Political parties and campaigns depend for funding on private donations, from businesses, from unions, from individuals. That is not working well. It is a source of widespread corruption and gives monied interests control over public policies. Is there a better way?

The American Supreme Court has decided that it would be a suppression of freedom to deny citizens the right to support political causes and candidates of their liking financially, and this principle seems to have broad support in jurisprudence in America and elsewhere. If we accept that, it still does not follow that there is a right to unregulated political use of private money. Such a right does not exist even in economic markets, where monopolistic use of financial resources is generally banned. That should be the case all the more in political “markets,” where the principle is, as it is not in economic markets, that each participant should have the same influence.

There are arguments for public funding of political parties and campaigns. Democracy is a public good and should be funded publically. Some European democracies do have extensive public funding, which to some degree does discourage some forms of private funding, for example from businesses. But there are drawbacks. One is that it is rarely consistent. For example, the ability of trade unions to fund social democratic parties has usually not been restricted in the way other forms of private funding has. Another drawback is that public funding has tempted established parties to fund themselves lavishly from the public purse in a way not available to up and coming parties. This has been visible in for example Germany and Scandinavia.

Some of us have for some time been suggesting alternative ways of arranging public funding, mainly some variation of letting public funds be distributed through the hands of voters, for example in the form of vouchers which voters would distribute to parties or candidates of their choice. That might, it has been thought, both shut down transgression and put a new power of equality into the hands of voters. This may have some theoretical merit, but is, in truth, not an idea that has found much favour and taken hold.

Which leaves us to search for some arrangement which would respect the rights of citizens to support political groups or candidates with money but have that regulated against the formation of monopolistic powers in the political market.

Monopolistic power arises if one or a few actors are able to obtain decisive influence, or collude to give themselves such influence, and when there is a direct connection between donor and recipient so that the donor is able to extract favours from the recipient on the threat of withholding funding.

But political monopolisation could be prevented in ways that are compatible with anti-monopoly thinking in respect to economic markets. That could be done, firstly, by upper limits on the size of any individual donation and standard anti-monopolistic regulation against collusion. Upper limits would not need to be draconian, only enough that an individual donor could not make himself dominant. Furthermore, it could be prevented by regulations whereby recipients would not know the identity of donors, as in economic markets buyers and sellers are (mostly) unknown to each other. A donor who wants to support a group or candidate does not for that purpose need to make himself known by name to the group or candidate in question. That is only a requirement if his intention is to purchase influence.

Imagine a clearing house into which citizens could put money earmarked for some group or candidate. That money would come out of the clearing house to the group or candidate in question, but without the nametag of the donor. Of course, the donor could still let the recipient know but as long as the contribution is not of monopolistic size that would do no harm. No donor could demand that his identity or donation be made public, and no recipient could demand to know who their donors are and what they have donated.

Now, if we think people make political donations in order to buy influence, why would anyone under such regulation put up any money at all? The first answer is that people are not necessarily out to buy influence. That may be the case for the big donors but cannot be the thinking behind smaller donations. It is common enough that people donate money to causes they are interested in, political and non-political, without any idea of return to themselves. President Obama pioneered the strategy of many small donations to great effect in his campaigns.

Furthermore, with a safe regulatory regime, citizens would not only be allowed to donate but should be encouraged to do so. If this were the way for politics to be funded, citizens would have to contribute in order to have a working democracy. We want democracy, it needs money to run, we have to put it up. It would become the done thing.

In addition, I would recommend direct fiscal encouragement. Let the government pledge to match each private donation with an equivalent donation from the public purse. Each individual contribution is thereby worth twice as much as the citizens pays up. Matching public monies could follow the private donations to the intended recipients. Or, as would be my preferred scheme, they could go into funds to support local civil society activities, including political party-like activities to facilitate the formation of new political groupings. My contribution, then, would first support a candidate of my choice and then, in addition, civil society activity in my community. That should be a pretty good deal for politically and socially interested citizens. The distribution of local funds would be in the hands of an appropriate local agency or committee under local government authority, breathing additional life into local democracy.

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