds that focused on key issues or local elections, such as Women Vote, were those that observed the highest rates of return. Similar points cannot necessar-

ily be made for other countries, however, as contributors to the Venezuelan and Brazilian elections experienced significantly higher rates of return.

Enforcing Transparency

Whether or not private finance actually plays an important role in influencing elections, various reforms exist that can broadly be agreed upon to improve the regulations surrounding political finance. Transparency requirements enable citizens, local watchdogs, and international NGOs to supplement the role of the state and prevent any bias on the part of the incumbent government. This is particularly important for less economically developed democracies, which may have limited resources to audit financial spending. Surprisingly, more than 25 percent of democracies that require full disclosure of campaign funding still do not have a requirement for this information to be made public.

Well-established democracies, however, still have room for improvement in this area. Transparency should be more strongly emphasized in local and smaller level races as well as nation wide campaigns. Legislature on the funding of national elections is extensive and well-enforced, both in North America and in Europe. However, research conducted by the Center for Public Integrity suggests that it is in more local elections that private money presents the potential for swaying policy. For example, a study by the Institute of Governmental Studies at Berkeley found a close correlation between campaign contributions and the price of telecommunication contracts in the United States, the high volatility of which had previously been inexplicable. Transparency reforms have been focused on the more widely publicized and more closely scrutinized national elections, but root level races should in no way be forgotten.

One final point to take into account when developing transparency norms is the existing landscape of political finance. For example, candidate funding is the area more closely monitored in the United States, where private financing is the norm, whereas in Germany it is spending that is reviewed at the end of the year, as the public sector provides most of the initial funds. The motivation in both cases remains the same and allows civil society and international groups to be involved in the auditing process, in order to ensure it exists elsewhere than on paper.

Non-Existent Law: Strengthening State Capacity

The other key issue plaguing political finance regulation is the gap between theory and practice. In newer democracies in particular, the priority should not be to introduce new legislation but to ensure that the existing legislation is actually being enforced. Although this reasoning may appear self-evident, this problem plagues campaign finance in many newer democracies, particularly in Africa and Oceania. In a study conducted by an Oxford research consortium, only 43% of candidates running for office in Nigeria were aware that spending limits existed on their campaigns. Although the Nigerian government operates an auditing department, only 40% of the respondents actually had their accounts examined by an official. To quote Pinto-Duschinsky, “political finance suffers from too many rules, too little enforcement.”

Likewise, existing legislature should be re-examined to check for potential loopholes. In India, for example, strict limits are in place on direct cash donations but goods donations, such as smuggled alcohol contributions, have become a common way to contribute to parties in heated elections. Similar loopholes exist in more economically developed democracies. In the United States, the 2010 Supreme Court decision mentioned earlier introduced a distinction between hard money, or in other words money donated directly to a politician’s campaign, and soft money, or money used to promote a cause that may or may not be associated with a particular politician. Limits on hard money are carefully observed, but soft money is much more loosely monitored. Although a distinction should be made between the two types of contributions, this is a potential loophole that could develop into a problem in the future.

Integrating Cultural Context Into Reforms

Finally, the cultural context and conception of the state should be taken into account when introducing reforms. The role of government is envisaged differently in the United States and Europe, a fact that is reflected in political finance regulations. Since its creation, the United States has developed a system of checks and balances through the division of powers and the federal system. This serves to limit the size of the government in contrast to European countries. In Europe, governments tend to have much more power once appointed, as they are directly chosen by a majority parliament and therefore unlikely to face deadlock from the legislative. The difference extends beyond institutional design—United States citizens are significantly more opposed to the idea of large government than Europeans. In a survey conducted by Pew Research in 2012, 56% of United States respondents said they valued the “freedom to pursue life goals without state interference” over “the state [guaranteeing] that nobody is in need.” Only 35% of Western Europeans responded likewise.

These different conceptions of the state have developed over centuries and influence approaches to political financing regulation. For example, it is no surprise that Norway, a country with universal health coverage and a wide social safety net, should sponsor political campaigns through the public sector. Although Europe allows individuals to impact the political process through private funding, this is restricted both directly and indirectly much more significantly than in the Americas: for example, France places a limit of 4,600 on individual contributions, which is a very different situation from the $30,800 limit placed on individual party contribution in the United States. However, 86% of European countries provide some sort of public funding to political campaigns, in contrast to 27% of countries in Oceania. These differences in the conception of democracy mean that there is no perfect solution in terms of private political finance. Principles of effectiveness and transparency should instead be implemented while taking into account these different conceptions of the state.

Large-scale, radical transformations to campaign finance are difficult to pass through. In the United States, for example, a move to a more public system of finance would require an amendment to the constitution and therefore the approval of two-thirds of Congress and three fourths of the states. Reform is therefore likely to move on a slow, case-by-case basis, but that does not mean it is impossible or unnecessary. In a poll conducted by Associated Press, 83 percent of United States citizens expressed themselves in favor of limits on contributions by corporations and unions. French and German citizens have expressed similar dissatisfaction with the state of public funding. The key is to ensure that the reforms that take place are implemented in a realistic and balanced manner that takes into account the global experience with campaign finance.