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Political Science

Money for democracies

Preventing corruption and ensuring competition are among the concerns in the debate to identify the best model for political funding

CATARINA BESSELLAs old as modern democracy, political funding is essential to its existence: it is what maintains the political parties, publicizes candidates, drives campaigns. Equally essential are the measures for its regulation, dating from the late nineteenth century. Britain was a pioneer in creating in 1883 a law to prevent corruption in this field. Decades later, in 1928, with the same desire to fight illegal practices, Uruguay adopted public funding for the first time ever in the world, believing that this would be more effective. Until then, the only source of resources was private. The Uruguayan example was followed by Argentina in 1955 and by Germany in 1959. Soon other countries would opt for such funding. However, there is no consensus as to what is best, whether public or private funding, to curb illegal practices – as one can see indistinctly from the scandals in countries that have either type, with the widest range of rules.

In the debate on the funding of political parties and elections, preventing corrupt maneuvers is not the only concern. One must also ensure that there is healthy competition, so that economically weaker areas can, in theory, compete with the same possibilities. “An appropriate model of political funding for a particular country may not be the best for another country,” says Adla Youssef Bourdoukan, a political scientist who studied the subject in her thesis O bolso e a urna: financiamento político em perspectiva comparada [The wallet and the ballot box: a comparative perspective of political finance], recently defended at the Department of Political Science, USP, under the guidance of Maria Herminia Tavares de Almeida. “And the best is one that ensures a flow of resources that allows electoral competition while minimizing possibilities for corruption,” he adds.

In Brazil, the financing is mixed. In other words, the funds come from both the private and the public sectors, the first predominating. Since the Collor scandal – when reports on unrecorded funding led to the impeachment of President Fernando Collor de Mello in 1993, a series of measures was put in place by the TSE (Superior Electoral Court) to increase the transparency of party accounts and to monitor and punish politicians and offending parties. However, according to the researcher, this process is still underway, and there are several cases of impunity for perpetrators of some scandals involving “unrecorded funds” in previous elections.

As examples of these important measures, the researcher cites the ones that allow the rendering of accounts of political parties and election campaigns to be viewed by voters on the internet. We can already see the benefits of the rendering of accounts from the election campaigns of 2002 and the political parties in 2007 and 2008. Moreover, today, the “hidden donations”, those made to parties and immediately transferred to candidates, are avoided. In the past, the identity of donors remained hidden. Voters only knew that a donor had contributed to the campaign of a particular party when the latter rendered its accounts in April of the year following the election, and even then the destination of the donation was unknown. With the new measures, political parties must declare the source of funds that they will transfer to candidates during election campaigns.

CATARINA BESSELLPolitical scientist Bruno Wilhelm Speck, a professor at the University of Campinas (UNICAMP) and the author of the study Caminhos da transparência: análise dos componentes de uma sistema nacional de integridade [Paths to transparency: an analysis of the components of a national system of integrity] (Editora Unicamp) and Control ciudadano del financiamento politico [Control of Political Financing by the Citizens] (Transparency International Secretary), says that, in fact, Brazil has made good progress in improving its funding model. The country, according to Speck, bets less on vetoes and bans and more on basic rules of accountability and transparency. “The previous model banned donations from companies, but in fact was a front that camouflaged a free-for-all system. Today, things are less precarious,” says Speck. Candidates and parties can receive funding from almost all individuals and companies without actual constraint on the values, subject only to the requirement of accounting for the origin and use of the funds to the Electoral Court, which publishes this data in its entirety on the Internet. “Certainly, there are still unreported funds. However, there is also a considerable amount of money – some R$2 billion per election – whose origin and application we know. We know the big donors. Even when donations are within the law, the press closely observes these companies and the politicians who were elected with the help of these resources. It is a system that still has flaws, but it is undeniably superior to what was in place before. It demands an efficient Electoral Court and citizens that pay attention and are critical, that question their candidates about these donations,” says the political scientist.

Thus the existing funding model has improved, adopting stricter accountability and disclosure rules. Another option, besides this training, would be, he said, a radical change toward an exclusively public financing system. However, as Speck indicates, Congress, which is responsible for this area, is not moving in this direction. “The discussion of the theme suggests exploring alternative ways to remove political reform from the impasse in which it has found itself for years,” says Speck.

In Brazil, there is a lot of literature on parties and party systems and elections, but almost nothing on how the parties finance their activities, evaluates Maria Herminia Tavares de Almeida. For this reason, she considered the thesis of Adla Bourdoukan a pioneering study. “Studies on party financing are in their earliest stages in Brazil. The international literature, which is well explored in her work, shows that there is diversity of funding models and that only a few countries rely on just one type of financing. What predominate are those that combine public and private funding, as in Brazil,” she says. Further studies, according to her, can advance the debate regarding various points: “The determinants of preference for different models; the thorny issue of the weight of non-governmental resources in the funding of political parties; and the possible types of public monitoring of party financing.”

CATARINA BESSELLThe models of political financing involve a number of variables, as explained by the author of O bolso e a urna. They determine how funds can be raised. The sources of funding, as noted, can be public, private or both. Depending on each country’s choice, donors may be individuals, companies, unions or associations. Countries can also set limits to individual donations and to what parties can raise. Additionally, they can establish rules on how those resources are spent and whether this can be carried out by parties, candidates or third parties, and whether there are limits, deadlines or vetoes. Generally, the political funding models are classified based on the sources of funding. Thus, in contemporary democracies, there are three models of political financing: exclusively private, mixed and matching funds.

In the survey that she conducted, Adla Bourdoukan found countries that put a cap on electoral campaign spending, including the UK, Portugal, Spain, Argentina and Mexico. Some prohibit donations from for-profit businesses. This is the case of the United States, Mexico and Israel. Other countries prohibit donations from unions or employer associations. This is the case of Brazil, Argentina, France, Portugal and the United States. In some countries, revenue sources of parties and candidates are very widespread. The United States is one such example. In its last presidential election, 34% of individual donations for the Barack Obama campaign consisted of low amounts, under US$200. The Obama campaign, she said, was well known for mobilizing large numbers of small donors, but one can say that small donations are a feature of the American system: in George Bush’s 2004 campaign, 26% of total revenue came from amounts less than US$200.

The matching funds models, whereby the state contributes funds in proportion to the resources raised by the candidates, is adopted in elections of certain positions in the USA and in Germany, but according to the researcher, this system suffered a major blow in the recent U.S. elections with Barack Obama’s refusal to join the scheme because he did not want to commit to a campaign spending cap.

Private financing has always been predominant in Brazil, other than during the military period, when donations from for-profit businesses were banned and the party fund was created. The first form of public financing in Brazil was free campaign air-time on radio and TV, which began in 1962. Direct public funding in the form of the party funding was established in 1965 and has been in continuous existence to this day, albeit with modifications as to how the funds are distributed. According to the researcher’s calculations, public financing in Brazil accounted for approximately 28% of total political funding in 2002, 24% in 2004 and 28.3% in 2006.

In countries that resort exclusively to private financing, the competition involves not only votes, but also the funding to finance political campaigns and the functioning of political parties. “However, it is wrong to assume that parties with access to more funds would benefit the most, because those resources may not turn into votes,” the researcher explained. “It is clear that a minimum amount of money is required for the proposals of the party or candidate to become known among the voters and thus to generate votes, but a series of studies also points to the opposite effect: votes draw funding. That is the case because few donors are willing to waste money by contributing to campaigns with little chance of winning the elections, whereas a large number of donors would be willing to contribute to campaigns that they see as winners, even when the political preferences of the donors and of the candidates are not the same,” adds Adla Bourdoukan.

CATARINA BESSELLIn the case of public financing, the possibility of having an impact on the competition among parties is greater, warns the researcher. “The state must establish criteria to distribute public funds: it can give an equal amount to all parties or candidates, which artificially equalizes the electoral dispute and attracts opportunists whose sole purpose is to appropriate these funds, or it can allocate resources in proportion to the political relevance of political parties or candidates,” he explains. There are basically two ways of measuring this political relevance, she says: either based on the performance of party in previous elections, or in the current election. In the first case, which is the option adopted by most countries that rely on public funding, there is an inclination to crystallize the party system, because any changes in voter preference with regard to political parties are not being taken into account in the allocation of public funds.

In O bolso e a urna, the political scientist focuses primarily on the effect of each type of financing – public or private – upon elections. One conclusion is that this tends to vary depending on the electoral system. In countries with a proportional system, which requires a minimum number of votes and in which there is a division of votes among parties, there is more public funding. At the other extreme, in countries where the electoral system is based on a majority vote – in other words, where the victorious candidate is the one who wins the majority, and where voters vote for individuals – there is a predominance of private funding. “There is a predominance of public funding in proportional systems, as an instrument of electoral market restriction, to the benefit of better established parties,” she says.

The researcher states that countries with proportional systems tend to employ criteria for the distribution of public funding based on the outcome of the preceding elections. As a result, according to her, competition may be impaired. Given the current rules for distribution of resources from party funds, the researcher says that in Brazil, an increase in the percentage of public funding relative to the total (today it is just over 20%), or the eventual implementation of public funding alone, as has been proposed, may have the effect of freezing the electoral contest, which could lead to a decrease in the number of parties.