The Deregulatory Moment?: A Comparative Perspective on Changing Campaign Finance Laws

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Acknowledgments The essays included in this volume were first developed for a July 2013 conference on recent changes in campaign and party finance law that I convened in Remich, Luxembourg, under the auspices of the Henry J. Leir Luxembourg Program. I am deeply grateful for the support provided by President Arthur Hoffman and VicePresident Margot Gibis of The Leir Charitable Foundations and by The Henry J. Leir Luxembourg Program–Clark University. Their commitment to furthering international understanding in honor of Mr. Henry J. Leir permitted participants from various nations to attend a successful workshop in Luxembourg that resulted in the publication of this book. On behalf of all of the contributors to this volume, I thank Uwe Gertz, director of the Leir Luxembourg Program–Clark University, and Angela Woodmansee, the program assistant and coordinator of our Luxembourg workshop. I also gratefully acknowledge the support of my political science colleagues at Clark for suggestions regarding the preparation of the workshop and of the department’s Francis Harrington Fund for additional financial support. A small portion of chapter 6 is drawn from Michael Koß’s 2010 book, The Politics of Party Funding: State Funding to Political Parties and Party Competition in Western Europe. I thank Oxford University Press for permission to include that material here. Finally, thank you to Melody Herr and her talented staff at the University of Michigan Press for their enthusiasm for this project and the care and professionalism they have shown in shepherding this book toward publication. As always, they have been a pleasure to work with. Rob Boatright

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Introduction Regulation and Deregulation of Political Finance Robert G. Boatright When government policies are changed, they often stay changed, and the fierce debates that swirled around them at the time of their implementation disappear. Consider, for example, the many changes to the American electoral system wrought during the late nineteenth and early twentieth centuries. Civil service laws were enacted in the 1880s and 1890s, removing large numbers of federal jobs from the control of political party bosses. The Australian ballot was also introduced in the 1880s, establishing once and for all that citizens were free to vote as they wished without scrutiny from anyone. And for the first time in American history, laws were passed regulating the way in which parties chose their candidates; the government now had a direct stake in decisions that were once seen as private matters to be handled at the discretion of the parties. These changes were controversial at the time, but they have endured, with only slight modifications, and there is no serious discussion of reversing any of them today. Furthermore, the United States was not the only nation to make such changes. In most democratic nations, similar laws were passed, insulating civil servants from politics and enhancing the privacy of voters’ decisions. From the standpoint of the late twentieth century, it might have been possible for an American observer to conclude that the regulation of money in campaigns was another such reform. The United States was not a leader in establishing rules regarding the spending decisions of political parties or candidates. However, by the 1970s it had established a comprehensive system for regulating political contributions, and it provided some public funding for presidential candidates. By the 1980s, nearly all democratic nations had some form of public financing—often a much more generous system than that of the United States—and proposals for strengthening U.S. regulations abounded. Given what other nations had Page 2 →done, it would not have seemed overly optimistic to conclude that the United States would get there eventually. As we now know, greater regulation of campaigns in the United States was not inevitable. By the late 1990s, many conservative politicians had begun to speak of “deregulating” campaigns in the same way that they spoke of deregulating various sectors of the economy. The results of this countermovement became clear in two developments that took place a decade later. First, in its Citizens United v. Federal Election Commission (558 U.S. 310) decision, handed down on January 21, 2010, a divided U.S. Supreme Court struck down restrictions on corporate advocacy in election campaigns, reversing its own six-year-old decision accepting the imposition of such limits. The Court also reversed a twenty-year-old decision that prohibited corporations from engaging in what is known as “express advocacy”—direct exhortations to vote for or against particular candidates. Second, in 2012, both major party nominees declined public financing—and the voluntary spending limits that came with it—in their primary and general election campaigns. These two developments contributed to making 2012 the least regulated American election since the 1960s and by far the most expensive election ever, even after accounting for inflation. After the election, many on both the political right and the left discussed the need for further deregulation—for doing away with restrictions on contributions to the political parties, for abandoning limits on what individuals could give to candidates, and for making data on such contributions and expenditures less available to the public. Deregulation had bred calls for more deregulation. During the late twentieth century, many political scientists sought to develop a theoretical understanding of governments’ growing role in funding campaigns and of the development of restrictions on political contributions and expenditures that tended to go with this government role. This effort was perhaps more successful in Europe and Canada than in the United States, but many of these theories purported to explain the United States as well. Most important, however, none of these theories suggested that governments might seek to do away with such regulations. And, as this book documents, it is not at all obvious that nations other than the United States have done so. Political scientists in other countries simply do not use the term deregulation when

talking about political finance. This book explores the relationship between the very recent and very American discussion of “deregulating” campaign finance and the ongoing discussion among comparative political scientists about the state’s proper Page 3 →role in regulating election spending. The chapters here explore two sets of questions: First, is the United States alone in its movement away from regulation of election spending? How have other nations’ campaign finance (or, to use the more common term in other countries, party finance) regulations changed over the past decade? In short, should we expect to see “deregulation” anywhere else? Second, is there a theory of deregulation of campaigns? How can we account for the experience of the United States or of other nations that have sought to reduce restrictions on political spending? The authors represented here are far from unified in our answers to either of these questions, but we agree that changes in campaign finance law over the past decade in the United States, Canada, Australia, Great Britain, Germany, Sweden, France, and other countries suggest that much of what we thought we knew about campaign finance at the outset of the century deserves to be rethought. Each chapter explores the notion of deregulation in political campaigns—what it means, whether it is happening, and how one might make theoretical sense of the concept. The chapters move from more deregulation to less (or, perhaps less confusingly, from less regulation to more). That is, we explore the American example before moving on to explore more ambiguous cases of change, as in Canada, Australia, and Great Britain, and then to European nations that have changed their laws to make them more restrictive. The authors whose work appears in this volume suggest that Western democracies are not taking and have not taken any clear path with regard to campaign finance regulation. There are regulatory moments, such as the adoption of public financing across many democracies in the 1960s and 1970s; there may similarly be deregulatory moments that are analogous to the wave of economic deregulation in which the United States and other democracies engaged during the 1970s and 1980s. Yet theories that posit any sort of deterministic logic to campaign finance regulation will fall short if they fail to consider the dynamics of competition between parties—the use of campaign finance laws as weapons against the opposition—and the institutional and political constraints under which politicians operate. While changes in the regulation of campaign finance may well be replicated in different nations at similar times, changes over the past decade provide little evidence of any sort of progression in democraticPage 4 → nations’ treatment of campaign spending. If deregulation is seen as an inevitability—a path to be taken—in some nations, then we may ultimately witness a divergence between the models of electoral democracy in those nations that pursue deregulation and those that do not.

Deregulation in the Economic and Political Sectors It has become customary to refer to the Citizens United decision as part of a movement toward the “deregulation” of American political campaigns. In September 2011, Congressional Quarterly published an article announcing the advent of the “deregulated campaign” (Carney 2011). Political pundits of all stripes agreed on the term. “For GOP Substance, Deregulate” urged conservative commentators such as George Will (2013), arguing that further deregulation of the campaign finance system would yield freer speech and higher-quality candidates. Meanwhile, liberal columnists such as the New York Times’s Nicholas Confessore (2012, A21) were quick to lament the “the deregulated campaign financing unleashed by the Supreme Court’s 2010 Citizens United decision.” This choice of words is hardly a surprise. For one thing, it seems accurate. If we follow the strictest definition of the word, any effort to remove legal restraint or to reduce the government’s role in a particular policy domain is an instance of deregulation. Furthermore, the term also had been deployed for ideological ends for at least a decade. Bradley Smith, one of the foremost opponents of campaign finance restrictions, titled his 1997 testimony

to the House of Representatives Judiciary Committee, “Should вЂCommitting Politics’ Be a Crime? The Case for Deregulating Campaign Finance.” Similarly, the Cato Institute’s John Samples (2008, 186) closed his attack on campaign finance “reform” by contending that “a deregulated system of campaign finance should be expected to increase competition.” It is no surprise, then, that journalists, politicians, and academics searching for a word to describe the status of American campaign finance law since 2010 have settled on this one. This frenzy of editorializing about deregulation may have been limited to American writers describing American politics, but deregulation is a concept that is easily understood in the framework of other nations’ politics. It is, in addition, an ideologically loaded term—regardless of whether it is an accurate description of what has happened. Advocates for deregulating campaigns tend to share a desire for deregulated markets. To take one U.S. example, the Cato Institute, long one of the more prominent libertarianPage 5 → groups involved in federal policy debates, states forthrightly on its website that it is “committed to expanding civil society while reducing political society.”1 To speak of deregulating campaigns is to link the regulation of, for example, the spending of political groups to the regulation of insurance prices, safety standards, and so on. This comparison is at least implicitly if not explicitly made in references to political campaigns as a “market” and the electoral arena as a “marketplace” (McDonald and Samples 2006). If one wishes to be a principled economic conservative, according to this logic, one cannot also advocate regulation of political spending.2 Following this logic, deregulation is not merely a descriptive statement about a particular policy decision; it is an agenda. An Agenda for Studying Deregulation The discussion of deregulating campaigns, then, brings up three questions. First, is there an inevitable path that one must follow once one seeks to reduce regulation? That is, does one instance of deregulation imply further deregulation? In the campaign finance case, it is easy to see why removing restrictions on one political actor places others at a disadvantage and thus leads to further calls for regulation. To return to the Citizens United aftermath, the fact that outside groups could now receive and spend unlimited amounts of money may well have placed political parties and candidates, whose contributors were still limited in what they could give, at a disadvantage (see La Raja 2012). Similarly, deregulated industries might well offer products at lower prices than their regulated competitors; for example, if the price of rail travel is set by the government, then bus lines and airlines can adjust their prices to undercut those of rail lines. If consumers can switch their allegiance from one product to a close substitute, then deregulation may well spread. A political contributor might seek to contribute to the organization that will most efficiently use his or her money. Is one outcome normatively better? A regulated market may imply a particular distribution of power; an unregulated market, however, also implies a particular distribution of power. Which distribution is preferable is a matter of taste, ideology, or opinion. Regulation raises a question of the justification of some redistribution, but so does the absence of any regulation. Second, to speak of deregulating campaigns with reference to voter choice, to improved candidate quality, or to increased freedom is to link the deregulation of campaigns to deregulation in other economic sectors. The United States is hardly the only nation where deregulation of Page 6 →government-controlled industries has taken place in recent years. In a global marketplace, it has been argued that firms that operate with reduced regulations imposed by their governments can acquire a competitive advantage over other nations’ firms.3 Does the same logic apply to politics? On the one hand, politicians do not necessarily compete with each other across borders. On the other, in some instances, political reforms have spread from one country to another. To take one example, in chapter 7, Daniela R. Piccio and Ingrid van Biezen show that similar public financing laws were adopted across many different countries at roughly the same time. If regulations are contagious, why should deregulation not be as well? If deregulation of campaign spending is taking place in the United States at the moment, should we expect it also to occur in other nations? Third, what is the relationship between public opinion and the deregulation or regulation of campaign finance? The causes of government regulation of business clearly apply to politics—externalities in the production of energy, for example, may call for government regulation in the same manner that the externalities that come from political parties’ competition for office may call for a role for government. The deregulation story, however,

is less forthright. Advocates of deregulating economic activity have often touted the benefits provided to consumers, and in many instances, compelling post hoc evidence demonstrates that citizens have been pleased with deregulation of industries. It is not clear, however, that this is or will be the case for politics. Few citizens devote substantial attention to matters of election financing, yet large majorities in most democratic nations advocate substantial regulation of many aspects of electoral politics. Conversely, citizens of Western democracies have shown a marked increase in their distrust of politicians and political institutions, so reforms that are presented as a blow against party control or against the perpetuation of an entrenched political class may be popular.4 We must ask, then, whether citizens’ voices are heard when campaign finance laws are changed and whether citizens are knowledgeable enough about the subject that they should be listened to. Or are those who advocate for deregulation wise to push forward and expect citizens to ratify their choices at some point in the future when the benefits become clear? This third question is particularly complicated for researchers because the agents of regulatory change are so different across the nations considered here. The cases we consider include decisions made by a wide range of political actors—by different types of legislatures, by courts, by appointed bureaucrats, and by independent regulatory bodies. If we are to talk about a trend, we must recognize the roles played by idiosyncratic Page 7 →political actors with different types of incentives, and we must recognize differences in responsiveness even for similar types of institutions. That is, differences in election rules for legislatures will yield different degrees of responsiveness for the legislatures themselves and for the parties that organize them. It is hard to come up with a theory that explains why one nation’s supreme court and another nation’s parliament took similar or contrasting steps. Such questions require a comparative approach to understanding developments in the financing of campaigns and political parties over the past decade. This is the case because democratic nations’ laws regarding political spending have developed in tandem over much of the past century. The technological and economic variables that affect election-related spending—the cost of television advertising, the rise of Internet communications and social media, and the cost of travel, among others—should be expected to change at roughly the same rate across nations. Social norms are also influenced by developments outside of one’s home country. In some instances, standards for what is considered corrupt behavior may also evolve at a similar pace across nations. One nation’s reform efforts may also serve as background research for another country’s debates. In the early twentieth century, surveys of political corruption in the United States frequently drew inspiration from the comprehensive British effort to restrict certain types of election spending.5 More recently, the Canadian government’s decadelong inquiry into reforming its own party finance laws included several volumes that considered recent changes in other nations.6 Because relatively few core concepts are involved in regulating campaign spending and they have remained much the same for decades, a comparative approach gains, at a minimum, a large sample size from which to draw. However, it is not obvious that a court decision overturning a campaign finance law or a legislative decision altering government spending on some aspect of elections constitutes part of any sort of deregulatory movement. Before turning to the relationship between deregulation and theories of campaign finance, it is appropriate to briefly consider the treatment that market deregulation has received from political economists; such a consideration will help us decide whether the term applies to political campaigns and how it relates to existing theories of political finance. Deregulation in Economic Theory The literature on economic regulation and deregulation is far too vast to do more than touch on some of the relevant themes here. All economies Page 8 →have some level of government regulation, and much of the economic literature has focused not only on the wisdom of regulating particular industries but on the appropriateness of particular types of regulations. In other words, regulatory economics focuses not only on the question of whether to regulate but on how to regulate. Alternately, the question of whether to regulate depends not only on the objectives but also whether the objectives can be achieved—that is, there are some forms of regulation, such as preserving property rights or preventing fraud and monopoly, that are often uncontroversial.

Deregulation, then, often is premised on leaving some aspects of regulation in place or on “improv[ing] regulation by reducing the costs of achieving desired regulatory goals” (Noll and Owen 1983, ii). When calls for deregulation are made, then, they generally address regulations that are said to restrict competition and/or to be in place for political reasons or for reasons that are no longer relevant. Political scientists and economists have generally taken a skeptical view of the goals of each of the players involved in regulation. Industries work to enact regulation to protect themselves from competition or to gain advantage over each other; as such, a market exists among firms for regulation (Stigler 1971). For Stigler, regulation is itself a form of competition conducted in a market for regulatory favors. Regulation is thus endogenous in the economy rather than an exogenous force. Politicians act as rent seekers to gain benefits from the industries they oversee and supply the benefits of regulation to firms (Baron 1995). Again, consistent with Stigler’s argument, they are the suppliers of an economic good and behave economically like producers. And the regulators themselves act in bureaucratic fashion, seeking to preserve their jobs and perhaps even expand their jurisdiction (Wilson 1989, chaps. 11–12). In classic iron triangle fashion, government is captured by private interests, and industries, agencies, and politicians can act to shut out the public interest. This is not to say that there is no public interest at stake in regulation. Almost all regulations, controversial or not, posit a political or moral good that unfettered market competition cannot provide on its own. Even in the case of regulations that clearly reduce competition, governments may have an interest in protecting certain industries, as has been the case in the United States with railroads (Rothenberg 1994, 44) and automobiles. Studies of winemaking in France have also noted that France has regulated the industry to insulate a practice valued in French culture from foreign competition—and, if one is an oenophile, perhaps to preserve the quality of French wines in the face of competition from cheaper, inferior products (Loftus 1985). Similarly, governments may act to forestall “destructive Page 9 →competition” (Noll and Owen 1983) or to reduce harmful externalities caused by competition in an industry. These may all be worthwhile goals, but as many students of regulation argue, appeals to any sort of public interest are always suspect in that those who make such appeals tend to be seeking some sort of private gain. Calls to deregulate, however, are equally suspect—just as regulation of an industry may confer a competitive advantage on those firms that have organized to win the political battle for favorable regulations, so deregulation has the ability to create different winners and losers. The decision about who should win or lose ultimately involves ideology or self-interest. A case in point is Martha Derthick and Paul Quirk’s well-known book, The Politics of Deregulation (1985). Derthick and Quirk documented the deregulation of the trucking industry, the airlines, and telephone services, all industries in which the regulated businesses claimed to be serving a public interest. Airlines, for example, argued that regulation was necessary to serve rural areas or to maintain safety standards. Although some individual airlines suffered as a result of deregulation of the industry, competition clearly enabled others to prosper. Similarly, Noll and Owen explore the deregulation of television broadcasting as cable television spread. Political scientists have associated this change with some ills, such as the fragmentation of the television news market along ideological lines (Prior 2007), but it is hard to argue that deregulation did not on balance provide substantial economic benefits to firms and consumers. Studies of deregulation often start with the observation that Western economies saw a wave of deregulation in areas as diverse as transportation, communications, financial services, and energy extraction and power generation during the 1970s and 1980s.7 There certainly is enough here to constitute a movement, but the causes of the movement are hard to identify. Political science of the 1950s and 1960s tended to predict a path to more regulation, not less (Lowi 1969, 1985). Why did deregulation happen? One answer can be ruled out easily—deregulation was not undertaken in response to public demand. Most accounts of regulation and deregulation begin from the premise that the public is ill informed about the economic implications of regulation. Derthick and Quirk’s retrospective analysis of airlines, trucking, and telecommunications concludes that deregulation in these areas increased economic competition, created more efficient markets, and saved American consumers billions of dollars. Americans likely noticed, after the fact, that deregulation had been a good thing, yet they did not ask for it.

If deregulation does not happen because of public demand for it, then Page 10 →it must happen because of changed goals on the part of the industries or of politicians. One possibility is that the rationale for it changes—the public interest served by, for example, protecting railroads may seem less obvious as time passes and technological change makes new modes of transportation more attractive. Alternatively, the goals of politicians may change—new interests may emerge that gain politicians’ ears. For Derthick and Quirk, neither of these explanations helped to account for deregulation in the 1970s; they conclude that “the power of ideas” ultimately drove decision making and that the bureaucratic regulators themselves began to doubt the wisdom of what they were doing. The case for deregulation, then, can build on itself—elites may believe that successful deregulation of one industry can be replicated in another and that the ex post benefits to politicians and the public may justify acting to deregulate despite limited public demand for it and initial hostility on the part of those who are regulated. This may provide one explanation of why the notion of deregulation remains a popular piece of political rhetoric. A “deregulatory moment” occurred in the 1970s, and the path of deregulation seems to suggest that deregulation is self-perpetuating—successful efforts breed confidence in doing more. Similarly, changing expectations about international trade and economic assistance to other countries may be premised on changes in the economy’s regulatory structure—one nation’s experience may encourage others. Economists, however, generally qualify their discussions of deregulation by pointing out that governmental controls are not entirely absent in deregulated industries and that when they speak of deregulation, they include modifications of existing regulations to fit particular economic problems (Joskow 2009). Such matters quickly become far too complicated to explain to citizens. The rhetoric of “getting government out of the economy,” however, contains a certain visceral, ideological appeal.8 For those who are paying attention, be they citizens or elites, the narrative about deregulation’s successes can be impressive, albeit only if one can generalize—can say that lessons from deregulation of air travel apply to deregulation of electricity provision or (to return to the matter at hand) that deregulation of economic affairs can provide lessons about deregulation of political campaigns. Deregulation of Campaigns? Are campaigns for office endeavors similar to the making of an economic product? That is, should we see political contributions made by citizens as Page 11 →somehow analogous to the decisions consumers make about purchasing airline tickets? Should we see the expenditures of candidates for office in the same light as we see the expenditures of toothpaste manufacturers? How one answers such questions may ultimately be more a matter of ideological viewpoint than of fact. The economic literature on deregulation features a general consensus that deregulation entails a reduction in legal constraints on private actors and a reduction of the role of government in making decisions or providing financial support. How does this perspective fit politics? Political campaigns do not necessarily constitute a well-defined industry, and it is not clear who should be considered analogous to the private business firm. Candidates for office are not necessarily private actors, nor are political parties. In the context of campaign-related expenditures, individual citizens, groups, or corporations might be seen as equivalent to economic firms, but since their goals always involve government action, it is not particularly meaningful to speak of removing governmental oversight from their activities. Before we explore the notion of deregulating campaigns, however, an effort to provide a detailed definition is in order. Rules governing campaign activities tend to be grouped into three categories, as shown in table 1. Perhaps the most straightforward categorization of rules from a European perspective is that of Biezen and Kopecky (2007), who propose three dimensions for party finance rules: the availability of public funding, the regulation of party finances, and constitutional recognition of parties. Similarly, Christopher Witko (2005) groups campaign finance laws in the American states into laws concerning public financing, contribution limits, and disclosure requirements.9 Insofar as constitutional recognition of parties tends to be a prerequisite for laws requiring disclosure of party funding, and insofar as public financing tends to be accompanied by restrictions on private contributions or spending, I use the Witko categories to show common forms of regulation. Deregulation, then, would simply be the act of removing one of these regulations or rendering these activities more market-like through judicial decision, legislative action, or (perhaps) the development of new campaign methods that render previous legal restrictions obsolete. That is, deregulation can happen on purpose or by

accident. In addition, deregulation is relative—a system that is highly regulated may see relaxation of some laws without becoming less regulated overall than other systems. In addition, deregulation is not necessarily a very precise term in that legislators may simultaneously loosen some restrictions and strengthen others. Would increasing disclosure requirements while simultaneously raising Page 12 →or doing away with contribution limits count as an act of deregulation? The level of regulation cannot be measured precisely or compared accurately across regimes, but it is still possible to identify deregulation as a rhetorical concept and to make general claims about deregulation—such as the claim, which few would dispute, that the abandonment of restrictions on interest group spending in the United States or the abolition of the public subsidy in Canada are clearly moves toward having less regulation of campaigns. It is easy, in short, to identify the big cases, but a substantial gray area remains. Table 1. A Typology of Campaign/Party Finance Regulations Type of Regulation: Public Financing Contribution Limits Disclosure Requirements Per-vote subsidies Matching funds Source restrictions Flat grants Disclosure thresholds Examples: Aggregate contribution limits Tax credits/ deductions Reporting requirements Spending limits Advertising subsidies Free airtime Many of those who discuss deregulation of campaigns seek to equate campaign finance regulation with private sector regulation. One rationale for deregulation of economic production has generally been that consumers will benefit, but it is unclear whether citizens “consume” politics in the same manner that they consume economic goods. Advocates of deregulation propose many potential benefits. In his collection Welfare for Politicians?, the Cato Institute’s John Samples (2003) contends that deregulation would produce greater competition in elections; more public engagement in campaigns; greater privacy for citizens, groups, and candidates; and a more accurate reflection of public sentiment. It is hard to find studies that prove his contentions, although many studies of enhanced regulation (regulations such as the Bipartisan Campaign Reform Act [BCRA], the 2002 law that substantially restricted interest group expenditures) have posited the converse—that regulation stifles competition (Campbell 2003). Similarly, several studies of public financing in other nations equate the establishment of public financing with the parties’ declining desire to innovate or appeal to voters (Jansen and Young 2010). In the United States, arguments against regulation have relied on anecdotal accounts of this process—for example, Justice Clarence Thomas’s dissent in McConnell v. Page 13 →Federal Election Commission (540 U.S. 93 [2003], the case that initially upheld BCRA) included stories of groups or individuals who felt themselves unfairly punished or harassed by spending limits or disclosure rules. If regulations have adverse effects, it is certainly plausible that deregulation would undo some of these effects, but there are too few instances of deregulation actually happening in the American system for strong claims to be made. A more common argument for deregulation is that regulations are ineffective, easily circumvented, or prone to yielding unexpected consequences. This argument parallels the distinction between whether to regulate and how to regulate but raises the possibility that if all forms of regulation fail, it might be wiser not to regulate at all. This is a common criticism of many types of electoral reforms (Bowler and Donovan 2013, 43–63), but it is perhaps most common in reference to campaign finance laws. A common trope in the study of American politics (though not in the study of other nations’ politics) is the “hydraulic theory,” which states that whatever legal obstacles are placed in its way, money will find a way into the political system. When BCRA restricted party fund-raising, party activists almost immediately turned to organizing separate groups to receive large contributions. When public matching funds for presidential candidates were introduced in 1976, all eligible candidates took public funds; by 2008, however, accepting public funds had become a sign of weakness, and almost no competitive candidates took them. Most studies of campaign finance of the 2000s have posited that the overall amount of money expended on campaigns steadily increased, but the nature of the donors, recipients, and conduits of this money changed.

Neither of these arguments necessarily indicates that the public will support deregulation. Citizens cannot necessarily be expected to see at the time of deregulation that they have benefited, although these benefits will be measurable later on. Further, deregulation will at a minimum not make citizens feel any worse about politics and politicians and will simplify a set of rules that most citizens do not understand. Ultimately, however, one might question whether it is possible to measure the benefits that might stem from regulation because one cannot easily construct counterfactuals or present useful comparative examples. In any economic sector, one might simply construct a model weighing the benefits to the consumer (from, say, lower prices) against the possibility of market failure and then use similar economic sectors (one deregulated, one not) to measure consequences. In politics, however, we cannot easily measure the benefits that voters receive from deregulation of campaign Page 14 →spending, nor can we be certain that voters are, in fact, analogous to consumers in an economic market. Do voters receive more information about policy issues when prohibitions on campaign advocacy are lifted? Do voters ultimately get a choice between better candidates when limits are lifted on what can be spent on behalf of a candidate? Finding answers to such questions might be possible in comparative studies of similar countries—something some scholars of European politics have done—or even in comparative studies of American states. Obvious difficulties arise, however, in comparing American national elections across time or in comparing American elections to those of other nations. The United States has traditionally been difficult to fit into comparative studies of campaign finance, so it is hard to see how the deregulatory push in the United States will either make the country more relevant to these studies or allow for any sort of comparative analyses of deregulation. Theoretical difficulties thus arise if one argues that the American experience with reductions in campaign finance rules is the same sort of deregulatory action as other actions in the private marketplace. Similarly, positing that the consequences of deregulation of American campaigns will have very much relevance to the affairs of other nations raises difficulties. This does not, however, mean that the notion of deregulation is irrelevant to these countries’ governments and political parties. There are two reasons why the notion of deregulation has crossnational significance. First, deregulation is not solely an American phenomenon, and politicians in other nations have arguably adopted the same rhetorical strategies pursued by American deregulationists to explain their actions. In the fall of 2009, the Canadian Conservative government attempted to abolish the per-vote subsidy to parties (discussed in chapter 3). By introducing this legislation along with a fiscal update, a variety of austerity measures, limits on the rights of civil servants to strike, and a sell-off of government assets, the Conservatives were clearly presenting the legislation as an economic measure—as an effort to reduce spending and ostensibly to respond to the 2008 recession. As Valpy (2009, 10) notes, the other parties responded by pointing out that the government had proposed the cuts in lieu of offering an economic stimulus program. In short, both sides saw the move in economic terms, as an effort to reduce the role of government in campaigns, or to deregulate. It is no accident that Conservative Party leader Stephen Harper had a history of working closely with conservative American think tanks; he framed government intervention in campaigns in the same fashion as did American libertarians and conservatives. The discussions in this book of Australia and Great Britain also indicate that this idea can be Page 15 →translated to other countries even if the specifics of American campaigns can not. Second, it is easy to construct an argument about why the deregulation of political campaigns might be inevitable. As Justin Fisher notes in the conclusion to this book, it is far more difficult today than it once was to define (and regulate or prohibit) foreign contributions; to restrict campaign advocacy in an environment where citizens are exposed to media from outside the country; and to assign dollar amounts to different types of communications. Just as economic deregulation has been tied to free trade and competitiveness in a global marketplace, so the deregulation of campaigns might be tied to globalization. From a normative point of view, one can even argue that this is appropriate—why shouldn’t European media or individual European bloggers have a chance to weigh in on Americans’ presidential elections, given that Americans’ choices have effects on other nations? Or why shouldn’t Westerners have a chance to make their views known regarding elections in nations such as Egypt, Iraq, or the Ukraine, where the outcome might influence regional stability and military action?

One can, then, develop plausible explanations of why a reaction to the regulation of elections might develop, why it might feed upon itself, and why it might be either a creation of those who would use it to partisan advantage or something that is substantially larger than the goals of individual politicians or parties. This possibility has received little consideration in the existing literature on how systems of party or campaign finance develop.

On Theories of Change in Campaign Finance Law This book explores the proposition that we are witnessing a deregulatory moment in campaign finance law—that a more substantial force is driving recent changes in campaign finance law than the idiosyncrasies of individual judges or politicians. If we are witnessing such a moment, however, it stands to reason that deregulation should be gaining popularity not just in the United States but in other capitalist democracies. It is possible to construct a good argument about whether this might be true, but the nation-by-nation explorations in this volume show, it is far more difficult to identify trends in the level of regulation of political campaigns today than it was forty years ago. This problem is compounded by the fact that existing theories of the development of campaign finance regulations say Page 16 →little about when and why regulations will be dismantled to the extent that they have been in the United States. For the purposes of this book, it is useful to consider five different theoretical approaches (summarized in table 2) to the adoption of campaign finance regulation. These theories share two characteristics. First, they either are explicitly comparative in nature or can be used in a comparative context. That is, they rely on comparisons of different political cultures or institutions. Most have been used to make cross-national comparisons, although they can also be employed to compare two or more attempted changes in one nation at different points in time or to compare the adoption of regulations among different subunits of one country, such as American states. All of these theories take institutions to shape the options available for regulation; since institutions themselves cannot bring about any sort of change, however, the question is what to add to the institutional differences. Second, these theories are not explicitly predictive in nature—most of the authors described here would object to using these theories to make claims about what one nation might do a decade or more in the future. Rather, one might describe them as post hoc means of grouping different types of regulatory changes. These theories are, however, malleable enough that we can ask questions that verge on being predictive, such as whether the deregulatory push is truly unusual or whether it could be reconciled with these theories. Cartels and Party Dependence Writing in 2000, German political scientist Karl-Heinz NaГџmacher distinguished among three consequences of the introduction of public financing of campaigns. First, parties may become “ossified” as the rules for the provision of funds privilege those in office and block others from receivingPage 17 → support. Second, parties dependent on public financing may become alienated from the public as they lose their incentive to develop a donor base and raise money from citizens. And third, public financing can yield a “cartel” system where the dominant parties collaborate to ensure their primacy and keep competitors out. In all three scenarios, there is no clear turning back—NaГџmacher noted that there were no examples of European countries abandoning public financing or taking serious steps to liberalize campaign finance rules. Table 2. A Typology of Causal Theories of Campaign Finance Party Normative EliteDiscourse Advantage Institutionalism Katz and Scarrow, Examples: Clift and Fisher KoГџ Mair La Raja Parties Parties Actors: (Party Parties, elites Parties, elites (individually) System) Theory:

Cartel

“Growing Out of System” La Raja, Franz Politicians

Direction More of No direction No direction regulation Change:

Convergence—regulation? Deregulation

NaГџmacher’s focus on public financing reflects the concerns of European political scientists of the past decade: virtually all European nations have some form of public subsidy for politicians. NaГџmacher’s discussion of the consequences of public funds does not speak directly to the imposition of other types of regulation of political spending—contribution limits, expenditure limits, source restrictions (that is, limits on who is eligible to give money), and so forth—but insofar as public financing tends to be instituted alongside restrictions on private money, it can be read as a description of what happens when parties act to restrict habits of raising private money as well. Of the theories NaГџmacher discussed, perhaps the most prominent in the scholarly literature is the cartel thesis. As formulated by Richard Katz and Peter Mair (1995, 2009), this thesis begins from observations of citizens’ growing disenchantment with political parties in many democracies. Parties have responded by seeking to insulate themselves from the public and by seeking to become, in essence, quasi-governmental organizations. This response includes, among other things, establishing state subventions or public financing mechanisms to fund activities that were once paid for through the labor or contributions of party members.10 In establishing public funding, however, the stronger parties have an incentive to establish distribution formulas that advantage stronger parties and exclude weaker ones. Public funding will tend to protect the stronger, well-established parties from competition and to ensure that these parties become dependent on state funds. In short, cartelization leads to regulation of political finance, and none of the partners in the cartel has an incentive to disrupt this arrangement. Katz and Mair (2009) note other forms of campaign finance regulation consistent with the cartel thesis, such as restrictions on private contributions to parties, use of state resources to promote party activity, and party access to commercial broadcast media. It is hard to overstate the cartel thesis’s influence on the comparative study of political parties. Many studies (including some of those presented in this book) have questioned the empirical accuracy of the thesis. The Page 18 →cartel theory is consequential, however, in that it provides the basis for a harsh normative critique of the motives behind public financing and most forms of campaign finance regulation while suggesting that these reforms are likely to endure (see Fisher 2011).11 The cartel thesis contains much with which campaign finance deregulationists would agree, but it also suggests that their efforts are likely wasted. However, both the cartel argument and NaГџmacher’s broader take on public funding are addressed primarily to multiparty systems; the major premise for both—that public financing privileges the parties in power at the expense of those out of power—assumes that multiple winners and losers exist. Some of the authors in this book have drawn on the cartel model to discuss the “two-and-a-half-party” systems of Canada and the United Kingdom, but there are few direct applications of it to the United States and even fewer applications that focus in particular on campaign finance law.12 This may be attributable to the weakness of American political parties, to the two-party American system, or to other idiosyncratic characteristics of the United States. Partisan/Electoral Advantage Among those critical of the cartel theory’s claims about public subsidies is Susan E. Scarrow (2004, 2006), who has observed that in practice, subsidies rarely achieve their alleged goal of preventing the development of new parties. She cautions that public financing programs take a wide variety of forms and that it is an oversimplification to conclude that public funding—or campaign finance regulation more broadly—benefits the stronger parties. She takes issue with the cartel thesis’s premise that parties will always seek greater resources. Political parties, she argues, are not resource maximizers. Rather, parties will seek reforms that increase their advantage over their opponents. This advantage might take the form of enhanced regulation, but it also might entail deregulation if such an action will hurt a party’s opponents more than the party. There is no collusion in Scarrow’s theory; parties might even take ostensibly principled stands against forms of government largesse that they enjoy as long as the result of doing so will harm their competitors more than it will harm them.

This perspective largely accords with claims about the history of campaign finance regulation in the United States; as La Raja (2008) notes, regulations have tended to be used for the advantage of one party over the other; perhaps just as consequentially, calls for reform have tended to be made in a partisan manner. Scarrow’s claims also do not explicitly address Page 19 →deregulatory efforts, but (as Lisa Young contends in chapter 3 of this book), the electoral advantage theory arguably provides clearer insight than does the cartel theory into why parties might seek to dismantle campaign finance regulations. It does not predict that they will but suggests that the relative strengths of the stronger parties may make it look like parties are colluding or that they seek to deregulate when their true goal is electoral positioning. Normative Institutionalism and Elite Discourse Several chapters in this book respond to the cartel and electoral advantage theories. Neither of these theories, however, explicitly incorporates anyone outside of government—such as citizens or policy activists—as an actor in bringing about legal changes. Yet deregulationist arguments tend to be framed by nongovernmental organizations, and they have been framed with reference to the public interest—that is, to the benefits that the political system can provide to citizens. Furthermore, such arguments have arguably had the greatest success not among elected officials but among the unelected—judges or commissioners. To return to the American example, far more has been done to turn back campaign finance regulations through the rulings of the Supreme Court and the Federal Election Commission than through legislation. While politicians may applaud these outcomes, few of them have publicly staked out a position in opposition to regulation. There may well be good reasons why this is the case. The normative case for why the public can benefit or be harmed by campaign finance regulation tends to play a major role in discussions of political corruption and of the merits of public subsidies, contribution limits, and other restrictions. Yet the descriptive case for a public “interest” in campaign finance regulation has always been shaky. Campaign finance is a classic “process” issue. Matters of political process have relatively low salience for voters. Antiregulation politicians such as Senate majority leader Mitch McConnell are wont to point out that when citizens are asked to name the most important problems facing the country, they do not name campaign finance. Nor, one might add, do they mention any process issues—they name policy issues or larger challenges for the government such as taxes, defense, terrorism, or simply the economy and jobs. On the flip side of this apparent lack of concern, however, are arguments about the growing public sense of detachment from political institutions—the “democratic deficit”—that has been documented in many Western democracies over Page 20 →the past three decades (Dalton 2004). While voters in these nations may not have a thorough knowledge of how to change their political institutions, they respond positively to arguments about increasing democracy, about increasing transparency within government, and about increasing politicians’ accountability. In the case of campaign finance, this has manifested itself in high levels of public approval for reforms when they are described to survey respondents (see Grant and Rudolph 2004; vanHeerde-Hudson and Fisher 2013). Citizens, then, are arguably not reliable allies for either side in debates over campaign finance law—they may harbor antipolitical attitudes, but there is little evidence that they will base their voting choices or political activism on process issues. As Katz and Mair (1995, 22) suggest, voters “should be concerned with results rather than policy,” and there is properly no reason for voters to truly care about party financing rules. There is little reason for politicians, then, to take a public role on either side of the debate. The most potent claims a politician might make about the political process—being opposed to business as usual, for example—can be summoned on either side of the campaign finance debate, but they can also be summoned without clearly linking a politician to any set of proposals. To simply dismiss the role for public opinion in predicting changes in campaign finance law, however, would also be to dismiss the alleged coincidence of reforms with political scandals. In the American case, some analyses of the most recent major reform, BCRA, have noted that the law’s passage came immediately after the scandal regarding the Enron Corporation became public; some studies have even noted that the New York Times and other newspapers sought to link these abuses to the cause of campaign finance reform (McSweeney 2005; La Raja 2008, 108–9). If the media succeed in influencing political discourse, does this not mean that the media can raise the salience of reform issues among the citizenry?

Many studies of the introduction of regulations, including three of those here (the chapters by Iain McMenamin, Justin Fisher, and Michael KoГџ), have concluded that scandal often precedes reform but that scandal alone cannot be said to precipitate reform. As Fisher and Eisenstadt (2004) have noted, politicians often will respond to scandal through symbolic actions that have no real effect. Clift and Fisher (2004) downplay scandals’ effects in bringing about regulation but note that prevailing norms about politics can lead to meaningful regulations. They emphasize two different ways in which this can happen: first, norms about appropriate behavior for politicians can lead to the establishment of regulations in the event that actual or potential behavior runs afoul of these norms. Second, societiesPage 21 → develop distinctive normative traditions—that is, to take their example, voluntarism may be common in some societies, and regulations that encourage voluntarism may be enacted even in the absence of any sort of precipitating event or scandal. Clift and Fisher, in short, suggest that culture plays a role in determining what types of regulations are enacted and how regulations are discussed. Culture is not the same as public opinion in that it cannot necessarily be changed by events, but it does provide a role for the public. Similarly, KoГџ (2011) suggests that elite discourse can play a role in fostering regulation. He disputes the notion that norms can meaningfully be spoken of as institutions, as things that endure and can be measured, but he does contend that regulation can be framed in ways that encourage or discourage it. These two perspectives, then, differ in their explanation of what role ideas play in the enactment of regulation, but both suggest that regulation must be explained with reference to more than institutions or the incentives of politicians. Chapters 5 and 6 of this volume show some of the back-and-forth between KoГџ and Fisher on this subject. To some extent, political culture, norms, elite opinion, and other noninstitutional factors are necessary to explain changes in campaign finance law. If we consider solely politicians’ goals, then progressive ideals, libertarian ideals, or any other ideological view about what is “right” in regard to politicians’ behavior simply becomes a facade for politicians’ self-interested maneuvering. To the extent that a coherent point of view encourages or discourages the regulation of campaigns, there must be some sort of pretense that ideas about the proper role of government in campaigns matter. Causal theories about campaign finance regulation also say little about the incentives of courts. This is so in part because democratic governments typically seek to insulate judges from politics and to deprive them of the incentives attributed to politicians or political parties—advancement in office, vote share, resources, and so forth. Yet court decisions play a major role not only in the American case but, as chapter 3 discusses, in the Canadian case as well. The role of the courts also remains undefined in theories of changes in campaign finance regulation. Katz (2011) suggests that court decisions have played an important role in countering the cartelization of the parties in the United States, Canada, and Germany. Although courts may not stand to gain from cartelization, the question of what judges gain by striking down campaign finance regulations remains untheorized. Although all of the chapters here do not dwell on the motivation for judicial decisions, the presumption of judicial independence assumesPage 22 → that judges will be more receptive to the politics of ideas than will elected politicians. Deregulation, then, may well be more attractive to judges than to other political actors. In a sense, the chapters in this book suggest that changes in campaign finance regulation must originate from something that lies beneath the parties—from hard-to-quantify groups, interests, movements, or normative ideas. If we are to understand the deregulationist approach, we must understand it as originating from outside the political system, not as a mere quest for power from within government. Secular Change—“Outgrowing the System” There is thus no theory that would predict a decline in campaign finance regulation across time. Deregulation might be a wise competitive strategy for some political parties, and it might even be a plausible response to certain instances of political corruption. But it is certainly not inevitable. Analyses of the 2012 American election, however, have suggested that a regulatory system can atrophy or become irrelevant—that deregulation can occur not because it is on its face advantageous to any political actor but merely because poorly constructed regulations can over time become harmful. In a political system unable to continually revisit and amend prior regulatory

actions, deregulation can build on itself. I address this perspective in chapter 2 of this book, responding to articles by, among others, La Raja (2012) and Franz (2012). Both of these authors have suggested that the spiraling costs of running for office—costs that were neither determined by regulations nor clearly containable—simply increased too fast for the regulatory system to keep pace. Regulatory changes often failed to account for these developments, yielding consequences at odds with those reformers had anticipated. In the case of presidential campaigns, public financing in the United States was always voluntary, and accepting public financing required accepting a cap on overall spending as well. Once it became possible to raise substantially more money than the cap allowed, candidates’ motives for accepting public financing disappeared. In a polarized political system where the two parties could not agree on a way to increase the cap or otherwise modify the system to induce candidates to accept public funds, the system broke down. Likewise (as chapters 1 and 2 discuss), the increased spending by nonparty groups that followed the Citizens United decision was not merely a consequence of that decision but was also in part a response to increased spending by candidates and in part a continuation of a pattern that precededPage 23 → the court decision. While the decision clearly played a role in increasing interest group spending, the previous years’ elections suggested that groups were becoming so adept at exploiting loopholes in the law that formal regulations of their activities were becoming less and less meaningful. The increase in interest group spending, in turn, placed parties and candidates at a disadvantage and encouraged them to seek creative spending alternatives. Perhaps a concerted effort to construct new regulations could have contained spending and mitigated some of the ethical problems raised by the increased spending of 2012, but, again, this was not politically possible. Both of these scenarios contain an element of path-dependence—perhaps the enactment of more flexible, more comprehensive, or more foresighted regulations as far back as the 1970s would have set the United States on a different path, but there is no way to revisit the original regulations and set the nation on a different course now. Both parties are too invested in the status quo or in relatively minor adjustments to it. While this sort of explanation of deregulation may not yet constitute a theory that is as generalizable as those of Katz and Mair, Scarrow, Clift and Fisher, or KoГџ, it does suggest some alternative explanations for looking at political deregulation. Deregulation can be a consequence of an ideological political agenda, but it also may be a consequence of a lack of political action—a failure to continually revise laws that have grown inapplicable to contemporary events. This calls into question the way we think of regulation—the revision of outdated restrictions may constitute not an increase in regulation but rather an attempt to revise existing laws so that they are equivalent, in a changed political context, to the status quo ante. Regulation and deregulation do not always represent progress and regression, respectively, or embody opposing Left and Right approaches to problems in campaign and party finance. I am not arguing that any one of these theoretical perspectives is necessarily correct. The available data do not always enable us to disentangle these different claims. These theories do, however, provide a useful palette for thinking about the direction of change in campaign finance law.

The Rationale and Plan of This Book All of the chapters in this book were written at a time of substantial economic uncertainty in the United States and Europe and at a time of relativePage 24 → political discord in the United States. Many popular and prominent books have recently discussed American decline—to quote journalist George Packer (2013), the “unwinding” of the American Dream is now taking place. The demise of the U.S. campaign finance system and the role that alleged modern-day plutocrats now are said to play in supporting candidates have been held to be both cause and consequence of this decline. Likewise, many arguments have taken place about the diverging U.S. and European political systems. These debates range from scholarly (Bartels 2013) to more journalistic accounts. Political and social critic Tom Geoghegan (2010), for example, recently published Were You Born on the Wrong Continent?, a plea for Americans to consider the benefits of the European social and political model. A discussion is taking place, then, about what the appropriate response to the economic downturn of 2008 should have been and

what should be made of the possibility that Americans and Europeans, confronted with similarly grim economic news, are responding in different ways. Although the authors whose work is contained in this volume do not purport to answer these broader questions, we nonetheless ask questions relevant to a discussion that goes far beyond matters of spending on elections. It is, of course, entirely fitting that the state of political finance should be reevaluated every few years, and thus this book joins a tradition of edited works on money in politics that dates back at least four decades.13 However, we have deliberately sought to make this book more thematically organized than other works in this vein have been, and we have pitched it somewhat more at American readers than has been the norm. This is so not only because comparative campaign finance has not received the attention we think it deserves in the United States but also because we hope that the chapters here will shed some light on the American role as an outlier in discussions of money in politics. The study of American exceptionalism comprises virtually an entire genre in itself, and perhaps we are adding to that genre. We do not, however, focus only on the United States. All of our essays start with some consideration of how one might define campaign finance deregulation, and we often refer to the American example. We hope that our efforts to explore this concept will interest not just Americans, not just those who see merit in the book’s organizing theme, and not just those who take sides on the question of how much governments should regulate election spending. Rather, the chapters here have something to say to anyone concerned with the larger questions of why differences in party finance systems exist and how these systems change over time. We do not all agree of any one definition of deregulation,Page 25 → on any one overarching theory of why campaign finance regulations change, or on the normative consequences of any particular regulatory structure. Instead, we have sought to represent the state of comparative research on money in politics as of the 2010s. We begin by taking as a given the premise that deregulation is taking place in the United States. Chapters 1 and 2 explore the ramifications of deregulatory change. In chapter 1, Diana Dwyre documents the history of the push back against campaign finance regulation over the past decade, with a particular emphasis on the role of political parties. She explores two consequences of the shift in spending from parties to groups: the erosion of disclosure laws and the declining accountability of those who shape election issues. Dwyre closes by exploring the path deregulation might take in the future, contending that the process is firmly enough established that Congress can do little to restrict campaign spending regardless of which party is in control. In chapter 2, I explore the consequences of deregulation for our understanding of the role of interest groups in campaigns. Organized interests have traditionally been far more active in American campaigns than in campaigns in other nations. Yet both BCRA and the Citizens United decision have in their own ways allowed interest groups to take on new forms, to take on some of the functions once fulfilled by parties, and to more closely coordinate with candidates and parties. I draw on literature on political marketing to argue that the interest groups that have come to dominate campaigns are less focused on issues than are traditional interest groups and more focused on fulfilling particular political functions. As more groups come to capture these “functional niches,” parties and candidates will become less and less able to control campaign discourse, and further deregulation of campaigns may well be both inevitable and (even for critics of the Citizens United decision) desirable. Chapters 3, 4, and 5 explore cases where the notion of deregulation is plausible but where attacks on regulation have been less organized or comprehensive than in the United States. In chapter 3, Lisa Young explores the Canadian government’s decision to end its decadelong experiment in public funding for political parties. She contends that the abolition of public financing is not a precursor to further relaxation of party finance restrictions; rather, it is a calculated move by the Conservative Party, which has traditionally had the most success of any party in raising money from individual donors, to impoverish its opponents. As such, the decision fits Scarrow’s electoral economy model. But in the absence of public funding, Canadian parties may well face the next election with too little money. Page 26 →Although the Conservative government has taken some steps to address this problem, no major reforms appear on the Canadian horizon. Funding problems for all of the parties, however, may make further changes necessary in the future. These three chapters make little reference to the public’s role in bringing about changes in campaign finance

law. As Iain McMenamin shows in chapter 4, however, Australian party interests have at times driven pushes for regulation. Australia has always had a less regulated system than most other democracies as well as a history of elite discourse about increasing regulation. McMenamin considers media discussions of campaign finance scandals to separate party interests from public interests, concluding that little evidence supports the idea that the party most interested in regulation—the Australian Labor Party—has been responding to public sentiment in this area. In chapter 5, Justin Fisher also considers the effects of scandal in bringing about calls for greater regulation. Fisher draws on his theory of normative institutionalism to explain efforts to increase regulation of party spending in Britain. Fisher sees no sustained movement toward deregulation in Britain; rather, he characterizes the British strategy as a “stop-go” approach, in which government-appointed commissions propose ambitious reforms but the government takes little concrete action. Fisher concludes that Britain has seen a modest trend toward increased regulation but that it falls far short of the robust reforms that have been recommended and widely discussed in the country’s media. Chapters 6 and 7 offer comparative studies of changing party finance laws in Western Europe. In chapter 6, Michael KoГџ looks for a relationship between public support for regulation and the responses of the governments of France, Germany, and Sweden. KoГџ, like Fisher and McMenamin, finds little evidence that reforms occur in response to public opinion. KoГџ draws on analyses of news coverage in the three countries’ leading newspapers to show that European nations converged on a common set of regulatory features years ago when state funding to political parties was introduced and have made few modifications since. These countries have seen neither a push for deregulation nor a movement toward greater regulation. Daniela R. Piccio and Ingrid van Biezen, the authors of chapter 7, disagree with KoГџ on this point and are skeptical of the prevailing view in earlier chapters that regulations are solely a function of party interest. While they do not seek to show a relationship between public sentiment and regulation or deregulation, Piccio and Biezen show that party interestsPage 27 → cannot solely explain recent changes such as the expansion of public subsidies to cover minor parties. Such changes, however small, suggest that European nations have adopted a common set of norms about the role of government in funding parties and elections. In some instances, these changes have been brought about by judicial decisions, but many have also been a response to the recommendations of international organizations. This chapter, then, returns us to a possibility raised in the American case—that courts and unelected actors can also play a role in determining a nation’s regulations. The direction most European nations have taken, however, runs counter to the American case—judicial decisions have pushed Europe toward greater rather than less regulation. Finally, Justin Fisher concludes the book with his reflections on the concept of deregulation. Is deregulation primarily an American phenomenon? For now, perhaps. Yet Fisher is not certain that it will remain so. As he notes, there are dangers inherent in excessive regulation of elections, and there likely are dangers posed by excessive deregulation. Despite more than a century of experimentation, campaign finance regulation remains a central problem in democratic nations, and its core principles remain a subject of ideological dispute.

Notes 1.See http://www.cato.org/mission. 2.Justin Fisher disputes this logic in the conclusion to this volume. 3.This claim assumes that regulations were initially put in place to reduce competition. Some regulations may enhance competition, as is the case for consumer protection legislation. Regulations prohibiting the use of lead paint in products, for example, may be seen as an effort to improve the competitive standing of one nation’s firms in the global market. Here, governments with an informational advantage over their firms enact rules requiring actions that individual firms may lack the foresight or knowledge to take on their own. 4.For an example of the substantial literature on the so-called democratic deficit, see Dalton 2007. 5.See, for example, the numerous references to Great Britain in Pollock 1926; Overacker 1932.

6.For examples, see any of the seventeen volumes of the Royal Commission on Electoral Reform and Party Financing; among the most pertinent for this study are Seidle 1991; Stanbury 1991. 7.For a list of notable deregulatory initiatives over this time frame, see Noll and Owen 1983, 4. 8.For discussion of the role deregulatory rhetoric played in Ronald Reagan’s campaigns, see Vietor 1994, 14–15. 9.For a discussion of these categorizations, see Bowler and Donovan 2013, 80–89. Page 28 → 10.The cartel thesis covers many aspects of party behavior apart from financing of their activities; Katz (2011, 61) reflects that the original discussions of the thesis likely overstated the importance of public funding. 11.However, Katz and Mair present their argument in descriptive, not normative, terms. 12.Katz (2011) and Katz and Mair (2009) have done so; Katz and Mair observe that American public financing tends to be limited to major party presidential candidates. For a more complete effort to reconcile aspects of the theory with American politics, see Bawn et al. 2012. 13.Some of the most frequently cited examples include Seidle 1991; Alexander and Shiratori 1994; NaГџmacher 2001; Young and Jansen 2011; Ewing, Rowbottom, and Tham 2012.

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Now? New York: Routledge. Page 29 →Fisher, Justin. 2011. “State Funding of Political Parties: Truths, Myths, and Legends.” In Money, Politics, and Democracy: Canada’s Party Finance Reforms, ed. Lisa Young and Harold J. Jansen, 19–36. Vancouver: University of British Columbia Press. Fisher, Justin, and Todd A. Eisenstadt. 2004. “Comparative Party Finance: What Is to Be Done?” Party Politics 10 (4): 619–26. Franz, Michael M. 2012. “Interest Groups in Electoral Politics: 2012 in Context.” The Forum 10 (4): 62–79. Geoghegan, Thomas. 2010. Were You Born on the Wrong Continent? New York: New Press. Grant, J. Tobin, and Thomas J. Rudolph. 2004. Expression versus Equality: The Politics of Campaign Finance Reform. Columbus: Ohio State University Press. Jansen, Harold J., and Lisa Young. 2010. “How Much State Money Goes to Canada’s Political Parties? ” Paper presented at the annual meeting of the Prairie Political Science Association, Winnipeg. Joskow, Paul L. 2009. Deregulation: Where Do We Go from Here? Washington, DC: American Enterprise Institute. Katz, Richard S. 2011. “Finance Reforms and the Cartel Party Model in Canada.” In Money, Politics, and Democracy: Canada’s Party Finance Reforms, ed. Lisa Young and Harold J. Jansen, 60–81. Vancouver: University of British Columbia Press. Katz, Richard S., and Peter Mair. 1995. “Changing Models of Party Organization and Party Democracy: The Emergence of the Cartel Party.” Party Politics 1 (1): 5–28. Katz, Richard S., and Peter Mair. 2009. “The Cartel Party Thesis: A Restatement.” Perspectives on Politics 7 (4): 753–66. KoГџ, Michael. 2011. The Politics of Party Funding. New York: Oxford University Press. La Raja, Raymond J. 2008. Small Change: Money, Political Parties, and Campaign Finance Reform. Ann Arbor: University of Michigan Press. La Raja, Raymond J. 2012. “Why Super PACs: How the American Party System Outgrew the Campaign Finance System.” The Forum 10 (4): 91–104. Loftus, Simon. 1985. Anatomy of the Wine Trade. New York: Harper and Row. Lowi, Theodore J. 1969. The End of Liberalism. New York: Norton. Lowi, Theodore J. 1985. “The State in Politics: The Relation between Policy and Administration.” In Regulatory Policy and the Social Sciences, ed. Roger G. Noll, 67–104. Berkeley: University of California Press. McDonald, Michael P., and John Samples, eds. 2006. The Marketplace of Democracy: Electoral Competition and American Politics. Washington, DC: Brookings Institution and Cato Institute. McSweeney, Dean. 2005. “Reform in a Cold Climate: Change in U.S. Campaign Finance Law.” Government and Opposition 40 (4): 492–514. NaГџmacher, Karl-Heinz. 2001. “Comparative Political Finance in Established Democracies.” In

Foundations for Democracy: Approaches to Comparative Political Finance—Essays in Honour of Herbert E. Alexander, ed. Karl-Heinz NaГџmacher. Baden-Baden: Nomos. NaГџmacher, Karl-Heinz, ed. 2001. Foundations for Democracy: Approaches to Comparative Political Finance—Essays in Honour of Herbert E. Alexander. Baden-Baden: Nomos. Noll, Roger G., and Bruce M. Owen. 1983. The Political Economy of Deregulation: Interest Groups in the Regulatory Process. Washington, DC: American Enterprise Institute. Page 30 →Overacker, Louise. 1932. Money in Elections. New York: Macmillan. Packer, George. 2013. The Unwinding: An Inner History of the New America. New York: Farrar, Straus, and Giroux. Pollock, James K. 1926. Party Campaign Funds. New York: Alfred A. Knopf. Prior, Markus. 2007. Post-Broadcast Democracy: How Media Choice Increases Inequality in Political Involvement and Polarizes Elections. New York: Cambridge University Press. Rothenberg, Lawrence S. 1994. Regulation, Organizations, and Politics: Motor Freight Policy at the Interstate Commerce Commission. Ann Arbor: University of Michigan Press. Samples, John. 2003. “Introduction: Taxpayer Financing of Campaigns.” In Welfare for Politicians?, ed. John Samples, 1–22. Washington, DC: Cato Institute. Samples, John. 2008. The Fallacy of Campaign Finance Reform. Chicago: University of Chicago Press. Scarrow, Susan E. 2004. “Explaining Party Finance Reforms: Competition and Context.” Party Politics 10 (6): 653–75. Scarrow, Susan E. 2006. “Party Subsidies and the Freezing of Party Competition: Do Cartel Mechanisms Work?” West European Politics 29 (4): 619–39. Seidle, F. Leslie, ed. 1991. Comparative Issues in Party and Election Finance. Toronto: Dundurn. Smith, Bradley A. 1997. “Should вЂCommitting Politics’ Be a Crime? The Case for Deregulating Campaign Finance.” Free Speech and Election Law Practice Group Newsletter 1 (2). Stanbury, William T. 1991. Money in Politics: Financing Federal Political Parties in Canada. Toronto: Dundurn. Stigler, George. 1971. “The Theory of Economic Regulation.” Bell Journal of Economics and Management Service 2 (1): 3–21. Valpy, Michael. 2009. “The Crisis: A Narrative.” In Parliamentary Democracy in Crisis, ed. Peter H. Russell and Lorne Sossin, 3–18. Toronto: University of Toronto Press. vanHeerde-Hudson, Jennifer, and Justin Fisher. 2013. “Parties Heed (with Caution): Public Knowledge of and Attitudes towards Party Finance in Britain.” Party Politics 19 (1): 41–60. Vietor, Richard H. K. 1994. Contrived Competition: Regulation and Deregulation in America. Cambridge: Harvard University Press. Wesleyan Media Project. 2012. “Presidential Ad War Tops 1M Airings.” Middletown, CT: Wesleyan Media Project. http://mediaproject.wesleyan.edu/2012/11/02/presidential-ad-war-tops-1m-airings/. Will, George F. 2012. “For GOP Substance, Deregulate.” Washington Post, March 30.

Wilson, James Q. 1989. Bureaucracy. New York: Basic Books. Witko, Christopher. 2005. “Measuring the Stringency of State Campaign Finance Regulation.” State Politics and Policy Quarterly 5 (3): 295–310. Young, Lisa, and Harold J. Jansen, eds. 2011. Money, Politics, and Democracy: Canada’s Party Finance Reforms. Vancouver: University of British Columbia Press.

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Part I | The Deregulation of U.S. Campaigns

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1 | Campaign Finance Deregulation in the United States What Has Changed and Why Does It Matter? Diana Dwyre In recent years, many of the rules and regulations governing the U.S. campaign finance system have been relaxed, lowering or eliminating some of the fundraising and spending barriers for nonparty groups, while restrictions on candidate and party campaign finance activity remain in place. These changes have resulted in a significant increase in nonparty outside spending—money not spent by candidates themselves or their parties. Loosened restrictions have resulted in the emergence of a new type of campaign finance group, an increase in money from undisclosed sources, and a shift in the sources of campaign spending. The recent actions to deregulate the U.S. campaign finance system cannot be explained by a single theory, because these changes reflect a number of possible causal explanations. For example, the partisan nature of the debate regarding contemporary campaign finance regulation, whereby virtually all Republicans embrace deregulatory changes and virtually all Democrats denounce them, suggests that one party sees some electoral advantage in deregulation (Scarrow 2004, 2006). However, most of the recent deregulatory changes have resulted from activists outside of government challenging campaign finance rules in court and working to shape regulations issued by bureaucratic agencies, not from the passage of laws by Congress. So although one party may favor deregulation and benefit from it electorally, neither party in the elected branches of government has initiated these changes. Instead, nonelected government officials in the courts and bureaucratic agencies have made decisions that have deregulated parts of the campaign finance system, but the plaintiffs’ arguments, the judges’ rulings, and the regulators’ decisions are not devoid of ideological justification.Page 34 → They generally make libertarian normative arguments that rest on ideas at the core of American political culture, such as freedom of expression, privacy, and the proper role of government. For example, many of these recent court and regulatory decisions rely on a particular view of the First Amendment. This view generally holds that all interested individuals and entities should be afforded the greatest level of freedom to speak about candidates running for office as long as their speech (and the money spent to broadcast or otherwise disseminate that speech) does not result in corruption or the appearance of corruption. Such normative arguments have encouraged deregulation in the name of fundamental rights and the government’s responsibility to protect those rights, not overtly to confer electoral advantage on one party. Of course, these activists and governmental actors may be promoting deregulation in an effort to create an environment that gives electoral advantage to one party—in this case, presumably the Republican Party. Yet as Robert Boatright notes in the introduction to this volume, we know very little about what motivates the courts. Partisan politicians appoint judges and top bureaucrats, so perhaps these nonelected officials are partisans as well. In a recent rigorous analysis of judicial behavior, Epstein, Landes, and Posner have found that “federal judges are not just politicians in robes, though that is part of what they are” (2013, 385). Many of the Supreme Court’s recent votes on campaign finance cases have certainly followed ideological lines, with the same five conservative justices outvoting the four more liberal justices. Another factor is that the Federal Election Commission (FEC), the agency responsible for implementing and enforcing federal campaign finance laws, is designed for partisan deadlock, with three Republican and three Democratic commissioners. Recent Republican appointees are more focused on rolling back what they consider regulatory overreach, leading to tie votes and thus inaction on various attempts to, for example, require disclosure of new campaign finance activities (Rowland 2013). The FEC’s inability to act is thus a form of deregulation, resulting in a regulatory system that is out of step with the reality of contemporary politics. Some deregulation is therefore the consequence of “policy drift,” whereby the rules and regulations have not kept pace with actual practice, creating opportunities to get around the rules or take advantage of loopholes in those rules (Hacker and Pierson 2010, 170–71). For example, the ability of presidential candidates to raise more money for their

campaigns if they do not accept public funding has made the voluntary public finance system in the Page 35 →United States virtually obsolete, a quaint remnant of a bygone era when public funding provided a way to level the playing field between presidential contenders. Sometimes, however, the FEC does issue regulations or make rulings, and many of its recent actions have loosened regulations and thus contributed to further deregulation of the campaign finance system. Indeed, some of its decisions do appear to be made to protect or promote the electoral fortunes of one party or its allied groups. In this chapter, I discuss many of the recent court and bureaucratic decisions that have deregulated much of the U.S. campaign finance system and evaluate the consequences of these changes in recent elections. I show that much of the spending in U.S. federal elections has shifted to nonparty political groups, thus reducing the financial role of candidates and their parties, a development that, I argue, is detrimental to the overall health of American representative democracy. Recent deregulatory changes also have eroded the long-standing requirement of public disclosure of campaign finance activity, making it impossible in some cases to know who is spending money to influence the outcome of elections. Big spending can certainly influence who sits in Congress and controls the White House and thus the direction of public policy. Without knowing who is spending to influence them, voters have more difficulty acting prospectively to choose candidates and parties closest to their policy preferences. Finally, I consider the fact that the purposeful deregulatory actions have come exclusively from the nonelected branches of government, those whom voters are least able to hold accountable for policy decisions. Indeed, Congress has not responded to either the changed campaign finance environment or the changes made by these nonelected officials.

Deregulation: What Has Happened? Campaign finance deregulation in the United States did not begin in 2010 with Citizens United v. Federal Election Commission. In fact, one could argue that the Supreme Court began chipping away at legislative actions to regulate electoral finance as early as Buckley v. Valeo (1976), the first major challenge to the expenditure limits on candidates, individuals, and groups imposed by the Federal Election Campaign Act (FECA). Yet the real movement toward deregulation did not begin until after passage of the 2002 Bipartisan Campaign Reform Act (BCRA), when the courts and the bureaucracy began to chip away at it and other campaign finance regulations.

Page 36 →The Bipartisan Campaign Reform Act BCRA dealt primarily with closing what were considered loopholes in the campaign finance system. The law was in essence an effort to deal with the results of policy drift. For example, it prohibited national political parties, federal candidates, or federal officeholders from soliciting or accepting soft money contributions—unlimited contributions often from otherwise prohibited sources, such as corporations and unions. Parties had collected millions of dollars in soft money from wealthy individuals, corporations, and unions, and prior to BCRA, the law allowed them to spend it on “party-building” activities but not for direct support of candidates (e.g., getout-the-vote drives and generic party advertising). The parties found creative ways to use soft money to more directly support their candidates, such as paying for so-called issue advocacy advertisements that do not expressly advocate the election or defeat of a candidate but that make it clear that a particular candidate should be elected or defeated. Reformers considered party soft money spending a loophole that allowed donors to get around the limits on contributions to parties and on party contributions to candidates and thus a potential avenue for corruption. Parties were seen as having a special and close relationship with their candidates, making party soft money a particularly effective way for interested actors to influence elected officials. BCRA also placed restrictions on so-called issue ads run before elections, which had remained outside of FECA regulation because these advertisements do not expressly advocate the election or defeat of a candidate but merely praise or criticize an issue position or record of someone who happened to be a candidate. According to reformers, when these “sham issue ads” were run just before an election, they constituted clear attempts to influence its outcome. The new law’s electioneering communications provision stipulated that any ad that featured a clearly identified candidate for federal office run within thirty days of a primary election or sixty days of a general election is indeed electioneering and must be paid for with funds subject to contribution and spending limits and

from permitted sources that must be fully disclosed. The new law thus prohibited corporations and unions from using treasury funds to broadcast such ads during the specified election seasons. In addition, the BCRA’s “Millionaire’s Amendment” increased many contribution limits and allowed congressional candidates who faced self-financed opponents to engage in additional fundraising in an attempt to level the playing field between the competitors. Page 37 →Although titled the Bipartisan Campaign Reform Act, the law’s pedigree is only slightly bipartisan. BCRA passed the House of Representatives on February 14, 2002, by a 240–189 vote, mostly along party lines, with only 41 Republicans voting for it and 13 Democrats and 176 Republicans against it. It passed the Senate by a 60–40 vote, just enough to avoid a filibuster, with 11 Republicans voting for it and only 2 Democrats opposing the bill. While these vote totals may seem to suggest that the Democrats had something to gain from the bill’s passage, there was a general sense that the loss of party soft money in particular would do more harm to the Democrats than the Republicans. One journalist called BCRA the “Democratic Party Suicide Bill” (Gitell 2003), and the chair of the Democratic Congressional Campaign Committee, Representative Martin Frost of Texas, opposed BCRA (Farrar-Myers and Dwyre 2008, 142–43). Indeed, the Republican national party committees had long raised more hard money than their Democratic counterparts. Some political scientists testified for the plaintiffs in the Supreme Court challenge to BCRA that the law would diminish the role and influence of parties relative to nonparty groups. One of these scholars, Ray La Raja (2008, 202), has written extensively about how the more restrictive campaign finance rules for parties than for nonparty groups that resulted from BCRA and other changes have “weakened the capacity of parties to organize elections and gave greater influence to candidates and interest groups.” La Raja also argues that BCRA’s strongest supporters were “ideological liberals in the Democratic Party who want to dislodge the influence of corporate interests and other groups that favor centrist policies” (206). Thus, passage of BCRA does not really fit the party advantage theory. Instead, La Raja’s argument suggests that the left flank of the Democratic Party had normative motivations that led to its passage. He adds that their desire to make the Democratic Party less reliant on corporate money actually resulted in “tilting it toward ideological groups on the left and away from labor unions, minorities, and centrists” (206).

The First Wave of Deregulation: Wisconsin, Davis, and the FEC The Supreme Court initially upheld most of BCRA’s provisions in McConnell v. Federal Election Commission (2003). Eventually, however, the courts and the FEC chipped away at BCRA as well as other, longstanding campaign finance laws and regulations. In a 2007 case, Federal Election Commission v. Wisconsin Right to Life, the Supreme Court narrowed the interpretationPage 38 → of what advertisements were subject to BCRA’s source and contribution limitations by ruling that corporations and unions were allowed to use their treasury funds to run legitimate issue ads that feature candidates (BCRA’s electioneering communications) close to an election. The majority in the 5–4 vote ruled that BCRA’s limits on political advertising close to elections were unconstitutional when applied to genuine issue ads that did not constitute “express advocacy” and that “an ad is the functional equivalent of express advocacy only if the ad is susceptible of no reasonable interpretation other than as an appeal to vote for or against a specific candidate” (Federal Election Commission v. Wisconsin Right to Life, 470). This decision effectively invalidated BCRA’s attempt to limit and regulate “sham issue ads.” The Wisconsin decision opened the door for those who wanted to run ads that featured one or more candidates close to an election without having to follow the source restrictions and contribution limits on such activities. Later that year, the conservative James Madison Center for Free Speech asked the FEC to amend its rules to account for the Wisconsin decision (Potter and Morgan 2013, 446). The commission requested comments on a variety of issues, including how it should modify the electioneering communications disclosure rules now that corporations and unions could engage in this type of spending during elections. A number of large labor unions also asked the FEC to limit requirements so that they would not have to disclose the identities of all of their members now that their union dues could be used to pay for electioneering communications as a result of the Wisconsin decision.

The FEC ruled that corporations and labor unions running electioneering communications need only disclose those contributions that were “specifically designated for electioneering communications” (Federal Election Commission 2007).1 The rule was adopted over many objections in part because it received the support of one of the Democratic commissioners “due to its ability to reduce the burden of disclosure on unions” (Potter and Morgan 2013, 455). This new rule significantly narrowed disclosure requirements for corporations and unions, making it quite easy for these organizations to avoid disclosure of their donors by merely designating contributions as “unrestricted donations” or “membership dues.” The Republican commissioners and one Democratic commissioner appear to have acted to protect some of their parties’ most important financial constituencies from having to disclose their donors—corporations for the Republicans and labor unions for the Democrats. This case thus providesPage 39 → some support for the partisan electoral advantage theory as a way of understanding campaign finance deregulation. In 2008, the Supreme Court further eroded BCRA in Davis v. Federal Election Commission, which reversed a lower court decision and declared the Millionaire’s Amendment an unconstitutional burden on the First Amendment rights of self-financed candidates. The majority found that the provision imposes different fundraising limits on candidates running against one another.

A Clear Shift to Deregulation: Citizens United, SpeechNow, American Tradition, and McCutcheon In 2010, the courts moved clearly in the direction of deregulation. In January 2010, the Supreme Court decided Citizens United v. Federal Election Commission by a 5–4 vote along ideological lines. The majority stated that corporations (and by extension unions) may use their treasury funds (i.e., corporate profits and union dues) without limit for independent expenditures during elections as long as those expenditures are not coordinated with candidates or parties. Independent expenditures are expenditures made by individuals, parties, groups, and now corporations and unions that expressly advocate the election or defeat of a candidate for office—for example, by using words such as vote for or defeat. Thus, advertisements paid for with independent expenditure funds are express advocacy, whereas electioneering communications generally refer to ads that do not specifically advocate the election or defeat of a particular candidate but are often indistinguishable from express advocacy in the message they convey to voters. With Citizens United, the Supreme Court conferred First Amendment political free speech rights on corporations, ending a prohibition against corporate and union expenditures in federal elections that had been in place since the 1947 Taft-Hartley Act.2 The Citizens United decision recalibrated the Court’s view of corruption by narrowing the sphere of legitimate state regulation to cover only contributions to candidates and parties because of their clear potential for quid pro quo corruption. The Court’s conservative majority stated that “government may not suppress speech on the basis of the speaker’s corporate identity” and that “independent expenditures, including those made by corporations, do not give rise to corruption or the appearance of corruption” (Citizens United, 913, 909). Writing for the Court majority, Justice Kennedy claimed that the “fact that Page 40 →speakers may have influence over or access to elected officials does not mean that these officials are corrupt” and that “ingratiation and access, in any event, are not corruption” (876, 910). Much of the outcry over the decision relates to this view that big independent spending by corporations and unions does not create the potential for corruption that justifies government regulation. Many left-leaning observers as well as the four more liberal justices disagreed with the Court majority’s narrow view of what constitutes the potential for corruption. In a forceful dissent, Justice Stevens wrote, Corruption can take many forms. Bribery may be the paradigm case. But the difference between selling a vote and selling access is a matter of degree, not kind. And selling access is not qualitatively different from giving special preference to those who spent money on one’s behalf. Corruption operates along a spectrum, and the majority’s apparent belief that quid pro quo arrangements can be neatly demarcated from other improper influences does not accord with the theory or reality of politics. (448)

The notion that independent spending poses no danger of corruption was suggested but not decided in previous cases. In Buckley v. Valeo, the Supreme Court made a clear distinction between contributions and expenditures by limiting the former but not the latter. The Buckley Court argued that since there is no coordination between candidates and individual independent spenders, there is no “danger that expenditures will be given as a quid pro quo for improper commitments from the candidates” (47). Yet the Buckley Court did not extend the right to make independent expenditures to corporations, unions, or even parties. Five years later, in 1981, Justice Blackmun noted in his concurring opinion in California Medical Association v. Federal Election Commission that “a committee that makes only independent expenditures poses noВ .В .В . threat” of corruption or the appearance of corruption (cited in Briffault 2012, 1653). Yet determining the potential for corruption was not the subject of the California Medical case, so the issue of whether independent spending might raise serious corruption concerns that justify government regulation was not decided or made clear until the Citizens United case. Indeed, in other cases, the Court had indicated that independent spending may in fact pose a threat of corruption. For example, in First National Bank of Boston v. Bellotti (1978), the Supreme Court struck down a ban on corporate spending for ballot measure elections, but the majority Page 41 →also noted that “Congress might well be able to demonstrate the existence of a danger of real or apparent corruption in independent expenditures by corporations to influence candidate elections” (788 n. 26). In addition, in 1990, the Court upheld a Michigan state law that prohibited corporate independent expenditures in Austin v. Michigan Chamber of Commerce. And in McConnell, the Supreme Court expanded its view of corruption that justifies restriction by upholding BCRA’s ban on soft money contributions to parties (unlimited contributions from individuals, corporations, and unions) to use for party building activities that did not directly aid candidates. As legal scholar Richard Briffault (2012, 1655) notes, in McConnell, “there was no need for an express donor-candidate relationship or for proof of a tie between a donation and a specific legislative or other governmental goal of the donor to establish вЂcorruption.’” With Citizens United, the Supreme Court overruled the Austin v. Michigan Chamber of Commerce prohibition on corporate independent expenditures and the portion of McConnell that upheld BCRA’s ban on corporate use of general treasury funds for electioneering communications close to an election. This significant shift in the Court’s thinking was based on the majority’s interpretation of such prohibitions as unconstitutional bans on political speech in violation of the First Amendment. Before Citizens United, “there were two strands in Supreme Court doctrine that pointed in different directions if restrictions on contributions to political committees that make only independent expenditures were ever challenged” (Citizens United 1656). That challenge came in 2010 with the Citizens United and SpeechNow cases. These two cases were indeed a major turning point in the deregulation of campaign finance in the United States, coming down clearly on one side of this debate. Just weeks after the Citizens United case was decided, the U.S. Court of Appeals for the District of Columbia Circuit issued a unanimous decision in SpeechNow.org v. Federal Election Commission. SpeechNow, a nonprofit association organized under section 527 of the Internal Revenue Code to make only independent expenditures expressly advocating the election or defeat of federal candidates, challenged the constitutionality of the fivethousand-dollar limit on individuals’ contributions to the group as well as the political committee registration and disclosure requirements. The D.C. Circuit Court held that limits on individuals’ contributions to independent expenditure groups such as SpeechNow are indeed unconstitutional in light of the Supreme Court’s decision in Citizens United, in which the Court held that there is no governmental anticorruption interest in limiting independent expenditures. Page 42 →The appeals court reasoned that since, according to Citizens United, independent expenditures do not cause corruption or the appearance of corruption, then neither do contributions to groups that make those independent expenditures. The nine-judge panel ruled unanimously that “contributions to groups that make only independent expenditures cannot corrupt or create the appearance of corruption.В .В .В . The Court has effectively held that there is no corrupting вЂquid’ for which a candidate might in exchange offer a corrupt вЂquo’” (SpeechNow.org 694–95). The judges declared that limits on individual contributions “violate the First Amendment by preventing plaintiffs from donating to SpeechNow in excess of the limits and

by prohibiting SpeechNow from accepting donations in excess of the limits” (696). Therefore, neither the money raised nor the money spent by independent expenditure-only committees is now limited. Yet the Circuit Court did not exempt SpeechNow from registration or disclosure requirements. In November 2010, the Supreme Court declined to grant certiorari in the SpeechNow case (i.e., it decided not to take the case), which allowed the D.C. Circuit Court’s decision to stand. In July 2010, the Federal Election Commission issued two advisory opinions to clarify the implementation of Citizens United and SpeechNow. The first opinion confirmed that independent expenditure-only political committees are not subject to federal contribution limits as a result of the SpeechNow.org decision. In the second opinion, the FEC went beyond the SpeechNow.org decision and ruled that Citizens United exempted independent expenditure-only committees from the prohibitions on corporate and union contributions as well as individual contributions. These FEC rulings thus enabled political action committees (PACs) to raise unlimited amounts from individuals, corporations, and unions and spend unlimited amounts to make express advocacy independent expenditure appeals close to an election as long as they did not coordinate with candidates or parties. Thus, Citizens United, SpeechNow, and these FEC decisions gave rise to perhaps the most significant change in the campaign finance landscape in this era of deregulation, the development of a new type of political committee, the super PAC. In 2012, the Supreme Court struck down Montana’s ban on corporate political money in another 5–4 ideologically split decision. The Court’s decision in American Tradition Partnership v. Bullock made it clear that the Citizens United decision did indeed apply to state and local elections. In his dissent, Justice Breyer wrote that “Montana’s experience, like considerable experience elsewhere, .В .В .В casts grave doubt on the Court’s supposition that independent expenditures do not corrupt or appear to do so” Page 43 →(567 U.S. ____ [2012]). Indeed, the same four justices3 continued to disagree with the majority on this issue, suggesting that a change on the high court could bring significant change to campaign finance rules. As Robert Boatright (2012, 23) notes, the efforts to challenge and nullify campaign finance regulations have also been aimed at public financing, contribution refund programs, restrictions on corporate contributions to candidates, and other regulations. He predicts that we will continue to see more challenges: “US campaign finance law promises to be unsettled over the next few years because the victories against BCRA have come in the courts and from outside the legislative arena” (23). Indeed, in April 2014, with another 5–4 decision split along ideological lines in McCutcheon et al. v. Federal Election Commission, the Supreme Court struck down the aggregate limit on the amount an individual may give during a two-year election cycle to all federal candidates, parties, and PACs combined, arguing that the aggregate contribution limit violated the First Amendment. The aggregate limit was first set with the 1974 FECA amendments, upheld in Buckley v. Valeo in 1976, and adjusted to inflation with BCRA in 2002. Before McCutcheon, the aggregate limit was $123,200, allowing an individual to give no more than $48,600 to all candidates and $74,600 to all party committees and PACs. After the decision, the contribution caps for each recipient remained in place ($2,600 per election to each candidate, $32,400 per year to each national party committee, $10,000 per year to each state party, and $5,000 per year to each PAC), but now a single individual may contribute to a candidate in every House and Senate election, the maximum allowed to a party’s three national party committees, $10,000 to each of a party’s state or local committees, and the maximum to as many PACs as he or she likes. A single donor thus could spend many millions of dollars—far more than the aggregate limit had allowed. In the plurality opinion, Chief Justice Roberts, joined by Justices Scalia, Kennedy and Alito, found that the right to participate in democracy through political contributions is protected by the First Amendment, but that right is not absolute. Our cases have held that Congress may regulate campaign contributions to protect against corruption or the appearance of corruption.В .В .В . At the same time, we have made clear that Congress may not regulate contributions simply to reduce the amount of money in politics, or restrict the political participation of some in order to enhance the relative influence of others.В .В .В . If the First Page 44 →Amendment protects flag burning, funeral protests,

and Nazi parades—despite the profound offense such spectacles cause—it surely protects political campaign speech despite popular opposition. (Roberts plurality opinion, 1–2)

Justice Thomas filed a concurring opinion in which he argued that all contribution limits are unconstitutional violations of the First Amendment and thus Buckley v. Valeo should be overruled because it “denigrates core First Amendment speech” (Thomas concurring opinion, 1). But in the dissent, Justice Breyer argued that the majority does not recognize the need for limits on contributions and other campaign finance activities because it defines corruption too narrowly, as only “quid pro quo corruption to mean no more than вЂa direct exchange of an official act for money’—an act akin to bribery” (Breyer dissenting opinion, 4). Breyer predicted that lifting the aggregate limits would provide legal channels for large sums of money to be directed to both candidates and parties through the expanded use of joint fundraising committees, organizations formed by at least two candidates, party committees, and/or PACs to share fundraising expenses and then distribute the proceeds among the members of the joint committee. In all of the Supreme Court’s recent campaign finance cases (Wisconsin Right to Life, Davis, Citizens United, American Tradition, and McCutcheon), the conservative majority has acted to deregulate some aspect of the campaign finance system by arguing that the regulations violate the First Amendment right to free speech. In all of these decisions, the conservative justices also contend either that removing restrictions poses no danger of corruption or even the appearance of corruption or that the right to free speech outweighs the slight possibility of corruption. In fact, the Court conservatives have forged a new definition of corruption that includes only direct quid pro quo corruption, which significantly narrows the scope of campaign finance activity that can be legitimately regulated. Their colleagues in the minority contend that the conservative justices have an unrealistic view of how politics actually works and are blind to the real potential for corruption that these deregulatory decisions will allow. The two sides also disagree about whether the access and influence that generous contributors often enjoy raise any corruption concerns. Whether or not the conservative justices are purposefully acting to provide some electoral advantage to the Republican Party and/or the liberal justices are trying to shape the rules to benefit the Democratic Party is not clear. Indeed, these recent deregulatory changes may not actually help the Republicans more than the Democrats. Yet the Court’s conservativePage 45 → majority is certainly winning the ideological battle to prioritize liberty (freedom of speech) over other values such as fairness or equality (moderating some voices so that other voices may be heard). Their decisions mirror the rule making by Republican FEC commissioners and the legislative efforts of many Republican elected officials, who in the name of liberty seek to reduce the role of government through deregulation in many policy areas. Thus, the activists outside of government who challenge campaign finance regulations in court, the conservatives on the Supreme Court, the Republican appointees on the FEC, and Republicans in Congress all are following the same ideological political agenda. While their efforts may not be coordinated, their shared goals suggest that campaign finance deregulation is not merely an attempt to gain power within government but also a plan to fundamentally change the role of government and the conduct of politics in the United States.

What Has Changed, What Has Not? In less than eight years, policy drift, the federal courts, and the FEC have fundamentally shifted the campaign finance regulatory regime away from the limits and restrictions that had been in place for many decades. As we might expect, individuals and groups that raise and spend money to influence elections reacted noticeably to these changes. As in the past, for example, big spenders found new methods and channels for raising and spending money to influence elections. So what has changed and what has not? First, I consider the development of super PACs, the increased use of 501(c) nonprofit corporations for election-related activities, and the activities of joint fundraising committees. Then, I evaluate the fundraising and spending activities of these groups and others over time and ask what has and has not changed.

Citizens United, SpeechNow, and the Birth of Super PACs The Citizens United and SpeechNow decisions and the FEC rulings to implement them led to the emergence of a new type of campaign organization—the independent expenditure-only political committee, or super PAC. Like traditional PACs, super PACs are required to register with the FEC and disclose their contributions and spending, but super PACs cannot make contributions directly to candidates or parties, as traditional Page 46 →PACs do. These new independent expenditure-only PACs can spend all of their money on elections, and the public can follow their activities because super PACs must disclose what they raise, from whom they raise it, and how they spend it. They may not coordinate their spending with candidates or parties—their expenditures must be independent. In 2010, former FEC chair Trevor Potter said that the new super PACs are “the clearest, easiest way to spend unlimited funds on an electionВ .В .В . pretty much the holy grail that people have been looking for” (Eggen and Farnam 2010, A1). Indeed, the number of super PACs has grown rapidly, from 83 registered in 2010 (spending $63.3 million), to 1,310 in 2012 (spending $609.4 million), to 1,360 in 2014 (spending $345.1 million) (Center for Responsive Politics 2014a).4 Some observers see Super PACs as a way to get around the limits on contributions to candidates and parties. Indeed, most super PACs are partisan in nature, and many of them are established and managed by former party officials, congressional staff, and partisan operatives. In 2012, super PACs were formed for each of the major party presidential candidates, most of the candidates for the GOP presidential nomination, and some House and Senate candidates. In 2012, most super PACs (63 percent, or 152 of the 240 with more than $1,000 in independent expenditures) were single-candidate super PACs, created to promote the election of just one candidate (Dwyre and Braz 2014, 16). These single-candidate super PACs challenge the requirement that super PACs be independent of candidates and lend support to the contention that super PAC independent expenditures may create the potential for corruption between the organization’s funders and a grateful candidate. Table 1.1 lists the ten largest super PAC spenders in the 2010, 2012, and 2014 elections. Restore Our Future, the super PAC established to support Mitt Romney’s presidential bid, spent more than twice as much in 2012 ($142.1 million) as all super PACs spent in 2010 ($63.3 million). Moreover, although super PACs may not legally coordinate with candidates or parties, candidates, party leaders, and elected and appointed officials may appear and speak at super PAC fundraisers as long as they do not actually solicit more than $5,000, the limit for contributions to candidates and traditional PACs (Federal Election Commission 2011, 4). Farrar-Myers and Skinner (2012, 111) ask, “Even if such expenditures are technically independent, are they functionally coordinated with campaigns so as to provide direct benefits to candidates?” They argue that such “functional coordination of Super PACs’ independent expenditures with candidate campaigns threatens to eradicate nearly 40 years of a campaign finance Page 48 →system premised on permissible restrictions on contributions to candidates” (116). Page 47 → Table 1.1. Top Super PAC Spenders, 2010–2014 Name of Super PAC Amount of Independent Expenditures Ideologya 2010 American Crossroads C $21,652,707 American Families First Action Fund L $6,018,958 Club for Growth Action C $5,023,255 NAE Advocacy Fund L $4,200,000 Women Vote! L $3,749,411 Commonsense Ten L $3,276,442 Super PAC for America C $1,835,197 Alaskans Standing Together C $1,645,778 New Prosperity Foundation C $1,542,444 First Amendment Alliance C $1,487,860

2012 Restore Our Future

C; supported Romney $142,097,336

American Crossroads Priorities USA Action Majority PAC House Majority PAC

C L; supported Obama L L

Freedomworks for America Winning Our Future Club for Growth Action

C $19,636,548 C; supported Gingrich $17,007,762 C $16,584,207

Ending Spending Action Fund Congressional Leadership Fund

C C

$13,250,766 $9,450,223

L L C C C L L; supported Begich C bipartisan L

$46,651,418 $29,422,890 $23,410,113 $22,585,431 $21,860,037 $19,504,503 $10,157,335 $10,098,748 $9,979,338 $8,987,431

2014 Senate Majority PAC House Majority PAC Freedom Partners Action Fund Ending Spending Action Fund American Crossroads NextGen Climate Action Put Alaska First PAC Congressional Leadership Fund National Association of Realtors League of Conservation Voters

$104,746,670 $65,166,859 $37,498,257 $30,470,122

Source: Compiled from Center for Responsive Politics 2014a. aLetters

denote the group’s ideology: C = conservative; L = liberal (as designated by the Center for Responsive Politics). This new means of influencing elections has encouraged many of the same big spenders from past elections to spend even more and has enticed some newcomers to get involved in electoral politics. One big Republican donor, Texas homebuilder Robert Perry, the primary funder of the infamous Swift Boat Veterans for Truth ads in 2004, gave $7.1 million to super PACs in 2010 and $23.5 million in 2012 (Center for Responsive Politics 2013). Before super PACs emerged in 2010, Perry gave large amounts to 527 organizations and other political committees ($1 million in 2008, $11.4 million in 2006, and $8.1 million in 2004). Perry seems to have found a preferred vehicle for his millions in super PACs. Las Vegas casino owner Sheldon Adelson and his wife, Miriam, were by far the biggest individual spenders in 2012, giving $91.8 million to super PACs. The Adelsons could contribute only $5,000 to Mitt Romney’s presidential campaign, and they could have made unlimited expenditures, but they would have to figure out how to spend that money themselves. Instead, in 2012 the Adelsons gave $30 million to Restore Our Future, the super PAC established to back Romney’s nomination and general election campaigns, and they did not have to create and air any advertisements themselves.5 The Adelsons did not invest nearly as much in elections before super PACs were an option. In future elections, we are likely to see more individuals who can leverage millions of dollars to influence elections gravitate toward super PACs. With only three election cycles worth of information about these new campaign finance entities, it is difficult to say what super PACs will become. Indeed, super PACs changed and grew dramatically from 2010 to 2014. They are sure to remain controversial and to test the limits of the recent court decisions that created them. More Use of Tax-Exempt 501(c) Nonprofit Corporations Another development in this era of deregulation is the increase in the use of nonprofit, tax-exempt groups organized under section 501(c) of the Internal Revenue Code. These organizations are permitted to engage in

political campaign activity, provided that this is not their primary activity. Yet the exact meaning of primary in this context is not clear in the statute or regulations. The Internal Revenue Service (IRS) is currently dealing with the fallout from revelations that the tax agency targeted some applicants for 501(c)(4) tax exemption for extra scrutiny, possibly for ideological reasons (IRS 2013, 25). Fig. 1.1. Reported Nonparty Outside Spending by Disclosure, 1990–2014 (Source: Compiled from Center for Responsive Politics 2014d.) Page 49 →These 501(c) groups are controversial primarily because although they report some of their spending, they are not required to disclose their donors. This aspect of the law is not new, but it has attracted a great deal of attention because of the increased use of 501(c) groups for electoral activity in 2008, 2010, 2012, and 2014 and thus an increase in the level of undisclosed campaign finance activity overall, as figure 1.1 indicates. Individuals, groups, and now corporations and unions that want to spend money to influence elections but do not want to publicly disclose that they are doing so are legally permitted to channel unlimited amounts through these 501(c) organizations. There are three types of electorally active 501(c) groups. Labor unions can organize under section 501(c)(5), and section 501(c)(6) organizations are trade associations or business leagues (e.g., the Chamber of Commerce has a 501(c)(6) group). Yet 501(c)(4) groups do most of the nonprofit electoral spending, as figure 1.2 shows. The IRS describes 501(c)(4) groups as social welfare organizations. Contributions to a 501(c)(4) are not tax deductible and could be subject to a gift tax, so contributors would Page 50 →have to be motivated to avoid disclosure if they are willing to pay a tax on their donations. However, the IRS started but then dropped an inquiry into whether some of these groups’ contributors should have paid the gift tax in 2010. Pro-regulation activists have pushed the IRS to investigate groups that appear to be engaged in too much election-related activity (i.e., it may actually be their primary activity), but the agency has done little on that front (Jaime 2010; see also Campaign Legal Center 2013). Given the current congressional and public scrutiny the IRS is facing because of it alleged targeting of some applicants for tax-exempt status, the IRS may not be inclined to pursue groups that are thought to be pushing the envelope or crossing the line on the amount of electoral activity they may conduct. Fig. 1.2. Reported Electoral Spending by 501(c) Non-profit Corporations, 2000–2014 (Source: Compiled from Center for Responsive Politics 2014c.) While these electorally active nonprofits are not required to report all of their campaign related spending to the FEC or the IRS, they do report much of it. Thus, we can see how their spending has changed over time. Figure 1.2 shows that the increase in 501(c) nonprofit campaign spending Page 51 →began in 2008, two years before the Citizens United decision. These nonprofits previously spent very little, and most of their expenditures went toward communicating with their members (known as “communication costs”). But the 2007 Wisconsin Right to Life ruling allowed corporations and unions to use treasury funds to run legitimate issue ads close to an election, freeing 501(c) nonprofit corporations to increase their spending on electioneering communications. The 2010 Citizens United decision subsequently relaxed restrictions on corporate election spending, and these groups, especially 501(c)(4)s, began to spend heavily on independent expenditures directly advocating the election or defeat of a particular candidate (i.e., express advocacy). Now 501(c)s do most of their political spending on independent expenditures. Figure 1.2 clearly shows that by 2012, 501(c)(4) nonprofits emerged as the vehicle of choice for unlimited spending on elections with money from undisclosed sources. Indeed, these groups are an attractive channel for corporations and individuals to shield their political activities from the public. Most of the 501(c) campaign spending from 2000 to 2008 was done by liberal nonprofits, particularly by unions for communications costs. In 2008, liberal 501(c) groups spent $85.2 million and conservative groups spent $62.9 million (Center for Responsive Politics 2014c). Then the trend shifted, and in 2010, 2012, and 2014 (after the Citizens United and SpeechNow decisions), conservative groups far outspent liberal nonprofits. In 2012, conservative nonprofits spent much more than all groups had in past elections—$269.5 million, 80 percent of all

nonprofit electoral spending during that election, while liberal nonprofits spent only $58.5 million. Moreover, a few groups, all conservative, spent far more than all the rest, as shown in table 1.2. In 2012, one group, Crossroads GPS, the 501(c)(4) established by Republican operatives Karl Rove (George W. Bush’s political adviser) and Ed Gillespie (former Republican National Committee chair), spent almost twice as much as the next biggest spender, Americans for Prosperity, a group founded by conservative billionaire businessmen David and Charles Koch. In 2014, the U.S. Chamber of Commerce spent more than any 501(c). While this Republican advantage in 501(c) spending seems significant, the Democrats came late to the game after Citizens United, in part because many Democrats, especially President Obama, criticized the decision for allowing corporations to secretly spend money in elections. Indeed, just days after the Supreme Court issued the Citizens United decision, President Obama said in his 2010 State of the Union address (with justices sitting in the front row of the audience) that the decision would “open the Page 53 →floodgates for special interests, including foreign corporations, to spend without limit in our elections.В .В .В . I just don’t think elections should be bankrolled by America’s most powerful interests” (Greenhouse 2010). Democratic-leaning groups could very well catch up in future elections, as they have done with party fundraising (Dwyre and Kolodny 2014a). Page 52 → Table 1.2. Top 501(c) Spenders, 2010–2014 (reported spending) Name of 501(c) Amount Spent Type and Ideologya 2010 U.S. Chamber of Commerce 501(c)(6) C $33,849,755 American Action Network 501(c)(4) C $18,945,602 Crossroads GPS 501(c)(4) C $16,733,363 American Future Fund 501(c)(4) C $9,367,283 Americans for Job Security 501(c)(6) C $8,258,099 60 Plus Association 501(c)(4) C $7,116,911 Americans for Tax Reform 501(c)(4) C $4,160,299 League of Conservation Voters 501(c)(4) L $4,026,036 VoteVets.org 501(c)(4) L $3,218,871 Center for Individual Freedom 501(c)(4) C $2,500,617 2012 Crossroads GPS 501(c)(4) C $71,181,940 Americans for Prosperity 501(c)(4) C $36,352,928 U.S. Chamber of Commerce 501(c)(6) C $35,657,029 American Future Fund 501(c)(4) C $25,414,586 Americans for Job Security 501(c)(6) C $15,872,864 Americans for Tax Reform 501(c)(4) C $15,794,552 American Action Network 501(c)(4) C $11,689,399 League of Conservation Voters 501(c)(4) L $11,137,177 Americans for Responsible Leadership 501(c)(4) C $9,793,014 NRA Institute for Legislative Action 501(c)(4) C $7,448,189 2014 U.S. Chamber of Commerce 501(c)(6) C $35,464,243 Crossroads GPS 501(c)(4) C $26,015,713 NRA Institute for Legislative Action 501(c)(4) C $12,675,153 Patriot Majority USA 501(c)(4) L $10,652,282 League of Conservation Voters 501(c)(4) L $9,563,129 American Action Network 501(c)(4) C $8,958,129 Kentucky Opportunity Coalition 501(c)(4) C; supported McConnell $8,231,603

Ending Spending

501(c)(4) C

$6,420,885

VoteVets.org Carolina Rising

501(c)(4) L 501(c)(4) C

$4,018,154 $3,279,626

Source: Compiled from Center for Responsive Politics 2014c. aLetters

denote the group’s ideology: C = conservative; L = liberal (as designated by the Center for Responsive Politics).

Does It Matter Who Is Spending? What are the consequences when the relative strength of various spenders changes in reaction to legal and regulatory changes? Does it matter who spends more and who spends less? And is it important to know who is spending money to influence the outcome of elections? I argue that it is useful for voters to know who is spending large sums to influence elections, and it also matters who is spending more or less than others. In particular, when the mix of party and nonparty spending shifts in a way that diminishes the relative influence of political parties, there is a net loss to the system in that the important functions parties perform to link voters to lawmakers in a representative democracy are also diminished. This would contribute to the growing “democratic deficit” in the United States and elsewhere, to citizens feeling even more disengaged from and distrustful of their political institutions (Pharr and Putnam 2000; Dalton 2004). Understanding the consequences of these recent deregulatory actions may help us understand more about the motives of those who instigated deregulation and thus contribute to our understanding of why some countries, especially the United States, are moving in a deregulatory direction while others are not. How Has Deregulation Changed the Balance of Noncandidate Spenders? Figure 1.3 shows outside spending by party and nonparty groups since 2000. This view allows us to see how campaign spending has increased, decreased, and shifted to and from different types of spenders as the campaign finance rules have changed. Outside spending increased dramatically in the 2004 election, the first one held after BCRA banned soft money fundraising by parties and regulated electioneering communications close to elections. A subsequent big jump occurred in spending by parties and 527 groups. After BCRA banned party soft money, some of that unlimited corporate, union, and individual money gravitated to 527 committees, and Page 54 →some new big givers who had not contributed soft money to parties, such as international financier George Soros and insurance company CEO Peter Lewis, contributed generously to 527s in 2004 (Dwyre 2007). Then Congress tightened disclosure and contribution requirements for 527 groups, making these committees a less attractive outlet for large contributors, and 527 committee spending decreased in 2006. Fig. 1.3. Reported Outside Spending, 2000–2014 (Source: Party data from Federal Election Commission 2014; 527 Committee data from Center for Responsive Politics 2014b; PAC data from Federal Election Commission 2014; Super PAC data from Center for Responsive Politics 2014a; 501(c) data from Center for Responsive Politics 2014c.) The increase in party spending in 2004 reflects in part the fact that the national parties had previously sent most of their soft money and some of their hard money to state parties to spend (the spending rules made this more efficient), and the soft money ban left them with only hard money to spend on independent expenditures. The parties also were highly motivated to make up for the loss of soft money, and both the Republicans and the Democrats worked hard to win close contests for control of all elected Page 55 →branches of the federal government, so they raised record amounts of hard money that year (Dwyre and Kolodny 2014a). In 2008, spending by parties and 527 groups remained somewhat stable, while traditional PACs engaged in more independent expenditure spending. The increase in 501(c) spending is a clear reaction to the 2007 Wisconsin decision. More traditional PAC spending also occurred in 2008, but this spending dropped after the presidential

election year. Though super PACs emerged in 2010 following the Citizens United and SpeechNow decisions, their spending and 501(c) spending did not really take off until the 2012 election cycle, when the changing balance of spenders really became interesting. Outside spending during the 2012 election clearly indicates the preference for super PACs over other possible spending vehicles, such as traditional PACs or 527 committees, and an increased use of 501(c) groups. Of course, only super PACs and 501(c)s are permitted to raise unlimited amounts from virtually any source and spend unlimited amounts on express advocacy independent expenditures, electioneering communications, and other campaign activities. While it is not possible to know for sure, since 501(c)s do not disclose their donors, corporations are probably directing most of their political spending to these nonprofits (rather than traditional or super PACs) because they can do so without disclosing their political activities. Corporations have good reason to conceal their electionrelated spending: it may negatively affect the bottom line. As Wert, Gaddie, and Bullock (2011, 727) note, “A rise in overt, direct political action by most corporations carries with it risks far exceeding political gains that might be achieved by acting through other agents.” Indeed, in 2010, corporate leaders saw Target Corporation come under attack from some of its customers and shareholders and experience a nationwide boycott after it contributed $150,000 to MN Forward, a group that supported a Minnesota gubernatorial candidate who opposed same-sex marriage. So rather than risk inviting scorn and negative public reaction from customers, clients, and shareholders, corporations that want to spend in federal elections can do so anonymously by giving money to a 501(c). The changes in outside spending depicted in figure 1.3 indicate that the various campaign finance actors have, at each turn, reacted to changes in campaign finance rules. This discovery is not surprising, since both party and nonparty groups have previously adjusted to statutory, legal, and regulatory campaign finance changes (Kolodny and Dwyre 1998; Dwyre 2007; Dwyre 2013). The current result is a distribution of outside spenders Page 56 →that looks very different than it did just a few years ago and radically different than it did in 2000 and 2002, before the deregulation era and the entrance of new outside spenders onto the campaign finance scene. The development of and substantial spending by super PACs in particular is most noticeable, and nonprofit 501(c) spending has grown in recent election cycles as well. Figure 1.3 also shows that parties were outspent by 527 groups in 2004, but in 2006, parties did slightly more outside spending than 527s, as 527 rules were tightened. Party spending remained at about the same or lower levels after 2006, as other groups began to eclipse the parties, with another shift in spending patterns in 2008, after the Wisconsin Right to Life decision, when spending by 501(c) nonprofit corporations increased substantially. Relative spending levels matter in part because spenders differ in their levels of transparency and accountability. For example, 501(c) groups have low levels of transparency because they do not disclose their donors. In addition, only candidates and their parties appear on the ballot, making them the only campaign spenders that can be held accountable by voters for campaign ads and other spending. All other groups do not face tangible voter evaluation or much more than a “fact check” from the media or good-government group. Thus, these nonparty spenders can strike hard in elections and suffer very few consequences if their independent expenditures or electioneering communications go too far. Yet sometimes candidates are blamed for overly negative or untrue campaign ads run by these outside groups. As a result, negative outside spending is not always welcomed by the candidate it is meant to help, and in some cases, candidates have begun to ask outside spenders to stay out of their elections.6 Moreover, political parties are more restricted in what they can raise and spend than super PACs and 501(c) nonprofits and thus are at a disadvantage relative to these other outside spenders. Now that BCRA, Wisconsin Right to Life, Citizens United, SpeechNow, McCutcheon, and the various FEC rulings have made significant changes to campaign finance rules, only candidates and parties are subject to meaningful limits on their fundraising and spending: individuals, interest groups, corporations, unions, and others have various ways to raise and spend money in unlimited and often anonymous ways. Parties, individuals, and traditional PACs may

contribute directly to candidates, but only in limited amounts, and they can make unlimited independent expenditures. Parties also can spend limited amounts on expenditures coordinated with candidates. However, unlike super PACs and 501(c)s, candidates, parties, and traditional PACs can raise funds only in limited increments, meaning that they have difficultyPage 57 → raising the amounts that super PACs and 501(c)s can raise from a few big contributors. Consequently, the balance of potential influence of each player has shifted away from candidates and parties, giving other political actors a greater ability to inject more speech into campaigns. The trend of diminishing party influence in the United States goes back a long way. In his classic, Curing the Mischiefs of Faction, Austin Ranney (1975) offered a thorough examination of the history of the push to minimize the perils of parties in the United States. Ray La Raja (2008, especially chap. 1) discusses the nineteenth-century Mugwump and Progressive reforms that began the shift away from party involvement in campaign finance and takes the story through the twenty-first century McCains and Feingolds. And I have argued that the Progressives’ efforts in the early 1900s to combat the corrupt political party machines also diminished the parties’ ability to play a constructive role in U.S. representative democracy (Dwyre 2013, 185–86). Parties are so heavily regulated that they are cut out of much of the financing of campaigns in the United States relative to other noncandidate spenders such as corporations, unions, super PACs, and 501(c)s, particularly when compared to other industrialized democracies. Thus, parties retain only a limited ability to play a meaningful and, some would argue, vital role in American elections. And while the loss of party influence in some instances meant the gain of candidate influence, the resulting rise of candidate-centered politics has brought a whole host of familiar concerns about accountability and other issues. Recent years have been particularly tough for parties. In 2002, BCRA banned unlimited soft money donations to parties. Then in 2010, in Republican National Committee v. Federal Election Commission, the U.S. District Court for the District of Columbia upheld parts of BCRA that restrict soft money raising and spending by parties, explaining that since the Supreme Court did not address contributions to parties in Citizens United or other cases, it could not go beyond the McConnell decision that upheld BCRA (Liptak 2010). Thus, the potential influence of parties relative to other spenders remains stagnant as other outside spenders have virtually no constraints on their electoral finance activities. Many political scientists and other observers argue that the parties play a vital linkage role in American politics (see, e.g., Broder 1972; Fiorina 1980; Sundquist 1983; Aldrich 1995; La Raja 2008; Jacobson 2013) and that this important role should be reflected in the campaign finance system. As the parties’ role in elections diminishes relative to other campaign spenders, the link that parties can provide between voters and their elected officialsPage 58 → and the accountability mechanism that the parties can offer voters also diminishes. Yet given the general agreement that candidates and their parties are the most likely nexus for quid pro quo corruption, any effort to level the playing field by eliminating or relaxing contribution and spending limits for candidates and parties is not likely to succeed. Indeed, the Supreme Court has signaled that party fundraising is the only kind of noncandidate fundraising that presents a risk of corruption and thus the only kind that warrants government regulation. Any change that might give parties a more equal status with other campaign spenders would have to involve a change in this view of corruption. For example, the Supreme Court would have to adopt Justice Stevens’s view of corruption expressed in his Citizens United dissent: “Selling access is not qualitatively different from giving special preference to those who spent money on one’s behalf” (448). This is likely to happen only if a change occurs on the Court that adds to the four votes against Citizens United. If this broader view of corruption were applied, then independent spending by corporations (including 501(c) nonprofit corporations), unions, super PACs, and individuals might also be seen as potentially corrupting, and their financial activities might be restricted as the parties’ activities are. The McCutcheon decision may actually benefit party leaders and perhaps the parties as institutions if the decision leads to the increased use of joint fundraising committees and if those committees work to fund the parties. If big donors give to party-allied joint fundraising committees, more funds may flow to the party committees, which may increase the parties’ share of overall spending and perhaps the parties’ influence in elections relative

to other spenders. Of course, more funds will likely flow to individual candidates and outside groups as well, meaning that the parties may not improve their financial status relative to other campaign finance actors. The Erosion of Disclosure Disclosure of the source and use of money raised and spent to influence federal elections is thought to be a deterrent to corruption and to provide important information to voters. Indeed, disclosure has been one of the hallmarks of the U.S. campaign finance system for more than one hundred years, since passage of the Publicity of Political Contributions Act of 1910 (the Publicity Act). Decades later, FECA and its amendments in the 1970s and BCRA in 2002 reinforced the requirements for disclosure of the Page 59 →source of virtually all funds used to influence federal elections. These disclosure requirements were designed to guard against corruption by revealing campaign finance activities to the public, because, as future Supreme Court justice Louis Brandeis (2013, 10) said in 1913, “Sunlight is said to be the best of disinfectants; electric light the most efficient policeman.” Moreover, knowing who is backing the candidates in an election is useful information for voters. The interested money behind a candidate may give voters insight into what interests the candidate will promote if elected to office. For example, Dowling and Miller used experiments to ascertain whether the source of campaign spending influenced voters’ opinions of candidates: they found that “when people are told that candidates benefit from either super PAC or interest group funding, they are more likely to feel that the candidate will serve special interests, and are less likely to vote for him” (2014, 100). The recent ability of wealthy contributors, corporations, and others to secretly make donations with the goal of influencing electoral outcomes struck many observers as contrary to the spirit of federal campaign finance laws and drew headlines such as “Return of the Secret Donors” (New York Times, October 16, 2010), “Voters Are in the Dark on Campaign Spending” (Washington Post, October 25, 2010), and “Secret Spending Defines Midterm” (National Journal, October 25, 2010). While full or near-full disclosure has not always been the norm, the recent spike in “dark money” has caused a good deal of controversy (Carney 2012). As figure 1.1 indicates, the percentage of spending that was disclosed began to decline in 2008, after the uptick in 501(c) spending as a result of the Wisconsin decision, when only about 64.5 percent of the sources of nonparty spending were fully disclosed. In 2010, just over half (50.6 percent) of the sources of nonparty spending were fully disclosed; in 2012, only 40.7 percent of nonparty spending came from disclosed sources; and in 2014, less than 40 percent was disclosed (Center for Responsive Politics 2014d). The recent erosion of disclosure can be traced to actions by the FEC and to the Court’s apparent inability to fully understand the practical impact of some key FEC rulings. In a very thorough analysis of past and current campaign finance disclosure issues, Potter and Morgan (2013, 387) note the existence of a long-standing judicial commitment to disclosure and clear statutory language in FECA and BCRA “to provide for full disclosure of the sources of the vast majority of funds used to influence elections.” They blame the FEC for narrowing the reach of disclosure rules: “The re-emergence of dark money is best understood as primarily a failure of the Federal Election Commission” (387). Page 60 →The 1910 Publicity Act and later the 1925 Federal Corrupt Practices Act included broad disclosure requirements “for persons вЂother than political committees’ that made вЂcontributions or expenditures’ over $100 in a calendar year, but whose activities did not rise to the level of triggering вЂpolitical committee’ status” (Potter and Morgan 2013, 413). Many years later, FECA and BCRA continued to apply this broad view of disclosure. Yet in Buckley v. Valeo, the Supreme Court narrowed the definition of “political committee” in a way that organizations whose “major purpose” was not political activity were not considered political committees and therefore did not have to disclose their donors unless they engaged in express advocacy. And since the Buckley court also narrowed the definition of what constitutes express advocacy to only those messages that

contain words of express advocacy such as vote for or vote against (the so-called magic words), fewer expenditures have been subject to disclosure requirements. Nevertheless, disclosure of the sources of funds used for independent expenditures remained very high until a 1980 FEC rule issued after the 1979 FECA amendments. The new rule significantly narrowed the disclosure requirement for organizations making independent expenditures. The FEC said that only those contributors who make a contribution “for the purpose of furthering the reported independent expenditure” need be disclosed (quoted in Potter and Morgan 2013, 425). This action was followed by a significant decrease in the percentage of independent expenditures with full disclosure of specific donors. At the time, very few individuals or groups were making independent expenditures, and corporations and unions were still barred from using treasury funds for such expenditures. So the change garnered little notice until after Wisconsin. The 2007 Wisconsin decision narrowed what ads would be considered express advocacy under BCRA and allowed corporations and unions to run issue ads that did not expressly advocate for the election or defeat of a candidate. The FEC then applied the narrow disclosure requirement once again, but this time to a much broader group of spenders that included corporations and unions. The FEC ruled that corporations and unions running electioneering communications need only disclose those contributions that were “specifically designated for electioneering communications” (Federal Election Commission 2007). As a result, the level of disclosure went down, as figure 1.1 shows. Then, after Citizens United permitted corporations and labor unions to use treasury funds to make independent expenditures, the FEC’s 1980 disclosure rule would again be applied, and, as figure 1.1 indicates, disclosure Page 61 →of contributors decreased dramatically even though eight of the nine justices rejected Citizens United’s request to be exempted from disclosure requirements. However, the Court seems not to have understood that the FEC had already significantly narrowed disclosure requirements in 1980 and again in 2007, and the justices seem also to have expected that the newly freed corporations and unions would report the sources of the funds they used to run independent expenditures. In another 2010 case, Justice Scalia asserted that running a democracy “takes a certain amount of civic courage” and that “part of the reason” disclosure is important is “so you can be out there and be responsible for the positions you have taken” (Doe v. Reed 2837). Scalia noted that “requiring people to stand up in public for their political acts fosters civic courage, without which democracy is doomed” (2837). So although Congress and the Supreme Court have expressed clear support for full public disclosure of campaign finance activity, the agency responsible for implementing and enforcing the laws passed by Congress and reviewed by the Supreme Court, the FEC, has not implemented those disclosure laws as Congress and the Court intended. This may be because the FEC has been responding to a determined effort by conservative activists to push the agency to limit disclosure, which lends some support to the theory of deregulation for partisan advantage. Yet in at least one case (FEC 2007), commissioners from both parties (albeit only one Democratic appointee) acted to reduce disclosure requirements. Fundamentally, however, the move to reduce campaign finance disclosure requirements is an effort by conservatives that has been embraced by many Republicans in Congress, who have consequently not acted to shore up disclosure requirements. The Unelected Deciding Election Issues Does it matter that those who have promulgated many of these recent deregulatory changes have little experience in electoral politics, are not elected to their positions, and are thus not subject to the electoral mechanisms of accountability? That deregulation is the result of actions by those who cannot be held accountable by voters challenges the legitimacy of the American system of representative democracy and separation of powers, particularly since the elected branches are unlikely to address campaign finance deregulation in the face of partisan gridlock and potential partisan advantage under the new rules. In fact, the Wisconsin, Davis, Citizens United, SpeechNow, American Page 62 →Tradition, and McCutcheon cases and some of the regulations and advisory opinions issued by the FEC represent in part the successes of a concerted

effort to deregulate the campaign finance system. Deregulation proponents outside of government have focused on two aspects of campaign finance: first, the promotion of a particular view of First Amendment free speech rights, which has played out mostly in the courts; and second, the promotion of contributor privacy rights over the public’s (and Congress’s and the Supreme Court’s) desire for transparency, where deregulation advocates have focused on the FEC to secure these rights. On both fronts, deregulation advocates have directed their efforts to venues of government that are not elected and therefore cannot be held accountable by voters. These unelected government officials in the courts and the federal bureaucracy will retain their positions regardless of the outcome of elections and as long as their terms of office last—Supreme Court justices can serve for life, and many FEC commissioners serve beyond their terms when Congress and the president cannot agree on new nominees. Activists such as attorney James Bopp, the primary legal adviser to Citizens United, and groups such as the James Madison Center for Free Speech, former FEC chair Bradley Smith’s Center for Competitive Politics, Citizens United, SpeechNow, and others have brought lawsuits and pressed the FEC to chip away at campaign finance laws enacted by elected representatives in Congress. Their arguments are based mostly on a view of the First Amendment that those who spend money to speak in elections should be neither limited in their ability to speak nor compelled to disclose that activity. Potter and Morgan (2013, 388) assert that “the proximate cause of the re-emergence of dark moneyВ .В .В . has been the anti-disclosure movement’s successful takeover or immobilization of the FEC.” Indeed, the FEC is set up for deadlock and political shenanigans. The agency’s commissioners include three Republican appointees and three Democratic appointees, and they often do not take action or issue rules because of partisan stalemate. Critics argue that Republican commissioners have held the agency captive in recent years in part because the president left vacancies open for so long (see, e.g., Democracy 21 2012). The federal courts also are insulated from public accountability, and Supreme Court justices are free to pursue their own ideological goals. Moreover, personnel changes on the Supreme Court have affected the course of the government’s decision making on campaign finance issues. For example, the Wisconsin decision came soon after the 2006 retirement of Justice Sandra Day O’Connor, who cowrote the Supreme Court’s majorityPage 63 → opinion in the McConnell case. O’Connor was for many years the only Supreme Court justice who had run for and held elective office, and although she is a Republican and usually voted with the conservatives on the Court, she generally sided with the more liberal justices on questions of regulation of campaign finance activities. Her previous electoral experience may have contributed to her willingness to more evenly balance the goals of liberty and equality in this area of the law. Justice O’Connor was replaced by Justice Samuel Alito, who holds a different view of the First Amendment’s application to electoral finance and voted with the 5–4 majority in the Wisconsin Right to Life, Citizens United, American Tradition, and McCutcheon cases. The members of the Supreme Court currently include no former elected officials. The close division on the Court suggests that one new appointment could shift the Court’s view of how and when corruption might be possible. Congress has not responded to these deregulatory changes in campaign finance rules, primarily because the institution is currently so polarized and there is no bipartisan agreement on campaign finance (and many other) issues. Indeed, after arguing for decades that disclosure is the only campaign finance regulation that is needed, many conservatives, including those who had supported BCRA and the Republican leader of congressional battles against campaign finance regulation, Kentucky senator Mitch McConnell, are now pushing to weaken disclosure requirements. Moreover, some lawmakers may not be inclined to respond to recent campaign finance changes because they perceive some electoral advantage under the new rules. This perception of electoral advantage may contribute to more policy drift on campaign finance issues as laws and regulations become less relevant to actual campaign finance practices. In 2010, some congressional Democrats introduced the DISCLOSE Act (Democracy Is Strengthened by Casting Light On Spending in Elections) to force campaign spenders to reveal the donors that fund their political ads, to

require ads to include sponsorship information, and to enhance restrictions on foreign-owned companies. However, the bill failed in the Senate, unable to get the sixty votes needed to overcome a Republican filibuster. In another effort, a group of Democratic senators introduced a constitutional amendment that would authorize Congress to regulate and limit the raising and spending of money (including independent expenditures) in federal elections and allow states to do the same. Yet the amendment has little traction. Moreover, a number of state and local governments across the country have passed resolutions proclaiming, “corporations are not people” and endorsing a constitutional amendment Page 64 →to reverse Citizens United, but these efforts cannot directly affect federal law (Karmasek 2013). Given Congress’s inaction on these issues and the low chance of a constitutional amendment, the public currently has little ability to hold officials responsible for recent campaign finance changes. In fact, a 2012 poll conducted for the Brennan Center for Justice (2012, 2) found that “more than three-quarters of all respondents—77 percent—agreed that members of Congress are more likely to act in the interest of a group that spent millions to elect them than to act in the public interest.” Yet the public has little power to curb interest groups’ ability to spend those millions as long as Congress remains unable to address this concern, the Supreme Court is controlled by a slight majority of justices who ignore the public’s concern about potential corruption, and the FEC is deadlocked. While deregulation continues on the national level, some states have responded to the new campaign finance environment by revising their regulations so that they exceed the federal rules: for example, Maryland requires corporations to inform shareholders about political spending; Alaska, California, and North Carolina require sponsors of independent expenditure ads to list their top donors in their advertisements; and Massachusetts requires corporations to “stand by your ad”—the CEO must appear in the ad (Suderman 2014). Twentyfive states have some form of public financing, and Colorado and Montana passed ballot measures in 2012 that support reversing the Supreme Court’s Citizens United ruling. However, these voter initiatives are merely advisory resolutions and do not have any power to force state or federal officials to act. These state efforts may prove to be useful experiments for changes at the national level, although federal lawmakers are unlikely to enact such changes in the near future.

Conclusion The U.S. campaign finance system has clearly moved in a deregulatory direction, primarily as a consequence of the relaxation of restrictions on corporate, union, and individual participation in electoral finance and to an increase in campaign finance activity that is not publicly disclosed. I have explained how deregulation happened and examined some consequences of these deregulatory changes. I now draw on a few causal theories about campaign finance regulation to understand why we have seen this move toward deregulation. Page 65 →First, the current system is in part the result of policy drift, whereby campaign finance practices have “grown out of” the regulatory system in place, as Boatright notes in the introduction to this volume. Lawmakers and regulators have not updated the rules to keep pace with developments in campaign fundraising and spending or with court and FEC rulings that have changed the behavior of some campaign finance actors. For example, after the Citizens United decision, the use of 501(c) nonprofits increased significantly and disclosure declined subsequently, but no action to update disclosure or other rules occurred in response. Second, many of the deregulatory changes have been initiated by activists outside of government and implemented by nonelected government officials in the judicial and executive branches. The activists, judges, and bureaucrats argue that deregulation of the campaign finance system is part of a larger ideological perspective that values liberty (in this case, freedom of speech) and a smaller role for government in most matters. This ideological view is libertarian in general and consistent with the ideology of most contemporary conservative Republican lawmakers, but it does not necessarily reflect the public’s opinion about the role of money in elections. Indeed, partisan activists tailored legal challenges that would appeal to the conservative majority on the Supreme Court, and Republican appointees to the FEC have stifled enforcement of existing regulations and supported rules and decisions that have reduced regulatory requirements. Officials who will never face the voters made these

decisions, meaning that elite opinion can prevail without concern for public accountability. These legal and bureaucratic institutional actors are serving the interests of partisan politicians. Their actions support the notion that campaign finance deregulation in the United States can best be explained as an effort to secure an advantage for their partisan allies in the elected branches. Whether or not these efforts to deregulate the American campaign finance system will benefit the Republican Party, the move toward deregulation is partisan in nature. As Susan E. Scarrow (2004, 2006) has argued, parties—as well as, in this case, their allied partisans in and outside of government—will act to shape campaign finance rules that give them an electoral advantage over their partisan opponents. Republican politicians appointed the Supreme Court justices and FEC commissioners who issued these deregulatory decisions, and Republican lawmakers in Congress have prevented legislative action to address the consequences of either campaign finance policy drift or the deregulatory decisions made outside of Congress. Thus much of the campaign finance deregulation in the Page 66 →United States is best understood as a partisan effort for electoral advantage. Additional developments are likely to occur in the next few election cycles, as the various political actors adjust to the new regulatory environment. For example, with the demise of the presidential public funding system, individuals, corporations, and unions seeking to influence the outcome of that race will no doubt push the envelope to find more ways to assist their favored candidates beyond the five-thousand-dollar direct contribution they can make. Moreover, given that control of both chambers of Congress and the White House have been and are likely to remain up for grabs, the motivation for partisans on both sides to find new ways to raise more money and direct it to help targeted candidates is very high. If Democrats manage to take control of all branches of the federal government, will they act to reverse any of the recent deregulatory changes? Probably not, if the Democrats are benefiting from unlimited super PAC and 501(c) spending, from big donors who want to help out without public scrutiny, and/or from more money from expanded joint fundraising committees. Like the Republicans in Congress now, the Democrats are likely to follow the partisan advantage theory and not move too quickly to add new regulations or push for more disclosure if they perceive that such changes would work against their electoral goals. Regardless, Congress may not be able to reverse new deregulatory changes that rest on the Supreme Court’s view of the First Amendment as it applies to campaign finance spending, for such changes would probably be considered unconstitutional. A constitutional amendment might be necessary unless the Supreme Court overturns the precedent it has set with its Wisconsin, Citizens United, SpeechNow, and McCutcheon decisions, which is not likely to happen. However, given that virtually all super PACs and electorally active 501(c)s are partisan (Dwyre and Braz 2014), the parties’ reach has in some sense been expanded. Some scholars see nonparty allied groups as part of a broader party network or “partisan web” (Koger, Masket, and Noel 2009; see also Grossmann and Dominguez 2009; Herrnson 2009). Herrnson (2009, 1221) views parties as “enduring multilayered coalitions” that include allied partisan groups, and he offers this phenomenon as evidence “of increased party influence that is missed by narrower definitions of parties.” Indeed, as Herrnson notes, the formation of many of these outside groups was motivated in part by “the introduction of constraints on the activities of party organizations [and] the creation of opportunities for political action by others” (1221). Moreover, some evidence indicates that the parties are actually “orchestrating” the campaign spending of some of their allied groups (Dwyre and Kolodny 2014b). Thus the recent increase Page 67 →in campaign finance activity by various nonparty groups can be seen as one way that the parties and their allies are adapting to the new regulatory environment. Yet there is still reason for concern. The link that parties can provide between voters and their elected officials is strained if the party organizations themselves are outnumbered and outspent by nonparty groups, even if they share the goal of electing more of their own partisans to office. Indeed, many of these nonparty outside spending groups have very specific policy goals, and their allied lobbyists press government officials to achieve those goals. If elected officials are more responsive to these special interests than to the public interest and/or to their own constituents, then the link between voters and politicians is weakened as interest group influence is strengthened. Indeed, it is not very difficult to imagine a member of Congress granting a good deal of access to a group that spent millions to help elect him or her, even if the Supreme Court thinks that such independent expenditures pose

no danger of corruption. The United States is not the only Western nation that has experienced a weakening of the link between voters and politicians. As subsequent chapters of this book discuss, it is debatable whether this weakening is a consequence of campaign finance laws and if so, whether the solution is increased or decreased regulation. A common theme in this and the next chapter, however, is the distinctly American role of interest groups in elections. Nonparty organized interests are arguably the most important beneficiaries of the recent relaxation of campaign finance restrictions. Groups have always been stronger in the United States than in other nations, and the greater advantage conferred on them by policy drift, the Supreme Court, and the FEC in recent years is likely to increase their strength relative to the political parties.

Notes 1.For a thorough discussion of the FEC’s rule making on this matter, see Potter and Morgan 2013, 446–55. 2.Some states banned corporate campaign contributions as far back as the 1860s, and a federal ban on corporations and banks making contributions in connection with federal elections has existed since passage of the Tillman Act in 1907. 3.Justices Ginsburg, Sotomayor, and Kagan joined Breyer on the American Tradition Partnership dissent. Ginsberg, Sotomayor, and Breyer have consistently opposed the conservative majority on their deregulatory campaign finance decisions, and Kagan has voted with them since joining the court in August 2010. 4.Only 255 of the 1,310 super PACs registered in 2012 reported spending any money on elections (Center for Responsive Politics 2014a). Page 68 → 5.Before Romney emerged as the front-runner in the Republican primary, the Adelsons gave more than sixteen million dollars to Winning Our Future, the super PAC that supported his primary opponent, Newt Gingrich. 6.For example, in one of the most competitive 2012 Senate elections, Scott Brown (R) and Elizabeth Warren (D) asked all outside spenders to stay out of their Massachusetts race, and surprisingly, most did (Bierman 2012).

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Campaigns for Majorities in the US House of Representatives in the 1990s.” Party Politics 4 (3): 275–95. La Raja, Raymond. 2008. Small Change: Money, Political Parties, and Campaign Finance Reform. Ann Arbor: University of Michigan Press. Liptak, Adam. 2010. “Courts Take on Campaign Finance Decision.” New York Times, March 26. www.nytimes.com/2010/03/27/us/politics/27campaign.html?_r=0. McConnell v. Federal Election Commission. 2003. 540 U.S. 93. McCutcheon et al. v. Federal Election Commission. 2014. 572 U.S. ____. Pharr, Susan J., and Robert D. Putnam. 2000. Disaffected Democracies: What’s Troubling the Trilateral Countries? Princeton: Princeton University Press. Potter, Trevor, and Bryson Morgan. 2013. “The History of Undisclosed Spending in U.S. Elections and How 2012 Became the вЂDark Money’ Election.” Notre Dame Journal of Law, Ethics, and Public Policy 27 (June): 383–479. Ranney, Austin. 1975. Curing the Mischiefs of Faction: Party Reform in America. Berkeley: University of California Press. Republican National Committee v. Federal Election Commission. 2010. 698 F.Supp.2d 150. Rowland, Christopher. 2013. “Deadlock by Design Hobbles Election Agency: The FEC Was Born of Idealism after Nixon Era Excesses, but Its GOP Members Have All but Shut It Down.” Boston Globe, July 7. http://www.bostonglobe.com/news/nation/ 2013/07/06/america-campaign-finance-watchdog-rendered-nearlytoothless-its-own-appointed-commissioners/ 44zZoJwnzEHyzxTByNL2QP/story.html. Scarrow, Susan E. 2004. “Explaining Party Finance Reforms: Competition and Context.” Party Politics 10 (6): 653–75. Scarrow, Susan E. 2006. “Party Subsidies and the Freezing of Party Competition: Do Cartel Mechanisms Work?” Western European Politics 29 (4): 619–39. SpeechNow.org v. Federal Election Commission. 2010. 599 F.3d 686 D.C. Cir. Suderman, Alan. 2014. “Lax State Rules Provide Cover for Sponsors of Attack Ads.” Center for Public Integrity report, May 16; updated May 19. http://www.publicintegrity.org/2013/05/16/12652/lax-state-rulesprovide-cover-sponsors-attack-ads. Sundquist, James L. 1983. Dynamics of the Party System: Alignment and Realignment of Political Parties in the United States. Washington, DC: Brookings Institution Press. Wert, Justin, Ronald Gaddie, and Charles Bullock. 2011. “Of Benedick and Beatrice: Citizens United and the Reign of the Laggard Court.” Cornell Journal of Law and Public Policy 20 (3): 719–37.

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2 | U.S. Interest Groups in a Deregulated Campaign Finance System Robert G. Boatright Many readers will take away from this book two messages: the United States differs from most other democratic nations in the extent to which it has sought to deregulate its system of campaign finance, and the United States always has differed from these countries in its reluctance to regulate campaign spending. This chapter combines these two concepts. Deregulation in the United States does not look like deregulation would (or does) in most other democratic countries because the United States begins from a different place. One major component of this “different place” is the role of organized interests in the American system. For much of the past forty years, interest groups have played a central—and highly regulated—role in American elections. In no other country do interest groups have such detailed official recognition as campaign contributors or as a formal part of the election process. In chapter 1, Diana Dwyre discusses the effects of a loosening of campaign finance restrictions for parties and candidates. In this chapter, I examine the consequences of deregulation for organized interests—not simply the role interest groups can now play but the consequences for the types of groups that engage in politics and the evolving relationships among new and newly empowered interest groups. The changes that occurred in the groups most active in politics are not necessarily the changes many observers predicted in the months following the Citizens United decision, nor are these changes entirely attributable to that decision. In the wake of Citizens United, many observers feared that elections would be dominated by the interests of a few large corporations. This did not transpire. Corporate spending has not surged, although group spending has (Farrar-Myers and Skinner 2012; La Raja 2012). Most of the money entering the campaign finance system has come from wealthy individuals—in some cases, individuals who contributed to parties or advocacy groups in the past; in other instances, Page 72 →individuals with idiosyncratic concerns who have seen the new rules as an opportunity to advance their own agendas. There were also many initial predictions that the increased prominence of “super PACs” would decisively tilt the playing field toward Republicans or more generically toward candidates and policies favoring the very rich. This may yet come to pass, but for the time being, it is difficult to draw a line between interest group spending and ideology, partisanship, or electoral results. Some outside spending amplified the parties’ messages, some countered it, ample super PAC spending occurred on both sides, and the increase in other types of spending makes it difficult to measure how newly formed groups have affected elections. At both the presidential and congressional levels in 2012, it was hard to make the case that outside groups’ spending won elections. What is indisputable, however, is that the most prominent interest groups in contemporary elections are different from the most prominent groups in previous years. A change has occurred in the interest group “marketplace, ” and this change resembles what takes place when more conventionally defined economic marketplaces are deregulated. Furthermore, this change is most pronounced in regard to groups’ means of differentiating themselves from each other, in their ability to coordinate efforts with each other, and in the nature of group, party, and candidate accountability to the electorate. Groups have more freedom to define and market themselves than was the case in the 1980s or 1990s. I take group differentiation to be a matter of presenting a unique group identity or brand to potential contributors. Literature on interest group competition has stressed the establishment and monopolization of policy niches as a consequence of group differentiation, but literature on market competition between business firms has emphasized the incentives for firms to differentiate on other dimensions—in terms of price, quality, or the nature of the process of making their product. A growing literature on American interest groups has also emphasized efforts by groups to create unique brands along these lines, and I explore this comparison here. I consider coordination here not simply in its legal sense—explicit communication between groups and/or parties and candidates about the timing and content of political appeals and reasons for these appeals—but also de facto coordination, which can be a consequence of observing what other groups are doing and making decisions in response to those actions without direct communication. And I consider accountability here in its traditional sense—can voters hold

political actors responsible for their actions, Page 73 →punishing those whose actions they do not support and rewarding those whose actions they do support? Over the past decade, a shift has occurred from elections featuring groups that differentiate by issue niche to elections featuring groups that differentiate according to their functional niche. This shift was not solely a consequence of deregulation, but deregulation has hastened it. That is, election-related group advertising in 2000 was dominated by recognizable groups such as the Sierra Club, Planned Parenthood, and the National Rifle Association (NRA), while 2012 featured less well-known groups such as American Crossroads or the Majority Fund, whose appeal to donors had less to do with what they cared about than with their ability to win elections or their ability to engage in a particular type of activity (advertising, Internet communication, voter targeting) more effectively than other organizations. This differentiation has led to an implicit coordination between groups and between groups and candidates and parties, where some groups take on functions that were once the responsibility of parties. Political parties, in other words, have been unbundled over the past decade, but mechanisms of coordination continue to govern activities within that network. As others have noted (La Raja 2012), however, restrictions on political parties’ expenditures, fund-raising, and coordination with other political actors have left the parties at a disadvantage, and this trend toward functional differentiation has harmed and will continue to harm parties. Given that parties are arguably a more recognizable brand than any interest group and that voters can use elections to respond to parties’ activities, the further weakening of parties will render them less able to be responsive to voters in future elections. We thus, paradoxically, have a weakening of party accountability at the same time as the parties are drifting inexorably apart from each other on matters of policy. In this chapter, I first summarize the relationship between changes in campaign finance law and group differentiation over the decade preceding the 2012 election. I then discuss theoretical literature on differentiation among interest groups and among business firms, with an eye toward understanding the decision making of existing groups and of new groups seeking to take advantage of regulatory changes such as the establishment of super PACs. I use this literature to categorize group strategies; then, using data on group spending in the 2012 congressional races, I show patterns in group differentiation and coordination according to party and according to candidate competitiveness. I close by considering the normative consequences of these changes.

Page 74 →Interest Groups in U.S. Elections, 2000–2012 Nonparty groups have many options when they choose to become active in elections. First, groups can create political action committees (PACs), which can collect contributions from individuals in amounts of no more than five thousand dollars per election cycle and then contribute money directly to candidates for office in amounts of no more than five thousand dollars per candidate per election cycle. PACs can also spend unlimited amounts of money on independent expenditures, communications that encourage voters to support or oppose a candidate but are not coordinated with any candidate. Groups’ ability to do this has been unchanged since limits on PAC contributions and expenditures were set in the Federal Election Campaign Act Amendments of 1974. Second, until the passage of the Bipartisan Campaign Reform Act (BCRA) of 2002, groups, individuals, corporations, and labor unions could contribute unlimited amounts of “soft money” to the party committees for “party building” purposes. Soft money could not legally be used in coordination with a candidate or to advocate for the election or defeat of a candidate, but in practice, parties used it for purposes closely connected to elections, including voter registration, advertising discussing issues, and targeted voter turnout efforts. Third, groups organized under sections 501(c)(4), (c)(5), and (c)(6) of the federal tax code may engage in issue advocacy or “electioneering,” communications that do not directly tell voters for whom to vote but cast a candidate in a decidedly favorable or unfavorable light. Following the passage of BCRA, groups were prohibited from running issue advocacy advertisements that named a candidate for office during the two months preceding the election, although a 2007 Supreme Court decision substantially weakened this prohibition.1 Groups can spend unlimited amounts on this provided that their political activities do not comprise a majority of what they do. And fourth, groups can communicate about politics with their members. The 2000s were marked both by changes in campaign finance law regarding group activities and by the

exploitation by groups of ambiguities in the law. BCRA’s prohibition of soft money and restrictions on electioneering were initially presented as a means of limiting the power of outside groups in elections. The soft money ban was intended as a response to the potential that a politician might be susceptible to corruption as a consequence of multi-million-dollar contributions to the party. Many corporations and wealthy donors supported the soft money ban, arguing that they felt they were being “shaken down” by the party campaign committees. In Page 75 →the years following the passage of BCRA, the party campaign committees increased their hard money fundraising—expanding their use of the Internet and of volunteers to raise money in the form of small contributions—to the point where they had compensated for the loss of soft money. BCRA’s restrictions on electioneering, however, were another story. Many reform advocates contended that interest group advertisements overshadowed their own campaign efforts and presented negative, misleading portrayals of the candidates. Many of the most prominent electioneering groups were left-leaning advocacy groups such as the Sierra Club or Planned Parenthood, but corporate-funded organizations such as Americans for Job Security and the Seniors Coalition also were major advertisers in the 1996 and 2000 elections. Such groups were neither as well known nor as large as the dominant liberal groups. Electioneering restrictions would enable groups that raised PAC money to continue to be involved in elections; this would benefit some traditional advocacy groups but would also aid bundling groups such as the Club for Growth. Although this pair of restrictions initially appeared to limit parties and groups equally, many existing and nascent groups moved quickly to reconstitute themselves to take advantage of gray areas in the law. Most notably, in 2004 several new groups were formed under section 527 of the tax code to engage in advocacy work to help the John Kerry presidential campaign. These groups raised unlimited contributions but were not technically registered as political committees and thus did not have to disclose their donors. The 527 groups active during the 2004 election did, however, abide by the electioneering restrictions. The 2007 FEC v. Wisconsin Right to Life decision, along with the FEC’s postelection rulemaking crackdown on 527 groups, obviated the need for such groups to exist in 2006 and 2008. The 2008 Obama campaign’s fund-raising prowess also limited the sense of urgency on the part of liberal groups and donors. Was 2004 an aberration, then, or was the 2008 election unusual? Table 2.1 shows the changing nature of the dominant electioneering groups from 2000 through 2012. The table shows not only the changes in the types of groups most active but also that these changes were afoot well before 2012. Among the top ten groups in 2000 were nine that had existed for at least a decade; the lone new group (Citizens for Better Medicare) was a front group funded by well-known pharmaceutical companies. Nine of these ten groups had an area of issue expertise, had a PAC, and engaged in lobbying, and although some of these groups exclusively supported one party, they did not come into existence for that purpose. By 2004, all but three of the most active groups in 2000 had dropped Page 78 →off of the list. The top spenders in 2000 included six groups of long standing (four of which were unions) and only two traditional issue advocacy groups. The four highest-spending groups on the list had been formed within the past decade, and three of these four were formed exclusively to affect the 2004 election. These groups disappeared by 2008, however, leaving the constellation of active issue advocacy groups in 2008 looking similar to 2000—the groups were different and labor and business were more heavily represented, but most of these groups were devoted to issues rather than to aiding one party. Page 76 → Table 2.1. Highest-Spending Interest Groups by Year, 2000–2012 Expenditures Age Organization Patron Partisanship

Group 2000 Citizens for $65 Better Medicare AFL-CIO 45

2000

501c

>10 yrs 501c

Republican

Issue

Medicare

Leans Democratic Labor

National Rifle 25 Association EMILY’s 20 List U.S. Chamber of 15 Commerce

>10 yrs 501c

Leans Republican Guns

>10 yrs 501c, PAC

Democratic

>10 yrs 501c

Leans Republican Business

>10 yrs 501c

Leans Democratic Abortion

>10 yrs 501c

Leans Democratic Civil Rights

>10 yrs 501c

Leans Democratic Environment

9

>10 yrs 501c

Leans Democratic Labor

8

>10 yrs 501c

Leans Democratic Abortion

$27.6

2004

527

26.5

2004

527

18.1

1998

527

AFSCME ($2.1m) AG Spanos Co.; Ameriquest ($5.0m) Peter Lewis ($3.5m)

17.2

2004

527

Harold Simmons ($3.0m) Republican

12.7 9.7

>10 yrs 501c >10 yrs 501c

Leans Democratic Labor Leans Democratic Labor

8.0

>10 yrs 501c

Leans Republican Guns

6.9

>10 yrs 501c

Leans Democratic Labor

5.8

>10 yrs 501c

Leans Democratic Labor

Planned 14 Parenthood NAACP National 11 Voter Fund Sierra Club 9.5 National Education Association NARAL ProChoice America 2004 Media Fund Progress for America MoveOn.org Swift Boat Veterans for Truth AFSCME AFL-CIO National Rifle Association Service Employees Int’l Union National Education Association

Club for Growth 5.2 Page 77 →2008 Service Employees Int’l Union AFSCME National Rifle Association Freedom’s Watch U.S. Chamber of Commerce

1999

527

Democratic Republican Democratic

Chesapeake Energy ($1m) Leans Republican

$42.0 >10 yrs 501c, 527

Leans Democratic Labor

20.0

>10 yrs 501c, 527

Leans Democratic Labor

18.0

>10 yrs 501c

Leans Republican Guns

17.5

2007

Republican

16.5

>10 yrs 501c

501c

Leans Republican Business

Patriot Majority USA National Republican Trust National Association of Realtors Americans for Job Security

15.6

2008

527

Democratic

9.4

2008

PAC

Republican

9.4

>10 yrs 501c

Bipartisan

Real Estate

8.0

>10 yrs 501c

Republican

Insurance

Club for Growth 6.9 2012 American Crossroads /Crossroads GPS Restore Our Future Majority PAC /House Majority PAC Priorities USA Americans for Prosperity U.S. Chamber of Commerce American Future Fund Service Employees Int’l Union National Rifle Association FreedomWorks

1999

501c, 527

Robert Perry ($850,000)

Leans Republican

$175.9 2010

501c, Super PAC Harold Simmons ($20.5m)

Republican

142.1 2012

Super PAC

Sheldon Adelson ($30m)

Republican

68.0

2012

Super PAC

Newsweb Corp. ($8.5m)

Democratic

65.2

2012

Super PAC

Newsweb Corp. ($4.5m)

Democratic

36.4

2004

501c

35.7

>10 yrs 501c

Leans Republican Business

25.4

2007

Republican

23.0

>10 yrs 501c, Super PAC

Leans Democratic Labor

19.8

>10 yrs 501c

Leans Republican Guns

19.7

2004

501c

Super PAC

Republican

Specialty Group Inc. ($10.6m) Republican

Source: For 2004–12, Center for Responsive Politics; for 2000, CMAG data reported in Magleby 2001. The Magleby data are estimates, while the rest of the data are drawn from federal filings; law regarding disclosure of electioneering expenses changed between 2000 and 2004. Note: Total expenditures include independent expenditures and electioneering expenditures. They do not include direct contributions to candidates. The shift in 2004 is instructive, however, because it shows that ephemeral groups can be quickly organized when doing so suits the interests of parties and candidates. This in itself is perhaps not revelatory, but these groups appealed to donors (for the most part, to those donors willing to spend millions of dollars on the election) not on the basis of what they stood for (apart from their partisan leanings) but what they could do. That is, MoveOn.org, an organization that had existed for six years at the time, presented itself as organizing voters using the Internet, and the Media Fund touted its skill at constructing anti-Bush advertisements. The highest-spending Democratic group, which does not appear here because it did not advertise, was America Coming Together, which specialized in directly contacting voters. These groups all prospected among the same pool of elite donors, and they worked simultaneously without interfering with each other’s activities. On the Republican side, the most prominent new group, the Swift Boat Veterans, was ostensibly organized around an issue (John Kerry’s military

service), but this issue had no relevance beyond the 2004 presidential election.

The groups active in the 2004 election, I argued at the time (Boatright 2007), sought not an issue niche but a functional niche. They sought to stand out based on what they could do, and their pursuit of contributions from relatively sophisticated political elites required them to propose measurable benchmarks to explain what they would do with their contributors’ money. Media accounts of the ferment within the Democratic Party during the decade, such as Matt Bai’s (2008) description of informal coordination among wealthy liberals, also made note of the fact that these groups did not operate like traditional groups. Issue-oriented groups may report what they have done, but they do not raise money strictly based on the success or failure of their political activities. In fact, it has been argued that issue-based groups are best at raising money not when they are successful but when they are threatened. The 2008 presidential election commanded relatively little interest Page 79 →group activity. Most of the money spent by interest groups in this election was in fact devoted to congressional races. The looming possibility of a filibuster-proof Democratic Senate, coupled with organized labor’s push for the Employee Free Choice Act, steered attention toward a particular issue in particular races. The lack of spending in the presidential race arguably stemmed from Barack Obama’s effort to discourage outside spending (and encourage contributions to his own campaign) and perhaps to the perception among conservative groups late in the campaign that John McCain was unlikely to win. Although groups supporting Obama were outspent by a three-to-one margin in the closing weeks of the campaign, the Obama campaign’s own spending advantage over McCain more than made up the difference (Wisconsin Advertising Project 2008). The list of the biggest spenders in 2012, however, looks much like the 2004 list. The list contains only three traditional groups (the Chamber of Commerce, the Service Employees International Union, and the Club for Growth). The remaining seven groups on the list consist of the two presidential candidates’ super PACs and five organizations formed within the past decade. Four of these groups sought to aid Republicans, while one sought to aid Democrats. Further down the list of groups active in the 2012 election are some traditional advocacy groups as well as many groups that appear to depend entirely on one individual—a “billionaire gone rogue” (Edsall 2012). The groups formed to influence the 2012 election drew largely on the fortunes of business owners but were again not businesses themselves. Is this a meaningful distinction? In 2010, when far more spending occurred than in the typical midterm election, independent spending was dominated more by the sorts of donors who had previously financed Republican efforts.2 In the 2010 election, conservatives had reason to expect that their efforts could help win back Congress, so groups and the Republican Party had more of an incentive to work together. With two additional years for groups to organize and a changed electoral landscape, the 2012 election featured more spending but apparently less uniformity in spending priorities. What does all of this mean? One could argue that the groups active in an election simply reflect the issues at play and the decisions of major donors or that they are summoned to the race by unique characteristics of the candidates. Fewer regulations governing campaign spending would, in this instance, translate into more groups—and more innovative groups, at that. In this regard, it is hard to argue that the 2012 election represents a complete and total break from previous years’ politics. The increasing role of these ephemeral groups, however, is of concern for several reasons—reasonsPage 80 → that echo my initial concerns in this chapter and Diana Dwyre’s in the previous one. First, these organizations individually or collectively have sought to aid one party or the other—to act, in short, in the place of or as add-ons to the party committees’ efforts. This may be in keeping with the desires of party activists—groups that can receive unlimited contributions can access money the parties cannot access. Conversely, however, these groups may compete with the parties both in seeking donations and in determining which elections will be priorities. Second, the absence of an issue appeal indicates that the fund-raising strategy for these groups will be different—they will be seeking money based not on what they care about but what they do. If they are seeking a niche, that niche entails a recognition of what other partisan groups do and an effort to improve on it. This niche presumes coordination. And third, given that such groups seek to do some of the things parties used to do before deregulation—or perhaps should do under some conceptions of democratic politics—how are voters to think about these groups?

Interest Group Niches and Differentiation Niches in Interest Group Theory It has long been acknowledged that interest groups’ behavior resembles that of for-profit business firms.3 Since the 1960s, political scientists have focused on interest group entrepreneurs, noting (contra pluralist theory) that it is far from inevitable that groups will form to advocate for identifiable interests held by citizens. The decision to form a group requires the identification by the group’s organizers of a source of funds, be it an institutional donor such as a foundation or a much larger public membership. Robert Salisbury (1969) argues that groups seek to establish “slack”—the ability to innovate or to engage in political activities not strictly sanctioned by their membership—in the same way that business firms seek to generate surplus profits. However, group leaders do not profit from their groups’ successes and may therefore seek to limit group membership to preserve other types of benefits—to maintain focus on a particular issue or to maximize benefits for existing members.4 This leaves us, according to James Q. Wilson (1995, 261–66), with a second-order goal—groups seek to maintain themselves. The easiest way for groups to do so is to seek dominance over a particular niche. Groups may achieve stability if they establish themselves, for example, as the dominantPage 81 → gun rights organization or the dominant association of dentists. In so doing, groups can establish a dependable membership base and can identify themselves with a “function, service, goal, or cause” (263). Competition within niches can occur if a group conspicuously fails to satisfy the demands of its clientele, but for the most part, interest group activity in elections will involve monopolistic competition.5 Groups that care about the environment, for example, will use elections to draw attention to their views, while groups with competing concerns or simply different concerns (in the first case, perhaps an association of coal producers; in the second, groups that care about an issue such as reproductive rights) will compete for the attention of voters and candidates. Wilson’s explanation of function, service, goal, or cause can serve as a guidepost in thinking about group differentiation. Wilson (1995, 10–11) referred to these matters as “distinctive competencies”—things groups could be better at than their potential competitors. An easy connection to draw here is between these competencies and issue niches, as William Browne (1990) has done. This makes sense in looking at lobbying, given that while the membership of a group that lobbies may be individual citizens or business firms, the product of such groups requires that they provide something of value to legislators. Interest group regulations with this goal have the effect of freezing competition. As McGee Young (2010, 3–7) argues, however, this perspective says little about group formation or about the identification of niches. The problem with theorizing based on established groups is that we can see the groups that did something right but we can measure neither the groups that failed to do things right nor the extent to which successful groups were truly behaving in a strictly rational fashion (as opposed to just being lucky). In a case study of environmental groups, Young shows both that group niches are not obvious—that is, there are many different niches within the environmental community, some based on issues and some based on methods of service delivery to members—and that successful groups often maintain suboptimal characteristics. Young (2010, 165) concludes that once a group has organized, it is left with a certain amount of “plumbing” that remains in place even when it is no longer necessary or useful. The process of group formation is path-dependent, then, but it is hard to see these paths when we look at groups at one point in time. Another approach to group niches, however, is to look not just at how groups are established but at how niches become available. It is easy to make a case for why policy niches appear: pluralist theory has long held that social change can produce new groups. An explanation of why gay Page 82 →and lesbian rights groups have become more prominent over the past two decades must start simply with an acknowledgment that social attitudes toward homosexuality have changed in ways that were propitious for group formation. Groups may hasten such change, but they certainly cannot cause it on their own. When we consider other types of niches, however, technological change becomes more important. David Karpf’s (2012) study of the development of MoveOn.org begins with the premise that the development of online organizing and fundraising represented a disruption of existing organizations’ revenue streams. This enabled the formation of new groups that adopted new methods of

service delivery to members. Technological changes have previously disrupted existing groups. The advent of direct mail fundraising in the 1970s, for example, spawned groups that excelled at this activity, but these still tended to be issue-oriented groups; they prospected from each other’s lists. More recently formed groups, Karpf argues, have tended to be “activity based” groups that recruit members not on the basis of issues but on the basis of user-generated criteria. There are substantial risks involved in the activities of groups such as MoveOn—it is hard for groups to develop an off-line institutional structure or develop a steady fund-raising base, to name two—but such groups can effectively take on functions of other groups or identify new functions without posing a threat to them. Karpf gives the examples of MoveOn’s “distributed GOTV” efforts in recent elections, activities that were once the province of political parties, and the unbundling of political organizing by Democratic groups in the 2000s, as some groups took on fundraising efforts, others gathered data on voters, and others generated issue content. This is a form of differentiation that presumes group coordination. Karpf’s argument squares quite well with the various party network arguments of the past decade. Many political scientists have called attention to the greater sorting of groups into dependable party allies, the regular communications among groups with different issue concerns about how to coordinate support for their preferred party, and the regular movement of political consultants and other elites between groups, party committees, and candidate campaigns (see, e.g., Bedlington and Malbin 2003; Herrnson 2009; Koger, Masket, and Noel 2009; Heaney 2012; Skinner, Masket, and Dulio 2012). All of these perspectives suggest that when we think about elections, we should concern ourselves more with groups’ functional expertise than with their maintenance strategies or issue concerns. In doing so, however, we still must confront the fact that many groups do still have traditional structures. Franz, Fowler, and Ridout’s Page 83 →(2012) effort to assess campaign activity according to whether groups are “loose cannons” that seek to address issues the parties are not discussing or “loyal foot soldiers” that amplify party and candidate messages is one example of this. All of these approaches give us some leverage in looking at the groups shown in table 2.1. The Karpf study suggests that functional differentiation can occur because of changes in technology. Pluralist or neopluralist accounts of group formation would point one to social or legal change as another catalyst for group formation; in this sense, changes in campaign finance law certainly created new organizational modes for groups, and a lifting of restrictions on group activities creates more competition among those groups. It is easy, however, to look at these groups and argue that they are nothing other than funds set up by parts of the party network. That is, why should we consider an organization such as Crossroads or the Majority PAC as a group in any meaningful sense? Why apply organization theory to what is essentially a bank account? In one sense, we might simply argue that these groups raise money that the parties cannot raise. However, these groups’ goals and activities differ from those of the party in other important ways, and they pose long-term issues for the regulation of American campaigns. In a two-party system, political parties are not supposed to establish distinctive competencies; rather, they are supposed to be flexible enough to construct majorities. If parties are being outsourced to function-based groups, we have reason to inquire into the implications of this for partisan politics and for the long-term role for these groups. Existing political science theories of differentiation do not quite allow us to do this. Niches and Marketing Theory When political scientists have written about group niches, they have always done so with the acknowledgment that groups take on particular forms because they are directed to do so by existing regulations. In other words, U.S. campaign finance law and the U.S. tax code shape groups’ options as well as their incentives for forming. This is certainly of concern when the regulatory burden on particular types of groups or potential groups is lifted, as has been the case in the years following the Citizens United decision. To claim that many of the most prominent groups shown in table 2.1 are “not really groups” is both inaccurate—some of these organizations have in fact persisted from one election to the next, while others have sought to do so and failed—and beside the point; after all, if an organizationPage 84 → files with the Federal Election Commission (FEC) and/or the Internal Revenue Service, it has fulfilled the legal criteria to be considered a political organization, so we are artificially and unnecessarily limiting our definition of what interest groups are. It is, however, true that such groups do not fit existing theories.

One solution to this problem comes from theories of market competition between firms. In his work on competitive advantage, David Porter (1998, 154–58) argues that firms can survive only if they differentiate themselves from their competitors. Firms can offer a differentiated product from their competitors, but if a firm is seeking advantage within a given industry, then there are limits in how different their product can be. The automobile industry, for example, has several well-established firms, and no firm will achieve the sort of market dominance that the NRA maintains among gun rights groups. Instead of offering a different product, firms within a given market will seek to differentiate at some point in the value chain. They may seek an advantage, for example, on price or on quality. Porter gives the example of Caterpillar, which sought to differentiate itself from its competitors in agricultural and construction equipment by offering superior product durability, increased parts availability, and a more extensive dealer network; and Heineken, which sought to differentiate itself from its competitors on quality, shipping time, and distribution. The Heineken example is particularly relevant for looking at political groups, because the notion of a “quality” beer is something that virtually any beer drinker can likely identify but that cannot be measured in a scientific sense. To return to the automobile example, automobile companies seek to use advertising to establish particular brand identifications—to emphasize quality, style, and other intangible features. The end result is clear—it is indisputable that particular types of consumers are attracted to Volvos or Subarus and others are attracted to Fords, but solely using the product, rather than the marketing and production process, to explain why can be difficult. Porter recognizes this, noting that firms’ market research can show them how consumers use their product and can give them insight into where they can best differentiate their product or the branding of their product.6 Marketing theories such as Porter’s have been applied in a limited way by political scientists. In an edited volume devoted to studying the successes and failures of NGOs, Maryann Barakso (2010) argues that advocacy groups seek to brand themselves based either on their product or on the process of making their product. This is, she argues, consistent with theories of firms’ behavior—firms often create a brand that has something Page 85 →to do with how they make their product rather than the product itself. Barakso singles out People for the Ethical Treatment of Animals, Amnesty International, and EMILY’s List as examples of political groups that emphasize process over product. Establishing a reputation for integrity, judgment, internal democracy, and so forth can give an interest group a stable brand and can, in the long run, reduce overhead—groups establish credibility and a unique identity that draw attention to their activities. Theories such as these, however, still start with the firm or group itself; they can perhaps be used to make ex post statements about the success or failure of an organization but say little about the stability of niches. Both Lecy, Mitchell, and Schmitz (2010) and Risse (2010) emphasize that comparing interest groups to firms requires an awareness of some of the imperfections in the market for groups’ appeals. Lecy and colleagues argue that because advocacy groups often share members and objectives, they may seek to avoid direct competition with each other and to work cooperatively to find niches for each other; as a consequence, the “firm” here is not the group but the advocacy network.7 This is largely an extension of Ronald Coase’s theory of the firm. Coase (1937) emphasized that firms exist and grow only when internal transactions are more efficient than external transactions, either because of long-run stability or because governments treat transactions within a firm differently from transactions between two firms. The same logic can apply to political organizations; in some cases, it may be advantageous to have one group engage in several different functions, while in others, it may make sense to have multiple groups that cooperatively perform the same functions. Risse criticizes the firm comparison on the grounds that firms are far more likely to go out of business if they fail than are political groups. The benchmark for a firm is clear—it must sell its product and satisfy its investors. The metrics for evaluating the success and failure of firms are clear. The metrics for evaluating political groups are not; groups may claim “victory” in a variety of circumstances and may use failure to rally members. Likewise, many political groups can endure for years on limited resources if they have a recognizable brand name. Furthermore, Risse argues, the branding that Barakso identifies is more fatal to political groups than to firms; NGOs can be severely punished if they lie or behave unethically, while firms generally suffer no similar penalty. A final relevant marketing example is the theory of differentiation applied to politics by, among others, LeesMarshment (2004), Foster, Hudson, and Yates (2012), and Foster and Lemieux (2012). In these arguments, groups

take one of three approaches to establishing a niche: a product-orientedPage 86 → approach, emphasizing their cause without tailoring what they do to their audience; a sales-oriented approach, using marketing techniques to frame their political message but not to determine the core nature of their cause; or a market-oriented approach, in which they find the best means to attract and maintain support, even if doing so means adopting issues or changing their product to maximize their support. Cosgrove (2012) argues that a market-oriented approach can entail offering differentiated “platform brands” when the group itself commands little support or loyalty. A firm such as BMW may command customer loyalty for a wide range of products, but a firm such as Proctor and Gamble, which does not have a very strong brand identity, can establish “platform brands” such as Tide and Swiffer that have their own identity. Similarly, when the value of the Republican brand is low, the party may seek support through platforms such as the Tea Party or through individual charismatic candidates. Differentiation among Contemporary Interest Groups All of these theories suggest that it is too simple to argue that deregulation by itself facilitated the formation of new political organizations. Such organizations are not new, but a relaxation of the rules governing the political market made unbundling the functions of existing groups—including political parties—an efficient strategy. This is so in part simply for financial reasons. Super PACs are capable of raising funds that parties cannot raise. But there is more to the situation. The brand identities of the parties and many of the major interest groups are indeed premised in part on these organizations’ reputation for honesty, democracy, and so forth; organizations that rely on large memberships, such as many of the electioneering groups of the 1990s, and organizations that seek votes, like political parties, are thus limited in their ability to raise and spend large sums of money on overtly political campaign tactics. In addition, most organizations active in 2000 were not marketoriented groups—they had stable brand identities related to their issues of concern, and deviating from those identities would have antagonized existing members. Many groups evaluated this trade-off during the 2000s, including Planned Parenthood (Boatright et al. 2006, 131), the AFL-CIO (Francia 2013), and the U.S. Chamber of Commerce.8 The Chamber example is particularly instructive—the Chamber did not establish a super PAC in 2010 or engage in political spending that differed markedly in content (though the amount did differ) than it had previously, but it worried quite a bit about the impact of its 2010 election activities on its brand. Establishing new organizationsPage 87 → allows existing groups to use resources to support these groups without breaking the law or running the risk of reputational consequences. This is not a particularly novel argument: it merely implies that groups wish to pursue their goals without unduly agonizing their current or potential members and allies. This argument is a first step in explaining why super PACs and other third-wave groups became attractive, but it says little about their durability or about what they will do (apart from suggesting they will capitalize on their lack of a brand name). Some of these groups may do shady things. But there was nothing particularly shady or unethical, for example, about the activities of groups like Crossroads or Majority PAC (or the Media Fund, America Votes, and other earlier organizations). The arms of these groups that were required to disclose their donors did so, and the leaders of these groups were well-known individuals. In a sense, these are platform brands, based on the reputation of their leaders. True, the people who led these groups are generally not particularly well known, but they are known among the types of people who contribute large sums of money to political campaigns, and they are known for expertise in particular aspects of politics. Such an account also makes the decline in the activities of functional groups in 2008 understandable—the Obama “brand” was more valuable for raising money than candidate or party brands had been in previous years, reducing the value of raising money through less conventional channels. The relevant firms here, then, are the Democratic and Republican Party networks, as Lecy and colleagues suggest; the appeal is clearly about winning elections and aiding candidates, without particular concern for policy, and the movement of group leaders back and forth from candidate campaigns, other interest groups, and party committees suggests that there is some coordination here—though again, it is coordination in an informal sense. To some extent, these groups are accountable—if a group requires multi-million-dollar contributions, it is not surprising that the groups will present donors with detailed descriptions of how money will be spent and of the effectiveness of activities. These groups are not accountable to a mass membership, however, and are certainly not accountable to voters. In a sense, this separates these groups from existing theories of interest group behavior, but this does

correspond to theories of business competition, where public support matters little as long as a business has an established clientele. Fitting contemporary groups into theories of competition between firms has, then, disturbing implications for democracy.9 In a sense, this effort entails an argument that somewhat accountable entities (parties, Page 88 →well-known advocacy groups) can privatize what they do to minimize their own accountability. It also suggests that the accountability of such groups rests on their ability to establish a business plan and win over investors—again, without accountability to the public. If traditional groups are weakened, the implications, furthermore, are that the merits of issue advocacy—educating the public about issues, forcing politicians to address matters that were of concern to segments of the electorate—are displaced. The problem with this conclusion, however, is that it looks very much like a normative argument. Assertions about accountability, coordination, and indeed about the idea that newer groups establish functional niches rather than policy niches are difficult to measure or prove.

Measurable Characteristics of Group Activity in 2012 Two testable claims derive from this discussion: (1) the relaxation of rules governing group activities has prompted groups to differentiate themselves based on their function, as opposed to their issue niche; and (2) one characteristic of having a set of functional groups in an election should be that these groups coordinate in some fashion with each other and with party organizations and candidates. Functional Differentiation It is difficult, though not impossible, to demonstrate the functional niches sought by groups. If a group runs advertisements that discuss a number of different issues, this may be satisfactory evidence that a group is not focused on one issue. Similarly, many of the groups formed in the wake of deregulation (or strengthened by deregulation) have explained themselves in relatively broad terms. American Crossroads proclaims on its website, for example, The people who started and support American Crossroads are united behind three simple convictions: First, we can’t keep going on like this.В Something’s got to give. Second, America deserves better than this.В Our kids deserve a better future than this. And third, it’s up to us to bring the change about.В No one else is going to do it for us. So what do we at American Crossroads do about it?В We raise money from a whole lot of volunteer donors all across the country.Page 89 →В And we spend it to promote people who have the courage, integrity and good ideas to get this country back on track.10 This is obviously not an issue-specific appeal, but its description of the function of American Crossroads and its relationship to the Republican Party is somewhat vague. Other functional groups explain their functions more directly. America Votes, for example, describes itself with reference both to its function and to its attempt to coordinate with other groups: America Votes works across the country with over 300 state and national partner organizations to advance progressive policies, expand access to the ballot, coordinate issue advocacy and election campaigns, and protect every American’s right to vote. America Votes has built a permanent advocacy and campaign infrastructure that provides coordination, data and targeting services to progressive organizations; pursues electoral reforms that expand voting rights across the country; advances progressive policies through state and local ballot initiatives; and works to ensure fair state redistricting processes that advance progressive policies and protect voting rights. America Votes’ strong progressive infrastructure will support our coalition partners’ advocacy efforts and facilitate the coordination of voter outreach.11 Senate Majority PAC, the highest-spending Democratic super PAC in 2012 apart from the super PAC organized to support Barack Obama, refers not only to its expertise but also to its partisanship, its relationship to Citizens

United, and its opposition to Crossroads and other groups: Senate Majority PAC was founded by experienced, aggressive Democratic strategists with one mission: Protect and expand the Democratic majority in the U.S. Senate. In 2010, the Citizens United decision allowed Karl Rove and a network of Republican-aligned outside groups to raise and spend hundreds of millions of dollars on false negative ads against Democratic Senators and Senate candidates. Democrats only engaged in outside spending in a few races, resulting in lopsided TV advertising that overwhelmed our candidates and contributed to some crushing Democratic losses in 2010.В .В .В . In the face of that threat, Senate Majority PAC formed in 2011 to make sure that our Democratic Senators and candidates Page 90 →would not be forced to face such overwhelming odds against them again in 2012. Running transparent, low-overhead, take-no-prisoners independent campaigns, we defended Democrats from Rove’s attacks, aggressively contested open Senate seats, and went after Republicans on their own turf.12 As an obvious point of comparison, traditional issue-oriented groups tend to clearly state their issue focus on their websites. While widely recognized today as a major political force and as America’s foremost defender of Second Amendment rights, the NRA has, since its inception, been the premier firearms education organization in the world.13 [The Human Rights Campaign] seeks to improve the lives of LGBT Americans by advocating for equal rights and benefits in the workplace, ensuring families are treated equally under the law and increasing public support among all Americans.14 The League of Conservation Voters (LCV) is a national non-profit organization that works to turn environmental values into national priorities. To secure the environmental future of our planet, LCV advocates for sound environmental policies, elects pro-environment candidates who will adopt and implement such policies, and provides state LCVs with the resources and tools to accomplish and sustain their mission.15 The Chamber works with more than 1,500 volunteers from member corporations, organizations, and the academic community who serve on committees, subcommittees, task forces, and councils to develop and implement policy on major issues affecting business.В .В .В . Our organization has one overarching mission—to strengthen the competitiveness of the U.S. economy.В .В .В . The fundamental activity of the U.S. Chamber of Commerce is to develop and implement policy on major issues affecting business.16 In sum, differentiating issue-based groups and functional groups is not particularly difficult. Issue-based groups are clear about their issues. Some functional groups call direct attention to their function, while others call attention to their political skills. In both types of functional group Page 91 →self-descriptions, the groups deemphasize individual issues, emphasize partisanship, and highlight their potential appeal to all Americans. Even groups that have only a small number of donors purport to be appealing to everyone. Some recent studies have sought to differentiate the advertising strategies of such groups from those of traditional interest groups and/or from the party organizations. Franz, Fowler, and Ridout (2013, 3) argue that On the one hand, there are traditional political action committees affiliated with large, long-standing interest groups or labor unions with millions of members. On the other hand, there are the more recent 501c4 organizations and Super PACs with no affiliation with any interest group, only vague issue agendas and no real membership base.В .В .В . [W]e expect variation in group activity depending on both the number of issues a group concerns itself with and whether the group has a membership base to which it is accountable.

For the purposes of this chapter, then, the distinctions provided in table 2.1 between newer and older groups can generally tell us whether a group makes functional appeals to donors. Issue groups certainly have formed within the past decade, but, as this table shows, no recently formed issue groups have been among the top spenders in elections. Coordination The establishment of a functional niche presumes a desire to take on a small piece of one’s party’s campaign. This can entail either engaging in particular activities or reaching agreement about which campaigns should receive help and when they should receive it. This is, again, coordination that can be done without running afoul of the FEC’s legal restrictions on coordination: groups can communicate among themselves freely, and as Pitney (2013) has noted, coordination can entail public statements about campaign themes, polling data, and spending strategy. A loosening of restrictions on groups enables them to be more clear about what they are doing. There was much dispute in 2012 over the effectiveness of coordination efforts among groups and party organizations; Franz, Fowler, and Ridout (2013) note instances of coordination in advertising strategy among conservative groups, while Smith and Kimball (2013) point to instances where conservative groups appeared to step on each other’s messages. There is nothing new about this sort of coordination, nor is it solely the Page 92 →province of functional organizations. As I documented for the 2004 election (Boatright 2011, 127–41), many issue-oriented liberal groups held regular strategy sessions to coordinate the timing of appeals in priority races—that is, an environmental group would run advertisements one week, an abortion rights group would run ads the next, and the groups would compare notes about what was and was not effective. There is thus a timing element to coordination as well. For the purposes of this chapter, I assume coordination to be a matter of ensuring that there is consensus about which candidates are worthy of support. If interest groups are generally supporting the same candidates and are supporting the same candidates that the parties support, we have some evidence of coordination. This is not explainable for issue-oriented groups; if the NRA, for example, cares about helping Republicans, this means neither that the association will exclusively help Republicans nor that it will help all Republicans in need. Few issue groups have priorities sufficiently vague that they will completely sublimate them to the needs of their party. To return to the discussion of partisanship, a group that tends to tilt to one side but is not solely seeking to advance the goals of its preferred party—for example, the NRA for Republicans or the League of Conservation Voters for Democrats—should demonstrate different priorities from the party committees. Coordination can, however, take two forms. In one form, the additive strategy, groups converge on the same candidates, providing support to the most competitive candidates and providing support to the same candidates that the party organizations support. In the second form, the replacement strategy, groups help candidates who are not receiving support from the party or other groups—groups coordinate to ensure that a broad range of candidates will be competitive. This strategy may be an effort to propel candidates into competition—to provide seed money to some candidates. Dante Scala (2013) has shown in his study of the 2012 Senate races that there was substantial agreement between the parties and most of the major super PACs in choosing which candidates to support. He has also shown that the Democratic Party and its allies were more unified than were the Republican Party and its allies, a difference that appears to be somewhat related to the role of Tea Party–affiliated groups in supporting some long-shot Republican candidates. The Republican side had more spending and more functional groups; on the Democratic side, many issue-oriented groups engaged in spending to support candidates, but the vast majority of Democratic spending came from one group, which was closely affiliated with the party leadership. Page 93 →This account of coordination does not cover all functional groups. It leaves out, for example, organizations that have adopted a function that does not entail spending in support of specific candidates. For such groups, coordination cannot be proven but seems evident based on their self-descriptions.

Here, I present some evidence on coordination by groups active in 2012 House and Senate races. The unit of analysis is the individual candidate: for each candidate, I show spending by candidates, party campaign committees, and nonparty groups. I show data for the full general election cycle as well as broken down to show spending through October 17 and during the final week of the campaign. We are interested here in the difference in spending priorities between party and nonparty groups. Each figure depicts three possible scenarios: outside expenditures will benefit the candidates who already have substantial campaign resources; outside expenditures will compensate for limited candidate resources; or the priorities of outside groups will change across the campaign, from supporting candidates with limited resources to supporting candidates with substantial resources (or vice versa). Convergence by party and nonparty groups on a similar strategy can be taken as evidence of coordination. However, there is no reason to expect parties not to be seeking to win the maximum number of races. Therefore, a pattern of divergence in which parties appear at first to be seeking to support less competitive candidates can also be seen as evidence of a form of coordination—the parties pursue the second scenario, while outside groups pursue the first. The reverse of this scenario (in which outside groups seek to aid less competitive candidates) does not seem likely to be a sign of coordination. Figure 2.1 shows patterns of party and nonparty group support for candidates with different resource levels for the full campaign cycle. Over the full election cycle, parties and outside groups tended to support similar candidates—that is, candidates who had raised substantial funds on their own (particularly in the case of Republicans). Both parties and groups pursued similar, election-oriented strategies. There are, to be certain, some outliers: the rightmost outlier in the bottom graph is Republican Joseph Walsh, an outspoken conservative from what became a predominantly Democratic Illinois district after redistricting. The Republican Party did little to help Walsh, but he benefited from one super PAC that spent millions on his behalf. Figure 2.2, however, shows intriguing variations in spending across time. The Democratic Party appears to have initially spread out its money, supporting a number of candidates who were having difficulty raising Page 95 →money and who received less help from nonparty groups. Conversely, nonparty groups supported a number of candidates early in the election cycle that the Democratic Party did not support until later. This could be a sign of inefficient use of resources—the party fails to identify its strongest candidates until late in the cycle—but it could also be a sign of coordination. In the latter story, the party assumes that other groups will support the strongest candidates throughout the cycle and invests its resources in trying to help less viable candidates become viable. As of October 17, the ten candidates who received the most support from the Democratic Party had slightly over one million dollars each spent by nonparty groups on their behalf. Five of these ten went on to win the election. None of the top ten Democratic beneficiaries of nonparty support are on this list; four of these ten went on to win. Republicans fared no better in terms of winning the election, but five candidates who were the top beneficiaries of party spending also appear on the list of the top ten beneficiaries of outside spending. By the end of the race, however, this odd relationship for Democrats had vanished, in large part because outside groups had followed the party’s cue and had invested much more heavily in the party’s preferred candidates.17 Page 94 →Fig. 2.1. Party and Nonparty Outside Spending, House Races, Full Cycle Note: I only show here candidates on whose behalf outside spending occurred, and I have excluded, for ease of presentation, two candidates (Allen West and Michele Bachmann) who raised in excess of fifteen million dollars. The exclusion of these candidates does not alter the overall pattern. (Source: Federal Election Commission, Campaign Finance Institute.) This pattern is borne out when we look at correlations between early and late spending for the parties. Nonparty spending is highly correlated with late spending for both parties, but early and late party spending are not correlated. Late nonparty spending is correlated with overall party spending for Democrats, but not for Republicans. The bottom right-hand graph in figure 2.2 also shows idiosyncratic expenditures for candidates in the last week, but the difference is instructive. In the case of Democrats, these were expenditures by the party campaign

committee; both candidates won. In the case of Republicans, these were expenditures by nonparty groups; both candidates lost. This, again, seems to signify a more coordinated Democratic strategy and a less coordinated Republican strategy. Figure 2.3 shows spending patterns for Senate races. For both parties, what is most noteworthy is the tight correlation between party and nonparty spending; perhaps because of the smaller number of races, there is less room for experimentation in trying to make a race competitive. Still, party differences remain; Democratic Party and nonparty and group spending are much more highly correlated than is the case for Republicans. In sum, the concentration of election-related spending appears to show that parties and outside groups coordinated their efforts in 2012 and that the Democratic Party and its allies coordinated their efforts more Page 96 →than did Republicans. This coordination does not speak to the exact nature of the niche the groups involved in 2012 have established, but it does suggest that nonparty groups have established a symbiotic relationship with the parties and that at a minimum they have established a role as the recipient of funds that cannot be given to the parties. The self-descriptions of many of the groups formed since 2004 suggest that they see themselves as allies of the parties and as organizations that will engage in tasks that the parties cannot do for legal or financial reasons. (a) Party Spending through Oct. 17 (b) Nonparty Spending through Oct. 17 Fig. 2.2. Outside Spending Patterns in House Races, through October 17 and during Last Week of Campaign (Source: Federal Election Commission, Campaign Finance Institute.) (c) Party and Nonparty Spending through Oct. 17 (d) Party and Nonparty Spending, Final Week Fig. 2.2. (continued) Page 97 →These data do not speak to the adequacy of issue-oriented groups’ efforts to coordinate with the parties. Work on the spending priorities of these groups has noted that they, too, often coordinate their efforts with the parties but that they do not do so to the same degree as functional groups. Data that resemble those I have used here but that cover previous elections would help to clarify the extent to which party-group coordination has changed. The data here also focus on support for individual candidates, not on Page 99 →the spending priorities of individual groups. Although I do this in part for the convenience of describing a large number of groups’ activities, this approach also accounts for the ephemerality of many of the newer groups. As noted earlier, a frequent criticism of the interest group literature of the 1970s was that it was biased toward a study of groups that had succeeded. Just as it is easier to analyze the decisions of successful business firms than to quantify the mistakes of businesses that have failed, so it is easier to draw conclusions about successful groups than about others. It is tempting to contend that groups such as America Votes or MoveOn.org are successful functional groups because they have persisted for a decade or so. Many groups active in recent elections, however, were designed to achieve short-term goals: for example, the candidate-specific super PACs in 2012 had no intention of continuing beyond the election. Even functional groups that are not specific to a candidate may rely on individual donors who have idiosyncratic short-term goals and who do not intend to create a permanent infrastructure. Establishing a functional niche need not entail longevity. Groups, like businesses, come and go, and entry and exit should be simpler in a less regulated marketplace. Page 98 →Fig. 2.3. Outside Spending in Senate Races, Full Cycle (Source: Federal Election Commission, Campaign Finance Institute.)

Conclusions The past few election cycles have been marked by changes in the ways that groups differentiate themselves from each other, in the ways that groups coordinate their efforts with each other and with the parties, and in citizens’ ability to hold political actors accountable for their actions. While these changes are not entirely inconsistent with trends before the Citizens United decision, that decision’s loosening of campaign finance restrictions has hastened these changes. This chapter has focused on developing a theory for understanding some of these less obvious consequences of deregulation. It is not just that there is more money in the political system, it is that interest groups have differentiated themselves from each other in novel ways and have coordinated their efforts in novel ways. Although much about these features of group activity is difficult to measure, the concepts themselves are descriptive in nature. These concepts lead us to some normative questions about accountability in a deregulated political system. A schematized take on representative democracy would contend that we seek to hold politicians accountable through elections. Political parties, in this conception, are a means of simplifying the process of evaluating politicians—they make it easier for us to develop expectations Page 100 →about what politicians will do. And parties, like politicians, are to an extent accountable to voters. In the pluralist conception, groups are a means of representing citizens’ views to politicians; they aggregate preferences so that politicians’ ability to represent can be improved. In the entrepreneurial conception, however, groups are essentially accountable only to their members and patrons, just as business firms are accountable to their shareholders. Changes in the nature of interest groups and in the role of groups in elections over the past few years largely seem to support the entrepreneurial conception—changes in technology, in the party system, and in campaign finance law have created new opportunities for group entrepreneurs. These changes are largely exogenous to changes in American society, and the groups that have formed may pay lip service to representing the public, but their memberships tend to be small and they appear to devote few resources to finding out how best to represent their members. The accountability problem, then, is clear—groups are not accountable to citizens in the manner that parties and politicians are. To the extent that deregulation has encouraged nonparty groups to take over party functions, then, citizens’ power to influence legislators is reduced, as is parties’ flexibility to adapt to public demands. Citizens have no means of holding the Koch brothers accountable for election results, but parties and candidates also have no clear means to influence the behavior of such individuals or the groups they fund. When parties and groups largely agree about where to spend money, this is not a problem. When they do not, the parties may well be the losers. American parties have traditionally been held to be relatively weak and ideologically incoherent in comparison to those of the other countries considered in this book, but the groups that have taken on party functions in 2012 seem no better. Many proposals have been circulated to address the changing role of groups in elections. La Raja (2012) calls for substantially raising contribution limits for parties, and political scientists have for years argued for lifting restrictions on coordination between parties and candidates (Corrado et al. 2010). Franz (2012) has speculated that increased contribution limits or generous public financing for campaigns might remedy this imbalance. And many politicians have argued that more rigorous disclosure laws will at least enable citizens to know what some of the newer groups are, perhaps generating more media scrutiny of these groups and giving citizens some tools to hold accountable the beneficiaries of these groups’ spending (Wyden and Murkowski 2013). Future candidates may also emulate agreements such as the Elizabeth Warren–Scott Brown pact to keep groups out of their Senate campaign. Page 101 →Most of these proposals share the admission that the genie is out of the bottle. If it is no longer possible to regulate outside spending, then perhaps the appropriate response is to deregulate other types of spending, as has been the case in the Supreme Court’s recent McCutcheon v. FEC decision relaxing aggregate individual limits. The implications of this rush to deregulate political entities other than groups are, to say the least, troubling, but they are politically feasible in the short term, while efforts to increase regulation of political spending appear at this point to face opposition at the hands of, among others, precisely the groups that deregulation has spawned.

Notes 1.In Federal Election Commission v. Wisconsin Right to Life (551 U.S. 449 [2007]), the court held that groups had the right to an “as applied” exemption from BCRA’s advertising restrictions if they could demonstrate that the advertisements were legitimately issue speech and not express advocacy; in the Court’s words, “an ad is the functional equivalent of express advocacy only if the ad is susceptible of no reasonable interpretation other than as an appeal to vote for or against a specific candidate” (551 U.S. at 469–70). In practice, this decision weakened BCRA to the point that most groups could challenge it, yet the limitations on express advocacy that Citizens United would overturn remained in place. 2.For discussion, see the essays in Herrnson, Deering, and Wilcox 2013. 3.In addition to the books and articles cited in the text, see also Gerber 1999. 4.Many groups, Wilson (1995) argues, have also already recruited their maximum potential membership, as is the case with peak associations. 5.Although he does not cite this, Wilson (1995) is clearly drawing on Robinson 1954. 6.Hirschman (1970, 4) applies this point to interest group membership. 7.One parallel is the oft-told (but apparently untrue) story that the vast majority of restaurants fail after a short period of time. The relevant question one would ask were one concerned with the wisdom of locating a restaurant in a particular area is not whether an individual restaurant succeeded or failed but whether restaurants appear to cluster in certain areas. That is, one should study restaurants, not an individual restaurant. See Parsa et al. 2005. 8.See Boatright 2013, especially the discussion of Douglas Schoen’s polling for the Chamber on the effectiveness of attacks on the Chamber’s 2010 spending. 9.Such arguments have been made; see, e.g., Ferguson 1995. However, one can make claims about changes in interest group organization or priorities (and about the utility of the firm comparison) without presenting the argument in an ideological fashion. 10. http://www.americancrossroads.org/about/. 11. http://www.americavotes.org/about. 12. http://www.senatemajority.com/about/. Page 102 → 13. http://home.nra.org/history/document/about. 14. http://www.hrc.org/. 15. http://www.lcv.org/about/mission/. 16. http://www.uschamber.com/about/advocacy. 17.Looking at the individual expenditures clearly demonstrates that such is the case and not the converse (party spending turning toward the candidates nonparty groups had originally supported). That is, nonparty groups increased their spending on behalf of the Democrats whom the Democratic Congressional Campaign Committee had supported early in the campaign and decreased their spending on behalf of the candidates they had supported (but the party had not supported) prior to mid-October.

References Bai, Matt. 2008. The Argument: Inside the Battle to Remake Democratic Politics. New York: Penguin. Barakso, Maryann. 2010. “Brand Identity and the Tactical Repertoires of Advocacy Organizations.” In Advocacy Organizations and Collective Action, ed. Aseem Prakash and Mary Kay Gugerty, 155–76. New York: Cambridge University Press. Bedlington, Anne H., and Michael J. Malbin. 2003. “The Party as Extended Network: Members Giving to Each Other and Their Parties.” In Life after Reform: When the Bipartisan Campaign Reform Act Meets Politics, ed. Michael J. Malbin, 121–40. Lanham, MD: Rowman and Littlefield. Boatright, Robert G. 2007. “Situating the New 527 Groups in Interest Group Theory.” The Forum 5 (2). Boatright, Robert G. 2011. Interest Groups and Campaign Finance Reform in the United States and Canada. Ann

Arbor: University of Michigan Press. Boatright, Robert G. 2013. “The Voice of American Business: The U.S. Chamber of Commerce in the 2010 Elections.” In Interest Groups Unleashed, ed. Paul S. Herrnson, Christopher J. Deering, and Clyde Wilcox, 31–56. Washington, DC: Congressional Quarterly Press. Boatright, Robert G., Michael J. Malbin, Mark J. Rozell, and Clyde Wilcox. 2006. “Interest Groups and Advocacy Organizations after BCRA.” In The Election after Reform: Money, Politics, and the Bipartisan Campaign Reform Act, ed. Michael J. Malbin, 112–40. Lanham, MD: Rowman and Littlefield. Browne, William P. 1990. “Organized Interests and Their Issue Niches: A Search for Pluralism in a Policy Domain.” Journal of Politics 52 (2): 477–509. Burns, Alexander. 2012. “Dems, GOP Fear Bomb from Outside Groups.” Politico, May 21. Coase, Ronald H. 1937. “The Nature of the Firm.” Economica 4 (16): 386–405. Corrado, Anthony J., Michael J. Malbin, Thomas E. Mann, and Norman J. Ornstein. 2010. Reform in an Age of Networked Campaigns. Washington, DC: Campaign Finance Institute. Cosgrove, Kenneth M. 2012. “Political Branding in the Modern Age: Effective Strategies, Tools, and Techniques.” In Routledge Handbook of Political Marketing, ed. Jennifer Lees-Marshment, 107–23. New York: Routledge. Edsall, Thomas B. 2012. “Billionaires Going Rogue.” New York Times, October 28. Page 103 →Farrar-Myers, Victoria A., and Richard Skinner. 2012. “Super PACs and the 2012 Elections.” The Forum 10 (4): 105–18. Ferguson, Thomas. 1995. Golden Rule: The Investment Theory of Party Competition and the Logic of MoneyDriven Political Systems. Chicago: University of Chicago Press. Foster, Emilie, Raymond Hudson, and Stephanie Yates. 2012. “Advocacy Coalition Strategies: Tensions about Legitimacy in Environmental Causes.” In Routledge Handbook of Political Marketing, ed. Jennifer LeesMarshment, 316–28. New York: Routledge. Foster, Emilie, and Patrick Lemieux. 2012. “Selling a Cause: Political Marketing and Interest Groups.” In Political Marketing in Canada, ed. Alex Marland, Thierry Giasson, and Jennifer Lees-Marshment, 156–71. Vancouver: University of British Columbia Press. Francia, Peter. 2013. “Onward Union Soldiers? Organized Labor’s Future in American Elections.” In Interest Groups Unleashed, ed. Paul S. Herrnson, Christopher J. Deering, and Clyde Wilcox, 129–52. Washington, DC: Congressional Quarterly Press. Franz, Michael M. 2012. “Interest Groups in Electoral Politics: 2012 in Context.” The Forum 10 (4): 62–79. Franz, Michael M., Erika Franklin Fowler, and Travis N. Ridout. 2013. “Explaining Interest Group Advertising Strategies: Loose Cannons or Loyal Foot Soldiers?” Paper presented at the annual meeting of the Midwest Political Science Association, Chicago. Gerber, Elisabeth R. 1999. The Populist Paradox: Interest Group Influence and the Promise of Direct Legislation. Princeton: Princeton University Press. Heaney, Michael T. 2012. “Bridging the Gap between Political Parties and Interest Groups.” In Interest

Group Politics, 8th ed., ed. Alan Cigler and Burdett Loomis, 194–218. Washington, DC: Congressional Quarterly Press. Herrnson, Paul S. 2009. “The Roles of Party of Organizations, Party-Connected Committees, and Party Allies in Elections.” Journal of Politics 71 (3): 1207–24. Herrnson, Paul S., Christopher J. Deering, and Clyde Wilcox, eds. 2013. Interest Groups Unleashed. Washington, DC: Congressional Quarterly Press. Hirschman, Albert O. 1970. Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and States. Cambridge: Harvard University Press. Karpf, David. 2012. The MoveOn Effect. New York: Oxford University Press. Koger, Gregory, Seth Masket, and Hans Noel. 2009. “Partisan Webs: Information Exchange and Party Networks.” British Journal of Political Science 39 (3): 633–53. La Raja, Raymond J. 2012. “Why Super PACs: How the American Party System Outgrew the Campaign Finance System.” The Forum 10 (4): 91–104. Lecy, Jesse D., George E. Mitchell, and Hans Peter Schmitz. 2010. “Advocacy Organizations, Networks, and the Firm Analogy.” In Advocacy Organizations and Collective Action, ed. Aseem Prakash and Mary Kay Gugerty, 229–51. New York: Cambridge University Press. Magleby, David B. 2001. Election Advocacy: Soft Money and Issue Advocacy in the 2000 Elections. Salt Lake City: Center for the Study of Elections and Democracy, Brigham Young University. Parsa, H. G., John T. Self, David Njite, and Tiffany King. 2005. “Why Restaurants Fail.” Cornell Hotel and Restaurant Administration Quarterly 46 (3): 304–22. Pitney, John J. 2013. “Iron Law of Emulation: American Crossroads and Crossroads GPS.” In Interest Groups Unleashed, ed. Paul S. Herrnson, Christopher J. Deering, and Clyde Wilcox, 170–92. Washington, DC: Congressional Quarterly Press. Page 104 →Porter, Michael. 1998. Competitive Advantage. New York: Free Press. Risse, Thomas. 2010. “Rethinking Advocacy Organizations? A Critical Comment.” In Advocacy Organizations and Collective Action, ed. Aseem Prakash and Mary Kay Gugerty, 283–94. New York: Cambridge University Press. Robinson, Joan. 1954. The Economics of Imperfect Competition. New York: Macmillan. Salisbury, Robert. 1969. “An Exchange Theory of Interest Groups.” Midwest Journal of Political Science 13 (1): 1–32. Scala, Dante J. 2013. “Are Super PACs Arms of Political Parties?” Paper presented at the annual meeting of the Midwest Political Science Association, Chicago. Skinner, Richard, Seth Masket, and David Dulio. 2012. “527 Committees and the Political Party Network.” American Politics Research 40 (1): 60–84. Smith, Jeff, and David C. Kimball. 2013. “Barking Louder: Interest Groups in the 2012 Election.” The Forum 10 (4): 80–90. Wilson, James Q. 1995. Political Organizations. Rev. ed. Princeton: Princeton University Press.

Wisconsin Advertising Project. 2008. Obama Outspending McCain 3 to 1 on TV; Nearly 75% of Presidential Ad Spending in Red States. Madison: Wisconsin Advertising Project. Wyden, Ron, and Lisa Murkowski. 2013. “Shedding Light on Anonymous Ads.” Politico, May 12. Young, McGee. 2010. Developing Interests. Lawrence: University Press of Kansas. Zeleny, Jeff. 2013. “New Rove Effort Has GOP Aflame.” New York Times, February 6.

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Part II | Regulation, Deregulation, and Electoral Advantage

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3 | Shaping the Battlefield Lisa Young

Partisan Self-Interest and Election Finance Reform in Canada, 2003–2014 Between 2003 and 2014, five major legislative initiatives relating to party and campaign finance were introduced in the Canadian House of Commons. The first—introduced by the centrist Liberal Party of Canada—established one of the most generous schemes for public funding of political parties that has been seen in a liberal democracy as well as new limits on the size and source of political contributions. The three subsequent legislative initiatives, all introduced by the right-of-center Conservative Party of Canada, elaborated on these contribution limits and sought to roll back the Liberals’ public funding scheme. In the final legislative initiative, the Conservatives tried unsuccessfully to relax restrictions on party spending as part of an omnibus effort to alter aspects of election administration in Canada. This chapter reviews this series of reform attempts, weighing evidence of partisan electoral self-interest against the possibility that all but the first (Liberal) reforms were motivated by an ideologically driven impulse to deregulate political finance. This analysis suggests that in several instances, partisan self-interest and ideology coincided for the Conservatives, making the task of disentangling motivation very challenging. Weighing the evidence, there is some support for a deregulatory motivation, though one focused on limiting states’ financial support rather than limiting state regulatory activity. Through all the reform attempts, limits on spending have not been affected, and limits on contributions have been maintained and even strengthened.

Page 108 →Theoretical Approaches to the Study of Party Finance Scarrow (2004, 658) observes that the academic study of political finance tends to be relatively weakly theorized, with most accounts working from an assumption that political parties and politicians with the opportunity to regulate their own electoral financial dealings will normally act to maximize revenue. According to this “revenue maximizing” view, in which parties and politicians view money as an end in itself, more revenue is always better, while political circumstances, public attitudes, and parties’ economic circumstances do not matter. Katz and Mair’s (1995) cartel model rests on the assumption of revenue maximization, arguing in essence that parties will collude to obtain state funding, resulting in a lessening of political competition. In contrast, Scarrow’s electoral economy approach posits that political actors perceive money as a means to an electoral end. More money is better “only if it creates an immediate electoral advantage” (2004, 658). Political circumstances affect political actors’ decisions, as do public attitudes and parties’ economic circumstances. A key contribution of the electoral economy model is its ability to explain political actors apparently working against their own self-interests by endorsing reforms that reduce the party’s income. The revenue-maximizing approach cannot account for such stances and might dismiss them as ideologically motivated or irrational. Conversely, the electoral economy model identifies several circumstances under which rational political actors might choose regulatory reforms that result in reductions to party income. For example, Scarrow posits that after scandals, parties may back reforms that reduce their expected income to increase their electoral support, pointing to the case of cross-partisan agreement among British parties, which cooperated in the aftermath of scandal to introduce reforms that reduced revenues. In positing a “deregulatory turn,” Boatright’s introduction to this volume puts the ideological explanation firmly on the table. He notes the prevalence of references to deregulation in scholarly and journalistic analyses of the Citizens United v. FEC decision and its aftermath. He also points out that conservative politicians

have drawn comparisons between market growth following deregulation in the economic sphere and predictions regarding voter choice and political representation following the relaxation of campaign finance laws. Further, he notes that the logic proposed by American conservatives hardly seems specific to the United States, asking whether a similar rhetoric has come to play a role in campaign finance legislation elsewhere. Page 109 →The recent Canadian experience offers a useful set of case studies to explore elements of the electoral economy and deregulatory theories. With political institutions modeled on the British, Canada employs a singlemember plurality electoral system and has a tradition of single-party, as opposed to coalition, government. Elections are consequently high-stakes undertakings, as winners take all. Despite the single-member plurality system, Canada during this period had four major parties—the Conservatives, the Liberals, the New Democrats, and the separatist Bloc QuГ©becois. Although all four are represented in the House of Commons, the high degree of regionalization means that most district-level contests are two- or three-party competitions. The Westminster political institutions make Canada an unlikely place for full-scale cartelization of the party system to occur. That said, the extensive public funding introduced in 2003 raised the question of whether Canada might be headed in that direction. From 2003 to 2014, five key significant decision points relating to party finance law can be identified. On only one—arguably the most minor—was there agreement among the parties (and even there it was manufactured). These changes were made in the context of a political system in which the norm of cross-party consensus on changes to electoral finance legislation had broken down and against the backdrop of a heightened “permanent campaign” atmosphere of intense interparty competition through much of this period. The legislative initiatives undertaken by the Conservative Party offer interesting tests for the electoral economy and deregulatory approaches. None (with the exception of a minor element of the 2014 Fair Elections Act) could be considered revenue-maximizing. Three of the four offer a potential electoral advantage to the governing party, and all but one could be considered deregulatory, as might be expected of legislative changes initiated by a right-of-center party. Table 3.1 summarizes the four legislative initiatives that form the focus of this analysis. All four were initiated by the Conservative Party, two (2006 and 2008) while forming a minority government, and two (2011 and 2014) while forming a more stable majority government. The table also summarizes whether each of the legislative initiatives is consistent with the three theoretical approaches to election and party finance outlined previously. To be considered “revenue maximizing,” the legislative initiative must increase the funds available to one or more parties in absolute (rather than relative) terms. To be considered to provide an “electoral advantage” consistent with the electoral economy approach, the legislative change cannot be revenue-maximizing and must offer some conceivable Page 110 →electoral or relative financial advantage to the party proposing it. To be considered “deregulatory,” a change must reduce the involvement of the state, either by relaxing or eliminating restrictions on candidates’ or parties’ behavior or by reducing the public funds available to political actors.

Setting the Stage: Legislative Change in 2003 From the early 1970s until 2003, the regulation of political finance in Canada was relatively stable, employing a system intended to limit parties’ and candidates’ demand for money through caps on election expenses and relatively short election campaigns, combined with a moderate level of public funding delivered through election expenditure refunds and generous income tax credits for individual donors. Beyond a ban on contributions from foreign entities, there were no limits on either the size or source of contributions. This system was the product of consensus among the Page 111 →three major parties at the time and was not widely contested through much of this period. In 1989, the federal government appointed the Royal Commission on Electoral Reform and Party Finance (the Lortie Commission) to address controversy about third-party spending that had occurred during the 1988 election. The commission interpreted its mandate widely and engaged in a multiyear exploration of election finance legislation. The Lortie Commission Report endorsed the key elements of the existing regulatory regime, most notably the reliance on spending limits and the absence of limits on the size or source of contributions. Few of its recommendations relating to strengthening political parties as primary organizations were implemented.

Year Act

Table 3.1. Summary of Legislative Initiatives, 2006–2014 Major Election Electoral or RevenueFinance Competitive Deregulatory? Maximizing? Policy Advantage? Change

Decrease contribution limit from $5,000 to Accountability 2006 $1,000; fully No Act ban union and corporate contributions Eliminate Fiscal Update 2008 per-vote No (withdrawn) subsidy Keeping Phase out Canada’s per-vote 2011 Economy and No subsidy by Jobs Growing 2016 Act Increase spending limit by exempting Fair Elections fundraising 2014 Yes (minor) Act (withdrawn); increase contribution limit to $1,500

Yes

No

Yes

Yes

Yes

Yes

No

Yes (spending limit); No (contribution limit)

Many observers were surprised in 2003 when the governing Liberal Party introduced legislation to fundamentally reshape the regulatory regime governing political finance. Given the absence of discussion in prior years, the reforms are best understood as a response to an emerging political scandal. The “sponsorship scandal” involved a federal government program that offered lucrative contracts to Quebec advertising agencies in return for relatively little work.1 In some instances, these firms or their senior management made donations back to the Liberal Party of Canada in Quebec2 or maintained Liberal fundraisers on their payrolls. One of the key elements of the sponsorship scandal related to political finance: in addition to evidence of quid pro quo relationships between advertising agencies and operatives associated with the Liberal Party of Canada in Quebec, testimony relating to an “envelope of cash” intended for political purposes changing hands later focused attention squarely on issues relating to the regulation of political finance. In 2004–5, the federal government appointed a commission of inquiry to investigate the allegations related to improper use of public funds, failure to abide by federal procurement rules, political interference in the management of the program, and other wrongdoing. The commission held a lengthy series of hearings, portions of which were televised and drew a significant audience, before issuing a report confirming wrongdoing on the part of both the federal government and operatives working on behalf of the Liberal Party of Canada in Quebec (Commission of Inquiry 2005). Although these details were not publicly known in 2003, senior members of the Chrétien government may have been aware of them, and the 2003 legislation can thus be seen as a preemptive strike by the Liberal Party—an

attempt to impose tighter regulation on election finance in anticipation that allegations relating to inappropriate activities in the party’s Quebec wing would become public. Prime Minister Jean ChrГ©tien assertedPage 112 → that the legislation would “address the perception that money talks, that big companies and big unions have too much influence on politics, a bill that will reduce cynicism about politics and politicians, a bill that is tough but fair” (quoted in Young and Jansen 2011, 9). Given the lack of public debate about political contributions in the years leading up to this decision, and given the revelations that later emerged regarding the political finance elements of the sponsorship scandal, there is every reason to understand this legislative change as an anticipatory response. The ban on union and corporate donations brought the federal legislation into line with the system of financement populaire that had been in place in Quebec since the 1970s. Since the Liberal Party’s ethical breach was centered there, an appeal to that province’s norms regarding political finance is in all probability not coincidental. Ironically, the commission of inquiry later learned that some of the unsavory practices had been commonly employed in Quebec to circumvent the strict regime of financement populaire—notably, the practice of having several executives of a company make the maximum allowable contributions to a party in place of a corporate contribution. A more recent Quebec provincial inquiry into corruption uncovered multiple instances of similar practices as well as cash payments to both provincial and municipal candidates, leading some observers to suggest that the regime has become a “sham” (Hamilton 2013). The 2003 federal legislation made the maximum contribution from an individual in a year five thousand Canadian dollars and banned contributions from all entities other than individuals, with a small exception permitting donations of up to one thousand Canadian dollars by corporations, unions, and other entities at the local level. In effect, this all but eliminated contributions from unions, a significant source of support for the New Democratic Party (NDP), and from corporations, a significant source of support for both the Liberal Party and for the Progressive Conservative Party (which was by then almost defunct).3 In 2000—the last election year before the 2003 legislation—the Liberal Party received some twelve million Canadian dollars in corporate contributions; the Progressive Conservative Party and the Conservative Alliance together received nine million dollars. The same year, the NDP received more than two million dollars from unions (see Young, Sayers, and Jansen 2007, fig 15.2, 343). The proponents of the 2003 decision to ban union and corporate contributions were careful not to cause a reduction to the Liberal Party’s income. Rather, revenues foregone by the Liberal Party (and the other parties) were to be replaced by a quarterly allowance based on the number of votes the party received. The per-vote rate was set to ensure that the LiberalPage 113 → Party’s revenues would not drop under the new regime, assuming its electoral support remained constant (Clark 2003 cited in Young and Jansen 2011, 9). This meant that the extent of public subsidization of parties was intended to be significant. Prior to the 2003 legislation, Canadian parties derived approximately one-third of their income from the state in election years and almost none in nonelection years; in the early years after the legislation, this figure increased to between 60 and 85 percent, depending on the party (Young, Sayers, and Jansen 2007, fig 15.1, 342). There is every reason to believe that the sponsors of this legislation intended the impact on political competition to be limited, essentially extending the status quo with a change in the source of funds. As long as the Liberal Party held onto its electoral support, its finances would remain secure. The maximum contribution permitted under the legislation was five thousand Canadian dollars per person per year, which allowed the Liberal Party to pursue a fundraising strategy that focused on soliciting relatively large donations from a relatively small number of potential contributors; the typical donor would be an affluent individual with corporate ties willing to pay several thousand dollars for a ticket to a fundraising event offering access to cabinet ministers and/or the prime minister. Lacking accurate membership lists or a reliable base of individual donors, the Liberal Party opted to pursue an event-based approach to fundraising from individuals, focusing between 2004 and 2006 on cocktail parties of twelve hundred people paying five hundred dollars per ticket and on more intimate dinners where a smaller number of guests would pay five thousand dollars to have dinner with the party leader (at that time the prime minister) (Young, Sayers, and Jansen 2007, 348).

The 2003 legislation was controversial. There was no consensus within the Liberal Party regarding these reforms. The president of the party at the time (the elected head of the party’s extraparliamentary wing) famously described the reforms as “dumb as a bag of hammers” and destined to cripple the party (cited in Stewart 2005). Many in the party’s extraparliamentary wing were also vociferous critics (Rana 2003), but Prime Minister ChrГ©tien pushed the legislation through, using party discipline to hold his parliamentary majority. The NDP and the Bloc QuГ©becois supported the legislation, but the two right-of-center parties—the Canadian Alliance and the Progressive Conservatives—opposed it. Most notably, the leader of the Canadian Alliance, Stephen Harper, later the leader of the merged Conservative Party, vocally criticized the idea of public subsidies for parties. The Liberal proponents of the legislation appear not to have taken into account the potential for other parties to improve their electoral fortunes Page 114 →or to create for themselves a competitive advantage in fundraising. In the view of the Liberal elite, it was essential only that the new legislation not disadvantage the party relative to its earlier performance. This ignored the essence of electoral competition: that other parties might find a way to outperform them under the new rules. At the time the legislation was conceived, this seemed improbable; the rift between the Canadian Alliance and the Progressive Conservatives was profound, and a merger seemed unlikely. This split on the right, coupled with the rise of the Bloc QuГ©becois, allowed the Liberals to sail to three successive majority governments (though with ever declining shares of the popular vote) through the 1990s and early 2000s. This sense of complacency arguably caused the Liberal elite to make a profound strategic miscalculation. Events quickly demonstrated this. In 2004, the Canadian Alliance and the Progressive Conservative Party agreed to merge, bringing together the considerable populist base of the Canadian Alliance with the technical fundraising prowess of the Progressive Conservatives. The result was a fundraising juggernaut that took the Liberal Party by surprise. The newly formed Conservative Party of Canada performed well in the 2004 election, reducing the Liberal Party to a minority government. This meant that the newly formed party received close to the same amount as the governing Liberals through the quarterly allowance in addition to a remarkable revenue stream generated from individual contributions. While the Liberal Party’s overall income declined between 2000 and 2005, the new Conservative Party of Canada’s total revenue in 2005 was slightly higher than the total income of its two predecessor parties in 2000 (Young, Sayers, and Jansen 2007, figure 15.2, 343).

The 2006 Reforms: More Stringent Limits on Size and Source of Contributions The 2003 reforms were followed closely by an election in 2004; under the leadership of Paul Martin, the Liberal Party lost its majority and was reduced to a minority. As details of the sponsorship scandal emerged, Martin appointed the commission of inquiry, which held a lengthy set of public, televised hearings, thereby making the sponsorship scandal a top-of-mind issue for many Canadian voters in the 2006 election, called when the Martin government lost a confidence vote. In their analysis of voting behavior in the 2006 election, Clarke et al. (2006, 817) report that survey respondents most commonly identified “government dishonesty” as the most importantPage 115 → issue in the election. Voters who identified this as their most important issue were more likely to cast a ballot for the Conservatives. Forming a minority government, the Conservative Party quickly moved to implement the Accountability Act, which addressed a range of issues, including lobbyist registration, government appointments, procurement, and access to information. It also included changes to the financing of political parties. The legislation imposed a complete ban on corporate and union contributions (which had been permitted at the local level in the 2004 legislation), lowered the annual limit on contributions from five thousand to one thousand Canadian dollars, and banned cash donations. In lowering the contribution limit to one thousand dollars (adjusted for inflation), Prime Minister Harper “imposed a populist model of grassroots fundraising upon all parties” (Flanagan 2010, 6). Although the Accountability Act passed unanimously, it did not reflect a consensus among parties regarding the political finance elements. The Liberal Party recognized the poison pill contained within the legislation but could not withstand the political fallout from voting against the measure. The complete ban on corporate and union contributions and the reduction of the maximum contribution had the

potential to reduce the income of all parties, so it might be considered to be a revenue-reducing policy change. Figure 3.1 shows the income for all four major parties, by quarter, from 2005 to 2012. No sharp drop-off occurred in any party’s income after 2006. This rule change implied a differential impact on parties. While all parties would suffer, the Liberal Party was poised to feel the greatest impact. The Liberals at the time were the party of corporate Canada and remained committed to a fundraising strategy that emphasized a smaller number of maximum-sized contributions from members of the corporate elite able to afford five-thousand-dollar dinner tickets. In 2005, the Liberal Party reported only 36,060 donations; the Conservative Party reported 166,976.4 The Conservative Party clearly was better equipped to flourish in under a regime focused on smaller contributions from individuals. As Flanagan (2010) points out, “Under the new regime, the Conservatives raise far more money than any other party, partly because of the earlier Reform experience in grassroots fundraising, and partly because of technological advances. The key to Conservative success is the unification of fundraising with mass voter identification, using a customdesigned data base (CIMS) that integrates all these forms of information.” It is tempting to characterize the more thorough ban on corporate and union contributions and the significant reduction in the maximum size of Page 116 →a contribution as a revenue-reducing reform undertaken in the aftermath of scandal. While technically correct, this account ignores the very differential impact the reforms had on various parties. Holding the largest share of the popular vote (36 percent) after the 2006 election, the Conservative Party was entitled to the largest share of the quarterly allowance (public funding provided to parties on a per-vote basis), giving it a stable financial base. The party was better equipped than any of its rivals to maximize revenue from contributions under these particular rules, as it had developed a formidable network of individual donors prepared to give relatively small amounts. The Liberal Party was ill equipped to replicate this. In this respect, the legislative change had the potential to reduce the governing party’s overall revenues but significantly improved its comparative financial position. In a competitive electoral system, a party’s comparative financial position is arguably just as if not more relevant than its absolute financial situation. In this respect, the 2006 reforms can be understood as an attempt to reshape the electoral terrain to the advantage of the governing party. Fig. 3.1. Party Income from Contributions: Quarterly, 2005–2012 Note: Spikes represent the quarters in which elections were held (in 2006, 2008, 2011) and for the Liberal Party, quarters in which leadership contests were held (2007, 2009, and the final quarter of 2012). (Source: Calculated from Elections Canada data.) It is difficult to construct an account of the 2006 changes that casts them as deregulatory. Rather than decreasing the involvement of the state Page 117 →in regulating elections, the legislation increased the stringency of legislative restrictions. An argument certainly could be made that the changes were consistent with the populist element of the Conservative Party’s ideology (predominant in the Reform Party), which emphasized the importance of soliciting small contributions from individual donors to ensure the responsiveness of politicians to voters, not entrenched interests.

The 2008 and 2011 Reforms: Eliminating the Quarterly Allowance The Conservative Party was reelected with a second minority government in 2008. The international financial crash occurred during the fall election campaign, and the Harper government’s first order of business was to adopt a plan offering economic stimulus in response to the crisis. As part of the plan, the government proposed legislation eliminating the per-vote subsidy to political parties. This idea had not been part of the party’s platform and was not related in any rational way to the economic crisis. The opposition parties banded together to thwart this move and were prepared to defeat the government in the House of Commons. In this unprecedented move, the Liberals and NDP prepared to form a coalition government that would rely on consistent support from the sovereigntist Bloc Québecois. This willingness to engage with the Bloc underlines the extraordinary

character of this decision and speaks to the parties’ desperation to maintain the public funding on which they had become dependent.5 The effort to form a coalition government was foiled by a prorogation of Parliament and subsequent mobilization of an anticoalition movement, but the Harper government backed away from its efforts to eliminate the subsidy. It did, however, include its intention to end it in its policy manifesto for the 2011 election. The Harper Conservatives won a majority government in 2011 and promptly moved to enact legislation phasing out the quarterly allowance by 2016. Although the opposition parties did not support the move, they had no capacity to stop the legislation. Once again, the reform has had a negative effect on all parties’ revenue, including that of the governing Conservatives, who received C$9.7 million in subsidies in 2012 (Elections Canada 2012). By 2016, the Conservatives will have forfeited the entire amount, and opposition parties will also lose their source of support: for the NDP (now the official opposition), C$7.5 million in 2012; for the Liberals, C$4.6 million. Although the Conservative Party will take the largest Page 118 →absolute loss, the proportional losses suffered by the parties vary. In 2012, the subsidy comprised just over one-third of the total income for both the Conservative and Liberal Parties (with Liberal fortunes buoyed by its leadership contest) but half the NDP’s income. Fig. 3.2. Popularity and Income, Quarterly, 2005–2012 (Source: Elections Canada data and opinion poll results reported by Nanos Research (previously SES Research), http://www.nanosresearch.com/library/opinion.html.) As with the 2006 reforms, the elimination of the per-vote subsidy appears to have been intended to benefit the Conservative Party’s relative competitive position, even if it had a significant negative effect on the party’s absolute financial position. Removal of public funding, combined with the restrictive regulations on contributions, favors a party that can translate its popularity into contribution dollars. Figure 3.2 suggests that the Conservative Party has, through much of this period, translated popularity into dollars raised more efficiently than its competitors. The figure is a scatterplot: each case represents one calendar quarter for one party from 2005 to 2012. Observations for the Conservative Party tend to fall further to the right on the horizontal axis, suggesting that the party translates popularity into revenue more efficiently than its competitors. The NDP and Liberals are similar in their capacity. These findings echo conclusions drawn by comparing each party’s share of contributions in the year to its share of the popular vote in the most recent election, with scores over one hundred indicating overperformance and scores under one hundred indicating underperformance.Page 119 → This analysis shows that from 2005 to 2009, the Conservative Party’s score ranges between 147 and 182, while Liberal scores range from 53 to 78 and NDP scores range from 66 to 98 (Jansen and Young 2011, 92). The Conservative Party’s superior capacity to translate its popularity into income illustrates its competitive advantage in a regulatory environment in which income can be derived only from small individual contributions; that is, in effect, the regulatory environment the Conservatives have created and that will be fully in place by 2016. This is consistent with the expectations of the electoral economy model: a party will act to maximize its electoral success under competitive conditions rather than simply to maximize revenue. Although the decision to eliminate the quarterly subsidy is consistent with the electoral economy model, it is also a deregulatory action insofar as it significantly reduces the state’s role in subsidizing political parties. The governing Conservatives certainly ideologically opposed the idea of the quarterly allowance from its introduction. When the ChrГ©tien government proposed the per-vote subsidy in 2003, parties lined up along ideological lines in their stances: the left-of-center NDP and Bloc QuГ©becois backed the centrist Liberals’ proposal, while the right-of-center Progressive Conservative and Canadian Alliance parties opposed it. Harper, the leader of the Canadian Alliance, argued in the House of Commons debate that “this bill will cause troubling changes to the source of contributions to political parties, shifting it from the voluntary act of free citizens to a tax levied on all taxpayers. In a democratic society, it is unfair for shareholders and unionized workers to contribute to a political party without their consent. However, it is even worse to take this money from taxpayers without their

permission” (Harper, February 11, 2003). A consistent Conservative objection to the quarterly allowance relates not simply to the use of state funds for political parties but to the involuntary nature of the contribution. According to Harper, the legislation would “simply require hardworking Canadians to pay for political parties they do not necessarily support” (ibid., emphasis added). Although the same could be said of public subsidies for election expenses and even of the political contribution tax credit, Conservative critiques of the perceived injustice of taxpayer dollars going to support a party not chosen by that taxpayer have focused on the quarterly allowance. This recurring theme is consistent with the Conservative Party’s populist and libertarian ethos. Presenting itself as the protector of ordinary, hardworking citizens against elitist special interests that had captured the Canadian state under Liberal rule, the Conservatives’ decision to end the public subsidy appears at first glance to be as Page 120 →consistent with an ideological explanation as it is with an electoral economy account. That said, the Conservatives’ deregulatory impulse has not extended to other aspects of public funding. They have made no attempt to eliminate reimbursement of election expenses for candidates and parties or to eliminate the political contribution tax credit. Unlike the quarterly allowance, which allocated funding to parties based on electoral support, the other two mechanisms allocate public funds with little regard for a party or candidate’s electoral support (once over the threshold for eligibility). The political contribution tax credit is related to support but has a bias toward higher-income earners who are more likely to donate. That these considerations did not prompt a review of other forms of state support for political parties suggests that the electoral economy approach might be more convincing than the deregulatory in understanding this legislative change.

2014 Reform: The Fair Elections Act The final legislative initiative relating to political finance considered in this chapter is the Fair Elections Act. Introduced in February 2014, the measure was an omnibus set of amendments to the Canada Elections Act focused primarily on elements of electoral administration. Among the controversial elements of the first version of the legislation were bans on the practice of “vouching” for voters without appropriate identification, significant limitations on the authority of the chief electoral officer, and changes to the appointment of poll supervisors. The key elements relating to party and election finance involved an increase of the limit for contributions from twelve hundred to fifteen hundred Canadian dollars and an increase to the spending limit by exempting fundraising activities. The expansion to the contribution limit was not controversial and has relatively limited impact. Even at fifteen hundred dollars, these contribution limits are low by Canadian provincial or international comparative standards. More significant was the effort to increase the spending limit. The legislation proposed an exemption from spending limits for any fundraising efforts involving an individual who had donated at least twenty Canadian dollars in the prior five years. In other words, a party could spend unlimited money during a campaign to contact previous contributors. Critics argued that this element of the bill would be extraordinarily difficult to enforce and that it might represent a very significant expansion of the spending limit for a party that had solicited a large number of contributionsPage 121 → from a broad base of donors. The government withdrew this provision of the legislation in an amended act. Had it been passed, this expansion of the spending limit would have been in the electoral interests of the Conservatives. Having the largest number of donors and more money on hand to spend during election campaigns, the Conservatives would have gained some competitive advantage. The amendment is also significant insofar as it is the first unilateral legislative attempt to expand the spending limits for parties and candidate, albeit in a backhanded manner. In this respect, it might also be understood as an attempt at a deregulatory reform, though not one that took on the idea of spending limits per se.

Deregulation of Political Finance: Evaluating the Canadian Case In the introduction to this volume, Boatright observes that many established democracies experienced similar regulatory impulses in the realm of election and party finance in the 1970s. The Canadian and American experiences were largely synchronous, with both countries moving to more extensive legislation at the national

level in the early 1970s and adopting limits on party and candidate spending The direction of regulation then parted ways, as the U.S. Supreme Court’s Buckley v. Valeo decision (1976) foreclosed the possibility of spending limits, leaving the regulatory regime reliant on disclosure and limits on contributions. In evaluating the notion of a deregulatory impulse in the Canadian context, it is important to point out the remarkable degree of consensus that has surrounded—and continues to surround—limits on spending for candidates and political parties. No significant legislative proposals have advocated the removal of spending limits, and no challenges to the constitutionality of spending limits for either parties or candidates have been launched at either the federal or provincial level. A series of constitutional challenges have related to the restriction of spending for “third parties” in Canadian elections (organizations other than parties or candidates seeking to influence the outcome), the most significant of which was Harper v. Canada (2004), in which the leader of a conservative advocacy organization (and now the prime minister) unsuccessfully challenged the constitutionality of restrictions on third-party advertising. Little in the decision encouraged a similar challenge to spending limits, but it is nonetheless noteworthy that these provisions have not been constitutionally tested. Page 122 →With these few exceptions, the deregulatory discourse Boatright notes has been largely lacking. Ideological contestation has been focused on the state’s appropriate role in subsidizing election expenses and parties’ incomes, not on the appropriateness of state regulation of election expenses and contributions. Even in this respect, the consensus is relatively wide: parties across the ideological spectrum agree on the appropriateness of the political contribution tax credit and on the use of public funds to subsidize election expenses. Only on the issue of the per-vote public subsidy have parties diverged on the appropriateness of using public funds.

Conclusion Returning to Scarrow’s electoral economy model, it is useful to recall the core assumption: parties view money as a means to an electoral end. The Canadian reforms in 2006 and 2011 show that the Conservative Party of Canada acted unilaterally to introduce reforms that reduced income for all parties but that disadvantaged its competitors more than itself. Compelling evidence indicates that the Conservative Party has, over a seven-year period, demonstrated a consistently more efficient ability to translate its votes into donations. Because relatively little research has examined political donations in Canada, the full reasons for this are not clear. In part, it has been a function of the Conservative Party’s well-organized fundraising machine. The Conservative Party’s electoral base—relatively affluent and disproportionately male supporters of free enterprise—may be more inclined to donate and may be more incentivized by the political contribution tax credit, but that is merely speculation.6 The Liberal Party of Canada, while trying to divert attention from a scandal, clearly let a genie out of its bottle. The party violated a prior norm of requiring cross-partisan consensus on major changes to election law, unleashing a series of fairly remarkable changes to both the regulation of political finance and arguably the character of Canadian political parties. In proceeding without cross-partisan consensus to implement public funding, the ChrГ©tien government made its own party and several other parties dependent on the state for financial support. In retrospect, it should not have been surprising that the Conservative party at its first opportunity acted unilaterally to eliminate the subsidy and weaken its competitors. (Perhaps the only surprising element is that the Conservatives agreed to phase the subsidy out rather than withdraw it immediately.) One alternative explanation that requires greater consideration is the Page 123 →role of ideology—more specifically, the deregulatory bent that Boatright identifies. It is difficult to disentangle the Conservative Party’s ideological commitment to populist political finance (small contributions from individuals and little public subsidization) from its self-interest. In these two cases, ideology and self-interest have coincided, making explanation difficult. The adoption of generous public funding of political parties coincided with a period of political tumult. The public dollars that might have been spent on strengthening political parties as agents of democratic integration were

instead devoted to partisan sniping and advertisements as the Conservative Party unleashed the era of the permanent campaign. In the words of political scientist and sometime Conservative Party strategist Tom Flanagan (2010), “The last ten years have deeply affected Canadian government and political culture. After so many years of continuous campaigning, federal politicians are like child soldiers in a war-torn African country: all they know how to do is to fire their AK-47s.” With abundant financial resources and a desire to cement their position as Canada’s new governing party, the Conservatives have spent a great deal of money both during and between elections on attack ads intended to discredit their competitors. One merciful consequence of the phasing out of public subsidies will presumably, be fewer dollars available for parties to engage in televised attack ads. Campaigning may be returned to the relatively short period of the formal election campaign, during which election expenses are subsidized at a rate of 50 percent. Between elections, however, political parties may struggle to raise the funds they need to operate as viable political vehicles. Quebec’s experience with financement populaire suggests that politicians may succumb to the temptation to find ways to circumvent the restrictions on contributions to maintain their viability. However calculated the Conservative Party’s move to impoverish its competitors may have been, it rests on an assumption that the party is uniquely able to convert political popularity into political contributions more effectively than its competitors. The opposition parties now have extraordinarily compelling incentives to try to match the Conservative Party’s fundraising prowess; to date, none of them have found a way to do so. If or when they do, the Conservatives may find themselves suffering from their own legislation. Parties focused on raising small contributions from individual donors make decisions that differ from those made by parties funded by the state or by larger entities. The former approach certainly enhances parties’ responsivenessPage 124 → to their political bases but may also lead parties to adopt stances designed explicitly to send out cues to reliable groups of donors. Some of these groups are far from the political mainstream, forcing the party to choose between the financial support offered by the base and electoral support offered by more centrist voters. As Canadian political parties are weaned from public funding over the next three years, this tension will become greater and the effects of the funding regime on party organization more evident.

Notes 1.In 1995, the government of Quebec held a referendum on separation from Canada that came close to reaching a 50 percent “yes” vote. In response, the federal sponsorship program was created to place Canadian symbols prominently in Quebec venues. 2.At the time, the Liberal Party of Canada employed a confederal structure, with individual members joining the party’s provincial wing rather than the national party. These provincial wings of the federal party were separate from the Liberal Party of the province. 3.The Progressive Conservative Party was Canada’s major national right-of-center party until 1993, when it suffered a stupendous electoral defeat as the Reform Party of Canada emerged as a major right populist party. The Reform Party later morphed into the Canadian Alliance, and in 2004, the Canadian Alliance and the Progressive Conservative Party merged to form the Conservative Party of Canada, which has governed since 2006. 4.Data from the Elections Canada searchable database, at http://www.elections.ca/WPAPPS/WPF/EN/PP /SelectParties?act=C24&period=0&returntype=1. 5.For an analysis of the parties’ reliance on public subsidies, see Jansen and Young 2011. 6.An effort to analyze Canada Election Study data to determine predictors of political donation foundered on questions of reliability of data. Some 10 percent of respondents claimed to have donated to a political party in the prior year; actual data show that the real number is closer to 1 percent.

References Clarke, Harold D., Allan Kornberg, Thomas Scotto, and Joe Twyman. 2006. “Flawless Campaign, Fragile Victory: Voting in Canada’s 2006 Federal Election.” PS: Political Science and Politics 37 (4): 815–19.

Commission of Inquiry into the Sponsorship Program and Advertising Activities (Gomery Commission). 2005. Who Is Responsible? http://epe.lac-bac.gc.ca/100/206/301/pco-bcp/commissions/sponsorship-ef/06-03-06 /www.gomery.ca/en/phase1report/summary/es_full_v01.pdf. Elections Canada. 2012. Quarterly Allowances to Political Parties 2012. http://www.elections.ca/content.aspx? section=pol&document=qua2012&dir=pol/qua&lang=e. Page 125 →Flanagan, Tom. 2010. “вЂSomething Blue.В .В .В .’: Conservative Organization in an Era of Permanent Campaign.” Paper presented at the annual meeting of the Canadian Political Science Association, Montreal. http://www.cpsa-acsp.ca/papers-2010/Flanagan.pdf. Hamilton, Graeme. 2013. “QuГ©bec Corruption Inquiry Exposes Cracks in RenГ© LГ©vesque’s Electoral Reform Legacy.” National Post, February 1. http://news.nationalpost.com/2013/02/01/graemehamilton-quebec-corruption-inquiry-exposes-cracks-in-rene-levesques-electoral-reform-legacy/. Harper, Stephen. 2003. “Canada Elections Act” Canada. Parliament. House of Commons, February 11. Edited Hansard, Number 057. 37th Parliament, 2nd Session. Retrieved from http://www.parl.gc.ca /HousePublications/Publication.aspx?Language=E&Mode=1&Parl=37&Ses=2&DocId=692185#Int-413382. Jansen, Harold J., and Lisa Young. 2011. “Cartels, Syndicates, and Coalitions: Canada’s Political Parties after the 2004 Reforms.” In Money, Politics and Democracy: Canada’s Party Finance Reforms, ed. Lisa Young and Harold J. Jansen, 82–104. Vancouver: University of British Columbia Press. Katz, Richard, and Peter Mair. 1995. “Changing Models of Party Organization and Party Democracy: The Emergence of the Cartel Party. Party Politics 1 (1): 5–28. Rana, F. Abbas. 2003. “Liberal Party Memberships Still a Hot, Simmering Issue.” Hill Times, June 30. http://www.maharaj.org/hilltimes7.shtml. Scarrow, Susan E. 2004. “Explaining Political Finance Reforms: Competition and Context” Party Politics 10 (6): 653–75. Stewart, Ian. 2005. “Bill C-24: Replacing the Market with the State?” Electoral Insight (January). Available at: http://www.elections.ca/res/eim/article_search/article.asp?id=127&lang=e&frmPageSize=. Young, Lisa, and Harold J. Jansen. 2011. “Reforming Party and Election Finance in Canada.” In Money, Politics, and Democracy: Canada’s Party Finance Reforms, ed. Lisa Young and Harold J. Jansen, 1–18. Vancouver: University of British Columbia Press. Young, Lisa, Anthony Sayers, and Harold J. Jansen. 2007. “Altering the Political Landscape: State Funding and Party Finance.” In Canadian Parties in Transition, 3rd ed., ed. Alain-G. Gagnon and A. Brian Tanguay, 335–54. Peterborough, ON: Broadview.

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4 | Partisan Interest and Political Finance Reform in Australia Iain McMenamin The literature on political finance reform (Scarrow 2004; KoГџ 2011) identifies the classic variable of comparative democracy as its master explanation. In consensus democracies with policy-seeking parties, parties are more likely to agree on public funding to facilitate cooperation and exclude new competitors. In majoritarian democracies, vote-seeking parties are less likely to compromise on public funding or indeed other regulations. Moreover, in consensus democracies, regulatory changes are unlikely to be driven by exogenous shocks such as scandals and public opinion. In electorally sensitive majoritarian democracies, changes in public discourse might motivate parties to regulate to maximize popular support (Young, this volume; Scarrow 2004, 658). This account tends to present scandals as operating through the interest channel: parties need to maximize public support and seek to accommodate or exploit new discourses. Similarly, KoГџ writes of discourse “forcing” change on parties (2011, 9). However, his interpretation also appears to allow for normative change (2011, 203; this volume). This chapter explores a series of interest-, norm-, and scandal-based interpretations of political finance reform in Australia. It finds very strong evidence in favor of partisan interest as a driver of reform. In spite of some large scandals and associated changes in discourse, norms do not help understand the pattern of stability and change. The evidence is mostly drawn from the period between 1995 and the present. Until 2007, the fundamental nature of the system was quite stable in spite of much tweaking and several proposals for regime change. Since 2007, abortive changes have occurred at the federal level, and major changes have taken place in two of the larger states. Overall, however, Australia does not appear to be moving in a deregulatory direction. This is a period of flux and asymmetry in the regulation of Australian political finance. This periodization has Page 127 →significant advantages. First, the basic level of stability allows me to interpret events and processes across time and jurisdictions as substantially equivalent. Second, the continuing emergence of reform proposals and their enactment toward the end of the period constitutes interesting and useful variation in the dependent variable—reform of political finance regulation. Third, looking at the Commonwealth and the six states over a substantial period reveals considerable variation in the interests of the parties and political finance scandals. The next section summarizes Australian party politics and party finance. This basic information underpins the formulation of a series of hypotheses in the subsequent section. I use these hypotheses to explore recent political finance debates in Australia and to engage with interests, norms, and scandals using a range of quantitative and qualitative evidence.

Political Competition in Australia Australia is a federation of majoritarian political systems. It is one of the few countries with compulsory voting. This system is usually regarded as having reduced the parties’ operating costs, notably by relieving them of the need to engage in voter mobilization and allowing them to concentrate on voter conversion (McAllister 2002, 387). Electioneering has become very focused on the media and political advertising. Most elections are held under the alternative vote, according to which voters can rank the candidates in single-member districts. Like firstpast-the-post, this is an essentially majoritarian system. It generally produces single-party governments of the center-left or center-right or coalitions of two closely allied center-right parties. Minority governments represent a small but significant proportion of administrations at state and Commonwealth (federal) levels (Sharman and Moon 2003, 255). The current prime minister of Australia, Tony Abbott of the Liberal Party of Australia, has a majority in the House of Representatives. The Commonwealth gets much of its power from its control of taxation. It has a monopoly on the collection of income tax, and the Goods and Sales Tax of 2000 was another milestone in its fiscal dominance (Weller and Fleming 2003, 18). The states retain responsibility for delivering citizens’ most cherished services, such as health care, education, and the police. The mutual dependence of the federal and state governments is reflected in

the meetings of the Council of Australian Governments. The prime minister dominates the cabinet (O’Malley 2007, 17, 19–20). In turn, Page 128 →the government dominates the House of Representatives, the politics of which is a classic example of Westminster adversarial theater. However, the use of proportional representation by single transferrable vote for elections to the Australian Senate adds a measure of consensualism to Australian politics. Government majorities have been very rare in the Senate, but since party discipline is also strong, the chamber has acted as a significant check on the government, especially in legislation (Thomas 2009, 376–77). The states also have Westminster governments with popularly elected upper houses, with the exception of Queensland, which has no upper house. Party Competition The Australian party system has been relatively stable for more than a hundred years, and parties have maintained a stronger position in politics than in other established democracies (McAllister 2002, 379–80, 382). Competition is based on a simple left–right divide (Kitschelt et al. 1999, 431, 434; McAllister 2002, 384). Australia’s center-right is defined by a permanent coalition of the Liberal Party and the smaller National Party, often known simply as “the Coalition.” The parties’ separate identities have rarely been challenged, but the two Queensland branches recently merged. The party system has been described pithily as “a trio in form and a duet in function” (Lipson 1959, quoted in McAllister 2002, 382). The Liberals can trace their origins back to 1909. They rebranded and reformed twice during and between the two world wars but had been unashamedly a classic cadre party, providing almost direct representation for the business elite. They were reformed again in 1944 under Robert Menzies as a mass-membership party with some autonomy from funders and parliamentarians. The party’s organization remains very much dependent on its relatively independent state branches. The National Party, previously the Country Party, grew out of rural discontent around 1920 and has subsequently played an important role in Commonwealth politics. The party is also a significant competitor in the states except for South Australia and Tasmania. The National Party ruled as a single-party government in Queensland from 1983 to 1990. The two parties have small memberships, ideological flexibility, and strong leaderships. The Liberals suffered a decline in membership in the 1980s and 1990s, but the Nationals claim that their membership has increased (McAllister 2002, 389). The Coalition faces the Australian Labor Party (ALP), which was founded in 1891 and has strong links to trade unions. Its membership is larger than its competitors and is relatively stable (McAllister 2002, 389). Page 129 →Unlike the right-wing parties, its organization is relatively strong at the federal level. The ALP has an enduring conflict between highly institutionalized more and less ideological factions, but in recent decades it has managed to avoid splits and has enjoyed greater electoral success. Under Bob Hawke and Paul Keating in the 1980s and 1990s, the party embraced the market and economic reform (McMullin 1991, 418–32, 442–43). Since 1973, the party has also gradually reduced union influence within its structures. The different branches of the parties maintain considerable autonomy from each other. Australian state parties are not as tightly linked to each other and their national party as their German counterparts but they are also less separate than Canadian state and federal parties. The ALP is somewhat more centralized and coordinated than the Liberals. In terms of political competition and political finance, the state parties can be treated as equivalents of the national parties. The parties maintain essentially the same identities in the states as in the Commonwealth, in contrast to, for example, the Canadian system. Nonetheless, they are by no means dominated or coordinated by the national parties, as is the case in Germany. Party Finance The Australian states differ greatly in population, geographic size, and economic power, and these differences are reflected in political finance. More money is contributed to the parties in the states of Victoria and New South Wales than at the federal level. Victoria contains the traditional business capital of Melbourne. In recent decades, many firms have transferred their headquarters to Sydney in New South Wales. The small federal capital of Canberra is not a substantial center of private business. Perhaps more important, the states are responsible for two highly politicized issues: property development and gambling (Horan 1997). Developers have been prominent

political contributors in both states (Tham 2006). One fundraiser said, “You get a lot of funding being in government at state level. If you’re a property developer, what can the feds do for you? Getting development approvals or a planning policy is not something the feds can do. Much of the relevant regulation is conducted at state level” (Elliott 2003, 11). Sydney and New South Wales have become notorious for poker machines, on which clubs, pubs, and hotels often depend to survive (Skelsey 2003). This dependence has also been reflected in political finance (Wainwright 2003). Data disclosed to the Australian Electoral Commission show that business is an important source of funding for Australian political parties. The Page 130 →Coalition, the ALP, and their associated entities received about twenty-five thousand itemized payments from 1998 to 2005, of which seventeen thousand were made by fifty-four hundred businesses. Dependence on business funding ranges from 23 percent in 2001–2 to 58 percent in 2002–3, with an average of 37 percent. In comparative terms, this is a very high level of dependence on business (McMenamin 2013, 122). The system of fundraising can be very intense. In one six-month period, Prime Minister John Howard’s New South Wales Liberal Party branch organized “fourteen lunches, one golf day and two receptions for major party donors to meet either him, his ministers or his parliamentary secretaries” (Clark and Glendinning 2001, 1). Business money tends to be interested money. The pragmatic relationship between business donors and the parties principally rests on two types of exchanges: discrete and reciprocal. Discrete exchanges are usually the sale to donors of access to politicians. Reciprocal exchanges are neither clear nor simultaneous. Rather, they establish an obligation toward the donor that is likely to increase the donor’s chances of access and influence in the future (McMenamin 2012, 25–29). Some commentators think that Australian business treats the two big parties equally (Gettler 2006), but this view is mistaken. The impartiality thesis tends to draw its evidence from periods when the ALP was in government and tends to concentrate on a minority of payments classified explicitly as “donations” rather than the majority classified as “other payments” and often channeled through “associated entities” (McMenamin 2008). In aggregate, business donors in Australia are motivated by a coherent combination of pragmatism and ideology (McMenamin 2012, 2013, 81). When the center-right controls government, few give to the ALP. However, when the ALP is in government, the parties are treated relatively equally. This logic is also applied prospectively. The ALP will receive business contributions in election years if opinion polls point toward a likely victory. By contrast, the ALP will receive almost nothing if it is languishing behind the Coalition in the polls. There is a clear ideological bias toward the Liberal and National Parties, whose business financiers are much less sensitive to their electoral fortunes than the corporate sponsors of the ALP. The ALP has an interest in restrictions on business financing of political parties, including disclosure, bans, and limits. Even more clearly, the centerright has an interest in restrictions on labor union financing of politics, since the ALP receives a substantial amount of its income from unions, thereby compensating for the ALP’s relative weakness in the business community. Page 131 →

Interests, Norms, and Scandals Partisan interest provides a very good understanding of the reform of political finance in Australia. I assume that partisan interest refers to electoral competition rather than revenue maximization. Instead of just looking at their own accounts, parties should calculate their interest in reforms according to how they expect changes to affect their relative (dis)advantage in the battle for votes. This broad perspective generates a range of potential types of evidence. As Lisa Young notes (this volume), the parties will have different interests in reform depending on the sources of their revenue. Since the ALP does less well in drawing support from business it should be more motivated to introduce bans, restrictions, or disclosure. Changes in political and financial circumstances may also drive preferences on reform. Labor is more likely to regulate when its income relative to the Liberals is decreasing and at the end of a parliamentary term. As mentioned previously, the ALP receives many more business contributions while in government than it does while in opposition. Labor is more likely to regulate when it is unpopular because business tends to shun the ALP if its electoral prospects are weak. Labor is more likely to regulate if its dependence on union finance is increasing.

Political parties are not unitary actors. Indeed, the ALP is famous for its bitter internal politics. Therefore, political finance reform might reflect the interests of the leadership. We might expect that Labor is more likely to regulate when the leadership is close to trade unions and/or distant from business. Australian politicians tend to maintain strong bases in their home constituencies and/or states, which could also influence preferences on political finance. If this is correct, Labor should be more likely to regulate when the leadership is from states where the Liberals have a fundraising advantage. Similarly, Labor might tend to regulate when the leadership is from states where the ALP’s income relative to the Liberals is decreasing. A normative account would offer a radically different explanation of political finance reform from one based on interests. Norms define what is appropriate, while interests define what is advantageous. Normative perspectives, perhaps like political-cultural arguments in an earlier period, are often criticized on the grounds that a theory that includes everything includes nothing. Sometimes, normative arguments appear to relate to the sum of behaviors and attitudes in a society. Nonetheless, some interesting and falsifiable ideas exist on norms and political finance. Fisher (this volume)Page 132 → argues that early decisions can define a logic of appropriateness and therefore establish a clear path-dependence for subsequent policy innovations. For example, he maintains that a voluntarist tradition helps explain much about the regulation of political finance in the United Kingdom. I think this is a helpful lens with which to interpret gradual (or within-type) change but is less productive in dealing with sudden (out-of-type) change. Australia has been very much influenced by the British norm of voluntarism. Nonetheless, the principal issue analyzed in this chapter is an out-of-type change, or a contestation of the legitimacy of business contributions, which has been one of the main sources of political finance in Australia. KoГџ (this volume) also takes norms seriously, and his approach has much in common with mine. We both emphasize political text as discourse and establish standards for measuring the scale and timing of changes in discourse, which are good indicators for normative change. KoГџ (this volume) searches for gradual and sudden changes in discourse. The latter are often associated with scandals and allow clearer empirical claims because of the opportunity to connect the timing of changes in discourse and policy. Moreover, a lot of commentary, academic or otherwise, makes a clear link between political finance scandals and regulatory changes. Of course, scandals can also affect the interests of political parties, so this chapter separates the normative and interest-based mechanisms though which scandals influence the regulation of political finance.

Stability and Change This section describes Australian political finance regulation, justifies a concentration on the regulation of business donations, and outlines the progress of reform proposals. The contemporary era of the regulation of Australian political finance began with the introduction of disclosure in New South Wales in 1981. The advent of Hawke’s Commonwealth Labor government in 1983 extended similar provisions nationally. However, disclosure was easily evaded until 1992. Previously, only campaign contributions had to be disclosed, with the predictable consequence that parties classified most payments as contributions to their day-to-day administration. The Political Broadcasts and Political Disclosures Act of 1991 brought all payments to parties within the disclosure regime (Chaples 1994, 31). Both parties reported that at least initially, this regulation drastically reduced corporate contributions (Hartcher 1992a, 1992b). The act severely restricted political advertising, banningPage 133 → it during campaigns and requiring broadcasters to provide free time instead. Use of this broadcasting time was confined to a figure talking to camera, without any dramatic effects (Chaples 1994, 34). Like Canada’s attempted ban on third-party advertising, the broadcasting provisions of the act were struck down as unconstitutional (Orr, Mercurio, and Williams 2003, 384–85). Disclosure applies not only to parties but also to “associated entities,” which until 2006 were defined as entities that are “either controlled by one or more political parties or operate wholly or to a significant extent for the benefit of one or more political parties” (Young and Tham 2006, 10). The revenue of the associated entities rivals that of parties. Income from associated entities ranged from 43 percent of party income in 2001–2 and 2004–5 to 116 percent in 1999–2000. However, the associated entities are more than fundraising vehicles. The ALP received on average only 13 percent of its income from associated entities between 1999 and

2005, while the Liberals received almost 19 percent. All payments or in-kind contributions must be reported and identified as either a “donation” or “another payment.” By law, donations are gifts for which no or inadequate consideration has been received (Orr 2006, 107). This distinction does not separate political contributions from payments received in the course of running the party as a business. An employee of the Australian Electoral Commission explained, “So if you think you got $2,000 worth of networking opportunities as well as your meal and the glossy brochure, you don’t have to declare it” as a donation (Sexton 2006, 2). Moreover, the Australian Electoral Commission lacks the resources to contest the parties’ classification of payments. The $1,500 limit for disclosure was introduced in 1984. The limits are per donor, per jurisdiction. Therefore, a firm could have secretly but legally contributed almost $12,500 by splitting contributions of less than $1,500 among the nine jurisdictions. Since 2006, donations below $1,500 have been tax-deductible. Public funding varies across jurisdictions. The ALP introduced it at the Commonwealth level in 1984 to reduce dependence on corporate donations. In New South Wales, the federal level, and Queensland, public subsidies for election campaigns were in place by the end of the 1990s. Victoria introduced them in 2002. Western Australia brought in publicly funded elections in 2006. South Australia and Tasmania have yet to do so. In every case, the funds are limited by a threshold of 4 percent of the vote and distribute an amount of one to two dollars per firstpreference vote (Orr, Mercurio, and Williams 2003, 396; Young and Tham 2006, 39). Public funding provided on average 25 percent of the income of the federal Coalition and Page 134 →ALP from 1998 to 2005. The parties’ research foundations also receive small amounts of money (Ramsey 1998), as do their international bodies, which assist in democracy promotion. New South Wales is the only jurisdiction to provide financial support for general party activities between elections (Young and Tham 2006, 42; Anderson and Tham 2014) amounting to between 4 and 5 percent of the income of the major parties in 2004–5. Therefore, private sources dominate party funding in all jurisdictions. Australia lacks the large quasi-independent party foundations found in other countries. However, both parties have important organizations that exist only to raise funds. The Greenfields Foundation collected contributions from businesses and passed them on to the Liberal Party, thereby avoiding the necessity to disclose the identity of the donors. Similarly, auctions or dinners organized outside the party could collect money without identifying the ultimate donors (Hannan and Carney 2005). A prominent example was the work of public relations company Markson Sparks on behalf of the ALP (Crabb and Rollins 2001). Both parties actively manage assets through companies that their opponents suspect might also be conduits for undisclosed donations (Gordon 2004). A common way for a specific interest to avoid transparency is to make multiple donations in the names of various companies and individuals. Sometimes donations have been made on behalf of mysterious companies, the ultimate ownership of which remains unknown. Political finance regulations are complex and multidimensional. Therefore, there are several ways in which the nature of the system and change could be conceptualized. For example, the authority on Australian electoral law characterizes the system as “lackadaisical” because of the ease with which many of its strictures can be ignored or circumvented (Orr 2007). This emphasis is also somewhat evident in journalistic discourse on the subject. However, this chapter concentrates on the regulation of the source of funding and in particular on corporate funding. The central role of business in political finance has been contested in Australia over the past forty years, but no significant restrictions on business funding of politics have been imposed during that period. Businesses have been allowed to make payments to parties in any amount, at any time, and for any reason. However, from 2008 onward, a succession of bills and laws in the Commonwealth, New South Wales, and Queensland have proposed substantial changes in the system. New South Wales has introduced a totally new system. The reform episodes in these three jurisdictions constitute variation in the dependent variable. Of course, it is also necessary to try to assess the extent to which they constitute independent cases. In Australia, like other Page 135 →federations, political innovation sometimes spreads from jurisdiction to jurisdiction, and similar outcomes sometimes reflect separate processes.

Understanding Reform This section employs a range of qualitative and quantitative data to test whether self-interest or norms best explain

political finance reform in Australia. The evidence shows that the ALP is more likely to regulate business contributions and the Liberals are more likely to deregulate them. Table 4.1 summarizes recent reform initiatives in Australian political finance and strongly confirms an interest-based explanation. The Australian Labor Party dominates reform initiatives. In only one instance has the Liberal Party made the first move. The Commonwealth Liberals sought to increase the disclosure limit from $1,500 to $10,000. The first attempt was blocked in the Senate, but when the Coalition gained control of the Senate in 2005, it quickly moved to raise the threshold on the grounds that donors were being “intimidated.” Disclosure had reduced the Liberals’ fundraising advantage among the business community. The ALP had written targeted letters to disclosed Liberal donors asking that they also donate to the center-left (Gordon and Ceresa 1995). Labor is not more likely to regulate when its income relative to the Liberals is decreasing. Figure 4.1 presents the relative income of the ALP and the Coalition across the Commonwealth and the six states. If a financial disadvantage were to predict attempts at political finance reform, the most likely jurisdiction would be Western Australia, where the ALP has consistently and sometimes very substantially raised less than the Coalition. Tasmania also seems to be a likely candidate for this motivation because this is the only polity in which the ALP’s income is declining relative to the center-right. The Tasmanian ALP began the millennium with an income twice that of the Tasmanian Liberals but now brings in less than they do. In Victoria, like Western Australia, the disadvantage is stable but much smaller. In New South Wales, left and right have maintained financial parity. A slight but noticeable decline in the ALP’s position appears to begin in 2008, more or less contemporaneously with the emergence of reform proposals. This is probably too early to indicate that the party’s financial situation could have acted as a motivation for the introduction of reforms. In the Commonwealth and Queensland, the ALP’s position oscillates between parity and a massive advantage. Queensland has seen a drastic and so far sustained fall in the ALP’s income relative to that of the NationalPage 137 → Liberals since 2007. This could explain the emergence of reform proposals in Queensland ALP from 2009 onward. Overall, the evidence that the timing of the ALP’s reform initiatives is motivated by a fundraising “arms race” is weak. Page 136 → Table 4.1. Political Finance Reform Initiatives (non-exhaustive) Year, Jurisdiction Status month 1981 NSW Law 1984 Federal Law 1989 Federal Law 1989 Federal Proposal 1989 Federal Proposal

Parties

Reform

Labor Labor Labor Labor Labor

Disclosure Disclosure and public funding Close some disclosure avoidance loopholes Free broadcasting time Ban advertising, funding for states linked to disclosures

1989 Federal

Proposal

1990 Federal

Proposal

1998 1999 2004, 9 2005

Federal Federal

Law Bill

Democrat Close some disclosure avoidance loopholes Labor, Liberal split but Ban advertising, funding for states linked to disclosures eventually prodisclosure Liberal Remove disclosure of campaign expenditure Liberal Increase corporate disclosure threshold to $10,000

Federal

Proposal

Democrat Revise donation rules

S. Australia Proposal

Labor

Ban on donations

2005, Tasmania 9 2006, Federal 10 2008, Federal 3 2008, 10 2008, 8 2008, 6 2009, 7 2009

Proposal

Green

Introduce state-level laws on political finance

Law

Liberal

Increase corporate disclosure threshold to $10,000

Proposal

Labor

Reduce threshold to $1,000

NSW

Law

Labor

Disclosure of developer donations

Federal

Proposal

Labor

Wide-ranging

NSW

Law

Labor

Rules on developer donations

QLD

Proposal

Labor

Ban on selling access

QLD

Proposal

Labor Ban on donations over $1,000 Labor pro, Liberal Twice-annual disclosure con

2010, Federal 6 2010, QLD 6 2010, QLD 8 2010, Federal 9 2010, Federal 8 2011, Tasmania 2 2010, NSW 11 2011, ACT 1

Proposal Law Proposal

Twice-annual disclosure Labor

$1,000 cap

Labor pro, Bill Liberal $1,000 cap and ban on foreign con Former leader supports ban on corporate and union, current leader Response Liberal signaled possible agreement if labor-aligned organizations also included Proposal

Labor

Ban on donations

Law

Labor

$5,000 cap and expenditure caps on third parties

Agreement

2012, Victoria 2

Proposal

2012, NSW 2

Proposal

Labor and $50,000 cap Liberal Labor pro, Liberal Disclosure threshold to $1,000 con Liberal, Ban on corporate and union donations Green

Note: The Democrats regularly won Federal Senate seats but have effectively been replaced by the Greens. Fig. 4.1. Relative Income of Australian Parties (Source: Australian Electoral Commission.) Labor tends to regulate at the end of a parliamentary term. The emergence of fundamental reform proposals coincided with the emergence of Kevin Rudd as Australia’s most popular leader in 2007 and the first ALP victory in a Commonwealth election since 1993. Early in its term, the Rudd government published a bill proposing the end of business funding of Australian politics. The Rudd government’s proposals were also a

reaction to the Wollongong scandal in New South Wales (NSW). They sought to lower the threshold raised by the Coalition and much more significantly suggested the introduction of a cap (O’Brien and Hannan 2008). The Coalition blocked these proposals in the Senate (Coorey 2008); they were then reintroduced in the House of Representatives (Canberra Times 2009). Malcolm Turnbull, the leader of the federal Liberals, suggested that his party would support a restriction of donations to individuals—that is, a ban on both business and union financing of politics (Parnell and Bita Page 138 →2009). Many observers think that larger businesses are increasingly unlikely to donate and will only contribute to both parties. This decline of donations from big businesses is mentioned as a motivation for the Liberals’ offer of a ban on both business and union donations (Hewett 2009). However, there is some evidence that the bigger the company, the larger the relative share of Labor (McMenamin 2008, 386). Nonetheless, there is little doubt that in the last few decades, the Liberals have lost their total monopoly on fundraising among the business sector. The two major Commonwealth parties reportedly reached an agreement on “new restrictions on donations,” but the issue disappeared from the political agenda and was not a feature of the 2010 general election (Epstein and Millar 2010). The unions and some ALP parliamentarians apparently thought that a cap would damage their interests, so the initiative was dropped (Priest 2011). In the 2010 general election, Julia Gillard and the ALP failed to win a majority but returned to government with the support of the Greens and independents. One of the Greens’ conditions was reform of political finance (Priest 2011), and Gillard promised a parliamentary inquiry on the issue. Small parties had an obvious interest in putting an end to business donations, which give an advantage to the large parties. Perhaps this began to change in 2012 when the Greens accepted the largest donation in Australian political history: $1.68 million from the founder of an Internet company (Atkins 2012). When little progress was made, the Greens threatened to introduce their own bill to force a reaction from the government. The Gillard government avoided the issue of bans and instead improved disclosure by reducing the limit to $1,000 and removing the loophole whereby amounts donated to the parties were not totaled across jurisdictions. The Coalition denounced the move as favoring the ALP and exposing donors to “intimidation and harassment” (Millar and Butt 2012). The New South Wales reform episode began in February 2008 with the eruption of a scandal in the town of Wollongong described as a “soap opera” (Frew and Besser 2008) and the “plot of a bad detective novel” (Ferguson 2008). The incident centered on exchanges of sex and money for planning permission but reached upward to implicate four state ministers, prompting promises of fundamental reform from NSW premier Morris Iemma, who said he wanted to ban donations outright. Instead, his ALP government introduced a minor reform to increase the frequency of disclosure and require councilors receiving donations from developers to absent themselves from meetings discussing planning applications by the donor/developer (Manning and Carapiet 2008). Iemma’s successor, Nathan Rees, also backtracked from this commitment, citing constitutional Page 139 →concerns. Instead, he said the issue of major changes in political finance regulation would have to be tackled at the federal level (Sydney Morning Herald 2008). Two years later, an ALP government under Kristina Keneally struck a deal with the Green Party. On January 1, 2011, the NSW law limiting donations to five thousand dollars came into force (Wilson and Kitney 2011). This was done close to an election at which the NSW lost power for the first time in sixteen years. The new government under Barry O’Farrell introduced a ban on donations from any source other than individuals on the electoral roll, a move denounced as favoring wealthy Liberal supporters (Tovey 2012). The measure required the Greens’ support in the upper house before it finally passed (Tovey and Nichols 2012). Unions have challenged the law in the High Court, saying it violates freedom of expression (AAP 2013). The Queensland ALP endured a succession of money and politics controversies before undertaking reform (Courier Mail 2012). In January 2007, a former minister, Gordon Nuttall, was charged with corruption over a secret three-hundred-thousand-dollar loan from a mining magnate. In July 2009, he received a seven-year prison sentence. In the same month, the premier, Anna Bligh, announced a green paper that proposed banning the sale of access, particularly targeting expensive dinners attended by donors (ABC 2009). The crime and misconduct commissioner also stated that he would instigate research on the practice of selling access, an issue about which his predecessor, too, had previously expressed concern (Wardill and Wenham 2009). Furthermore, Bligh called

for a ban on donations at the federal level, a plan that the federal Liberal Party denounced as dangerous and biased (AAP 2009). However, the Greens welcomed the proposal. Bligh’s attempt to end the systemic link between access and fundraising very quickly hit resistance from the Queensland ALP. She had to make an exception for “Business Observer” programs organized by the party (Parnell and Bita 2009). Instead of waiting passively for a Commonwealth initiative, Bligh tried to move the federal government into action, in particular by stating that her government would introduce a €1,000 cap within nine months unless a similar measure was taken by the national government (Viellaris 2009). The Queensland Liberals denounced this plan as biased, even though it would have capped both union and business donations. They said that the ALP could count on a much better return on its investments than the Liberal Nationals (Lappeman 2009). When Bligh’s political reform bill was finally published in the August 2010, it made no reference to donations (Wardill 2010). Nonetheless, the Bligh government published an April 2011 bill introducing a cap of five Page 140 →thousand dollars for business donations to parties and two thousand dollar to candidates (Australian Government News 2011), but unions were capped at five hundred thousand dollars (ABC 2012). These restrictions applied only to the campaign period. An opinion poll suggested that the reputation of the ALP and Queensland remained tainted after these reforms (Wardill 2011), but there is no time series for the relevant questions. This reform was introduced prior to a disastrous election in which the ALP registered the worst performance of an incumbent government in Queensland history, retaining only seven seats. The new Liberal National government has mooted rescinding the Bligh reforms because they are ineffective and biased toward Labor and perhaps replacing them with a total ban on donations (Wardill 2013). In two out of three reform episodes, fundamental reform was not enacted or seemingly intended until the end of a parliamentary term. The laws in Queensland and New South Wales came after the emergence of a reform agenda in the Commonwealth. However, the Wollongong scandal clearly put reform on the agenda in New South Wales and at the national level. Moreover, in Queensland, the Nuttall case surely provides a substantial explanation for the timing of Bligh’s proposals on political finance reform. Labor seems more likely to regulate when it is unpopular. NSW and Queensland undertook major reforms in periods of deep and sustained unpopularity. Prime Minister Rudd brought up political finance reform while still riding high in the polls but did not bring anything to enactment. His successor, Gillard, who enjoyed much less popular support, introduced minor reforms. There is mixed evidence on the relationship between Labor’s reform initiatives and its dependence on union finance. Figure 4.2 shows the ALP’s dependence on union funding in the Commonwealth and the six states. The Commonwealth appears to be a substantially different funding environment for the ALP in that income from unions has always constituted less than 10 percent of overall receipts. Therefore, moves to reform political finance at the federal level would not appear to be motivated by Commonwealth electoral competition. However, since Commonwealth law can set a minimum standard for the states, it could be aimed at providing the ALP with an advantage in the states. In the five largest states, unions contribute at least 10 percent of the ALP’s income. New South Wales exhibits the greatest volatility, having exceeded 30 percent in 2011. South Australia’s ALP managed similarly large percentages in 1999 and 2000 but now relies on unions for only 10–15 percent of its income. Tasmania is an outlier. It fell below 10 percent in 2000 and has stayed below Page 141 →that level ever since. No state has an obviously increasing or larger financial dependence on unions. Therefore, this aspect of party finance should not be able to identify where reform will begin. However, the low union dependence in Tasmania and the decreasing union dependence in South Australia mark these two states as unlikely innovators in political finance regulation. These two smaller states have shown little inclination to introduce their own reforms. Instead, they passively await developments at the Commonwealth level.

Note: Due to changes in disclosure rules over the sample period, this analysis uses only contributions of more than $9,999. The Australian Electoral Commission does not treat union contributions separately. The measure was constructed from coding 16,075 reported contributions. Unions were defined narrowly, excluding workingmen’s clubs, trusts, and funds. Labor is not more likely to regulate when doing so is in the leadership’s interest. The Australian Labor Party has had five leaders during the sample period. Kim Beazley served from 1996 to 2001 and from 2005 to 2006. He is from Western Australia and was affiliated with the Right faction in the ALP. Simon Crean led the party from 2001 to 2003. He is a Melburnian and former president of the Australian Council of Trade Unions. Mark Latham held the leadership from 2003 to 2005. He is from Sydney. His Page 142 →book Civilizing Capital was an ideological statement of Third Way politics. Kevin Rudd was leader from 2006 to 2010 and prime minister from 2007 to 2010. He hails from Queensland and has been perceived as pro-business and pragmatic on the issue of donations (McCullagh et al. 2009). He espouses a Third Way ideology. His minister, Julia Gillard, rolled back some of the Howard government’s reforms in industrial relations. Rudd’s popularity contributed to the ALP’s success in attracting business funding before the 2007 general election (Anderson, Tingle, and Breusch 2007). Gillard was leader and prime minister between 2010 and 2013. Her state political career was based in Victoria, which is not distinctive in its union dependence but is a state where the ALP has not enjoyed the same financial advantage over its competitors as other state branches. She is nominally a member of the Left faction of the ALP but is perceived as ideologically centrist. She piloted a bill that undid some of the labor market reforms of the previous Coalition of the Liberals and Nationals. The reform push took place under Rudd and Gillard. It does not appear that their state background, general ideological position, or specific relationship with the unions differed sufficiently from their predecessors to motivate a move to reduce business influence and increase union influence within the party.

Reform and Political Discourse Identifying interests is relatively straightforward using previous research on the funding of the parties and obvious data on executive and legislative power as well as opinion polls. Observers often remark that discourse is subtle, elusive, and difficult to measure. A less noticed problem is the selection of cases. Much research studying political discourse selects on the dependent variable. Scholars identify different outcomes of interest and then investigate the nature of accompanying discourse. In the Australian case, it is easy to find discourses accompanying each scandal and each reform. Indeed, any political change must be presented in some discourse, and it is hard to imagine discussion of reform of political finance without reference to episodes that are alleged or widely accepted to be scandals. Looking for discourses that accompany scandals and political finance changes is an excellent strategy for generating theories but is problematic for theory testing, which generally requires selection on different values of the independent variable. This chapter confronts this issue by using keywordPage 143 → searches of newspapers across the period to identify variation in discourse. The searches were performed on all Australian news sources in Nexis-UK from 1995 to 2012 (inclusive). This is dominated by newspapers, which are mostly based in a single state but also includes newswires and transcripts from the Australian Broadcasting Corporation (ABC). The search terms were Australia and politics and donations and Australia and politics and donations and corruption. Experiments with slightly different terms were unsuccessful, either producing too few articles or exceeding the maximum of three thousand. The concentration on donations is justified by the permissive nature of the Australian political finance system. The restriction or banning of donations from corporate or union sources dominated the public and debate and politics of regulation in this period. Monthly counts of the number of articles returned provide measures of the prominence of the issue and the extent to which it was perceived as a serious problem, as denoted by the term corruption. Figure 4.3 shows an increase in coverage of political donations, but this increase was abrupt, not gradual. February 2008, when the Wollongong scandal broke, appears to be a turning point. In December 2007 and January 2008, 79 and 68 articles appeared, respectively. In February 2008, however, the number jumped to 289 and remained above 200 for three months; in subsequent years, that figure again topped 200 in several months. The Wollongong scandal contributed to an increase in the coverage of Australian political finance that was sustained,

albeit unevenly, until at least the first half of 2012. The Nuttall case in Queensland made a smaller impression on the coverage of political finance, perhaps because bribery and secret loans were hardly problems that would be solved by a ban on donations. January 2007, when he was charged, featured very little coverage, only 54 articles, and even the month of his conviction registered only 147, which does not constitute a noticeable spike. The largest number of articles appeared in March 2012, with many of them relating to Bligh’s allegations that Liberal National Party leader Campbell Newman had granted favors in return for developer donations (ABC 2012). There is less evidence that the Wollongong scandal also marked a medium-term shift in the quality as well as the quantity of discourse about Australian political finance. Nonetheless, a change is noticeable in figure 4.4. After February 2008, a massive jump occurs in the proportion of articles associated with the word corruption. In December 2007 and January Page 144 →2008, the percentages are 6 and 4, respectively. The percentage rises to 38 in February and to 41 in March; it remains above 10 percent for a whole year. The Nuttall conviction also coincides with an increased association of corruption with articles on donations and politics. The percentage stays over 20 percent for five months after July 2009. The corruption scores are more volatile, at least partly because of smaller numbers, but the effect of the scandals appears to dissipate rather quickly: there is no percentage over 10 between March 2011 and March 2012. The data indicate that Wollongong had a greater potential to influence political finance reform. FebruaryPage 145 → and March 2008 are the only months that appear in the top six for both the number of articles on donations and the proportion of articles referencing corruption. Fig. 4.3. Prominence of Political Finance in the Australian Media Note: Number of articles returned monthly searching on Australia, politics, and donations in Australian sources on Nexis-UK. A large proportion of the returned articles are irrelevant. However, there is little reason to think the proportion of irrelevant articles should vary hugely from month to month and even less to think that it should increase systematically over time. Another issue is that an increase in the number of articles returned over time could reflect more articles about Australia or Australian politics than about the topic of donations. Unfortunately, this is hard to test because Nexis will not return more than 3,000 articles. Looking at the annual minima suggests that this problem does exist but that it is relatively minor and should not change the interpretation of monthly spikes. Fig. 4.4. Corruption and Political Finance Coverage in the Australian Media Note: Number of articles returned monthly searching on Australia, politics, donations, and corruption as a proportion of those in figure 4.3. In contrast to the overall figure, there is no problem with a time trend related to articles in the database. Moreover, searches using these keywords return fewer irrelevant articles. In every case of potential reform, Australian politicians adopted a discourse that had been present for at least the previous twenty-five years. Labor’s reforms have been justified by a standard and widespread discourse that is not specific to the party. Throughout this period, there has been a discourse that associates business financing of politics with corruption, especially through the system of access, which is legal and familiar to politicians but appears outrageous to many commentators and presumably to many citizens. Putative Labor reformers have repeated this discourse, sometimes giving it a partisan spin to suggest that the problem is greater for the Coalition than it is for the ALP. The Bligh reforms in Queensland and the Keneally reforms in New South Wales were introduced by governments and premiers that were perceived as pro-business Page 146 →and had assiduously sold access through their long terms in power. Once again, the federal reform push seems to differ. Rudd and his government were new to power and therefore did not have such a clear association with the system of access, although this statement is relative, not absolute. The ALP under Rudd was more successful in selling access than it was under Rudd’s less popular predecessors, who never served as prime minister. The political finance reform agenda was led at this time by a special minister of state, John Faulkner, an elder statesman of the ALP and member of the Socialist Left faction. He also introduced other reforms in the area of political ethics. So Faulkner probably owned the discourse on corruption and business financing of political parties in a way that other senior ALP politicians did not. Similarly, the Greens, who made reform in this area a condition for supporting Gillard’s government, were associated with this discourse. Of course, the Faulkner reforms were stymied by

resistance from within the ALP, and the Greens eventually had to settle for Gillard’s offer to increase transparency rather than restrict donations. The Wollongong scandal had a substantial effect on the quantity and quality of discourse on political finance. Therefore, had a major reform taken place in NSW directly thereafter, it could plausibly be linked to normative change. However, the Iemma government did not carry through on its promise to enact substantial change. Fundamental reform came only at a later date, when an unpopular ALP was facing electoral defeat. Thus, an interest-based interpretation is much more convincing for this legislation. Similarly, in Queensland, the Nuttall conviction must have motivated Bligh’s adoption of the political finance issue and her radical proposals for her state and all of Australia. Her government also initially passed relatively minor reforms, waiting for two years to enact fundamental reform as electoral defeat loomed. The spike in the corruption discourse in 2011 appears to reflect the role of the government in setting the agenda, as this was the time of the introduction of the new laws in NSW. Overall, scandals affected discourse, including that of politicians, but normative change made at most a minor contribution to political finance reform in Australia. There is insufficient evidence to make any claims about the interrelationships among scandal, interests, and political finance reform. The 2010 NSW and Queensland episodes seem to be an example an interest-based reaction to scandal (see Young, this volume), as the ALP scrambled to mitigate the damage to both its popularity and finances. However, it is difficult to separate this from the straightforward interest-based hypothesis about Labor regulating when it is unpopular. The federal level is harder to interpret. Opinion polls offer some evidence that the Rudd government enjoyed a Page 147 →honeymoon period in regard to evaluations of its political ethics, which would be consistent with an argument that scandals offered the ALP an opportunity to attack the Liberals’ revenue (McAllister, Pietsch, and Graycar 2012, 17). Overall, a series of very specifically worded polls would be needed to begin to test this hypothesis, and these sorts of data are not available. Similarly, it is also difficult to adjudicate whether political finance reform is motivated by scandals’ impact on the parties’ revenue from business.

Conclusions This chapter offers very strong confirmation of an interest-based explanation of reform in Australian political finance. The disclosure, restriction, and banning of business donations is in the interest of the Australian Labor Party, which has many times introduced reform proposals. Partisan interest also appears to explain the timing of the ALP’s reforms. Since the ALP can attract business contributions while in government and/or popular, it has delivered on its numerous reform promises only in the context of defeat in an impending election. Much as Michael KoГџ (this volume) argues for Sweden, France, and Germany, my analysis offers quite strong evidence against the notion that scandals drove normative change which in turn drove reform of political finance. The Wollongong and Nuttall scandals appear to have had a substantial effect on Australian discourse in relation to political finance. However, this normative change does not appear to explain regulatory changes. The Australian case confirms the literature’s argument that in majoritarian systems, political finance is likely to be treated as a competitive issue. It does not confirm the literature’s argument that scandals can precipitate reform—they appear to have played a relatively minor role in Australia. Different reforms are unlikely to be explained satisfactorily in an identical fashion. Public funding is perhaps quite a different dependent variable to the regulation of private funding. Public funding can be biased toward larger or smaller parties, but basic principles of democratic equality mean it has to be shared equally among similarly sized parties. This is, of course, not the case for private funding. Therefore, the regulation of private funding is more likely to be dominated by naked interests and less likely to be transformed by a consensus on a new discourse. This chapter has concentrated on the ALP for good reasons. Except in reaction to ALP legislation, the Liberals have initiated only one change, and it was to brazenly raise the disclosure threshold in 2006. Nonetheless, Page 148 →the last-gasp changes introduced by ALP governments in Queensland and New South Wales may have set off an interesting dynamic. Such ALP legislation disadvantages the Coalition. The center-right is then faced with two ways of restoring balance: deregulate to restore the status quo ante or regulate further to ban union donations.

The Queensland government has mooted the former, while the NSW government did the latter, but the High Court ruled the measure unconstitutional (Roth 2014). Moreover, the Commonwealth Liberals have also on occasion hinted that they would consent to a total ban on both business and union financing of parties. The ALP’s approach to political finance regulation has been hardheaded and instrumental. It is possible that a more subtle relationship between norms and interests lies behind the contemporary Liberal stance.

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Tovey, Josephine, and Sean Nicholls. 2012. “Greens Clinch Vote on Electoral Funding.” Sydney Morning Herald, February 16. Page 151 →Viellaris, Renee. 2009. “Canberra Takes Note as Bligh Toughens Up on Party Donations.” Courier Mail, November 11. Wainwright, Robert. 1992. “Criminal Probes on Three Ex-Premiers.” Advertiser, October 21. Wardill, Steven. 2010. “Bligh Bills Go Soft on Political Donations.” Courier Mail, August 2. Wardill, Steven. 2011. “Taint of Rot Resisting Reforms.” Courier Mail, June 10. Wardill, Steven. 2013. “State Considers Dumping Compulsory Voting.” Courier Mail, January 3. Wardill, Steven, and Margaret Wenham. 2009. “Dirty Dozen—Fitzgerald Savages Labor’s Ten Years in Power.” Courier Mail, July 29. Weller, Patrick, and Jenny Fleming. 2003. “The Commonwealth.” In Australian Politics and Government, ed. Jeremy Moon and Campbell Sharman, 12–40. Cambridge: Cambridge University Press. Wilson, Lauren, and Damon Kitney. 2011. “New Laws add $4.5 Bn to Economy.” Weekend Australian, January 1. Young, Sally, and Joo-Cheong Tham. 2006. Political Finance in Australia: A Skewed and Secret System. Canberra: Australian National University.

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5 | Britain’s “Stop-Go” Approach to Party Finance Reform Justin Fisher In the 1950s and 1960s, it was argued that British economic management was characterized by “stop-go economics.” This entailed expansion and contraction of the economy to control inflation and maintain full employment. At the time, this was a deliberate policy, but this kind of economic approach ultimately became seen as a contributory cause of Britain’s postwar political problems. Economic policy is not the subject of this chapter, but the phrase stop-go has become a useful way to characterize Britain’s approach to party finance reform since 2000. By that, I mean a policy area without any clear direction, consistently producing outcomes that contradict the previous policy goal. Until 2000, British political finance was subject to a remarkable lack of regulation. Since then, two pieces of legislation have changed the regulatory landscape considerably. However, the “problem” of British party finance has refused to go away. Far from solving the “problem,” the Political Parties, Elections, and Referendums Act (PPERA, 2000) has led to two government-sponsored inquiries, both of which recommended significant further reform. The result is that Britain has developed a “stop-go” approach to reform, whereby reviews are entered into with reforming zeal only for the ensuing proposals to be shelved by a failure of the main political parties to reach agreement. Unlike the United States, which has experienced a deregulation of party finance since 2000, Britain has experienced growing levels of regulation, with relaxation occurring only in terms of declaration thresholds. Indeed, only the stop-go approach has prevented political finance from becoming subject to even greater regulation. Prior to PPERA, which came into force in early 2001, Britain was subject to a remarkable lack of regulation, with the principal piece of legislation originally passed in the nineteenth century—the Corrupt and Illegal Practices (Prevention) Act (1883). This measure capped candidate campaign spending at constituency level Page 153 →but imposed no limits on party campaign spending at the national level, no required reporting of donations, no bars on any kinds of donations (such as foreign donations), and no institutional oversight of party finance. While Britain may have been an early regulator of political finance, by 2000 it had notably less regulation than other Western democracies. Three principal problems resulted. First, there were increasing concerns with aspects of fundraising by the parties; second, there were increasing disparities in terms of party income; and third, the costs of party activity were rising, but the parties’ incomes were not keeping pace (Fisher 2000; Clift and Fisher 2004). PPERA introduced extensive changes and represented the most radical reform of political finance since 1883. The measures implemented almost all of the recommendations of the Fifth Report of the Committee on Standards in Public Life (1998). The most important of these reforms were regular declaration of donations; a ban on foreign donations; limits on national election campaign expenditure; a standardization of the starting point for the regulation of candidate election expenditure; and the establishment of the Electoral Commission to regulate and enforce the legislation. (For a detailed discussion of the legislation, see Fisher 2001a, 2001b; Clift and Fisher 2004.) In many respects, PPERA worked surprisingly well—genuine abuse of the system and loophole-seeking remained comparatively modest. Yet the “problems” of party finance did not entirely disappear. First, the new transparency rules generated more stories about party finance and therefore more public (or at least media) unease (Clift and Fisher 2005, 250). Second, national spending limits did not reduce the parties’ demand for money, especially given the increase in the number of elections following devolution in Scotland and Wales as well as the re-creation of London government. Parties face a bigger challenge in raising money between rather than at the time of general elections. This has two consequences. All parties periodically find themselves in debt, not necessarily from profligate spending but rather from the need to maintain their organizations. And, as figure 5.1 shows, national spending limits have not reduced the main three parties’ demand for money. In addition, the decline of other forms of

party income has made large donations a far more significant funding source for the two larger parties, leading to concerns about potential gains or leverage that such donors might enjoy (Fisher 2004, 408–9). The evidence for the existence of such leverage is very thin, but if these concerns persist, they may undermine public confidence. Third, after 2005, some regulatory aspects of PPERA faced challenges. Page 154 →In the build-up to the 2005 campaign, the Conservatives and the Liberal Democrats appeared to challenge the spirit of the 2001 legislation (Fisher 2005). The Conservatives had received a number of loans, rather than donations, in excess of ВЈ1 million. With loans, no declaration was required, provided they were made at commercial rates, thus challenging the principle of transparency in party funding established by PPERA. Moreover, some of those who made loans to the Conservatives could not have made donations because they were not eligible to vote in British general elections. For their part, the Liberal Democrats received donations in excess of ВЈ2.4 million from a company whose registered address was in London and from whom no accounts had at the time been filed. No breach of the law had occurred, yet the benefactor actually resided in Majorca, thus challenging a principle laid down in PPERA—the ban on overseas donations. Fig. 5.1. Central Expenditure as a Percentage of Income, 1989–2012 Labour had also sought loans rather than donations, and in 2006, it emerged that a number of those making the loans had subsequently been nominated for political honors. The House of Lords Appointments CommissionPage 155 → subsequently rejected all of the nominations, but the resulting “loans for peerages” episode saw a number of arrests and police questioning of the prime minister, though no charges resulted (Fisher 2010, 783–84). The government acted swiftly to close the loans loophole by tagging a provision onto the Electoral Administration Bill, which came into force in the autumn of 2006. However, party funding episodes continued to occur, resulting in the resignations of Labour’s general secretary, cabinet member Peter Hain, and Scottish Labour leader Wendy Alexander following alleged irregularities in the reporting of donations (Fisher 2010, 785). Moreover, donations to the Conservative Party by a company whose owner was nondomiciled for tax purposes continued to disturb many in the Labour Party (Fisher 2010, 787). A fourth problem occurred in respect on candidate spending limits. A number of local Conservative parties fighting marginal seats were recipients of so-called “Ashcroft money,”1 whereby significant sums were contributed and used for campaigning by Conservative challengers before the regulated campaign period at the constituency level began. In this and other seats where the Conservatives were spending heavily, it was argued that election results were being affected, and academic research lent some support to this thesis (Johnston and Pattie 2007). In effect, PPERA’s attempt to introduce clarity to the rules for constituency spending was undermined by the overly short official campaign period (the four to five weeks following dissolution).

Drivers of Further Reform Policies, practices, and regulations may be regarded as institutions when viewed through an institutionalist lens. When considering explanations for institutional change, there are two stages. First, it is necessary to consider the drivers for the consideration of reform. The nature of institutions is their apparent stability—institutions endure. So an important first step is to consider why that stability might be challenged. The second stage involves explanation of the paths taken in any proposed reforms. It is important to establish the extent to which, for example, existing norms or practices shape the reforms that are undertaken. Both stages are especially pertinent in the case of British political finance. Overall, despite the relative newness of PPERA and the extensive changes it introduced, two government-sponsored reports proposed further reforms, and in 2013, a less high-profile report suggested similar measures. Yet significant change Page 156 →has not occurred. In light of PPERA’s significant overhaul of party finance legislation, why have further reforms been attempted (the drivers for reform), and what has shaped the options put forward? Recent literature on party finance reform helps to create a theoretical understanding not only of the answers to those questions but also why the British case has followed the stop-go pattern. Clift and Fisher (2004) identify a series of drivers for reform through institutional change. The first is intentional

design by strategic agents, which is likely to occur when existing rules no longer serve the interests of dominant actors. This idea assumes that rational actors design institutions to serve their own interests. Thus, party finance reforms will be designed to primarily benefit either the ruling party at the time of their inception or dominant political parties in general. A second driver is evolution. As society develops, selective mechanisms can lead to institutional change or survival. Institutional change here is a form of learning, and institutions adapt, though they have a set of routinized solutions to problems and familiar responses are preferred (Peters 1999, 33). Thus, change in party finance regulation is driven principally by changes in the environment in which parties operate rather than being specific to concerns associated with party finance per se. Third, change may also occur when rules no longer confer legitimacy. Thus, when the institution becomes discredited, change—and even fundamental change—is likely, especially when significant disjuncture occurs between the values professed by an institution and its actual behavior or between society’s values and the institution’s behavior (Peters 1999, 34). The greater the disjuncture, the greater the chance of change. Alternatively, change may occur when existing rules are no longer functional, especially if practices elsewhere present a viable alternative. Thus, an increase in political episodes or scandals associated with party finance spurs changes in regulation. What constitutes a scandal is linked to what March and Olson (1989) describe as the “logic of appropriateness” within each country—values shared by decision makers that extend to norms in behavior. This country-specific distinction becomes very significant when considering “scandals” comparatively, since the “logic of appropriateness” may differ (sometimes significantly) across cases. A fourth theory draws on the idea of policy communities and institutional change. From this perspective, a policy community may change if the resources that each actor possesses change in value relative to other actors. In the case of party finance, we may define a party finance community as consisting of parties and those who support them financially. If Page 157 →the resources of an actor within that community decline in relative importance, the structure of that community may change. New actors can enter the community, or indeed, new arrangements for funding can be explored. Actors’ resources may also reflect changes in levels of political power. Thus, a change in the balance of resources between funders and between funders and parties may lead to changes in party finance regulation.

Theories Shaping Reforms These drivers may help explain what prompts attempts at reform. However, it is also important to understand which paths are ultimately chosen. In so doing, we can further understand Britain’s stop-go approach to party finance reform. A variety of different theoretical perspectives seek to explain the outcomes. The Cartel Model Perhaps the most famous theoretical position (as well as perhaps the most contested) is the cartel party system espoused by Katz and Mair (1995). Their analysis is based on the premise that state funding has grown significantly in many democracies but that the effects of state funding are controlled by dominant parties. Since parties also play the role of governors, they lay out the conditions under which parties are supported by the state and indeed how much they receive. For Katz and Mair, parties effectively “invade” the state and determine the resources to be distributed. In so doing, they seek to ensure their own survival and enhance their ability to resist the rise of alternative parties. Parties cooperate in this process and become “semi-state agencies” (16). From this perspective, therefore, major parties are expected to collude about delivering state funding to protect their position and/or to create regulations that provide such parties with advantages relative to smaller parties and new entrants. The Electoral Economy Model Susan E. Scarrow (2004) uses rational choice theory to arrive at different conclusions from Katz and Mair. While they see parties as revenue maximizers, she argues that rational parties may pursue a different path. Her

“electoral economy” model suggests that parties may seek to gain competitive electoral advantage by actively opposing state subventions even if such Page 158 →a move would be financially damaging. Parties not only seek funds sufficient for their own needs but also consider the effects of state subventions on their political competitors. This viewpoint helps explain why parties that receive individual and institutional donations and thus have less need for state aid have often been among the fiercest critics of state subventions (656). A second consequence of the electoral economy model is that parties may take into account public opinion on issues of state subventions and regulation and take a position accordingly, whether or not that position is financially advantageous to them. Scarrow (2004, 657) suggests that two likely outcomes flow from such patterns. First, when the public is “inattentive,” the political costs of introducing additional public expenditure in the form of state funding are likely to be relatively low. However, the costs rise considerably when there is negative publicity pertaining to party finance (and probably to parties in general). Parties are less likely to support increases in state subventions under such circumstances. But more critically, electoral economy parties may seek to gain competitive political advantage by actively opposing increases in subventions or advocating enhanced regulation, even if this position may cause financial damage to the party. Normative and Historical Institutionalism Clift and Fisher (2004) use forms of new institutionalism—normative institutionalism and historical institutionalism—to explain the paths adopted in party finance reforms. Normative institutionalism emphasizes the norms of institutions as a means of understanding how they function and shape individual behavior. This approach recognizes the “logic of appropriateness,” suggesting that decisions are shaped not by formal structures but rather by the values shared by decision makers. Such ideas also extend to norms in behavior. Actors within institutions develop “appropriate” behavior—acting corruptly or honestly, for example, on the basis of institutional norms. This is likely to influence institutional design. If appropriate behavior is honest, regulation will be based upon trust. If appropriate behavior is not honest, then strict rules are more likely to be applied. The dominant political culture will influence whether rules or trust are more likely to be employed. Normative institutionalism depends more on human agency than structure, because the emphasis on the role of institutions and the transmission of norms stresses how members of an institution behave. However, therein lies a potential weakness with this approach—the definition of an institution (in this case, shared values) may be too broad. In other Page 159 →words, if institutions need not consist of any structures, then there may be a point at which institutionalism is not open to falsification, a concern highlighted by KoГџ (2008, 2011). What can be drawn from normative institutionalism, however, is the notion of “optimality,” a concept based on normative criteria of optimal design. Optimality of party funding institutions relates to the normative institutions that are the political traditions in the particular democracies concerned. The voluntarist tradition of British political finance is one key normative institution. Thus, from normative institutionalism, we would expect two outcomes regarding the kinds of reforms that occur: first, appropriate behavior will determine whether regulations based on trust or rules are adopted, and second, normative traditions will shape the party-funding regime. The key aspect of historical institutionalism is that choices made early in the history of any policy or system determine subsequent decisions. These choices may be normative, of course. Yet while some initial choices will be based on normative values, others will not. Initial choices in a policy field will have an enduring impact—they will shape both the strategies and goals pursued by political actors (Thelen and Steinmo 1992, 8), in a manner analogous to path-dependency. Policy choices depend on the adoption of an initial path. Policy evolution can occur, but developments are constrained by the formative period of the institution (Peters 1999, 65). These constraints are also influenced by historical preferences for certain ideas or core values. Institutions produce sets of ready solutions for policy problems based on enduring ideas. These contribute to limits on what are acceptable actions by governments or institutions. An historical approach suggests therefore that institutions in most cases are not chosen—they evolve so that different actors with different interests build layers, taking as

their starting point not a blank canvas but existing arrangements. Thus, at any one time, only a few areas can be altered. This is because attempts at institutional redesign have been carried out against a backdrop of a set of past practices that have a peculiar set of constraints and possibilities (Goodin 1996, 30). From an historical institutionalist perspective, therefore, reforms are path-dependent based on existing policy options that are judged to have performed successfully. Veto Points, Goals, and Discourse Michael KoГџ (2008, 2011) offers an alternative theoretical perspective, rejecting the normative institutionalism advanced by Clift and Fisher (2004) Page 160 →and instead focusing on three determinants: institutional veto points, parties’ goals, and discourses on political corruption (KoГџ 2008, 284). He suggests that party finance reform is more likely where more institutional veto points are available, particularly if they are available to opposition parties. He also posits the existence of three different veto points: influence points, where actors have the opportunity to express their positions; autonomous decision points, where nonelected actors have relatively autonomous powers; and genuine veto points, which provide actors with the institutional power to approve, modify, or veto policies (286). With regard to party goals, he adopts a variation on Scarrow’s electoral economy model, differentiating among policy-seeking, vote-seeking, and office-seeking parties. He suggests that vote-seeking goals will be a bigger block to reform, since office-seeking parties are more concerned with avoiding attacks on potential future coalition partners (KoГџ 2008, 286–88). The third area—discourses on political corruption—is arguably a less well-developed position and suggests a theoretical flaw. KoГџ argues that “the discourse on political corruption plays a crucial role in shaping parties’ goals in funding regime reforms since it is not only the parties that take part in the debate, but also the wider public which through this discourse influence parties’ positions and thus reform outcomes” (288). This discourse may manifest itself through corruption scandals or a general view about minimizing the risk of potential scandals as a result of attitudes toward parties. Yet while this is a strong argument, it is effectively indistinguishable from the ideas within normative institutionalism, an approach from which KoГџ wishes to distinguish himself. The “discourse on corruption” differs only slightly from the concept of the logic of appropriateness, which KoГџ characterizes as “cryptodeterministic” (285).

Britain’s Stop-Go Approach Assessing the explanatory powers of these different approaches requires first outlining the details of the government-sponsored reviews and the responses to them that have characterized the British experience. The Hayden Phillips Review—A Go Approach The review was commissioned in 2006 by Prime Minister Tony Blair, who asked Sir Hayden Phillips to review the whole basis of party funding, looking not just at the immediate concerns thrown up by the “loans for Page 161 →peerages” affair but at all aspects of party funding: income, expenditure, regulation, and state funding. Despite the highly charged political issue, a great deal of political consensus existed regarding the supposed need for reform in certain areas. All parties, for example, seemed in broad agreement about reducing the sums that could be spent on national campaigns and on extending state provision. The results of the review were published in March 2007 and included eight major recommendations that would have fundamentally changed in British party finance (Fisher 2009).

Recommendations of the Hayden Phillips Review 1. The status quo, in which there are no caps on donations, is unsustainable and therefore donations to parties should be limited. 2. Restrictions on donations should be buttressed by measures to prevent breaches of the new regulations. 3. Expenditure on general election campaigns has progressively grown and should now be reduced.

4. Controls on expenditure by all third parties should be strengthened. 5. The price of a fairer, more stable system of party political financing may be some increase in public funding of political parties. 6. Any increase in public funding should be linked to a recognised measure, or measures, of popular support, and should encourage greater democratic engagement. 7. The public should have access to better, clearer information on the sources of party income. 8. A new funding settlement will present the regulator with fresh challenges. The Electoral Commission must have the powers, the capacity and the practical experience needed to fulfil its new role. Yet despite the consensus for reform in most areas, significant disagreement occurred in two. First, some in the Labour Party feared that any restrictions on contributions (Recommendation 1) could threaten the constitutional link between affiliated unions and Labour. Second, the Conservatives opposed proposals to further regulate and restrict spending at constituency level on the grounds that they would unreasonably burden volunteer party staff. When the review was published these two issues remained unresolved. Given that Phillips (2007, 4) argued that “nothing should be agreed until everything is agreed,” he proposed the establishment of all-party talks (including the Conservatives, Labour, and the LiberalPage 162 → Democrats) to find consensus on the outstanding issues. However, the positions of the Conservatives and Labour became increasingly entrenched, and talks broke down in October 2007 (Fisher 2008a). The Political Parties and Elections Act of 2009—A Stop Approach The government’s response to the Phillips review, Party Finance and Expenditure in the United Kingdom, was published in June 2008. The government supported Phillips’s broad approach yet did not propose implementing the vast majority of his recommendations at that time, indicating that reform would move “at different speeds” (5), though no timetable was given. In fact, the eventual legislation contained only two provisions relevant to party finance that originated in the Phillips review: greater transparency regarding donations and further regulation of candidate spending at the constituency level (Fisher 2010). The legislation required anyone making a donation (direct or in-kind) to a registered party (at either the national or local level) in excess of seventy-five hundred pounds to declare that the donation is from that person rather than a third party. In addition, following up on PPERA’s requirements, the new act provided that anyone making a cash or in-kind donation in excess of seventy-five hundred pounds (or a series of donations totaling more than seventy-five hundred pounds in one calendar year) must declare that he or she is ordinarily resident and domiciled in the United Kingdom for income tax purposes in the tax year in which the donation is made. This provision proved particularly controversial: it was introduced very late, following amendments proposed by Labour backbenchers, and appeared specifically targeted at donations to the Conservative Party by Lord Ashcroft, whose tax status was unclear at the time (but who was subsequently revealed to have had nondomiciled tax status). The government tried to resist the provision, but backbench pressure led to its late inclusion. The act also sought greater transparency regarding donations by unincorporated associations.2 Donations from unincorporated associations—especially but not exclusively to the Conservatives—had grown significantly, and observers were concerned that while any donation from the association to a political party was transparent (provided that it exceeded the minimum declaration threshold), donations to unincorporated associations had no transparency, meaning that such organizations could be fronts for other interests. As a result, the new act stipulated that unincorporated associations making donations (cash or in-kind) or loans in excessPage 163 → of twenty-five thousand pounds in any calendar year to any political parties must declare donations and loans received in the period before during and after that year. To reduce the legal and administrative burden on parties, the act raised the minimum reporting thresholds for cash donations, in-kind donations, loans, or regulated transactions to parties. Specifically, the reporting threshold at the constituency level increased from one thousand to fifteen hundred pounds, while the reporting threshold at the national level increased from five thousand to seventy-five hundred pounds. Both increases were above rises in

the inflation rate. The most significant change in terms of party finance, however, was the new provision for candidate spending. The key change was the introduction of two campaign periods: the “long campaign,” which lasted from up to four months prior to the election through the day that Parliament was dissolved, and the “short campaign, ” which lasted from adoption as a candidate to polling day—in effect, from dissolution. (For details, see Fisher 2010.) This created some very generous spending limits overall. Under the previous system, regulated candidate spending had been limited to around ВЈ12,500 (over the period following dissolution). Under the regulations, a candidate could spend around ВЈ40,000 in 2010. In fact, few did spend that much, though as table 5.1 shows, candidates from the two larger parties were more likely to do so. While the 2009 act did not introduce the bulk of the reforms proposed by the Phillips report, it engaged in some reform, and it is necessary to evaluate the degree of reform to see whether the measure represented a stop approach. Hall (1993) argues that reform can be considered as first-, second-, or third-order change. First-order change is characterized as the changing of policy instrument settings in light of experience and new knowledge while the overall goals and instruments of policy remain the same (278). Second-order changes are characterized by modifications to both the instruments and settings of policy in the light of past experience, but overall goals remain constant (279). Finally, third-order change entails “simultaneous changes in all three components of policy: the instrument settings, the instruments themselves, and the hierarchy of goals behind Page 164 →policy” (279). The 2009 act implemented first-order changes—the policy instrument settings were altered in order to take into account PPERA’s early experiences. Fisher (2009) shows that while the Phillips review represented a considerable challenge to established practices in British party finance, particularly in in the area of proposals to limit donations and to expand state funding, the ultimate government response featured neither of these proposals and fell very much within the exceptional tradition of British political finance, rooted in unrestricted voluntarism. Coupled with the very modest first-order reforms, the act represented a stop approach. Table 5.1. Mean Maximum of Permitted Candidate Expenditure in 2010 (n = 621) % Conservative Labour Lib Dems Short Campaign 66.7 51.0 37.4 Short + Long Campaign 38.2 25.6 19.6 The Committee on Standards in Public Life Report—A Go Approach Soon after the 2010 general election, the then deputy prime minister, Nick Clegg, a champion of radical party finance reform, asked the Committee on Standards in Public Life (CSPL) to again review the whole area of party finance. The committee reported in November 2011 (Committee on Standards in Public Life 2011) and focused on trying to remove “big money” from politics. The report made it clear that difficult choices would have to be made: if the desire was to remove large donations, then caps were necessary, and if caps were introduced, an extension of public funding was the only realistic way of ensuring party survival. The report made twenty-four detailed recommendations, the most significant of which were capping donations, extending state funding, and cutting election expenditure limits. The CSPL report echoed the Phillips report’s recommendation regarding donation caps but went further. Where the Phillips report recommended a fiftythousand-pound cap, the CSPL went for ten thousand pounds, arguing that such a cap would not advantage any party to the extent that the fifty-thousand-pound cap would. As with the Phillips report, the issue of donation caps drew strong criticism from those who felt that a cap on trade union affiliation payments would threaten the Labour-union link. The report proposed that to avoid being caught by the cap, unions should demonstrate that they were in fact making a collection of individual donations by requiring members to both “contract in” to the political levy and declare that some of that levy should be paid to Labour. Historically, this had been a “no-go area”—even Margaret Thatcher’s Conservative government in the 1980s deleted the idea of “contracting in” from its trade union reforms. Thus, this report challenged another key historical tradition:

save for a period between the Page 165 →mid-1920s and the end of World War II, “contracting out” had been in place in Britain since 1913. The report proposed an extension of public funding based on votes not only at Westminster level but also in the devolved elections, adding up to around fifty pence per elector per year. As Scarrow (2004) notes, proposals to increase state funding are more or less difficult to pass depending on public attention, but any proposal to increase public spending on politics during an economic crisis may be problematic. The report acknowledged this difficulty and proposed that nothing should be done until after the 2015 general election. The final key area was election spending: the committee proposed a 15 percent reduction in spending limits despite the fact that since PPERA’s limits had never been adjusted for inflation, they had effectively already been reduced by around 20 percent. Nevertheless, the emphasis on using expenditure caps to reduce the demand for income echoed policy choices made by PPERA, the Phillips report, and even the 1883 act. The Response—A Stop Approach Despite the fact that the report had cost almost half a million pounds to produce, the response from the government was swift: the report was effectively buried on the day of its publication. Speaking for the Conservatives, party chair Baroness Warsi announced, “The public will simply not accept a plan to hand over almost ВЈ100m of taxpayers’ money to politicians.”3 Even Clegg rapidly distanced himself from the report’s conclusions, saying, “The government believes that the case cannot be made for greater state funding of political parties at a time when budgets are being squeezed and economic recovery remains the highest priority.”4 Labour, too, failed to support the report. All-party talks for some kind of deal were attempted, but they explicitly excluded the possibility of an extension of state funding and drew to a close in the spring of 2013 when the government proposed tagging on legislation about trade union payments to Labour to a bill designed to regulate lobbyists. This, then was clearly a stop approach: nothing from the report has been implemented. A Backbench Attempt—A Go Approach In April 2013, three backbench politicians from the largest three parties in Britain proposed a draft bill to reform party funding (Funding DemocracyPage 166 → 2013). While not a government-sponsored review, comparing it with the earlier reviews is instructive. Arguing that there “is widespread agreement that our representative democracy in the UK is vulnerable to the influence of well-financed interest groups and wealthy individuals” (3), the proposals were firmly rooted in the Phillips and CSPL reviews. The 2013 proposals included very similar reforms—donation caps, reduced campaign expenditures, and more extensive state funding—as well as some notable innovations. First, while the CSPL report had suggested delaying implementation until after the 2015 general election, this report favored phasing in donation caps and increased public funding, with a donation cap of fifty thousand pounds (in keeping with the Phillips review) introduced in January 2014 and incremental reductions that would bring it down to ten thousand pounds (the CSPL figure) by January 2023. Moreover, this cap would apply to loans as well as donations. To compensate for the loss of income, state funding would be enhanced, in keeping with the CSPL proposal, but in a phased manner, inverse to the reduction in the cap on donations. And again echoing the CSPL report, the 2013 plan envisaged a 15 percent reduction in campaign spending. Rather than representing just a slow-moving version of the CSPL report, however, the new plan also contained significant additional regulations. First, not only would election campaign expenditures face further limits, but expenditures would be restricted on an annual basis. Second, centrally directed efforts in key target seats would also be limited (a provision that would be almost impossible to enforce but a strategy that parties have been employing, quite rationally, with increasing electoral success) (Fisher, Cutts, and Fieldhouse 2011). Third, far stricter controls on third-party expenditure would be put in place, with parties required to officially distance themselves from third-party campaigns or have them count against the parties’ expenditure limits. While theoretical justifications may arguably have existed for the first two increases in regulatory burden, the desire to regulate third-party spending was rooted in what is presently a purely hypothetical problem. PPERA introduced national-level third-party spending controls (previously only constituency-level activity had been covered), but

that aspect of the legislation has never been tested, since third-party activity has been at a much lower level than many expected. Overall, far from being deregulatory, this report proposed significant increases in the regulation of party finance. Yet the report has to date produced no change whatsoever, not so much via a stop approach but because it has simply been ignored (though the Transparency of Lobbying, Non Page 167 →Party Campaigning and Trade Union Administration Act [2014] has further restricted third-party spending).

Evaluation and Discussion Drivers of Further Reform In keeping with Clift and Fisher’s (2004) theories of reform through institutional change, evolutionary change was a contributing factor to the Phillips review—parties fighting numerous elections with the attendant pressure on costs. In simple terms, the costs of political life were not becoming cheaper, yet the new glare of publicity meant that some previous donors were now unwilling to contribute, prompting the use of loans. Yet this explanation is less compelling with regard to the CSPL and backbench reform attempts, since while the costs of elections continued to create pressures, the potential glare of publicity no longer seemed to deter donors. As Fisher (2010, 789, 790) shows, the Conservatives received more than twenty million pounds in declared donations in the six months before the start of the 2010 election campaign, while Labour received some very large donations from individuals in 2008 although the party’s overall total fell. Second, the loans issue and the adverse publicity surrounding donations was a clear example of the rules seemingly failing to confer legitimacy, resulting in the Phillips review. Yet again, there is less compelling evidence for this explanation for the CSPL or backbench reports. While Phillips was conceived against a backdrop of what was regarded as unacceptable behavior, neither of the subsequent reports had such a prompt. However, the resources of actors within the party finance community had changed. Labour experienced a decline in income, while the Conservatives enjoyed an increase, returning them to the position of the wealthy party (Fisher 2010). Other resources changed, too. First, of course, Labour lost power. Had the Conservatives won a majority, a review of party funding might not have occurred so quickly after the election, reflecting Scarrow’s argument that parties that are financially well endowed (as the Conservatives were by 2010) are less likely to support enhanced state funding. Yet of course, the 2010 election produced not a majority but a coalition with the Liberal Democrats, who have long been committed to party finance reform. The resources within the community therefore changed, as Page 168 →did the personalities within it. Sir Hayden Phillips entered the decision-making community in 2006, followed by Clegg in his role as deputy prime minister after the 2010 election. Yet this explanation does not account for the 2013 backbench report. Neither does the driver of intentional design by strategic agents, though that explanation of precursors to reform does not apply to either the Phillips or CSPL review. That said, the Political Parties and Elections Act, which placed additional regulations on candidate spending, could be seen as intentional design, since it originated in Labour concerns about Conservative precampaign spending. Thus, although it is too early to say definitively whether the backbench report will achieve anything, there is a much greater likelihood that it will not, because there is no particular rationale for its appearance. Were the three politicians who compiled the report pivotal members of the party finance community, the report might point to a change in resources within that community. But they are not. Theories That Shape Reforms Some theories of reform explain both the “go” and “stop” approaches better than others. The cartel party thesis fits the proposals made by all three reports: an expansion of state funding that privileges parties that are more successful in parliamentary elections. (Indeed, the backbench report proposed limiting the availability of state funding to parties with two or more seats in the House of Commons, the European Parliament, or the

devolved assemblies.) Yet the proposal in all three plans to extend the provision based on second-order elections, which in the United Kingdom are fought using variants of proportional representation rather than the majoritarian system used at Westminster, runs counter to a view that the largest parties would seek to exclude most of the smaller ones, since these second-order elections clearly produce outcomes that extend party competition. Of course, none of these proposals for reform were produced by parties (though the backbench report was promoted by politicians from them). When parties interacted with the first two reports, the approach was not one of a cartel. Despite Labour’s falling income by 2009, the party did not legislate to introduce enhanced state funding, while the CSPL report’s suggestion of enhanced state funding was almost immediately dismissed. And the all-party talks that followed the CSPL report explicitly ruled out any discussion of enhanced state funding. Overall, it is difficult to make the case that cartel-like behavior characterizes the British attempts at reforms, at least with regard to extending party funding. Page 169 →The electoral economy model arguably better explains the paths followed. The almost instant dismissal of the CSPL report by the Conservative Party chair, focusing solely on enhanced state funding, closely reflects the Scarrow model—seeking to distance oneself from state funding on the grounds of the claimed electoral benefits of so doing (even if the genuine evidence of public attitudes on this issue is limited). Incorporating Koß’s distinction between vote-seeking and office-seeking parties adds some useful nuance to the understanding of this reaction. As predicted, the vote-seeking party (the Conservatives) were most virulent in their dismissal, while the office-seeking Liberal Democrats (who may seek a coalition with Labour in future elections), through Clegg, were a little more cautious in dismissing the proposals, indicating that the rejection was a function of timing rather than principle. The rejection of the Phillips report was less immediate, but the Labour government’s proposals to implement reforms “at different speeds” indicates a move designed to avoid an anticipated public backlash even though Labour’s finances were in decline. Coupled with the parties’ acceptance of regulatory change that would hardly benefit them relative to smaller parties, including a broad consensus about reducing election expenditure, Scarrow’s model provides a persuasive explanation of the stop approaches. Clift and Fisher’s approach is also instructive. The normative tradition of voluntarism has been protected following both reports, as has Labour’s desire to maintain its normative preference for collective support for parties (through trade unions) rather than the individualized model of party funding proposed by both Phillips and the CSPL. It is true that Labour leader Ed Miliband passed new proposals for a different relationship with the unions and that these reforms resembled those advocated by the CSPL report. Moreover, these changes followed significant concerns over the involvement of a large trade union in candidate selection. However, they are not due to come into full effect until 2019 (Fisher 2013, 2014). In effect, then, the normative institution of voluntarism as the basis for party finance helps explain the rejection of state funding following both government-sponsored reports. This is amplified by the fact that while the Phillips report was drafted following concerns about inappropriate behavior that arguably breached the “logic of appropriateness,” the same did not hold true for the CSPL or backbench reports. Thus, the rejection of the challenge to accepted norms through enhanced state funding following the CSPL was much quicker than was the case with the Phillips review. In terms of historical institutionalism, the proposals in the various reports do not entirely fit in terms of overall path-dependency. Yet in one Page 170 →key area where consensus existed between the parties, the pathdependency approach does fit well. Throughout all three reports, reducing election expenditure was the policy choice to reduce the demand for party income, a policy first implemented in 1883. Indeed, the 2009 act, while creating quite high limits, nevertheless focused on the extended regulation of election spending as a means to deliver reform, just has had been done in 1883 and 2000. Koß’s approach again makes a useful contribution, building on Scarrow’s work. However, the presence of veto points fares less well with regard to political parties. In the case of both the Phillips and CSPL reviews, all parties had the opportunity to express their positions. Moreover, the passage of the Political Parties and Elections Act also featured genuine veto points, including all-party talks. The approach, however, is useful when looking at autonomous decision points, providing actors with autonomous powers to make decisions. As independent reviews of party finance, both the Phillips and CSPL reviews had the autonomy to decide on whichever proposals

they thought appropriate. And in both cases, they opted for similar proposals: donation caps, enhanced state funding, and reductions in expenditures. Yet the nature of the British system is such that the ultimate decision falls with Parliament, thus formally denying an autonomous decision point to these review bodies. As Fisher (2002) points out, resisting the reforms proposed by the CSPL in 1998 would have been difficult, and they were ultimately reflected in PPERA. The CSPL was then at the height of its powers and had been seen to deliver wellthought-out reforms, which governments implemented. By 2011, however, the CSPL’s status had declined. Thus, whereas the committee effectively enjoyed an informal autonomous decision point in 1998, it did not do so by 2011, perhaps helping to explain why the CSPL’s 2011 proposals were not adopted.

Conclusions British party finance has changed considerably since 2000. Not only was PPERA implemented in 2001, but the Electoral Administration Act (2006) and the Political Parties and Elections Act (2009) have further increased the regulatory burden on parties. And each new proposal seems to bring with it further schemes for regulation—caps, third-party controls, trade union political payments. Some of these breach the system of trust rather than rules that has traditionally characterized the British approach to regulating politics (Fisher 2002). This helps further explain why the more Page 171 →extensive regulation in the go approaches has not been adopted. While stop-go characterizes the overall British approach to reform, regulation is fairly steadily increasing, albeit slowly. Perhaps this is inevitable. After all, prior to PPERA, Britain’s party finance was remarkably unregulated. Yet in the case of enhancing state funding, the picture is much more stop-go. Whereas elite opinion among analysts of party funding options appears to have converged on the idea of introducing more public money (just as KoГџ predicts), no similar pattern is evident in public opinion data. Yet many politicians appear to believe that public opinion is hostile. Thus, as Scarrow suggests, this may frame parties’ responses if they behave along the lines predicted by the electoral economy model. This may in part help explain Britain’s stop-go approach—all parties are too conscious of supposed public opinion on this issue. Yet more detailed public opinion research demonstrates both a lack of knowledge about the issue (with large numbers admitting no real knowledge) and contradictory opinions (VanHeerde-Hudson and Fisher 2013). Taken at face value, the only acceptable form of funding of political parties would appear to be membership dues and the kinds of fundraising associated with school parent-teacher organizations, despite the fact that this has never been the reality of funding British parties. However, therein lies the explanatory power of the normative institution of voluntarism. And as long as appropriate behavior is not unduly compromised, the preference among decision-making elites is likely to remain. What, then, may challenge Britain’s stop-go approach? Four possibilities emerge. First, a significant breakdown may occur in the “logic of appropriateness.” If a genuine party funding scandal occurs (as opposed to the episodes that Britain has experienced), this may be a spur. Second, changes in resources within the policy community may matter. A large majority of a new reforming party in government made the reforms of PPERA more likely. Such an outcome is currently less likely, but a coalition between Labour and the Liberal Democrats may move party funding reform forward, just as the Liberal Democrats delivered the referendum on electoral reform through their partnership with the Conservatives. Third, Miliband’s successful reforms of the relationship between trade unions and the Labour Party mean that should donation caps be proposed again in the future, Labour will more easily accept them because trade union affiliation payments will genuinely be classified as a collection of individual payments made positively by members (i.e., as a deliberate contracting-in decision rather than by default, or contracting out). In effect, the principal stumbling block to party finance reform from Labour’s perspectivePage 172 → will have been removed, meaning that other parties’ objections to change and restriction may be more difficult to justify (Fisher 2014). A final possibility may simply be gradual reform delivered by evolution of the political environment so that state funding becomes all but inevitable as traditional modes of party membership and fundraising gradually break down (Fisher 2008a). For now, however, we can expect British party finance to continue to pursue its “exceptionalism” (Fisher 2009) and for stopgo to continue to characterize Britain’s approach to party funding reform.

Notes 1.The term Ashcroft money is now slightly misleading, since while Michael Ashcroft instigated this technique, it has now been adopted by the Conservatives using money from a variety of sources, of which Ashcroft is one. 2.An unincorporated association is not a legal entity but a group of individuals who voluntarily agree to form an organization to accomplish a purpose. 3.See http://www.theguardian.com/politics/2011/nov/22/party-funding-reforms-kelly-report. 4.See http://www.bbc.co.uk/news/uk-politics-15822333.

References Clift, Ben, and Justin Fisher. 2004. “Comparative Party Finance Reform: The Cases of France and Britain.” Party Politics 10 (6): 677–99. Clift, Ben, and Justin Fisher. 2005. “Party Finance Reform as Constitutional Engineering? The Effectiveness and Unintended Consequences of Party Finance Reform in France and Britain.” French Politics 3 (3): 234–57. Committee on Standards in Public Life. 1998. The Funding of Political Parties in the United Kingdom. October, Cm 4057-I. London: TSO. Committee on Standards in Public Life. 2011. Political Party Finance: Ending the Big Donor Culture. November, Cm 8208. London: TSO. Fisher, Justin. 2000. “Economic Evaluation or Electoral Necessity? Evaluating the System of Voluntary Income to Political Parties.” British Journal of Politics and International Relations 2 (2): 179–204. Fisher, Justin. 2001a. “Campaign Finance: Elections under New Rules.” Parliamentary Affairs 54 (4): 689–700. Fisher, Justin. 2001b. “The Political Parties, Elections and Referendums Act 2000.” Representation 38 (1): 11–19. Fisher, Justin. 2002. “Regulating Politics: The Committee on Standards in Public Life.” In Central Debates in British Politics, ed. Justin Fisher, D. T. Denver, and John Benyon, 389–408. Harlow: Longman. Fisher, Justin. 2004. “Money Matters: The Financing of the Conservative Party.” Political Quarterly 75 (4): 405–10. Page 173 →Fisher, Justin. 2005. “Campaign Finance.” In Britain Decides, ed. Andrew Geddes and Jonathan Tonge, 170–86. Basingstoke: Macmillan. Fisher, Justin. 2006. “Research on Proposals for the Funding of Political Parties in the Context of the Electoral Commission’s Existing Responsibilities for the Regulation of Donations to Political Parties.” Report produced for the Committee on Standards in Public Life. Fisher, Justin. 2008a. “Party Funding: Back to Square One (and a Half) or Every Cloud Has a Silver Lining? ” Political Quarterly 79 (1): 119–25. Fisher, Justin. 2008b. “Whither the Parties?” In Constitutional Futures Revisited, ed. Robert Hazell, 249–66. Basingstoke: Palgrave. Fisher, Justin. 2009. “Hayden Phillips and Jack Straw: The Continuation of British Exceptionalism in Party Finance?” Parliamentary Affairs 62 (2): 298–317.

Fisher, Justin. 2010. “Party Finance—Normal Service Resumed?” Parliamentary Affairs 63 (4): 778–801. Fisher, Justin. 2013. “Ed Miliband’s Clause IV Moment?” Political Insight, July 12. http://www.psa.ac.uk/political-insight/blog/ed-miliband%E2%80%99s-clause-iv-moment. Fisher, Justin. 2014. “How Ed Miliband’s Changes to the Labour Party Could Break the Stop-Go Cycle on Party Finance Reform.” Political Insight, April 28. http://www.psa.ac.uk/insight-plus/blog/how-edmiliband%E2%80%99s-changes-labour-party-could-break-stop-go-cycle-party-finance. Fisher, Justin, David Cutts, and Edward Fieldhouse. 2011. “The Electoral Effectiveness of Constituency Campaigning in the 2010 British General Election: The вЂTriumph’ of Labour?” Electoral Studies 30 (4): 816–28. Funding Democracy. 2013. Funding Democracy: Breaking the Deadlock. London.. www.fundingukdemocracy.org. Goodin, Robert. 1996. “Institutions and Their Design.” In The Theory of Institutional Design, ed. Robert Goodin, 1–53. Cambridge: Cambridge University Press. Hall, Peter. 1993. “Policy Paradigms, Social Learning, and the State.” Comparative Politics 25 (2): 275–96. Johnston, Ron, and Charles Pattie. 2007. “Funding Local Political Parties in England and Wales: Donations and Constituency Campaigns.” British Journal of Politics and International Relations 9 (3): 365–95. Katz, Richard, and Peter Mair. 1995. “Changing Models of Party Organization and Party Democracy: The Emergence of the Cartel Party.” Party Politics 1 (1): 5–28. KoГџ, Michael. 2008. “Party Goals, Institutional Veto Points, and the Discourse on Political Corruption: The Evolution of the German Party Funding Regime.” Journal of Elections, Public Opinion, and Parties 18 (3): 283–301. KoГџ, Michael. 2011. The Politics of Party Funding. Oxford: Oxford University Press. March, James G., and Johan P. Olsen. 1989. Rediscovering Institutions. New York: Free Press. Party Finance and Expenditure in the United Kingdom: The Government’s Proposals. 2008. June, Cm 7329. London: HMSO. Peters, B. Guy. 1999. Institutional Theory in Political Science. London: Continuum. Phillips, Hayden. 2007. Strengthening Democracy: Fair and Sustainable Funding of Political Parties. The Review of the Funding of Political Parties. London: HMSO. Scarrow, Susan E. 2004. “Explaining Party Finance Reforms: Competition and Context.” Party Politics 10 (6): 653–75. Page 174 →Thelen, Kathleen, and Sven Steinmo. 1992. “Historical Institutionalism in Comparative Politics.” In Structuring Politics, ed. Sven Steinmo, Kathleen Thelen, and Frank Longstreth, 1–32. Cambridge: Cambridge University Press. vanHeerde-Hudson, Jennifer, and Justin Fisher. 2013. “Parties Heed (with Caution): Public Knowledge of and Attitudes towards Party Finance in Britain.” Party Politics 19 (1): 41–60.

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Part III | The End of the “Regulatory Moment” in Europe?

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6 | Slow Convergence or No Change at All? The Development of West European Party Funding Regimes, 2003–2013 Michael KoГџ In my recent book on the politics of party funding, I argued that West European party funding systems have converged (KoГџ 2011).1 By “converged,” I mean that a cross-party, cross-national consensus about appropriate regulations of party funding has developed. Convergence can be defined, however, as “a process of вЂbecoming’ rather than a condition of вЂbeing’ more alike.В .В .В . In comparative research, therefore, the essential theoretical dimension is temporal rather than spatial” (Bennett 1991, 219). In practice, this means that there are still salient differences among European nations’ systems but that these differences have become smaller over time. This chapter investigates whether party funding regimes in Western Europe still converge or whether the reform era recently came to an end, as has been suggested for North America. Both ideas can claim some plausibility: in Western Europe, state funding to political parties has accurately been referred to as “the carrot which goes along with less welcome transparency requirements” (Scarrow 2006, 636), in turn causing a self-reinforcing process of ever-closer regulation of party funding in return for growing dependence of political parties on state subsidies. In North America, however, the U.S. Supreme Court’s Citizens United v. FEC decision lifted restrictions on contributions to and expenditures by political advocacy groups. Similarly, the abandonment of the public subsidy for political parties in Canada points toward a more liberal and deregulatory approach to party funding (Boatright 2012). The observations of both convergence and the end of the “regulatory moment” rely on public attitudes toward party funding as the causal factor underlying convergence/deregulation. From a convergence perspective, parties respond to public pressure to justify their reliance on the public Page 178 →purse by rendering their income and expenditure transparent. From a deregulation perspective, parties respond to the public preference for less public expenditure and less regulation. To acknowledge the importance of public attitudes, this chapter relies on an analysis of two of each nation’s most well-respected newspapers (“quality newspapers”) to investigate which reforms of party funding were suggested throughout the last decade and whether parties responded to these suggestions. The newspapers selected are assumed to reliably mirror the elite discourse on party funding reform, which is primarily led by nongovernmental organizations (NGOs), experts such as lawyers and political scientists, politicians, and the informed public. This chapter looks at Germany, France, and Sweden, West European democracies in which state funding is an important source of income for political parties but where income and expenditure are transparent to different degrees. These countries represent a “smoking-gun test” (Mahoney 2012, 575–78) for any recent process of convergence or deregulation: if such processes took place, they should be visible here. The next section presents the assumptions underlying a development toward more (or less) regulation of party funding. Subsequently, the party funding regimes of the three countries under investigation are introduced. The empirical section then discusses the descriptive statistics of the newspaper discourse about party funding reform and identifies the major reform projects and their evolution over the period between April 1, 2003, and March 31, 2013. As the conclusion suggests, the evidence is mixed: despite heavy newspaper demand for more regulation (and hence convergence), reforms are incremental at best, and differences persist in transparency of party funding. This leads to the conclusion that the development of party funding regimes is driven by the strategic goals of parties and the institutional environment in which they operate rather than by responses to the public reform discourse.

Why (and Where) Should a (Non)Convergence of Party Funding Regimes Occur? This section applies the explanation for the introduction of state funding to political parties presented elsewhere (KoГџ 2011) to the regulation of party funding in general. Put differently, apart from state funding, transparency

obligations and sanctions are also taken into consideration. In addition, the role of temporal factors for party funding regulation also deserves special attention. Drawing on an actor-centered institutionalist Page 179 →framework (Mayntz and Scharpf 1995), I originally differentiated among three causal factors for the introduction of state funding to political parties: the institutional environment, the strategic goals of political parties, and the public discourse on political corruption. Given the constitutive character of party funding for political competition, state funding depends on a virtual consensus of all major parties (defined as those with parliamentary representation and coalition potential). Such a consensus becomes more likely as parties have more institutional veto points (Kaiser 1997) at their disposal, as parties increase their emphasis on policy- or officeseeking strategies (StrГёm 1990; Scarrow 2004), and as public discourse (Schmidt and Radaelli 2004) on political corruption intensifies. However, this framework only implicitly recognizes the role of temporal factors. Over time, the impact of the discourse on political corruption strengthened. The increasing awareness of and sensitivity to illicit party funding can be explained by the rise of investigative journalism and, more important, by the breakdown of communism, which allowed for a more critical assessment of the performance of democracies as the threat of an alternative to democratic rule disappeared (Heywood 1997, 419). Indeed, NGOs soon began to systematically screen party funding practices and provide best-practice advice. The most important of these transnational initiatives are the recommendation from the Council of Europe Recommendation 2003(3); the ensuing assessments of the Group of States against Corruption (GRECO), an initiative of members of the Council of Europe; and, last but not least, the role played by Transparency International and its national chapters. The assumption underlying this chapter is that if parties initially feel no need to introduce transparency obligations and sanctions (because no institutional incentives exist and/or doing so is not in their strategic interest), then public discourse over time can become sufficient to prompt later reforms in party funding. From this perspective, NGOs, especially those mentioned previously, established new norms of fairness in party funding, which, through an increasingly intensive elite discourse, become more and more important over time until political parties could no longer ignore them and they prompted party funding reforms. Indeed, the introduction of state funding and transparency obligations in France (a latecomer, with reforms starting only in 1988) could be explained mainly by the newly intensified public discourse (KoГџ 2011, 179–203). In this respect, the politics of party funding in Europe are expected to differ remarkably from those in the United States, where ideological polarization prevented any joint response to public demands (see Dwyre, this volume). Page 180 →To create a smoking-gun test for this sufficiency relationship between party funding reform and the discourse on corruption, this chapter analyzes all articles on party funding that appeared in the two major newspapers (one progressive and one conservative) in the period after the initial reform stimulus driven by the newly intensified discourse on political corruption (see also Pujas and Rhodes 1999). This stimulus, which started in the late 1980s, arguably was fully present by 2003, when the Council of Europe published its Regulation 2003(3), which can be regarded as a direct response to the increased awareness of the problem of political corruption and the resulting interest in party funding reform. Therefore, newspaper articles are analyzed for the 2003–13 period. Is there a domestic discourse calling for party funding reform in the countries under investigation here, and more important, do political parties respond to this discourse by tightening transparency obligations and sanctions? This would be an indicator for the convergence of party funding regimes, which increasingly become public utilities (Biezen 2004). Or is there no such discourse and, as a consequence, do parties make no (more) effort to regulate party funding or even deregulate the existing framework? This would be an indicator of the dominance of the liberal approaches toward party funding that characterize the “deregulatory moment” observation. To investigate the explanatory power of these competing claims, I selected three countries where parties heavily rely on state funding but where transparency and sanctions were introduced to different degrees in the early 2000s, not least in response to the intensified discourse on political corruption. In Germany, both transparency and financial sanctions existed; in France, transparency was accompanied by sanctions for formal noncompliance but not for wrongly declared income or expenditures; in Sweden, transparency was virtually absent and sanctions were completely nonexistent. If the convergence argument was right, the latter two countries should move toward

closer regulation—that is, more transparency obligations and sanctions (the stick going hand in hand with the carrot of public subsidies). On the contrary, cuts of public funding to political parties or relaxations of the regulatory framework could be regarded as indicators of deregulation of party funding.

The Party Funding Regimes This section discusses the party funding regimes of Germany, France, and Sweden prior to 2003 as the start of the reform period under investigation Page 181 →here.2 Emphasis will be put on transparency regulations, sanctions, and the income structure of the major political parties. In general, income rather than expenditures is regulated; parties are not allowed to buy radio or television advertisements (with the exception of only local radio and TV stations in Sweden). Transparency Obligations and Sanctions Germany adopted the “transparency option” of party funding regulation (NaГџmacher 2003a, 11). Since the passage of the 1967 Party Law, parties are required to present annual reports, and a comprehensive legal framework with dense transparency regulations and sanctions has emerged (see table 6.1). The president of the Bundestag supervises parties’ compliance with the legal framework. However, the parties also play an important role in Page 182 →this process since the president of the Bundestag depends on their cooperation when investigating suspicious financial transactions. Table 6.1. Transparency Regulations for Political Parties Regulation Germany Sweden France Income since 1968 — since 1988 General — €7,500a caps Cash up to up to €150 donations €1,000 Anonymous up to up to €3,000 donations €500 only Reporting since 1968 between since 1990 duties parties Reporting annually annually annually periods < Disclosure €10,000 of (instantly — —b donors’ < identities €50,000) president Supervising of — CNCCFP & CTFVP body Bundestag Sanctions since 1994 — since 1990 fines: up to 3Г— Financial amount of — forfeiture of state funding (direct, indirect) objected donation

Other

up to 3 years prison

—

suspension of the capacity to finance elections or other political organizations

Source: Adapted from KoГџ 2011, 88. aThis

applies only to donations to single parties (and to candidates).

bThe

CNCCFP publishes summaries of the parties’ annual reports that do not reveal donors’ identities.

In France, an act to regulate party funding was introduced only in 1988. The new framework emphasized income limits and regulation of election campaigns (Clift and Fisher 2004, 689; see table 6.1). Overall, the framework is oriented toward election campaigns and candidates. Limits on expenditures exist for candidates but not for parties. In 1990, the National Commission of Campaigns Accounts and Political Funding (CNCCFP), an oversight institution, was established.3 Since then, donations to parties must be channeled via special financial agents who need to register with the CNCCFP. Sanctions, however, hardly exist: article 4 of the French Constitution guarantees the parties’ freedom and is understood to restrict the CNCCFP’s powers (Clift and Fisher 2005, 247). The CNCCFP may refer cases to an electoral judge, who can apply electoral sanctions (e.g., declare candidates ineligible) as well as financial and penal ones (NaГџmacher 2003b, 132; see table 6.1). However, these sanctions refer only to breaches of formal stipulations, not to wrongly declared income or expenditures. In addition, the Commission for Financial Transparency in Politics (CTFVP) supervises individual officeholders’ statements of assets.4 Candidates face additional sanctions—the loss of state funding, fines up to fifteen thousand euros, and most severely, the forfeiture of the passive right to vote for up to three years and up to one year in prison. As table 6.1 indicates, both parties’ income and expenditures are completely unregulated in Sweden. Political parties are not even defined in law; unlike in France, Swedish parties do not have to register and are not subject to supervision or monitoring by any state authority or other mechanism. Paradoxically, levels of corruption in Sweden are clearly lower than in Germany and France; Sweden was (and still is) regarded as essentially free from political corruption (MГ¶ller 2007, 31). The only real case of party political corruption occurred in 2002, when the Social Democrats’ youth wing fraudulently claimed public subsidies (Nergelius 2005, 476). In Sweden, requiring parties to publicly declare their income and expenditures is regarded as an invasion of their constitutional freedoms. For this reason, parties conclude only voluntary joint agreements on a set of principles to be followed in fulfilling their accounting obligations. The agreement from 2000 was renewed in 2012. However, parties’ annual reports do not follow a uniform format, making comparisons difficult. In addition, the reports cover only the national level and tend to provide only aggregate information (GRECO 2009c, 14). The Social Democrats claim to have a voluntary cap on donations at twenty thousand Swedish krona Page 183 →(twentythree hundred euros) (DN, September 13, 2009). Prior to 2012, no information was given on the identity of individual donors. In the absence of transparency, sanctions could hardly exist. The Commission on Financial Support to the Political Parties only administers the payment of the subsidies and has never rejected an application for state funding (GRECO 2009c, 8). Income Structure This section focuses on the relative importance of different sources of income rather than on absolute numbers. Data for France and Sweden refer only to national parties: subsidies on the regional and local levels (Sweden) and for candidates in parliamentary and presidential elections (France) are not included. Table 6.2 provides an overview for the most recent years for which information for all countries under investigation here is available (2001 and 2002). Because 2002 was an election year in all countries, the data also permit comparisons between income during election and nonelection years. The table shows that election years obviously do not make any major difference to parties’ income structure in any of the three countries. In Germany, income from private and public sources is comparatively balanced. The major sources of income are

membership dues, followed by state funding and donations. A total of 60 percent of the public subsidies are linked to the votes parties receive in elections, while 40 percent are calculated based on their income from membership dues and small donations. Parties that poll at least 0.5 percent of the national vote (or 1 percent in regional elections) currently receive matching funds of .70 euros per Page 184 →vote (.80 euros for the first four million votes) and .38 euros per euro derived from membership dues or small donations up to 3,300 euros. Parties also receive indirect forms of public funding not mentioned in table 6.2, such as subsidies for parliamentary parties and political foundations affiliated with parties. If one takes into consideration income from these sources,5 the income derived from public funding climbs well beyond the 50 percent threshold. Most donations are small or medium-sized (below 3,300 euros). Differences between parties are also small. Even for the liberal Free Democratic Party (FDP), income from large donations was below the 10 percent threshold. Table 6.2. Income Structure of Political Parties, 2001 and 2002 (percent) Germany France Sweden 2001 2002a average 2001 2002a average 2001 2002a average Members 38.8 37.0 36.9 8.1 9.9 9.0 5 4 4.5 Donations 23.8 25.7 24.8 7.1 8.7 7.9 7 11 9.0 Direct public funding 30.7 29.9 30.4 57.1 50.0 53.6 73 64 68.5 Other 6.7 7.4 6.8 27.7 31.4 31.6 15 21 18.0 Source: www.bundestag.de/bundestag/parteienfinanzierung/rechenschaftsberichte/index.html (Germany); SOU 2004, 44 (Sweden); www.cnccfp.fr/index.php?art=220 (France). Adapted from KoГџ 2011, 78. aElection

year.

The French data underlying table 6.2 were compiled for the major parties represented in the National Assembly, the communist PCF, the socialist PS, the liberal UDF, the conservative RPR (as the predecessor of the UMP founded in 2003), and the Greens. In France, state funding is the dominant source of income for all parties. In 1990, genuine and direct state subsidies to political parties were introduced. This money is paid in two installments: first, all parties that put up candidates in more than fifty constituencies are eligible for a reimbursement per vote—currently 1.8 euros); second, parties receive a specific sum (currently 44,210 euros) per seat in both the National Assembly and the Senate. Since 2000, the first installment is curtailed when gender parity among the party’s elected officials does not exist.6 However, this measure seems to have had no specific impact. Between 2003 and 2007, a total of seven million euros remained undistributed in the context of the first installment (GRECO 2009a, 6). Income from donations halved in 1995 when France banned corporate donations. The huge amount of income from sources other than membership dues, donations, and state funding goes back to what French parties’ reports term “income from other political formations”—predominantly groups of officeholders that receive the bulk of their income from the public purse. For this reason, the share of state funding in French parties’ income is higher than displayed in table 6.2 (see CNCCFP 2006, 28). In fact, only the UMP and the PCF receive more than 10 percent of their income from members and donations. Similar to France (and Germany, if indirect subsidies are considered), both membership dues and donations are of minor significance in Sweden, where the state provides the lion’s share of parties’ income. State funding to parties on the national level (partistГ¶d) is proportionally divided among all parties with at least 2.5 percent of the vote. In addition, parties represented in Parliament receive public contributions for their Page 185 →administrative work (kanslistГ¶d). As opposed to the general partistГ¶d, the kanslistГ¶d linked to parties’ administrative duties does not follow a strictly proportional distribution, as all parties receive equal basic payments and opposition parties receive more money per seat. As in Germany and France, the share of state funding displayed in table 6.1 is lower than the actual total because of the omission of subsidies on the local and regional levels, which are more than double the national subventions and of which local and regional party units

pass up to 20 percent on to the national party (see Finansdepartementet 1994, 78–79, 83). As a consequence, only the Social Democrats do not rely exclusively on state funding. They derive significant income from trade unions and lotteries, with the latter comprising about 30 percent of the SAP’s annual income. Traditionally, two center-right parties, the liberal People’s Party and the conservative Moderates, received corporate donations. However, their refusal to accept business donations in 1971 and 1978, respectively, dried up this important income source.

Identifying the Reform Debates This section describes the selection process for the newspaper articles that underlie the analysis of the party funding reform discourse. First, to observe the discourse on party funding regulation over an extended period of time starting with the publication of the Council of Europe Recommendation 2003(3), the period of investigation was defined as the ten years from April 1, 2003, to March 31, 2013. For all countries, articles were chosen from one major progressive (center-left) and one major conservative (center-right) quality daily newspaper (see table 6.3). For Germany, this is the SГјddeutsche Zeitung (SZ, progressive) and Frankfurter Allgemeine Zeitung (FAZ, conservative); for France, Le Monde (Monde, progressive) and Le Figaro (Figaro, conservative); and for Sweden, Dagens Nyheter (DN, progressive) and Svenska Dagbladet (SvD, conservative). Newspapers were not chosen strictly by circulation but rather by reputation. In the French case, for example, Ouest France is the largest centerright newspaper; however, Le Figaro is regarded as one of the reference newspapers, with a better reputation. Therefore, it was included here. For reasons of parsimony and to render the results more comparable, only articles appearing in the print version of these newspapers were selected. Regional supplements were also excluded from the analysis. For all countries, the equivalent of “party funding” was selected as the major search Page 186 →entry (see table 6.3). The only exception to this rule is France, where a second entry was added for the funding of election campaigns (financement campagnes electorales) to reflect the campaign-oriented nature of the country’s regulation.7 In a second step, only articles that dealt primarily with matters of party funding (either in the title or subtitle or at least one paragraph) were included in the analysis. These articles arguably are read by political elites but not necessarily by the wider public, which is often ill informed on matters of party funding (see vanHeerde-Hudson and Fisher 2011). However, political elites can be expected to engage in an internal “coordinative” discourse in the same way that they engage in a more “communicative” discourse with the public at large, especially in political systems with several institutional veto points (see Schmidt 2002, 211–12). For this reason, articles in quality newspapers hypothetically affect the politics of party funding in these three countries, all of which display substantial levels of power sharing between political elites.8 A mere reference to “norms” blurs the important distinction between the bearers of normative attitudes and the likeliness of their impact on decision makers (but see Fisher, this volume). Journalists themselves are actors in the process of party funding reform.9 Not only might they have their own political preferences, they can also be assumed to have a vested interest in shaping public opinion in general and in drawing attention to party funding scandals. However, this bias is likely stable across countries. There is no reason why the professional self-interest of journalists should significantly vary across Western European established democracies. Therefore, a comparative analysis of quality newspaper articles should not be subject to systematic bias. Rather, such articles are the most reliable sources available to uncover systematic differences in the elite discourse on party funding. Table 6.3. Newspapers Investigated Newspapers Country Progressive Conservative SГјddeutsche Frankfurter Germany Zeitung Allgemeine Zeitung

Search entries Parteienfinanz*

France

Le Monde

Le Figaro

financement partis politiques; financement campagnes electorales

Sweden

Dagens Nyheter

Svenska Dagbladet

partifinans*; partistöd*

* Asterisks indicate that any ending of the respective word was included in the search. Page 187 →In the third step, the selected articles were categorized (see table 6.4). Scandals refers to all articles dealing mainly with misbehavior with respect to existing party funding rules and sanctions against such misbehavior. Overviews reflects articles that present income and/or expenditures for all parties in an overview fashion. Other refers to articles covering the income and/or expenditures of particular parties or incremental changes to the public funding scheme. The most important category here, Reforms and Need for Reform, includes articles either dealing with reform attempts or suggesting reforms of the regulatory framework for party funding. Within the Reform and Need for Reform category, I identified the most important reforms discussed. To more precisely assess the impact of the discourse on political corruption, I also calculated the share of articles mentioning national and international NGOs and calling for reforms in these areas. For Germany, these mostly referred to the tightening of transparency obligations and limits for certain private sources of income. Beginning in 2009, caps for large donations were discussed as a separate category in parties’ annual reports for income from large donations above fifty thousand euros. Both reforms were not realized. The only real change involved the speeding-up of reporting requirements for large donations. In France, reforms discussed largely involved sanctions for wrongly declared income and expenditures and caps on donations to contain the number of “microparties” (basically political machines for individual candidates). Given the almost complete absence of transparency in party funding in Sweden, reforms discussed here were the least specific. Basically, the major issue was whether a legal framework for transparency should be introduced. Table 6.4. Newspaper Coverage of Party Funding Germany # % 324 100 147 45.4 20 6.2 74 22.8 83 25.6 62 19.1

France # % 168 100 62 36.9 34 20.2 45 26.8 27 16.1 20 11.9

Sweden # % Total 103 100 Scandals 4 3.8 Overviews 13 12.6 Other 45 43.7 Reforms and need for reform 41 39.8 On reforms covered here 34 33 20.6* Referring to national/international NGOs 18/0 29*/0 1/1 5*/5* 7/12 35.3* * Unlike other percentage shares, these refer not to the total number of articles but to the number of articles on the reforms covered here. Page 188 →In the two German newspapers, a total of 324 articles dealt with party funding. The majority of these articles dealt with scandals. The most important of these scandals affected the Hessen branch of the CDU, which during the 1990s had kept secret accounts with 17 million deutsche marks (8.7 million euros) and illegally accepted 12.7 million deutsche marks (6.5 million euros) from anonymous donors during the 1990s (Cordes 2002, 64). A total of 11.1 percent of all articles (36) dealt with the Hessen CDU. Another major scandal affected the CDU in the federal state of Rhineland-Palatinate (for using the subsidy for the parliamentary party for campaign purposes, the subject of 29 articles [9 percent]) and the FDP, which had accepted undeclared donations between 1996 and 2002 and was finally charged 4.3 million euros in 2009 (12 articles, 3.7 percent). The most important other topic was the debate regarding the exclusion of the right-wing NPD from public party funding through rendering it unconstitutional. The NPD also faced prosecutions for wrongly declared donations, and the party

accounted for 19.1 percent of all articles (62).

The share of articles explicitly dealing with reforms was 25.6 percent (83)—including 6.2 percent (20) with the regulation of donations and 13 percent (42) with the sponsoring of political parties. Among the articles, 29 percent referred to national NGOs such as the German chapter of Transparency International and Lobbycontrol. No articles referred to international NGOs, even though the 2009 GRECO report for Germany (GRECO 2009b) referred to both sponsoring and large donations. Apart from these major reform issues, the Constitutional Court’s refusal to lift the threshold preventing small parties from qualifying for direct state funding also received noticeable attention (9 articles; 2.8 percent). In 2004, the Court rejected the established parties’ attempt to raise the threshold to 1 percent of the vote in at least three state elections (rather than one state election). In France, 168 articles dealt with party funding. As in Germany, most of the articles covered scandals (62; 36.9 percent). A total of 49 articles (29.2 percent) dealt with the structural corruption that characterized French party funding up to the mid-1990s, when parties used public services (such as state-owned corporations or government funds) for their purposes; in addition, they accepted kickbacks from companies (which also employed people who worked exclusively for parties) (Miguet 1999, 55). Of particular interest, former president Jacques Chirac was sued for illicit party funding during his time as mayor of Paris in 2009. Another major scandal was the secret funding of the UMP in general and later President Nicolas Sarkozy through billionaire heiress Liliane Bettencourt Page 189 →(13 articles; 7.7 percent). The comparatively high share of overview articles reflects the fact that state funding affects parties heavily and directly after elections. Given that vote share is the only factor determining the amount of state funding a party receives, newspapers pay considerable attention to the financial implications of elections. The major other issue was the separation of two liberal parties from the UMP after 2007 (the Nouveau Centre and Modem, 14 articles; 8.3 percent) and the financial implications of the parity requirement discussed previously (6 articles; 3.5 percent). Almost equal numbers of reform articles dealt with sanctions (9; 5.4 percent) and the cap on donations (11; 6.5 percent). Only a single article dealt with a national NGO (the Observatoire de la Vie Politique et Parlementaire) and an international NGO (Transparency International) (Monde, July 7, 2010). A total of 103 Swedish newspaper articles dealt with party funding. Given that Sweden is generally perceived as free from corruption, it comes as no surprise that scandals play almost no role. The 4 articles in this category concern alleged misuses of public funding. In Sweden, the most important issue was the financial implications of the rise of the right-wing Sweden Democrats (21 articles; 20.4 percent [categorized under Other]). This issue was particularly controversial because the Sweden Democrats were allegedly funded by extremist groups and did not subscribe to the other parties’ voluntary agreement on the disclosure of their income. The party’s rise consequently also affected the reform discussion, which explains why Sweden had the largest share of articles dealing with reforms.10 A substantial share of articles dealing with reforms of transparency obligations also referred to national and international NGOs (mainly Transparency International and GRECO). However, only one article put major emphasis on the need to monitor and sanction parties’ reports on their own funding (SvD, June 25, 2008); all other articles predominantly refer to reporting.

Further Regulating Income from Private Sources in Germany, 2003–2013 Even though German newspapers reported widely on the regulation of large donations to and sponsorships of political parties, this reform debate had only marginal consequences. Attempts to regulate income from large donations resonated with the traditional skepticism in Germany about corporate funding of political parties (KoГџ 2011, 121). Such funding, especiallyPage 190 → from tobacco companies, the pharmaceutical industry, and hedge funds, continued to cause disquiet (e.g., SZ, July 4, 2006, December 6, 2010). This debate intensified when banks saved with public money under the ESF-scheme (such as the Commerzbank) donated to political parties (FAZ, March 17, 2009). Calls for reform entered the political agenda in 2010, when the FDP received a 1.1-million-euro donation from a hotel company that was widely perceived as a reaction to the lowering of the tax on hotel stays. The Greens called for a cap on donations at one hundred thousand euros and the immediate disclosure of the

identity of donors for donations above twenty-five thousand euros. The Left Party even called for a ban on corporate donations. However, the Social Democrats (who also received large donations) did not join this reform initiative (SZ, February 4, 2010). Accordingly, this episode only led to a speeding up of the reporting duties for donations above fifty thousand euros, which now were disclosed immediately on the Bundestag homepage rather than after as long as two weeks. The regulation of sponsorships followed a similar pattern. Calls for reform were sparked by allegations of misbehavior. However, in this case, the issue was decided judicially: once no breach of the legal framework could be identified, reform initiatives lost momentum. The debate started with revelations about direct access to the CDU minister-presidents of North Rhine-Westphalia (FAZ, February 22, 2010) and Saxony (FAZ, March 1, 2010) being sold for cash. The matter soon developed into a debate about party sponsorships, especially of meetings (e.g., FAZ, February 25, 2010; SZ, February 26, 2010). The Greens (FAZ, March 1, 2010) and even Bundestag president Norbert Lammert, a CDU member, and the CSU (SZ, March 8, 2010) called for the creation of a separate category for income from sponsorships in parties’ annual party reports (SZ, March 3, 2010). Both newspapers backed these reform proposals (FAZ, March 3, 2010), and political scientist Christine Landfried called for ban on sponsorships, since sponsors received services in return for their payments (a principle illegal for donations) (FAZ, March 1, 2010). Public attorneys, however, refused to investigate the case, finding no initial suspicion of political corruption (SZ, March 2010). The Bundestag administration also found that the services provided were acceptable under the Party Law (FAZ, March 26, 2010). Sponsorships thus remained unregulated. The SPD kept a low profile in this area, too, since it faced similar allegations of taking cash for access to its parliamentary leader (SZ, March 5, 2011). However, the reform debate made businesses more reluctant to become Page 191 →sponsors (FAZ, April 27, 2010, April 15, 2012); large donations also declined (FAZ, January 3, 2013). In the wake of the reform debates, newspapers began to report more widely on NGO demands with respect to party funding. One example was Transparency International’s call for a cap on donations at fifty thousand euros (e.g., FAZ, October 27, 2010; SZ, October 27, 2010) and for a lowering of the threshold for donations (SZ, February 19, 2012, January 3, 2013), a proposal the SPD (cautiously) supported. National NGOs also petitioned for regulation of sponsorships and a cap on donations, garnering twenty-five thousand signatures as well as wide media coverage (FAZ, March 4, 2010, SZ, June 6, 2010). Overview articles in newspapers included sections on sponsorships and NGOs’ demands (see SZ, January 27, 2013).

Reforming Sanctions and Containing “Microparties” in France, 2003–2013 Sanctions reform in France took a zigzag route: some regulations were tightened and others loosened. As table 6.4 shows, French newspapers followed the reform debate less closely than their German counterparts, both in absolute and relative numbers. In 2003, the CNCCFP received the status of an independent regulatory agency (autoritГ© administrative indГ©pendante) (Maligner 2010, 9–10). However, it did not receive new investigative powers.11 Consequently, the head of the CNCCFP called the reform “no revolution” (Monde, December 29, 2003). In 2008, another attempt to introduce sanctions for improperly declared donations occurred after two deputies lost their passive right to vote for failure to hire financial agents. The fact that both had spent less than ten thousand euros in their election campaigns played no role in the matter: the legal framework provided sanctions only for formal offenses (such as failure to present accounts) and not for inaccurate statements (Figaro, June 10, 2008). Senior UMP politician Pierre Mazeaud chaired a reform commission, and its April 2009 report called for reduced sanctions when candidates were acting in good faith coupled with an application of the legal framework for regulating election campaigns to Senate elections (Figaro, April 3, 2009). Mazeaud proposed that election accounts be maintained only for six months (as opposed to one year, as before) but that sanctions of up to two years in prison and fines of up to thirty thousand euros be imposed when income and expenditures were inaccurately declared (Mazeaud 2009, 13, 21). Page 192 →The UMP majority in the National Assembly ensured that these changes were not included in the reform finally passed in 2010. No new sanctions were introduced, and the CNCCFP and the CTFVP received no new inspection rights (Monde, December 22, 2010, December 23, 2010). In addition, the notion of “good faith” was now to apply to accounts rejected by the CNCCFP (Monde, December 16, 2010). Le Monde (April

9, 2011) subsequently discovered a pattern of party funding reforms triumphantly announced and considerably watered down before passed. If this pattern persists, expectations should remain low for the ongoing attempts to contain “microparties” by applying caps on donations. In France, limiting donations did not equate to limiting the maximum amount that could be donated to a party. Such a cap has been in place since 1990. Rather, the French debate focused on proposals to limit the number of parties to which individuals could donate. After 1990, France had seen the emergence of “microparties”—essentially personal machines of candidates. The phenomenon went back to the broad definition of political parties: all institutions that presented candidates for elections (and eventually get them elected) were regarded as parties, eligible for reimbursement of electoral expenses. The number of political parties jumped tenfold, from 28 in 1990 to 296 in 2007 (PhГ©lippeau 2013). The first reform attempt, in April 2003, stipulated that to be eligible for state funding, parties needed not only to present candidates in fifty constituencies but also to poll at least 1 percent of the vote in fifty constituencies (Figaro, October 25, 2007). However, lower thresholds were envisaged for overseas departments (1 percent of vote in only one department), which meant that candidates began to create microparties there (Figaro, May 22, 2003). In 2007, when it became evident that the 2003 reform had not had the intended results, Prime Minister FranГ§ois Fillon announced another reform (see Figaro, July 6, 2007; Monde, July 7, 2007). However, Fillon himself created a microparty just three years later (Figaro, July 10, 2010). The Bettencourt scandal also prompted a discussion of how to prevent the large parties in general and the UMP in particular from using microparties to hide their real income and expenditures. The head of the CNCCFP called microparties “against the spirit of the law” (Figaro, July 21, 2010). In addition, the CNCCFP called for limits on the number of parties to which individuals could donate (Monde, May 28, 2011). However, when the PS was also using microparties to fund its candidates (Monde, July 22, 2010), and when that information became public, the reform debate lost momentum. Page 193 →In October 2010, PS members of Parliament called not only for limits on the size of donations but also for a requirement that each individual donate to only one party (Figaro, October 6, 2010). However, this proposal required a precise definition of political parties, which was still lacking after more than twenty years of reform (Monde, August 9, 2010). The Greens nonetheless joined the Socialists’ demand in 2012 (Monde, October 16, 2012). However, this proposal met resistance from senior politicians, especially from the UMP, all of whom have their own machines/parties. Reform remained stalled after the new government took office in 2012 (when the PS and Greens could theoretically have realized their reform plans), indicating that the same senior deputy network that had prevented the institutionalization of sanctions was delaying reforms to donation limits, too. Party funding reform does not currently seem a priority: a constitutional reform committee chaired by the former prime minister Lionel Jospin found regulation of party funding and electoral campaigns in general “satisfying” (Jospin 2012, 119). Moreover, the most important reform topos, “moralization of political life [moralisation de la vie politique],” which played a crucial role in the initial introduction of party funding regulation (KoГџ 2011, 199–203), does not feature prominently in the 2003–13 debate: only 10 of the 172 articles refer to moralization. This suggests that politicians’ strategic interests dominate the politics of party funding in France, while public demand for reform is low.

Toward Legal Reporting Requirements: Sweden, 2003–2013 In many respects, the Swedish debate on party funding reform followed the opposite direction from the one in France: newspapers meticulously looked into reform proposals and widely reported on NGO initiatives. However, the two debates are comparable in one respect: their results could be called marginal at best. In 2004, an expert committee on “openness of parties’ and candidates’ income [utredningen om offentlighet fГ¶r partiers och valkandidaters intГ¤kter]” proposed a detailed draft law that included disclosure requirements for donors giving more than twenty thousand Swedish krona (twenty-three hundred euros) (SOU 2004, 16). Sanctions were not recommended because they would interfere with constitutional guarantees of freedom of speech (SOU 2004, 19). The law was supposed to come into force on January 1, 2006, but the Moderates and the Christian Democrats opposed the proposed regulation, arguing that Page 194 →any regulation of parties’ income ran afoul of constitutional guarantees regarding secrecy of the ballot and party freedom (e.g., DN, March 1, 2004;

SvD, April 16, 2006). In addition, the reform received a serious blow from the feedback loop to which all Swedish legislation is subject: several academic lawyers declared that disclosure of donors’ names was unconstitutional (SvD, November 14, 2004). After this reform initiative failed, new proposals from the Liberal Party leader (SvD, April 16, 2006) and the Social Democrats’ party secretary (DN, June 20, 2007) also brought about no change. Even the rise of the Sweden Democrats and their clandestine funding did reduce the legal arguments against reform. Attempts to introduce transparency obligations gained new momentum in 2009, when a constitutional reform committee found that the absence of party funding regulation was a “deficit” in the Swedish legal framework (SvD, April 6, 2009). However, the committee suggested no reform in this area and regarded the absence of a legal definition of parties as the major obstacle to reform. The same year, the GRECO report delivered a surprisingly harsh verdict about the level of transparency in Swedish party politics: the current party funding regime “does not seem convincing in its present form” and “falls short” of standards of the Council of Europe’s recommendations (GRECO 2009c, 16). Unlike in France, where newspapers did not mention the GRECO report at all, this assessment caused major concern among members of the Swedish public. On the initiative of the Greens and the Left Party, the Riksdag’s constitution committee unanimously called for another reform committee. Parliament created the committee, but one year later, nothing had happened (DN, March 27, 2010). Center-right backbenchers declared their support for more transparency, but party leaders had no interest in letting the issue split the four-party minority government created in 2010 (DN, November 26, 2010). NGOs calling for party funding reform are far more visible in Sweden than in Germany or France. Even the Institute against Bribery (Institutet mot Mutor) called for reform, even though it has close relations to business companies (see SvD, January 23, 2008; DN, November 9, 2009). Newspapers regularly refer to other NGOs such as Transparency International—both the international and Swedish chapters (which together are mentioned in 8 of the 34 articles dealing with reform initiatives)—as well as GRECO (9 articles). These articles in particular stress that corruption in Sweden might well be much more common than is often assumed since the lack of attention, transparency, and security measures for potential whistleblowers mean that no reliable data are availablePage 195 → (see, e.g., DN, February 8, 2012). This gives rise to the assumption that a “mentality problem” might underlie the failure of all reforms to regulate party funding (see DN, August 8, 2010). The newspaper debate thus defies GRECO’s (2009c, 13) statement that the “existing system [of party funding] is not subject to any major debate.” It is remarkable, however, that sanctions were not even discussed, with the whole debate centering on the issue of transparency except for the 2004 reform proposal that suggested that parties that improperly declared income forfeit state funding (SvD, March 3, 2004). In addition, only one article called for mechanisms to control political parties’ funding reports (SvD, June 25, 2008). Given the poor information available and the awareness of the need to supervise transparency agreements, the 2009 GRECO report appears correct: “The control that can be exercised by the public and the media isВ .В .В . limited” (GRECO 2009c, 16). The 2012 renewal of the voluntary agreement to disclose party funds illustrates all major parties’ strategic interest in maintaining the status quo, which is characterized by nonregulation. In 2011, the Moderates surprisingly announced their willingness to implement the 2004 recommendation to reveal the identity of donors who gave more than twenty thousand Swedish krona (twenty-three hundred euros). However, they soon clarified that they favored only renewing the voluntary party agreement and remained opposed to any legal requirements for increased transparency (DN, April 28, 2011). Their actions apparently constituted a response to the reform pressure resulting from the Sweden Democrats’ new presence in the Riksdag and the international environment, especially the GRECO report (SvD, April 29, 2011). The Moderates indeed managed to make the Social Democrats defect from the supporters of legal regulation. As the 2000 agreement was running out and the center-right parties were in a minority government, a unified opposition could have introduced legal transparency obligations. However, the cash-strapped Social Democrats gave up their call for legal regulation in exchange for a considerable increase of state funding available for political parties (DN, November 23, 2011). This tit-for-tat deal anticipated the renewal of the 2000 voluntary agreement. In December 2011, all-party negotiations for legal regulation failed. The Moderates and the Social Democrats

could not agree on a way to handle the Social Democrats’ lotteries and donations from trade unions, so the status quo persisted (DN, December 2, 2011). However, in April 2012, when the parties renewed their voluntary agreement, they added a Page 196 →new obligation to disclose all individual donations above twenty thousand Swedish krona (twenty-three hundred euros). Whether the disclosure requirement applied to donations from trade unions or companies was deliberately left open, and the Sweden Democrats again did not take part in the voluntary agreement (SvD, April 14, 2012).

Conclusion The results of this analysis of newspaper coverage of the trajectory of party funding regulation in Western Europe are mixed: the evidence supports neither the idea of increased convergence nor the idea of substantial divergence. Rather, the situation remained virtually unchanged in these three countries, with only marginal reforms instituted between 2003 and 2013. Germany, France, and Sweden show no evidence of having reached a deregulatory moment. However, their experiences suggest that the regulatory moment in party funding might well be over after state funding of political parties has been introduced alongside more (Germany), less (France), or even no (Sweden) transparency obligations and sanctions. The intensity of the discourse on party funding reform appears to have virtually no effect on the results. Sweden, which had the most intensive discourse (including frequent references to other countries, best practices, and the like), maintains by far the lowest level of regulation, whereas the much weaker discourse in France resulted in minor improvements in the regulatory framework (as well as in some deregulation). Germany occupies a middle position, with respect to both discourse and scope of reforms. What does this imply for the causes of party funding reform? Institutional veto points and political actors’ strategic interests obviously outweigh public demands for reform. Increased regulation goes against politicians’ self-interests, and legal institutions in particular serve politicians’ interest in maintaining the status quo. In all three countries, reforms were declared to conflict with constitutional stipulations (precluding more control of parties, most notably in France and Sweden) or to be unnecessary as a consequence of the comprehensiveness of the existing framework (most notably regulations of sponsorship in Germany). However, past reforms have often been sparked by major scandals, and the good news might be that no major scandals emerged in any of the countries during this period. Even if this does not constitute evidence that the existing regulations fulfill their purpose (which they do not, as the medium-sized scandals in GermanyPage 197 → and France suggest), we can at least conclude that public demands for regulation of party funding remain the sufficient condition for substantial reform (activated only when major scandals as the necessary condition occur), at least in Germany and Sweden. Only in France has demand for reform obviously decreased since the 1990s, a situation that explains why some deregulation of party funding has taken place.

Notes I thank Diana Flemmig for excellent research assistance. Advice on recent reforms in France by Eric Phélippeau (University of Paris Nanterre) is also thankfully acknowledged. 1.Permission by Oxford University Press to use parts of this book for this chapter is thankfully acknowledged. 2.This section draws on Koß 2011, 77–99. 3.The CNCCFP consists of nine members, with three each nominated by the vice president of the State Council (Conseil d’État), the president of the Court of Cassation (Cour de Cassation), and the first president of the National Audit Office (Cour des Comptes) (Naßmacher 2003, 132). 4.The CTFVP consists of three ex officio members (the vice president of the State Council, who chairs the commission; the first president of the Court of Cassation; and the first president of the Audit Court) and six other full members and six substitute members, all of whom are members of the judiciary (GRECO 2009c, 18). 5.The so-called global subventions ( Globalsubventionen) for political foundations can be regarded as public funding since they are not linked to specific purposes such as maintaining external relations or

scholarships for students. 6.In this case, half of the difference between male and female officeholders is held back. If, for example, 80 percent of those elected for a party are male and only 20 percent are female, the amount of state funding is reduced by 30 percent (i.e., half the difference between 80 and 20 percent). 7.All newspaper articles referred to here are available from the author on request. 8.For France, this claim is arguably true only when the president and prime minister come from different political camps. The 2008 constitutional reform decreased the likelihood that such circumstances would occur by synchronizing the election cycles for the presidency and the National Assembly. 9.I thank one of the anonymous reviewers for raising this important point. 10.In addition, Sweden’s reform category was the broadest of the three countries as a consequence of the absence of any legal framework for transparency there prior to 2003. 11.“The CNCCFP is not empowered to verify supporting documents or perform on-site control procedures, and parties’ auditors can refuse its requests on grounds of professional confidentiality. The CNCCFP is not authorized to require parties or their agents to provide accounting records or other financial and bank documents. Nor can it request any information concerning suppliers of goods or services” (GRECO 2009c, 16–17). Page 198 →

References Bennett, Colin J. 1991. “What Is Policy Convergence and What Causes It?” British Journal of Political Science 21 (2): 215–33. Biezen, Ingrid van. 2004. “Political Parties as Public Utilities.” Party Politics 10 (6): 701–22. Boatright, Robert G. 2012. “The End of the Reform Era? Campaign Finance Retrenchment in the United States and Canada.” The Forum 10 (2). Clift, Ben, and Justin Fisher. 2004. “Comparative Party Finance Reform: The Cases of France and Britain.” Party Politics 10 (6): 677–99. Clift, Ben, and Justin Fisher. 2005. “Party Finance Reform as Constitutional Engineering? The Effectiveness and Unintended Consequences of Party Finance Reform in France and Britain.” French Politics 3 (3): 234–57. Cordes, Doris. 2002. “Parteienfinanzierung in Deutschland: Transparenz durch Rechenschaftspflicht?” Österreichische Zeitschrift für Politikwissenschaft 31 (1): 61–72. Finansdepartementet. 1994. Det offentliga stödet till partierna—inriktning och omfattning: rapport till Expertgruppen för studier i offentlig ekonomi. Stockholm. GRECO. 2009a. Evaluation Report on France: Transparency of Party Funding, Strasbourg. GRECO. 2009b. Evaluation Report on Germany on Transparency of Party Funding, Strasbourg. GRECO. 2009c. Evaluation Report on Sweden: Transparency of Party Funding, Strasbourg. Heywood, Paul. 1997. “Political Corruption: Problems and Perspectives.” Political Studies 45 (3): 417–35. Kaiser, André. 1997. “Types of Democracy: From Classical to New Institutionalism.” Journal of Theoretical Politics 9 (4): 419–44. Koß, Michael. 2011. The Politics of Party Funding: State Funding to Political Parties and Party Competition in

Western Europe. Oxford: Oxford University Press. Mahoney, James. 2012. “The Logic of Process Tracing Tests in the Social Sciences.” Sociological Methods and Research 41 (4): 570–97. Maligner, Bernard. 2010. “Les budgets des partis et des campagnes electorales comme mareriau sociologique: Opportunires et limites de l’objectivation comptable.” In Le financement de la vie politique franГ§aise: Des rГЁgles aux pratiques (1988–2009), ed. Abel Francois and Eric PhГ©lippeau, 7–22. Paris: Weka. Mayntz, Renate, and Fritz W. Scharpf. 1995. “Der Ansatz des Akteurzentrierten Institutionalismus.” In Gesellschaftliche Selbstregelung und politische Steuerung, ed. Renate Mayntz and Fritz W. Scharpf, 39–72. Frankfurt a.M.: Campus. Miguet, Arnauld. 1999. “The Funding of Political Life in the Fifth Republic.” In The Funding of Political Parties: Europe and Beyond, ed. Keith D. Ewing, 45–66. Bologna: Cooperativa Libraria Universitaria Editrice Bologna. MГ¶ller, Tommy. 2007. “Sweden: Still a Stable Party System?” In When Parties Prosper: The Uses of Electoral Success, ed. Kay Lawson and Peter H. Merkl, 27–42. Boulder: Lynne Rienner. NaГџmacher, Karl-Heinz. 2003a. “Introduction: Political Parties, Funding and Democracy.” In Funding of Political Parties and Election Campaigns, ed. Reginald Austin and Maja TjernstrГ¶m, 1–20. Stockholm: International IDEA. Page 199 →NaГџmacher, Karl-Heinz. 2003b. “Party Funding in Continental Western Europe.” In Funding of Political Parties and Election Campaigns, ed. Reginald Austin and Maja TjernstrГ¶m, 117–38. Stockholm: International IDEA. Nergelius, Joakim. 2005. “Sweden.” In Lobbying, Government Relations, and Campaign Finance Worldwide: Navigating the Laws, Regulations, and Practices of National Regimes, ed. Thomas D. Grant, 467–68. Oxford: Oceana. PhГ©lippeau, Eric. 2013. “Financing of French Political Parties.” Paper presented at the workshop Denaro e partiti, come cambiare? Idee per l’Italia, Turin, Collegio Alberto. Pujas, VГ©ronique, and Martin Rhodes. 1999. “Party Finance and Political Scandal in Italy, Spain and France.” West European Politics 22 (3): 41–63. Scarrow, Susan E. 2004. “Explaining Political Finance Reforms: Competition and Context.” Party Politics 10 (6): 653–75. Schmidt, Vivien A. 2002. The Futures of European Capitalism. Oxford: Oxford University Press. Schmidt, Vivien A., and Claudio Radaelli. 2004. “Policy Change and Discourse in Europe: Conceptual and Methodological Issues.” West European Politics 27 (2): 183–210. SOU. 2004. AllmГ¤nhetens insyn I partiers och valkandidaters intГ¤kter: BetГ¤nkande av Utredningen om offentlighet fГ¶r partiers och valkandidaters intГ¤kter. Stockholm: Fritzes Offentliga Publikationer. StrГёm, Kaare. 1990. “A Behavioral Theory of Competitive Political Parties.” American Journal of Political Science 34 (2): 565–98. vanHeerde-Hudson, Jennifer, and Justin Fisher. 2011. “Parties Heed (with Caution): Public Knowledge of and Attitudes towards Party Finance in Britain.” Party Politics 19 (1): 41–60.

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7 | More, and More Inclusive, Regulation: The Legal Parameters of Public Funding in Europe Daniela R. Piccio and Ingrid van Biezen Although the crisis of political representation has been acknowledged as one of the fundamental problems of our time, political parties are still perceived as necessary and desirable institutions for democracy. The growing financial support that states have been providing to political parties is among the most relevant indicators of a conception of parties as public goods (van Biezen 2004). In European democracies, a general consensus appears to have emerged that states should support political parties on the grounds that public funding enhances transparency and provides the opportunity for different political forces to access the political arena. However, some critics have argued that rather than constituting a tool for enhancing democratic processes, public funding constitutes an instrument for self-perpetuating the political status quo and disadvantages challenger parties (e.g., Katz and Mair 1995). Indeed, it has been argued that the established political elites may exploit the provision of financial facilities to political parties to their own financial advantage, granting themselves greater opportunities for organizational survival while keeping new or potential party formations out of power resources. If this is the case, rather than enhancing political pluralism and leveling the political playing field, public funding regimes would qualify as exclusionary, and their democratic justification would be undermined. This chapter has two main objectives. First, it engages with this debate by verifying the empirical accuracy of these criticisms. Is political finance regulation instrumental for those in power to preserve their position and for excluding potential challengers? Drawing on up-to-date, longitudinal data gathered on both Western and Eastern European countries, we focus on those funding rules with the greatest potential to exclude smaller and new political parties: the eligibility rules (or payout thresholds) for public Page 201 →subsidies. If the critics are right, we should see party finance legislation developing so that it favors the established political parties and disadvantages the challengers. Second, this chapter explores whether Europe is characterized by a similar “deregulatory moment” as found for other regions of the world (and as discussed in the preceding chapters in this volume). The results are not as unequivocal as might be expected. Not only does no move toward political finance deregulation appear to have taken place in Europe, but changes in the quality of the regulations seem rather to point toward more inclusive systems of party funding.

Political Finance Regulation and Its Critics Access to state subsidies and rules governing public funding regimes affect the flow and amount of resources available to political parties (Bowler, Carter, and Farrell 2002, 88) and have the potential to influence interparty competition. As a consequence, the role of public money in the political process has stimulated intense debates among academics, supranational organizations, and media actors. According to conventional discourse, public funding of political parties is necessary to promote fair competition, level the playing field among party competitors, insulate parties from pressures from wealthy donors, and enhance the political parties’ financial transparency. Supranational governmental and nongovernmental organizations unanimously agree that states should support political parties and that state support is as an important instrument for the promotion and the maintenance of a healthy and effective democracy and rule of law.1 Academics appear more divided on the benefits of public subsidies.2 In this chapter we concentrate on the major criticism that has been raised against public funding—that it favors established political parties at the expense of newcomers. This argument was initially brought up by Paltiel in the late 1970s, when only a few countries had introduced systems of public funding to political parties. Paltiel (1979, 38) argued that public funding was prompted by “the desire of legislators to stabilize the party system and entrench the electoral position of established groups.” From this perspective, public funding is a means by which incumbents restrict opportunities for new political competitors and freeze the status quo ante. A similar argument was later advanced by Katz and Mair (1995), who developed one of the most influential critiques to public funding regimes. The authors pointed to public subventions as the primary indicator of the cartelization of political parties and party systems. Indeed, in their view, established Page

202 →political parties were using their legislative power to guarantee their own organizational survival by making public resources available to themselves while withholding these financial resources from outsiders, thus posing barriers for the emergence of new political groups. According to these criticisms, these regulations may constrain the democratic process by limiting rather than promoting political contestation. Indeed, if proved true, these arguments would point to a very fundamental problem with the functioning of representative democracies. If public subsidies discriminate against new party formation to the advantage of the established parties, this would interfere with the most basic mechanisms of electoral competition and ultimately undermine the fundamental principles of political pluralism and democracy. Several scholars have researched these criticisms with a particular eye on the cartel party, investigating the political impact of the introduction of state support to political parties. Research has focused on the effects of public subsidies on patterns of party competition (Scarrow 2006), on party system developments (Pierre, SvГҐsand, and Widfeldt 2000), or more specifically on new party entry (Tavits 2006; Bolin 2007; van Biezen and Rashkova 2014).3 Results so far have revealed little evidence that public funding alone effectively shapes the party system arena and have failed to lead to many generalizable conclusions (cf. NaОІmacher 2001; KoГџ 2008; Roper and Ikstens 2008). Contrary to the arguments raised by Paltiel and Katz and Mair, various scholars have argued that public funding may in fact provide important boosts to new parties and that in many countries, finance legislation has actually improved new parties’ chances of emerging, surviving, or even gaining parliamentary representation, both in Western and in Eastern Europe (Mendilow 1992; Ikstens et al. 2002; Casas-Zamora 2005; Casal BГ©rtoa and Spirova 2013). The proliferation of Green and populist parties in countries with relatively high thresholds for public funding (as in the case of Belgium, for example, with an effective payoff threshold of approximately 5 percent of the votes), moreover, suggests that the effects of public subsidies on new party entrants are rather weak (NaОІmacher 2009, 347–52). The fundamental problem of this outcome-oriented approach (as also acknowledged by scholars who have embarked on such endeavors) is the difficulty of insulating the effects of public subsidies from other institutional and noninstitutional factors that also may impact the likelihood of the emergence of political alternatives to the status quo, such as electoral rules or societal changes (Pierre, SvГҐsand, and Widfeldt 2000; Casas-Zamora 2005; Scarrow 2006, 2007). All in all, the Page 203 →dynamics of party systems appear too complex to be determined solely by funding regimes (NaОІmacher 2009, 348). Instead of “cautiously generalizing about the overall effects of public subsidies” (Scarrow 2007, 204; emphasis added), we adopt a different approach. We are not searching here for potential evidence about the impact of public subsidies at the party-system level. Rather, we focus on the parameters of the legal framework of public funding regulation in itself. As NaОІmacher (2009, 310) has rightly argued, “Procedures for access and distribution must be considered separately and closely before any conclusion on openness and fairness will be justified.” We suggest that no unequivocal evidence has thus far been found on the effects of state subsidies on party systems because public funding regimes are by nature not necessarily exclusionary. Despite the growing attention toward political finance rules and practices, a shortage of comparative and longitudinal approaches still characterizes the field (NaОІmacher 2009, 27, 29). This is the case in particular for the content of the political funding rules—that is, the legal parameters that establish access to state subsidies. Indeed, studies that have assembled cross-national political finance data frequently appear outdated, with the information often based on older collection of data (most notably Katz and Mair 1992), and typically focus on Western European countries.4 Information on Eastern Europe so far remains scattered, lacking a comparative dimension (but see Lewis 1998; Walecki 2001) and mainly existing in single case-study book chapters or articles (e.g., Smilov and Toplak 2007; Roper and Ikstens 2008). Thus, we present an up-to-date and comprehensive comparative analysis of the content of political finance rules in both Western and Eastern Europe, with a particular emphasis on the legal parameters that establish access to public subsidies. Specifically, we argue that the establishment of rules preventing smaller parties from benefiting from public funding and thus deterring their access to party systems may be considered an indicator of a cartel behavior of established parties in itself. This stems from the particular nature of political finance legislation, which affects the

same subjects who enact the legislation. Indeed, as Katz and Mair (2009, 756) stress, political parties are privileged organizations, “and they are unique in that they have the ability to devise their own legal (and not only legal) environment and, effectively, to write their own salary checks.” The fact that legislators are also partisans (see also NaОІmacher 1993; Scarrow 2004; Piccio 2014b) and that the parties themselves are the principal agents of their own regulatory environmentPage 204 → justifies a more in-depth investigation of the legal rules determining ease of access to public subsidies in Europe.

Inclusive or Exclusive Party Funding Regimes? Criteria for Assessment Does the evidence support the major criticisms raised toward political finance legislation—that it is advantageous to the established political parties and discriminates against new or smaller ones? To assess these arguments, we focus here on the rules with the greatest potential to exclude smaller or new political parties and examine the eligibility thresholds for access to public funding. Indeed, political parties need financial resources, and the criteria by which these resources are distributed are likely to play an important role in the emergence and organizational continuity of political parties (Norris 2004). Rules governing access to public funding are principally based on two main criteria: a minimum number of seats, and a minimum number or percentage of votes (Pierre, SvГҐsand, and Widfeldt 2000; Casas-Zamora 2005; NaОІmacher 2009).5 The first criterion is, in principle, the most restrictive. Indeed, the provision of public funding only to political parties represented in parliament undercuts the possibility for new and smaller parties to compete with the established ones and may weaken their chances for entering the political arena. It thus undermines the principle of a level playing field of electoral competition, on which grounds the provision of public funding is often justified. Indeed, the “Guidelines on Party Regulation” by the OSCE/Venice Commission explicitly encourage legislators to establish payoff thresholds for public funding that are lower than the electoral thresholds,6 while the recommendations issued by the Council of Europe emphasize the importance of public funding regimes that enable new parties “to compete under fair conditions with the more wellestablished parties” (Council of Europe 2001). The second criterion governing access to public funding is the votes that parties have obtained. This can be based on an absolute number of votes or, as is more common, on a certain percentage of votes. When such a criterion is established, the eligibility threshold for accessing public funding may be (and in practice generally is) set at a lower level than the electoral threshold, thus enabling political parties without parliamentary representation to receive a “vital infusion of funds” that will allow them to remain politically active outside parliament (Pierre, SvГҐsand, and WidfeldtPage 205 → 2000, 624). Overall, when eligibility is defined in relation to votes obtained, ease of access is determined by the height of the electoral threshold: the higher this threshold, the less likely that smaller or new political parties will reach it, meaning that they will remain confined to an extraparliamentary existence without state resources to support their organizational structures or electoral activities. Conversely, high thresholds tend to favor major established parties and may contribute to the maintenance of the status quo ante (NaОІmacher 2009, 313). Whatever eligibility criterion is chosen, the degree to which access to public funds is inclusive with respect to smaller political parties ultimately depends on the actual electoral and payoff thresholds in force. In fact, when the electoral threshold is particularly low, eligibility defined in terms of parliamentary representation may turn out to be more inclusive than a criterion based on a minimal threshold of votes obtained. Empirically, we are drawing on a comprehensive data collection undertaken within the ERC-funded project “Re-Conceptualizing Party Democracy” (van Biezen 2013).7 The dataset covers both Western and Eastern European countries, thus including a variety of political funding regimes and their development over time. The collection of data is based on the analysis of political finance legislation (Piccio 2012), backed by official reports of the Council of Europe8 and secondary sources.

More, and More Inclusive, Regulation: Cross-National and Longitudinal Comparisons The Introduction of Regulations

Since the Second World War, an increasing number of countries have established rules regarding political parties in different sources of party law.9 While different areas of activity of political parties have become subject of regulation (van Biezen and Borz 2012; van Biezen and Piccio 2013), party funding is probably the area in which the most rules have been established. Since the introduction of public funding to political parties in Germany in 1959, the provision of direct public subsidies to political parties has become a normal feature of European democracies. Figure 7.1 displays the years in which public funding to party central offices was introduced. Currently, political parties in only three European countries do not benefit from state funding at the national level: Malta, Switzerland, and Ukraine. In these countries, however, the possibility of introducing such Page 206 →provisions has been extensively discussed, especially in the past two decades. In Malta, the introduction of public subsidies to political parties has recently entered the political agenda. In Switzerland, while regulation at the federal level is absent, a small number of cantons (Geneva and Fribourg) have introduced legislation on the reimbursement of campaign expenses, and a number of recent initiatives to regulate political finance have been presented to (and rejected by) the Swiss National Council. In Ukraine, provisions on direct public funding of political parties were introduced in 2003 but repealed in 2006 (Kovryzhenko 2010). However, while the trend toward the provision of direct public subsidies to political parties is uncontroversial, this form of payment is a relatively recent phenomenon and took several decades to be adopted throughout Europe. While almost all established European democracies (with the exception of Ireland, the Netherlands, Cyprus, and Iceland) had introduced systems of public funding to political parties by the end of the 1980s, the younger democracies in Southern and Eastern Europe introduced such systems at the same time they democratized or soon thereafter. Fig. 7.1. Public Funding to Party Central Office by Year of Introduction The introduction of public funding has been accompanied by the establishment of a broad set of rules governing the financing of political parties. Hence, a growing number of countries have introduced specific and comprehensive acts incorporating in one single legal document rules concerning different aspects of political finance. The growing number of countries providing direct state subsidies to political parties and the greater number of rules that political parties in Europe need to comply with under public law, especially in relation to transparency and public Page 207 →disclosure, seem to point to some fundamental differences between the regulation patterns observed for the United States and Canada on the one hand and Europe on the other. While the former seem to be experiencing a “deregulatory moment,” the rules governing the financing of the political process, including state subventions to political parties, are instead on the rise in Europe (Piccio 2014a). One of the key aspects of public funding regimes is the degree to which they can be considered inclusive of political challengers. Assuming the self-serving logic as valid—that is, established political parties enhance their revenues and exclude new or smaller parties from these revenues—it would seem reasonable to expect to find evidence of the establishment of restrictive eligibility criteria. Table 7.1 shows the eligibility criteria for public funding in force when public funding to political parties in central office was introduced. As eligibility thresholds may vary depending on different types of subsidies (Casas-Zamora 2005; NaОІmacher 2009), we Page 208 →selected for all countries the minimum threshold level of support that political parties need to reach to benefit from public funds (see also Scarrow 2006, 627). Table 7.1. Eligibility Criteria for Public Funding (t0) Eligibility based on Seats Eligibility based on Votes Country Electoral Threshold (%) Country Eligibility Threshold (%) Electoral Threshold (%) Belgium (4.8) Austria 1 (8.5) Bulgaria 4 Czech Republic 2(*) 5 Croatia 3 Denmark 1,000 votes 2 Cyprus (1.8) Greece 3 (16.1) Estonia 5 Hungary 1 4 Finland (5.4) Iceland 2.5 5

France

(37.5)

Italy

2

(2)

Germany 5 Ireland (14.9) Luxembourg (14) Netherlands (0.67)

Latvia Lithuania Norway Romania

2 3 none none

5 5 (8.9) (1.05)

Poland Portugal Serbia

5 (5.6) 5 (d)

Slovakia

2

3

Slovenia Spain

(3.2) 3 (d)

Sweden

(8.4)

Sources: For political finance regulations, Piccio 2012; Casal BГ©rtoa and Spirova 2013; for legal and effective electoral thresholds, Carter 2005; Scarrow 2006; Lijphart and Grofman 2007; Bowler, Carter, and Fowler 2002; Renwick 2011; authors’ calculation for Romania. Notes: Effective electoral thresholds in parentheses if no legal threshold is in force; (d) = threshold set at the district level; (t0) = as in figure 7.1; (*) Eligibility threshold as introduced in Czechoslovakia in 1990. As previously mentioned, countries that limit state subsidies to political parties that have obtained parliamentary representation are, in principle, the most restrictive toward new and smaller parties. This type of financing does not support parties that fail to achieve the electoral thresholds and decreases the likelihood that they will maintain organizational continuity until the next election. Our data show that when public funding was introduced, parliamentary representation was by far the most common eligibility criterion: out of the twenty-nine countries under observation, seventeen disbursed public funding only to political parties with at least one parliamentary seat, and the remaining twelve did so on the basis of vote percentages. However, while eligibility criteria based on parliamentary representation are in principle the most unfair to new and smaller parties, the degree to which this reflects reality depends on the actual electoral thresholds in force. Hence, for all countries, we included the electoral thresholds that political parties must meet to obtain parliamentary seats: the legal electoral thresholds (the minimal percentage of the vote in the electoral district or the whole nation that, by law, party lists must meet to be eligible for a parliamentary seat). Where legal electoral thresholds do not exist, we use the effective threshold. Hence, while countries such as the Netherlands provide public funding only to political parties represented in parliament, the particularly low effective threshold (of 0.67 percent) does not constitute a major obstacle for smaller political parties to benefit from public funding. Quite on the contrary, the Netherlands has been referred to as one of the countries where political finance regulations provide the easiest access to public funding and where opportunities for smaller parties to compete are the greatest (NaОІmacher 2009). The same argument does not apply for Germany, Poland, Serbia, and Estonia, where legal electoral thresholds were set at 5 percent, or Spain, where the eligibility threshold (3 percent) is set at the constituency rather than the national level (van Biezen 2000). These countries appear to have established more exclusive party funding regimes when they introduced public funding. The remaining eleven European countries provide public funds on the basis of vote percentages, with thresholds for receiving subsidies generally set lower than the legal thresholds and ranging from 1 percent in Austria to 3 percent in Greece and Lithuania. In Norway, public funding was originally disbursed to all registered political parties, giving that country the Page 209 →lowest eligibility threshold, together with Denmark, where the law established a minimum of one thousand votes to qualify for state funding. On the whole, when public funding was introduced in Europe, the criteria for the distribution of subsidies indeed privileged political parties with parliamentary representation over their competitors outside parliament, even though the relatively low effective electoral thresholds in some countries do not in practice seem to have constituted a very significant barrier for

smaller and new parties. Changes in the Scope of Regulation To assess the extent to which public funding regimes have become more or less inclusionary, it is also important to analyze changes in these regulations over time. Scholars who have analyzed the development of eligibility criteria across countries and over time have found that criteria have loosened and that smaller parties have greater access to public funding than before (Pierre, SvГҐsand, and Widfeldt 2000; Bowler, Carter, and Farrell 2002; Scarrow 2006). However, most comparative data on political finance tend to be rather outdated and mainly focused on Western Europe. Table 7.2 presents a more comprehensive and up-to-date overview of the contemporary criteria for access to public subsidies, presenting the rules as they were in force in 2012. The evidence shows that the eligibility criteria for state funding have changed in almost half of the European countries under investigation. Our results confirm the trend found in previous research: over time, the criteria for access to public funds have become more liberal. The first and most significant indicator pointing in this direction is the decline in the number of countries requiring political parties to obtain at least one parliamentary seat to obtain public funding. While seventeen countries limited public subsidies to parties with parliamentary representation when state subventions were introduced, only six retain this criterion under their current regulatory regime. Eleven countries have thus changed their payout threshold for public funding to an eligibility system based on votes. None of the countries have changed the criteria in the other direction. Moreover, as the new eligibility thresholds are generally set lower than the electoral thresholds, these countries now grant public funding also to political parties that have not obtained representation in parliament. Currently, eligibility thresholds range from 0.5 percent of votes in Germany to 4 percent in Romania, with a European average of 1.86 percent. Six countries maintain parliamentary representation as an eligibility Page 211 →criterion for public funding. Among these, Croatia raised the electoral threshold (from 3 to 5 percent) in 1995, thus effectively raising the barrier for access to state subsidies. Belgium introduced a formal electoral threshold of 5 percent in 2003, setting the eligibility criterion at a slightly higher level than the previous effective electoral threshold. Of the eleven countries10 that originally provided public funds on the basis of a minimum number or percentage of votes, two have lowered the eligibility thresholds (the Czech Republic and Greece), while the threshold has instead been increased in three countries (Norway, Romania, and Slovakia). Table 7.3 summarizes the longitudinal trends. Page 210 → Table 7.2. Eligibility Criteria for Public Funding (t1 = 2012) Eligibility based on Seats Electoral Threshold Country (%)

Eligibility based on Votes

Belgium 5 Croatia 5 Finland (5.2) Netherlands (0.67) Serbia 5 Spain 3 (d)

Austria 1% Bulgaria 1% Cyprus 1% + candidate presentation reqs. Czech Republic 1.5% Denmark 1,000 votes Estonia 1% France 1% in at least 50 electoral districts Germany 0.5 % Greece 1.5% + candidate presentation reqs. Hungary 1% Iceland 2.5%

Country

Eligibility Threshold

Electoral Threshold (%) 4 4 (1.8) 5 2 5 (37.5) 5 3 5 5

Ireland

2%

(14.9)

Italy Latvia Lithuania Luxembourg

2% 2% 3% 2% + candidate presentation reqs.

4 5 5 (14)

Norway Poland Portugal

2.5% 3% 50,000 votes

4 5 (6.7)

Romania Slovakia

4% 3%

5 5

Slovenia Sweden

1% 4 2.5% in one of the two last elections 4

Sources: see table 7.1. Notes: Effective electoral thresholds in parentheses if no legal threshold is in force; (d) = threshold set at the district levels. In Bulgaria, Estonia and Germany, the lowering of the threshold has been significant (between 3 and 4.5 percent), while in the Czech Republic and Greece, the reduction has been relatively marginal (0.5 and 1.5 percent respectively). Such percentage changes cannot be computed for all countries, in particular those in which no formal electoral threshold or numerical payout threshold exists. Nevertheless, the general trend appears to be toward qualitatively lower thresholds. For example, Ireland, Luxembourg, Portugal, Slovenia, and Sweden initially set the payout threshold for state funding at one parliamentary seat but now maintain eligibility criteria below the electoral threshold. Serbia changed its electoral system Page 212 →in 2000 so that the electoral threshold is now set at the national rather than the district level, which in principle should lower the barrier for parliamentary representation and thus facilitate access to public funding. Table 7.3. Changes in Eligibility Criteria (t1 в€’t0) No change Austria Denmark Finland Hungary Iceland Italy Lithuania Netherlands Spain

Increase (%) Decrease (%) Belgium Bulgaria (в€’3) Croatia (+2) Cyprus Norway (+2.5) Czech Republic (в€’0.5) Romania (+4) Estonia (в€’4) Slovakia (+1) France Germany (в€’4.5) Greece (в€’1.5) Ireland Luxembourg Poland (в€’2) Portugal Slovenia Serbia Sweden

Notes: t0 = regulations in force when public funding to parties in central office was first introduced (see figure 7.1 for dates); t1 = regulations in force as of 2012. Computation of percentage changes in eligibility thresholds only for countries where legal electoral thresholds and/or eligibility thresholds are established in exclusively numerical

terms.

The eligibility threshold has increased in only three countries: Norway, which turned from an extremely liberal criterion in 1970—parties merely had to be registered to benefit from public funds—to a threshold of 2.5 percent introduced in 1977 (SvГҐsand 1992, 777); Romania, which like Norway initially provided state subsidies to all competing parties but increased the payout threshold to 4 percent of the votes in 2003 (Gherghina and Chiru 2013); and Slovakia, where the current threshold (2 percent) is 1 point higher than the one originally introduced in Czechoslovakia in 1990. In the remaining cases, no change has occurred in the criteria for accessing public funds, although Croatia and Belgium effectively raised the barrier by increasing the electoral threshold. Belgium’s increase, however, has been only marginal.11 In general, our analysis confirms the trend observed by previous scholars toward more inclusive public funding regimes. More important, this trend has continued up to the present day and has taken place in both Western and Eastern European countries. In this sense, developments in Europe provide a clear contrast with the other regions discussed in this volume. Not only do European governments not appear to be deregulating, but they also seem to be implementing further rules while opening the system of public funding to a larger number of political actors. While explaining these divergent patterns lies beyond the scope of this chapter, we can point to a number of possible explanations. First, this variation may result from the fact that European political parties have a stronger position than parties occupy in the more candidate-centered United States, thereby contributing to a growing conception of political parties as necessary instruments for democracy and leading to a pattern of increasing constitutionalization and legal regulation. Second, political finance has required an increasing number of rules as a consequence of European parties’ particularly strong economic dependence on the state. Indeed, public funding has become the most important source of revenue of Europe’s political parties,12 requiring more comprehensive and narrowly drafted regulation of the financial management of political parties and candidates. A third possible explanation lies with the role of the courts as the external agents driving regulatory change. The regulation of U.S. party funding is largely shaped by the jurisprudence of the Supreme Court, which has adopted a decidedly liberal (in the free market sense) approach, largely rejecting state intervention in party finances. European courts, in Page 213 →contrast, have tended to endorse a more egalitarian notion of political competition in which an important role is reserved for the state to enable the creation of a level playing field. Indeed, despite the divergent paths on opposite sides of the Atlantic, there is a common instigator for changes in regulations. Our analysis suggests that political finance regulations do not merely accord with the interests of the established political parties. Indeed, changes are often driven by actors external to the parties in power. On the one hand, the impetus for changes in the party funding rules in favor of more inclusive regimes may come from the blackmail potential of smaller parties. NaОІmacher, for example, observes that the lowering of the thresholds for access to public funding in Sweden and Austria resulted from the need to appease smaller parties to secure their cooperation in the formation of coalitions or their support for minority governments (NaОІmacher 2009, 325). Similar processes took place in Portugal with the adoption of the 2003 political finance law (Casal BГ©rtoa 2013) and in Italy with the lowering of the election reimbursement threshold to 1 percent in 2001 (Piccio 2014b). On the other hand, constitutional courts have played a pivotal role in opening up the system of public funding to smaller and nonparliamentary parties. This famously occurred first in Germany, when the Constitutional Court declared part of the party financing rules unconstitutional, emphasizing the principle of Chancengleichheit (i.e., that the law should seek to guarantee equal opportunities between political parties [Kommers 1997, 201–3]). Constitutional courts in other countries, including Portugal, France, the Czech Republic, and Slovenia, have played a similar role in curtailing the possible cartelization of the party systems by ruling that access to state aid should also be available to outsider parties (Scarrow 2006, 634; Casal BГ©rtoa and Spirova 2013; Fink-Hafner and KraЕЎovec 2013). The presence of these corrective mechanisms, forced either by political contingencies or by court rulings, suggests an important role for external counterweights to the potentially self-serving behavior of the established parties.

Conclusion

In Europe, we have found no signs of a “deregulatory moment” similar to that in North America. Not only have systems of public funding been introduced in virtually all European countries, but the availability of state support for parties is considered the norm as well as a basic tenet for democratic competition and political pluralism, to the extent that movements Page 214 →away from it are highly unlikely. However, as the rules for public funding are not exogenous to the parties that design them, they potentially provide self-serving political actors with a powerful resource to keep outsiders at bay. Such exclusionary practices would clearly challenge one of the major justifications conventionally offered in favor of the introduction of public funding to political parties—that is, the creation of a level playing field for political competition. To the extent that state subsidies disadvantage new and smaller parties—in particular, those outside the parliamentary arena—they restrict political pluralism, bias the electoral arena, and potentially undermine rather than promote the fundamental principles of democracy. In this chapter, we have focused on analyzing the legal parameters of party funding. This is a different approach from the majority of existing studies, which tend to focus on the actual impact of funding rules on the openness of the party system. We argue that the nature of the access rules for public subsidies itself provides a powerful indication of the existence of a self-serving logic of established actors and potentially discriminatory practices of state funding. We have thus conducted a content analysis of the political finance rules, with a special emphasis on legal eligibility criteria for qualifying for public funding. Presenting an up-to-date comparative and longitudinal analysis of eligibility rules for public funding and thus extending the chronological and geographical boundaries of extant research on this subject to current regulations in both Western and Eastern European countries, we have shown how the criteria for the disbursement of state subsidies have become more inclusive over time in that they are currently less restrictive of smaller and new political actors than when the criteria were introduced. While a majority of European countries initially restricted eligibility for public subsidies to parties with at least one seat in parliament, only a few countries now maintain this criterion. As a consequence, in the large majority of the cases, public funding is now available to parties without parliamentary representation. Throughout Europe, public funding eligibility criteria have thus become more generous as the rules have become more inclusive of smaller political actors. This suggests that fairer mechanisms of interparty competition have been established over time, thereby enhancing the opportunities for smaller parties to compete. Although these results seem to disprove the arguments regarding the possible cartelizing effects of public funding regimes, we cannot be completely sure about the underlying motivations of the actors who create the rules. Evidence suggests that the access barriers created by the established parties often were lowered in responsePage 215 → to the demands of external actors, such as potential coalition partners or the courts. Such corrective mechanisms, driven by the contingencies of political competition and government formation or by the rulings of constitutional courts, indicate an important role for external counterweights to the established parties’ potentially self-serving behavior.

Notes Financial support from the European Research Council (ERC_Stg07_205660) is gratefully acknowledged. This chapter is part of a larger research project on the legal regulation of political parties in postwar European democracies. For more details about the project, see http://www.partylaw.leidenuniv.nl. 1.See, for example, Venice Commission 2001. 2.For a comprehensive review of the public subsidy debate, see Pierre, SvГҐsand, and Widfeldt 2000. 3.Tavits 2006 analyzed twenty-two OECD countries between 1960 and 2002 and found that public funding does not act as a substantively significant cost of entry for new parties. Bolin 2007 analyzed new party entrance in eighteen West European countries between 1960 and 2005 and found that electoral systems and socioeconomic factors play a greater role in explaining party entrance than do state subsidies to political parties, which have only marginal effects. Scarrow 2006 looked at twenty-six European countries and found no evidence that the subsidies have made it any more difficult for new and outsider parties to enter parliaments. Similarly, van Biezen and Rashkova 2014 find no evidence for the effect of state subsidies on new party entries in both Western and Eastern European democracies. 4.The focus on Western Europe in comparative volumes on political finance clearly stems from previous

research reviewing the cross-national comparisons. See especially NaОІmacher 2001, 20; Scarrow 2007, 196. 5.While we refer only to these main principles, eligibility for accessing public funding to political parties can also be determined by a combination of different criteria. For example, in Greece, eligibility is granted to those parties that garner 1.5 percent of the votes and that present candidates in more than 70 percent of the country’s electoral regions. Similar provisions exist in Cyprus, France, Luxembourg, and Slovenia (Piccio 2012). 6.According to the OSCE/Venice Commission Guidelines, “At a minimum, some degree of public funding should be available to all parties represented in parliament. However, to promote political pluralism, some funding should also be extended beyond those parties represented in parliament to include all parties putting forth candidates for an election and enjoying a minimum level of citizen support. This is particularly important in the case of new parties, which must be given a fair opportunity to compete with existing parties” (OSCE/ODIHR and Venice Commission 2010, 71–72). 7.The dataset includes all European democracies classified as “free” by Freedom House at the end of 2008, with the exception of states with populations under one hundred thousand. For this chapter, the criteria for the selection of our cases are thus the existence of an independent and democratic nation-state with direct public funding of Page 216 →political parties. Twenty-eight of the thirty-three European democracies comply with these criteria: Austria, Belgium, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Lithuania, Luxembourg, Netherlands, Norway, Poland, Portugal, Romania, Serbia, Slovakia, Slovenia, Spain, and Sweden. In the United Kingdom, direct forms of party funding are present in the form of subsidies to opposition parties in both houses (Short and Cranborne Money) and of Policy Development Grants (since 2000). However, public funding accounts for a minimal proportion of the British political parties’ income, and in comparison to other European countries, the amount of public funds disbursed to parties is negligible (Committee of Standards in Public Life 2011). For these reasons, we have excluded the United Kingdom from our analysis. See also Fisher (chap. 5) in this volume. 8.GRECO, Evaluation Report. 9.Party law can be defined as “the total body of law that affects political parties” (MГјller and Sieberer 2006, 435). For any country, the body of party law is derived from a series of related public laws, including party laws, political finance laws, electoral laws, campaign laws, media laws, and national constitutions. 10.Latvia is not included in the longitudinal analysis, as public funding was introduced only in 2011 and did not come into effect until in January 2012; t1 and t0 thus effectively coincide. 11.The present analysis does not account for possible fluctuations in the eligibility criteria for public funding between t1 and t0. In Italy, for example, both first and current regulations establish a minimum level of 2 percent of the vote, but the payoff threshold has been changed several times in the interim (see Piccio 2014b). 12.For Western Europe, public funding accounts for an average of 67 percent of political parties’ total income (see Piccio 2014a, 224).

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Conclusions: Deregulating Party Finance Is the United States an Outlier or a Pioneer? Justin Fisher The analysis of party finance in this book suggests that the United States is following a different path from other countries in North America, Europe, and Australasia. Whereas Diana Dwyre and Robert Boatright show that the United States appears to be moving toward deregulation, the opposite appears to be true elsewhere. Indeed, many of the cases in this book point to growing regulation of various kinds. Yet one factor unites all cases: party finance is a problem that seemingly refuses to be “solved.” In other words, there is little in the way of a settled will surrounding the regulation of this aspect of political life. This in itself is a puzzle. Why should this area of regulation prove so consistently controversial compared with other aspects of electoral law? And why does the United States seem to have embarked on a different path? As Robert Boatright points out in the introduction, the vast majority of nations in North America, Europe, and Australasia have deregulated the economic sphere (though often while establishing agencies to oversee the deregulated market). Boatright thus argues that the ideology that promotes a deregulated market may also extend to the deregulation of political life. This approach offers an appealing logic. If libertarians regard market restrictions as analogous to an infringement of human liberty, then there is arguably no reason why the same concerns should not apply to private associations such as political parties or indeed citizens. Thus, for example, there is an argument to be made that restricting what citizens (or indeed, corporations) can spend their (often already taxed) private income on represents such an infringement of liberty. Of course, no governments have taken an entirely libertarian approach while in office, but many have followed the path of economic deregulation, so in that sense, the deregulation of party finance may represent a logical step. Page 221 →Yet as this volume shows, while the United States has followed this ideological logic, most of the other democracies under investigation have not. At best, instances that look like deregulation in other countries can be explained as the consequences of partisan competition, as Lisa Young and Iain McMenamin show. Indeed, while these countries have pursued economic deregulation in the private sphere, in public life, Daniela Piccio and Ingrid van Biezen show, the reverse has often been the case—and not only in terms of party finance. If that holds true, it might suggest that the ideological explanations for regulatory change have little purchase outside the United States. However, just as Scarrow (2004) uses rational choice to arrive at different conclusions to the similarly rational-choice-driven conclusions of Katz and Mair (1995) by reexamining the actors’ incentives, so the ideological explanations advanced by Boatright may still be utilized if the underlying logic is reconsidered. A libertarian perspective that promotes economic deregulation implies a preference for private activity. But just as with many liberal perspectives, it also implies a suspicion of public actors. Thus, assuming that the case for democracy is accepted, deregulation of economic activity and the simultaneous increasing regulation of public life—in this case, party finance—may be consistent with that case. From this perspective, an ideological explanation may help explain the apparently different paths chosen by the United States on the one hand and the other nations considered here on the other. The basis of this difference may lie in the party-centered (and therefore collective) democracies in Europe, Canada, and Australia and the more individualistic, candidate-centered politics of the United States. Where politics is individualized, the principle of entrepreneurial activity may be a more natural bedfellow with economic activity, thus increasingly the plausibility of an approach that is consistent with economic deregulation. Conversely, collective activity by political parties may be more likely to invoke the suspicion of public activity, possibly helping to explain the growth in regulation. However, the down side of the “ideological direction” explanation is that it potentially underplays the role of institutions. Regulation requires regulatory institutions such as the UK Electoral Commission or Elections Canada. And institutions may develop their own motivations—either to grow in scope and therefore size along the lines predicted by the public-choice critique of bureaucracy or to justify their continued existence. From this

perspective, a regulatory machine is created and is dedicated to regulating larger and larger areas of public life. Thus, growing regulation in the face of economic deregulation may be a function of institutional survival or expansion. This, then, may help explain the growth of party Page 222 →finance regulation outside the United States but does not address the deregulation within it, which remains a puzzle. Ideas derived from normative institutionalism may be helpful here. As Boatright points out in the introduction, scandal may lead a country to embark on a regulatory path. Yet the evidence in the various chapters in this volume (particularly my own but also those by Michael KoГџ and Iain McMenamin) suggests that this is not a uniform pattern. From a normative institutionalist perspective, this reveals not a weakness in the arguments about the impacts of scandal but rather a weakness in the term scandal itself, especially when applied to comparative analysis. As Guy Peters (1999) argues, institutional change may occur when a significant disjuncture exists between an institution’s behavior and society’s values. The key insight here is that these values may not be constant across democracies. Or, to put it another way, what constitutes scandal in one democracy may not even register as a misdemeanor of any consequence in another. Coupled with the overuse of the term scandal by commentators and political scientists alike (Fisher and VanHeerde-Hudson 2014), the power of scandal in explaining regulation or deregulation diminishes significantly. In short, too many regard scandal as being a binary variable, when in fact it should be treated as a continuous one. From this perspective, the degree to which the logic of appropriateness has been challenged may then explain in part the different paths chosen in the United States and in other democracies (and indeed the variations between these other democracies). Using this approach, the United States may be seen as something of an outlier, a position that it is tempting to seek to explain through the lens of political culture or its more developed theoretical cousin, normative institutionalism. Equally, the candidate-centered structure of U.S. politics compared with party-centered politics elsewhere is also potentially helpful in explaining different paths through the ideological thesis. Taken together, the deregulation of party finance in the United States compared with the increasing or at least relatively stable regulation elsewhere adds weight to the “American exceptionalism” thesis. Yet there may also be a case for arguing that the United States may be a pioneer in deregulating party finance and that other democracies will ultimately follow suit. This may have nothing to do with ideology or normative institutions and everything to do with the practicality of implementation. As Boatright points out in the introduction, regulatory systems can atrophy or become irrelevant, leading to deregulation. In the case of party financePage 223 → regulation, this phenomenon may occur because of the growing difficulty of implementation in an increasingly internationalized environment. Party finance regulations are principally national concerns, focused on the conduct of political life within a nationstate. Yet many forms of regulation are increasingly difficult to implement (or perhaps justify) as interdependence and internationalization grows. For example, many democracies seek to ban “foreign money” from party finance. Yet if institutional donations (such as those from corporations) are permitted, it becomes increasingly difficult to say what money is domestic and what is foreign, as many corporations operate across several borders. Even if a company’s headquarters are in one country, a major client may be abroad, and meaningful differentiation between domestic and foreign money for the purposes of regulation becomes nearly impossible. Second, both through satellite broadcasting and the Internet, communications in most democracies are by no means solely domestic. Thus, in the United Kingdom, political parties are not permitted to purchase advertisements on television or radio, and broadcast news is required to be politically impartial. These regulations are currently observed in respect of both terrestrial and satellite broadcasters, but as the Internet becomes an increasingly important channel of communication and entertainment, such a regulation may be impossible to sustain, especially if Internet sites or perhaps even satellite broadcasters that can be received in the home nation are beyond domestic legislative control. Similarly, domestic campaign expenditure limits may become redundant (or at least come under severe challenge) if “off-shore” broadcasters pursue a strongly partisan line. A further potential challenge relates to the principle of votes being available to only national citizens. With an increasingly mobile and international labor force, such a principle may inevitably come under challenge,

especially in the European Union. Labor mobility can lead to long-term residence in a foreign country without a requirement to take citizenship of the host nation. For example, it is estimated that between three hundred thousand and four hundred thousand French citizens live in London alone (Ash 2012). Those individuals may still be denied the franchise in national elections despite paying tax in the host country. Such a situation is arguably unsustainable, and if franchise rights are relaxed, that implies that donations by newly registered foreign voters could become permissible. Some European and Latin American governments have addressed this concern, although it has not yet become a subject of serious political discussion in the United States. Page 224 →Overall, a deregulation of party finance is distinctly possible if many existing rules become impossible to implement or irrelevant. Yet this does not imply that all regulation would be removed. Rather, transparency may be maintained or even enhanced and will become the principal form of party finance regulation. If so, the actions of parties or candidates may be judged not by regulators but solely by public opinion, a situation that may have some advantages. Transparency should provide a safeguard against inappropriate behavior—in effect, through self-censorship. Ideally, for example, parties may avoid receiving monies from certain sources not because the rules forbid accepting funds from those sources but because transparency may lead to criticism, with results at the ballot box. Yet a reliance solely on transparency is more likely to deliver unsatisfactory outcomes if the purpose of party finance regulation is to help deliver free and fair elections. This is so for two principal reasons. First, unless all activity is reported in real time, the electorate may not be able to reward or punish candidates or parties until after an election in which apparently inappropriate behavior took place. The check on behavior would, therefore, be effectively lost until a subsequent election (if voters’ memories were that long). Reporting donations in real time is theoretically possible (although it would add significant administrative cost to parties), but reporting expenditures in real time would be almost impossible. The second reason is that, as VanHeerde-Hudson and Fisher (2013) show, the public remains largely ignorant about matters of party finance despite relatively high levels of transparency, and party finance remains a low-salience issue. As a consequence, public scrutiny by either the electorate or NGOs may be neither a particularly effective nor a consistent means of helping to deliver free and fair elections. The future of party finance regulation contains uncertainty. The danger of ever-growing regulation is that legitimate political activity will become increasingly difficult and may alter the balance in favor of unregulated bodies at the expense of regulated ones—the candidates and parties who stand for election and are accountable to the voters. Democracies (and NGOs), therefore, must learn when to stop adding to existing regulation and accept that not every move by voluntary actors such as parties can or should be subject to control. Equally, the logic of deregulation itself presents many dangers if it ultimately comes to rely on transparency alone as a means of delivering free and fair elections. Whether the United States remains an outlier through its deregulation or whether it is a pioneer in this respect remains to be seen. Much will depend on whether the will to deliver appropriate party finance regulation is as strong as it is in other Page 225 →areas of electoral law, such as qualification for the franchise or candidature. All of which leaves us with two final questions: Why is it so difficult to regulate party finance? And is deregulation of party finance the most effective means of delivering free and fair elections?

References Ash, Lucy. 2012. “London, France’s Sixth Biggest City.” BBC News Magazine, May 29. http://www.bbc.co.uk/news/magazine-18234930. Fisher, Justin, and Jennifer vanHeerde-Hudson. 2014. “A Very British Episode?” In At the Public’s Expense? The 2009 British MPs’ Expenses Crisis, ed. Jennifer vanHeerde-Hudson, 196–203. Basingstoke: Palgrave. Katz, Richard, and Peter Mair. 1995. “Changing Models of Party Organization and Party Democracy: The Emergence of the Cartel Party.” Party Politics 1 (1): 5–28.

Peters, B. Guy. 1999. Institutional Theory in Political Science. London: Continuum. Scarrow, Susan E. 2004. “Explaining Party Finance Reforms: Competition and Context.” Party Politics 10 (6): 653–75. vanHeerde-Hudson, Jennifer, and Justin Fisher. 2013. “Parties Heed (with Caution): Public Knowledge of and Attitudes towards Party Finance in Britain.” Party Politics 19 (1): 41–60.

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Contributors Editor Robert G. Boatright is Associate Professor of Political Science at Clark University, Worcester, Massachusetts. He is the author of Interest Groups and Campaign Finance Reform in the United States and Canada (University of Michigan Press, 2011), Getting Primaried: The Changing Politics of Congressional Primary Challenges (University of Michigan Press, 2013), and Expressive Politics: Issues Strategies of Congressional Challengers (Ohio State University Press, 2004). He has published many articles and book chapters on campaign finance, electoral politics, and primary elections.

Contributors Ingrid van Biezen is Professor of Comparative Politics and Chair of the Institute of Political Science at Leiden University. She is a coeditor of Acta Politica, the official journal of the Dutch Political Science Association, and a former coeditor of the EJPR Political Data Yearbook and the ECPR series Studies in European Political Science (Routledge). She is the author of Political Parties in New Democracies (Palgrave, 2003) and Financing Political Parties and Election Campaigns (Council of Europe, 2003), and the editor of On Parties, Party Systems, and Democracy: Selected Writings of Peter Mair (ECPR Press, 2014). Between 2008 and 2014, she was the principal investigator on two large-scale research projects on the legal and constitutional regulation of political parties funded by the UK Economic and Social Research Council and the European Research Council. Diana Dwyre is Professor of Political Science at California State University, Chico. She has coauthored two books and published many articles and book chapters on American political parties and campaign finance, Page 228 →including Limits and Loopholes: The Quest for Money, Free Speech, and Fair Elections (Congressional Quarterly Press, 2007) and Legislative Labyrinth: Congress and Campaign Finance Reform (Congressional Quarterly Press, 2000). She was the 2009–10 Fulbright Australian National University Distinguished Chair in American Political Science, and she was the 1997–98 William A. Steiger American Political Science Association Congressional Fellow in Washington, D.C. Justin Fisher is Professor of Political Science and head of the Department of Politics, History, and the Brunel Law School at Brunel University, London, England. He is the author of eight books on British electoral politics, including The UK General Election of 2010: Explaining the Outcome (Routledge, 2011). He has acted as an adviser and consultant to numerous bodies, including the Committee on Standards in Public Life, the Electoral Commission, the Public Administration Select Committee, the Phillips Review of Party Finance, and the Council of Europe. Michael KoГџ is Associate Professor of Political Science at Ludwig-Maximilians-University, Munich, Germany. He is the author of The Politics of Party Funding: State Funding to Political Parties and Party Competition in Western Europe (Oxford University Press, 2011). He is currently a Schumpeter Fellow of the Volkswagen Foundation and leads a research project, “What Do Parliaments Actually Do? Parliamentary Agenda Power between Legitimacy, Effectiveness, and Efficiency.” Iain McMenamin is an Associate Professor in the School of Law and Government at Dublin City University, Ireland. He is the author of If Money Talks, What Does it Say? Corruption and Business Financing of Political Parties (Oxford University Press, 2013). He has published articles and book chapters on business-government relations in Australia, Canada, Germany, Ireland, Poland, and the United Kingdom. His articles on many aspects of comparative politics have appeared in World Politics, International Studies Quarterly, European-Union Politics, the European Journal of Political Research, and other journals. Daniela R. Piccio is Marie SkЕ‚odowska-Curie Fellow at the University of Torino. After receiving a PhD in Political Science at the European University Institute of Florence, she worked as a Research Associate at Leiden

University for the ERC-funded research project “Party Law in Modern Europe.” Her main research interests include political parties, political Page 229 →representation, internal party democracy, social movements, party regulation, and political finance. Her work has appeared in several international journals and edited volumes. Lisa Young is Professor of Political Science and Dean and Vice Provost of graduate studies at the University of Calgary, Canada. She is the author or coauthor of five books on Canadian politics, including Money Politics, and Democracy: Canada’s Party Finance Reforms (University of British Columbia Press, 2012), Feminists and Party Politics (University of British Columbia Press, 2000), and Rebuilding Canadian Party Politics (University of British Columbia Press, 2000).

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Index Note: Page numbers followed by f indicate a figure. Those followed by t indicate a table. Abbott, Tony, 127 Accountability Act of 2006 (Canada), 110t, 115–17 accountability to the electorate: of candidates and parties, 72–73, 99–100; of interest groups, 72–73, 87–88; weakening of, 61–65, 67, 73, 100 Adelson, Sheldon and Miriam, 48, 68n5, 77t AFL-CIO, 86 Alaska, 64 Alexander, Wendy, 155 Alito, Samuel, 43–44, 63 America Coming Together, 78 American Crossroads, 73, 88–89 American exceptionalism, 222 Americans for Job Security, 75 Americans for Prosperity, 51, 52t American Tradition Partnership v. Bullock, 42–43, 61–62, 67n3 America Votes, 87, 89, 99 Amnesty International, 85 appropriateness, logic of, 131–32, 156, 158–59, 167, 171–72, 222 Ashcroft, Michael, 172n1 Ashcroft money, 155, 172n1 Austin v. Michigan Chamber of Commerce, 41 Australia, 3, 26, 126–48; elite discourse and scandal in, 132, 137, 142–47; majoritarian democracy of, 127; normative accounts of appropriateness in, 131–32; Nuttall scandal in, 139, 143–44, 146; partisan interest in, 131, 146–48; party-centered politics of, 128–29, 221; party foundations in, 134; party funding in, 129–30, 132–34, 137f; Political Broadcasts and Disclosure Act of 1991 in, 132–33; reform initiatives in, 143–48; Wollongong scandal of, 137–40, 143–46 Australian Broadcasting Corporation (ABC), 143 Australian Labor Party (ALP), 26, 128–29; funding of, 130, 131, 133–34; internal politics of, 131; reform initiatives of, 133–42, 146–48; union funding of, 140–42

Austria, 206f, 207t, 208, 210t, 211t, 213, 215–16n7 Bachmann, Michele, 94f Bai, Matt, 78 Barakso, Maryann, 84–85 Beazley, Kim, 141 Belgium, 206f, 207t, 210t, 211t, 212, 215–16n7 Bettencourt, Liliane, 188–89, 192 Biezen, Ingrid van: on eligibility for public funds, 208; on new parties, 202, 215n3; on parties as public goods, 180, 200; on regulation of political parties, 6, 11, 26–27, 205, 221 Page 232 →Bipartisan Campaign Reform Act (BCRA) of 2002 (U.S.), 12–13, 20, 25, 35–37; contribution disclosure requirements of, 38–39, 49f, 58–61; contribution limits in, 36; electioneering communications provisions of, 36–39, 101n1; Federal Election Commission v. Wisconsin Right to Life and, 37–39, 51, 56, 59–63, 75, 101n1; issue advocacy restrictions in, 36, 38–41, 74; McConnell v. Federal Election Commission and, 12–13, 37, 57, 62–63; partisan supporters of, 37; on soft money, 36, 37, 41, 53–55, 57, 74–75 Blackmun, Harry, 40 Blair, Tony, 160 Bligh, Anna, 139–40, 143, 145–46 Bloc QuГ©becois (Canada), 109, 112–14, 116f, 118f Boatright, Robert: on ideological motives of deregulation, 108, 123, 220–22; on interest groups, 25; on legal challenges to the BCRA, 43; on motivation of courts, 34; on policy drift, 65; on regulatory and deregulatory moments, 108, 121, 122 Bolin, Niklas, 215n3 Bopp, James, 62 Brandeis, Louis, 59 Breyer, Stephen, 42–43, 44, 67n3 Briffault, Richard, 41 Britain. See Great Britain Brown, Scott, 68n6, 100 Browne, William, 81 Buckley v. Valeo, 35, 40, 43, 44, 60, 121 Bulgaria, 206f, 207t, 210t, 211t Bullock, Charles, 55 bundling groups, 75

California, 64 California Medical Association v. Federal Election Commission, 40 Canada, 3, 7, 107–24; Accountability Act of 2006 in, 110t, 115–17; cartel theory in, 109; deregulatory impulse in, 110, 121–24; electoral advantage theory in, 109–10, 122–24; Fair Elections Act of 2014 in, 109, 110t, 120–21; Fiscal Update initiative of 2008 in, 110t; Keeping Canada’s Economy and Jobs Growing Act of 2011 in, 110t; Lortie Commission of, 111; party-centered politics of, 221; permanent campaign atmosphere in, 109, 123; political contribution tax credit in, 119–20, 122, 124n6; public financing of elections in, 25–26, 110–11; reforms of 2003 in, 110–14; role of courts in, 21–22; single-member plurality system of, 109; sponsorship scandal of, 111–12, 114–15, 122, 124nn1–2; summary of legislative initiatives in, 110t; two-and-a-half-party system of, 17; vote-based party subsidies in, 14–15, 112–13, 117–20, 123–24, 177 Canadian Alliance (Canada), 112–14, 124n3 candidate-centered politics, 57, 221–22 candidates: accountability to voters of, 72–73, 99–100; coordination with interest groups of, 73; fundraising restrictions on, 56–57 cartel theory, 16t, 17–18, 28nn10–12, 157, 221; Canadian reforms and, 109; European public funding and, 200–205; Great Britain reforms and, 168; on revenue maximization, 108 Caterpillar, 84 Cato Institute, 4–5 Center for Competitive Politics, 62 Chirac, Jacques, 188 ChrГ©tien, Jean, 111–13, 119, 122 Christian Democratic Union (CDU) (Germany), 188, 190 Christian Democrats (Sweden), 193–94 Citizens for Better Medicare, 75 Citizens United v. Federal Election Commission decision, 2, 4, 25, 39–41, 45–48, 108, 177; activism against, 63–64, 66; on corruption, 39–44, 58; on disclosure requirements, 60–62; First Amendment argument in, 39–40, 66; on independent expenditures, 39, 60–61; individual spending and, 48, 68n5, 71–72; interest-group spending and, 22–23, 47t, 48, 50t, 51–53; Obama’s statement Page 233 →on, 51–53; on party fundraising and spending, 57 Civilizing Capital (Latham), 142 Clegg, Nick, 164, 165, 168, 169 Clift, Benjamin, 16t, 20–21, 23, 156–59, 167, 169 Club for Growth, 75, 79 Coalition (Australia). See Liberal Party (Australia); National Party (Australia) Coase, Ronald, 85

Colorado, 64 Committee on Standards in Public Life (CSPL) report (Great Britain), 153, 163–64, 166–70 comparative study of campaign finance, 7, 14–27; on party interests, 26–27; on public support of regulation, 26; theoretical approaches to, 15–23 competitive advantage, 84–85, 87–88 Confessore, Nicholas, 4 Congressional polarization, 63–64 consensus democracies, 126, 128 consequences of U.S. deregulation, 53–67; challenges to government legitimacy as, 61–64; differentiation among interest groups as, 72–80, 86–88, 99–101; diminished influence of parties as, 57–58, 73; erosion of disclosure as, 49f, 55–56, 58–61; on issue advocacy, 38–41, 51, 53–56, 74–75; for organized interest groups, 71–101; on party fundraising and donations, 54–57, 73 Conservative Party (Canada), 25–26, 113–14; formation of, 114, 124n3; impact of reforms on, 115–16; on the per-vote subsidy, 14–15, 117–20; reform initiatives of, 107, 109–10, 113, 115–17, 122–24 Conservative Party (Great Britain), 154–55; funding sources of, 160, 162–63, 167, 172n2; on Phillips review recommendations, 161–62, 165; reform initiatives of, 171; as vote-seeking party, 169 coordination among interest groups, 72–73, 88, 91–100, 102n17; additive strategies in, 92; consensus on candidates in, 92–93; replacement strategies in, 92 corporate spending, 39–56, 71; disclosure regulations for, 60–61; in Germany, 189–91; nondisclosure of, 55; prohibitions of, 39, 67n2; state and local resolutions against, 63–64 Corrupt and Illegal Practices Act of 1883 (Great Britain), 152–53 corruption and scandal, 20–21, 26, 126, 187–89, 222; Bettencourt scandal (France) and, 188–89, 192; Citizens United debates on, 39–44; disclosure as deterrent to, 58–59, 64; in elite discourse models, 132, 137, 142–47, 159–60; loans for peerages scandal (Britain) and, 154–55, 160–61, 167; logic of appropriateness and, 156, 222; Nuttall scandal (Australia) and, 139, 143–44, 146; quid pro quo forms of, 44, 58; soft money and, 74–75; sponsorship scandal (Canada) and, 111–12, 114–15, 122, 124nn1–2; weakened links between voters and elected officials and, 67; Western European reforms and, 180–83, 187–89, 196–97; Wollongong scandal (Australia) and, 137–40, 143–46 Cosgrove, Kenneth M., 86 Council of Europe, 205; Recommendation 2001, 204; Recommendation 2003(3), 179, 180, 185, 194 courts as regulatory/deregulatory actors, 21–22, 34, 44–45, 213. See also U.S. Supreme Court Crean, Simon, 141 Croatia, 206f, 207t, 210t, 211t, 212, 215–16n7 Crossroads GPS, 51, 52t, 83, 87 cultural norms. See normative institutionalism Curing the Mischiefs of Faction (Ranney), 57

Cyprus, 206f, 207t, 210t, 211t, 215n5, 215–16n7 Czech Republic, 206f, 207t, 210t, 211t, 213, 215–16n7 dark money, 59–60, 62 Davis v. Federal Election Commission, 39, 44, 61 Page 234 →democratic deficit, 19–20, 53 Democratic Party (Australia), 136t Democratic Party (United States): BCRA and, 37; coordinated spending of, 92–99, 102n17; failed DISCLOSE Act of, 63; partisan electoral advantage theory and, 66–67 Denmark, 206f, 207t, 209, 210t, 211t, 215–16n7 deregulation, 1–27; as economic concept, 7–10, 27n3, 220; implications for further deregulation of, 5–6; as political concept, 10–15; United States as outlier in, 24–25, 71, 220–25 deregulation activism, 61–65 deregulatory moments, 3, 15, 180, 196, 201; in Canada, 110, 121–24; in Europe, 177–78, 196–97, 201, 207, 213–14; ideological basis for, 108, 122–23, 220–22 Derthick, Martha, 9–10 differentiation among interest groups, 72–88; advertising strategies in, 91; finding a niche in, 80–88; by function, 73, 78, 81–83, 88–91; highest spending groups by year and, 75–80; by issue, 73, 78–79, 81, 88 DISCLOSE Act (U.S.), 63 disclosure requirements, 38–39, 49f, 58–61; as deterrent to corruption, 58–59, 64; for 501(c)4 groups, 55–56; for 527 committees, 54; for super PACs, 46, 55 discourse. See elite discourse Doe v. Reed, 61 Dowling, Conor, 59 Dwyre, Diana, 25, 71, 80, 220; on the BCRA, 37; on Democratic interest group fundraising, 53–54; on party coordination with super PACs, 66; on party fundraising in 2004, 55–56; on party influence, 57, 179; on singlecandidate super PACs, 46 Eastern Europe. See Europe economic deregulation, 3–10, 27n3, 220 economic regulation, 7–10 Eisenstadt, Todd A., 20 electioneering. See issue advocacy elections of 2000 (U.S.), 76t, 78

elections of 2004 (U.S.), 55–56; coordination among interest groups in, 92; highest spending groups in, 76t, 78 elections of 2008 (U.S.): congressional races in, 79; highest spending groups in, 75, 77t, 78–79; Obama’s fundraising in, 75, 79, 87 elections of 2010 (U.S.), 46, 47t, 79 elections of 2012 (U.S.), 22–23, 88–99; coordination among interest groups in, 91–99, 102n17; highest spending groups in, 75, 77t, 79–80; super PAC spending in, 46, 47t, 68nn5–6; Warren-Brown pact on interest groups in, 68n6, 100 elections of 2014 (U.S.), 46, 47t Electoral Administration Bill of 2006 (Great Britain), 155, 170 electoral economy model (partisan electoral advantage theory), 16t, 18–19, 25–26, 66–67, 157–58, 160, 167; BCRA and, 37, 38–39; Canadian reforms and, 109–10, 122–24; on electoral role of money, 108; Great Britain reforms and, 169; public opinion in, 158, 171 elite discourse, 16t, 19–22, 159–60, 222; in Australia, 137, 142–47; of nongovernmental organizations, 19, 27, 175, 179–80, 201; scandal and, 16t, 21, 23, 132, 147, 160, 222; in Western Europe, 178, 185–89 EMILYs List, 85 Employee Free Choice Act, 79 Enron scandal, 20 Epstein, Lee, 34 Estonia, 206f, 207t, 208, 210t, 211t, 215–16n7 Europe, 203–15, 216n12, 220–22; constitutional courts in, 213; eligibility thresholds for funding in, 206–9, 215n3, 215n5; external actors in, 213; increases in eligibility thresholds in, 212–13; introduction of public funding in, 205–6; lack of deregulatory moments in, 177–78, 196–97, 201, 207, 213–14; partycentered politics of, 221; party funding sources in, 212; reductions in eligibility Page 235 →thresholds in, 209–12; voting rights in, 222–23. See also Western Europe express advocacy, 2, 38–41, 60 Fair Elections Act of 2014 (Canada), 109, 110t, 120–21 Farrar-Myers, Victoria, 46, 48 Faulkner, John, 146 Federal Corrupt Practices Act of 1925 (U.S.), 60 Federal Election Campaign Act (FECA) (U.S.), 35; on contribution caps, 43; contribution disclosure requirements of, 58–60; on PAC contributions and expenditures, 74 Federal Election Commission (FEC), 19; contribution disclosure requirements of, 38–39, 46, 49f, 59–61; on independent expenditures, 42; partisan stalemate in, 34–35, 61–62, 64 Federal Election Commission v. Wisconsin Right to Life, 37–39, 51, 56, 59–63, 75, 101n1 Fillon, FranГ§ois, 192

Finland, 206f, 207t, 210t, 211t, 215–16n7 First Amendment arguments, 34, 39–44, 62, 66 First National Bank of Boston v. Bellotti, 40–41 Fisher, Justin, 20–21, 27; on foreign contributions, 15; on French reforms, 182; on normative institutionalism, 16t, 18, 21, 23, 131–32, 156–59, 167, 169, 222; on Phillips review recommendations, 161, 162, 164; on the Political Parties and Elections Act of 2009, 163–64; on PPERA, 153, 170, 172; on scandal, 26 501(c)4 groups, 48–53, 74; conservative spending by, 51–53; disclosure requirements of, 55, 56; electoral spending by, 50f, 51–53; liberal spending by, 51, 52t 501(c)(5) groups, 49, 50f, 51, 74 501(c)(6) groups, 49, 50f, 74 527 organizations, 48, 53–54, 56, 75 Foster, Emilie, 85–86 Fowler, Erika Franklin, 82–83, 91 France, 3, 178, 196–97, 215–16n7; Commission for Financial Transparency in Politics (CTFVP) of, 182, 192, 197n4; constitutional court in, 213; constitutional reforms of 2008 in, 197n8; debates on reform in, 185–89, 191–93; eligibility thresholds in, 207t, 210t, 211t, 215n5; funding sources in, 183t, 184; gender parity regulations in, 184, 197n6; introduction of public funding in, 206f; microparties of, 187, 192–93; National Commission of Campaigns Accounts and Political Funding (CNCCFP) of, 182, 191–92, 197n3, 197n11; public support for regulation in, 26; state funding and transparency in, 179; transparency requirements and sanctions in, 180, 181t, 182, 191–92 Franz, Michael M., 16t, 22, 82–83, 91, 100 Free Democratic Party (FDP) (Germany), 184, 188, 190 freedom of speech. See First Amendment arguments French Communist Party (PCF), 184 Frost, Martin, 37 functional differentiation, 88–91 Gaddie, Ronald, 55 Geoghegan, Tom, 24 Germany, 3, 178, 196–97, 215–16n7; Chancengleichheit principle in, 213; constitutional courts in, 213; corporate sponsorship in, 189–91, 196; debates on reform in, 185–91; eligibility thresholds in, 207t, 208–10, 211t; funding sources in, 183–84, 197n5; introduction of public funding in, 205, 206f; Party Law of 1967, 180, 190; public support for regulation in, 26; transparency requirements and sanctions in, 180–82, 187 Gillard, Julia, 138, 142 Gillespie, Ed, 51 Gingrich, Newt, 68n5

Ginsberg, Ruth Bader, 67n3 globalized politics, 15 Great Britain, 3, 7, 152–72; advertising regulations in, 223; candidate spending limits in, 155; cartel thesis and, 168; challenges to regulation in, 153–55; Page 236 →Committee on Standards in Public Life report in, 153, 163–64, 166–70; Corrupt and Illegal Practices Act of 1883 in, 152–53; direct party funding in, 216n7; drivers of reform in, 155–57; Electoral Administration Bill of 2006 in, 155, 170; electoral economy model and, 169; Funding Democracy proposal in, 165–66; loans for peerages scandal of, 154–55, 160–61, 167; normative institutionalization in, 167–72; party demand for money in, 153, 154f; Phillips report in, 160–70; Political Parties, Elections, and Referendums Act of 2001 in, 152–56, 165–66, 168, 170–72; Political Parties and Elections Act of 2009 in, 162–64, 170; stop-go approach to regulation in, 26, 152–55, 160–69; transparency regulations in, 153, 162–63, 166–67, 172n2; two-and-a-half-party system of, 17; voluntarist tradition in, 132, 159, 170–71 Greece, 206f, 207t, 208, 210t, 211t, 215n5, 215–16n7 Greenfields Foundation, 134 Green parties, 202 Green Party (Australia), 136t, 138, 139, 146 Green Party (France), 184, 193 Green Party (Germany), 190 Green Party (Sweden), 194 Group of States against Corruption (GRECO), 179, 188–89, 194–96 “Guidelines on Party Regulation” (OSCE/Venice Commission), 204, 215n6 Hain, Peter, 155 Hall, Peter, 163–64 Harper, Stephen, 14, 113, 115, 119 Harper v. Canada, 110 Hawke, Bob, 129, 132–33 Heineken, 84 Herrnson, Paul, 66 highest spending groups by year, 75–80 historical institutionalism, 159, 169–70 Howard, John, 130 Hudson, Raymond, 85–86 Human Rights Campaign, 90

Hungary, 206f, 207t, 210t, 211t, 215–16n7 hydraulic theory of American campaign finance, 13 Iceland, 206f, 207t, 210t, 211t, 215–16n7 Iemma, Morris, 138, 146 independent expenditures, 39–41, 60–61. See also interest group spending individual spending, 48, 51, 68n5, 71–72, 79 institutional change. See normative institutionalism interest groups, 71–101; accountability problem of, 61–65, 67, 72–73, 87–88, 100; activity in 2012 of, 88–99; advertising strategies of, 91; coordination among, 72–73, 88, 91–99, 102n17; differentiation among, 72–88, 101n4, 101n7, 101n9; functional differentiation among, 88–91; highest spending of, 75–80; issue-based differentiation among, 90; legal filing requirements of, 83–84; partisanship of, 66–67; persistence of, 99; types of, 74–75 interest group spending, 25, 67, 68n6; consequences of deregulation on, 22–23, 33, 35, 53–67, 71, 99–101; by 527 organizations, 53–54, 56; by nonprofit 501(c) organizations, 50f, 51–53, 54f, 55–57; by super PACs, 45–48, 54f, 55–57, 72; by traditional PACs, 54f, 55–56. See also corporate spending; labor union spending Internal Revenue Service, 48, 50 Ireland, 206f, 207t, 210t, 211t, 215–16n7 issue advocacy, 74–75, 88; BCRA’s restrictions on, 36–39, 101n1; deregulation and, 38–41, 51, 53–56; disclosure and, 60 issue-based differentiation, 90 Italy, 206f, 207t, 210t, 211t, 213, 215–16n7 James Madison Center for Free Speech, 38, 62 Jospin, Lionel, 193 Kagan, Elena, 67n3 Karpf, David, 82–83 Page 237 →Katz, Richard S.: on cartel thesis, 16t, 17, 23, 28nn10–12, 108, 157, 200–205, 221; on the motivation of the courts, 21–22; on public opinion of campaign finance regulation, 20; on self-regulation in political finance, 203–4 Keating, Paul, 129 Keeping Canada’s Economy and Jobs Growing Act of 2011 (Canada), 110t Keneally, Kristina, 139, 145–46 Kennedy, Anthony, 39–40, 43–44 Kerry, John, 75, 78

Kimball, David C., 91 Koch, David and Charles, 51, 100 Kopecky, Petr, 11 Koß, Michael, 20–21; comparative study of, 26, 177–79, 189, 193; on elite discourse and scandal, 16t, 21, 23, 132, 147, 160, 222; on forcing change in parties, 126; on institutional veto points, 160, 170, 196–97; on normative institutionalization and appropriateness, 132, 160, 171; on vote-seeking vs. office-seeking parties, 160, 169. See also Western Europe labor union spending, 39–45, 67; by 501(c)(5) groups, 49, 50f, 51, 74; in Australia, 140–42; disclosure regulations for, 60–61; prohibitions of, 39 Labour Party (Great Britain), 154–55; funding sources of, 167; on Phillips review recommendations, 161–62, 165; reform initiatives of, 162, 171–72 Lammert, Norbert, 190 Landes, William, 34 Landfried, Christine, 190 La Raja, Raymond J.: on nineteenth-century reforms, 57; on obsolescent regulations, 16t, 22; on party advantage theory, 16t, 18–19, 37; on party contribution limits, 100 Latham, Mark, 141–42 Latvia, 206f, 207t, 210t, 211t, 215–16n7, 216n10 League of Conservation Voters, 90, 92 Lecy, Jesse D., 85, 87 Lees-Marshment, Jennifer, 85–86 Left Party (Germany), 190 Left Party (Sweden), 194 legal parameters of public funding, 200–215, 216n9, 220–22; eligibility requirements in, 200–205, 207–9; external actors driving change in, 213; increases in eligibility thresholds in, 212–13; introduction of, 206–7; new party access and, 202–5, 208–9, 214, 215n3; reductions in eligibility thresholds in, 209–12; self-regulation of, 203–4, 214; Venice Commission Guidelines on, 204, 215n6; votes vs. seats as criteria for, 204–5, 207t, 208–9, 215n5 Lemieux, Patrick, 85–86 Lewis, Peter, 54 Liberal Democrats (Great Britain), 153–54, 167–68; as office-seeking party, 169; on Phillips review recommendations, 161–62; reform initiatives of, 171 Liberal Party (Australia), 127, 128; funding of, 130, 133–34; reform initiatives of, 135–42, 147–48 Liberal Party (Canada): impact of reforms on, 114–28; reform initiatives of, 107, 111–14, 122, 124nn1–2

Liberal Party (Sweden), 194 Lithuania, 206f, 207t, 208, 210t, 211t, 215–16n7 Lobbycontrol, 188 Luxembourg, 206f, 207t, 210t, 211t, 215n5, 215–16n7 Mair, Peter: on cartel thesis, 16t, 17, 23, 28nn11–12, 108, 157, 200–205, 221; on public opinion of campaign finance regulation, 20; on self-regulation in political finance, 203–4 majoritarian democracies, 126, 127 Majority PAC, 83, 87 Malta, 205–6 March, James G., 156 marketing theory, 84–88, 101n7, 101n9 Martin, Paul, 114 Maryland, 64 Massachusetts, 64 Page 238 →matching funds. See public financing Mazeaud, Pierre, 191 McCain, John, 79 McCain-Feingold Act. See Bipartisan Campaign Reform Act (BCRA) of 2002 McConnell, Mitch, 19, 63 McConnell v. Federal Election Commission, 12–13, 37, 41, 57, 62–63 McCutcheon et al. v. Federal Election Commission, 43–44, 58, 62, 101 McMenamin, Iain, 20, 26, 130, 138, 221–22 Media Fund, 78, 87 Menzies, Robert, 128 Miliband, Ed, 169, 171 Miller, Michael, 59 Mitchell, George E., 85 MN Forward, 55 Moderate Party (Sweden), 185, 193–96 Montana, 64

Morgan, Bryson, 59–60, 62 MoveOn.org, 78, 82, 99 Mugwumps, 57 Naßmacher, Karl-Heinz, 16–18, 203, 213 National Democratic Party (Germany), 188 National Party (Australia), 128, 130, 133–34 National Rifle Association (NRA), 73, 90, 92 Netherlands, 206f, 207t, 208, 210t, 211t, 215–16n7 New Democratic Party (Canada), 112, 116f, 117–18 Newman, Campbell, 143 niches, 80–88, 101n4; availability of, 81–83; by function, 73, 78, 81–83, 88–91; by issue, 73, 78, 79, 81, 88; marketing theory on, 83–88, 101n7, 101n9 Noll, Roger G., 9 nongovernmental organizations, 19, 27, 175; on benefits of public funding, 201; on best practices in public funding, 178–79, 187–89, 191; in Sweden, 194–95 nonparty organized groups. See interest groups nonprofit groups. See tax-exempt 501(c) nonprofits normative institutionalism, 16t, 19–22, 222; evolutionary change in, 156, 167; in Great Britain, 155–57, 167–72; vs. historical institutionalism, 159, 169–70; intentional design in, 156, 168; logic of appropriateness in, 131–32, 156, 158–60, 167, 171–72, 222; optimality in, 159; policy communities and, 156–57, 167–68. See also corruption and scandal North Carolina, 64 Norway, 206f, 207t, 208–9, 210t, 211t, 212, 215–16n7 Nuttall, Gordon, 139, 143–44, 146 Obama, Barack: on Citizens United, 51–53; fundraising by, 75, 79, 87; on outside spending, 79 O’Connor, Sandra Day, 62–63 O’Farrell, Barry, 139 Olsen, Johan P., 156 optimality, 159 Organization for Security and Cooperation in Europe: “Guidelines on Party Regulation” of, 204, 215n6 outdated campaign finance systems, 22–23, 222–24; policy drift and, 34–36, 45, 63, 65–67; practicality response to, 16t, 22–23, 222–24

outside spending. See interest group spending Owen, Bruce M., 9 Paltiel, Khayyem Zev, 201–2 Parker, George, 24 parties: accountability to voters of, 72–73, 99–100; coordination restrictions on, 100; coordination with interest groups by, 73, 88, 91–99, 102n17; corruption arguments and, 58; diminished influence of, 57–58, 73; fundraising for party-building by, 74; fundraising restrictions on, 56–57, 73; interest group networks of, 66–67, 87; joint fundraising committees of, 58; outsourcing to interest groups of, 83; spending restrictions on, 54–56, 73 Page 239 →partisan electoral advantage theory. See electoral economy model party-centered politics, 221–22 Party Finance and Expenditure in the United Kingdom, 162–64 Party Law of 1967 (Germany), 180 People for the Ethical Treatment of Animals, 85 People’s Party (Sweden), 185 Perry, Robert, 48, 77t Peters, Guy, 222 Phillips (Hayden) report, 160–70 Piccio, Daniela R., 6, 26–27, 203–5, 207, 213, 221 Pitney, John J., 91 Planned Parenthood, 73, 75, 86 platform brands, 86 plutocracy, 24 Poland, 206f, 207t, 208, 210t, 211t, 215–16n7 policy communities, 156–57 policy drift, 34–36, 45, 63, 65–67 political action committees (PACs), 42, 45–48, 74–75. See also super PACS Political Broadcasts and Disclosure Act of 1991 (Australia), 132–33 political deregulation, 10–15; activism in, 61–65; analogies to economic deregulation of, 13–15; arguments for, 13–14; comparative study of, 14–15; globalization and, 15; public opinion of, 13; as rhetorical concept, 11–12; United States as outlier in, 24–25, 71, 220–25. See also deregulatory moments; theories of campaign finance regulation development Political Parties, Elections, and Referendums Act (PPERA) of 2001 (Great Britain), 152–56, 165–66, 168,

170–72 Political Parties and Elections Act of 2009 (Great Britain), 162–64, 170 political regulation: arguments against, 12–13; European forms of, 220–22; three categories of, 11, 12t. See also regulatory moments; theories of campaign finance regulation development The Politics of Deregulation (Derthick and Quirk), 9–10 Porter, David, 84–85 Portugal, 206f, 207t, 210t, 211t, 213, 215–16n7 Posner, Richard A., 34 Potter, Trevor, 46, 59–60, 62 practicality, 16t, 22–23, 222–24 presidential elections, 2, 34–35, 66. See also Obama, Barack privacy rights of contributors, 62 Progressive Conservative Party (Canada), 112–14, 124n3 Progressives, 57 public financing, 1–3; access of new parties to, 202–5, 208–9, 214, 215n3; in Australia, 132–35; in Canada, 25–26, 107; criteria for, 204; discourses on competition in, 3, 201–2; eligibility thresholds in, 200–205, 207–9; in Europe, 177–80, 200–215; percentage of seats as criteria for, 204; percentage of votes as criteria for, 204–5; spending limits and, 2; at the state level, 64; transparency obligations in, 177–80, 224; voluntary nature of, 2, 22, 34–35, 66; widespread adoption of, 1, 3, 6. See also theories of campaign finance regulation development Publicity of Political Contributions Act of 1910 (U.S.), 58, 60 public opinion, 6–7; in the electoral economy model, 158, 171; on interest group spending, 64; on political deregulation, 13; U.S. polarization of, 179; in Western Europe, 178 quid pro quo corruption, 44, 58 Quirk, Paul, 9–10 Rally for the Republic (RPR) (France), 184 Ranney, Austin, 57 Rashkova, Ekaterina R., 215n3 “Re-Conceptualizing Party Democracy” (ERC), 205 Rees, Nathan, 138–39 Reform Party of Canada, 124n3 regulation, 1–5; as economic concept, 7–10; as political concept, 10–15. See also public opinion

Page 240 →regulatory moments, 3, 10; in Australia, 132–35; in Canada, 110–14, 121; in Europe, 177–78, 196–97, 201, 207, 213–14 Republican National Committee v. Federal Election Commission, 57 Republican Party (United States): coordination with interest groups of, 92–99; deregulation activism of, 65–66 Restore Our Future, 46, 47t, 48 Ridout, Travis N., 82–83, 91 Risse, Thomas, 85 Roberts, John, 43–44 Romania, 206f, 207t, 209, 210t, 211t, 212, 215–16n7 Romney, Mitt, 46, 48, 68n5 Rove, Karl, 51 Rudd, Kevin, 137, 142, 146–47 Salisbury, Robert, 80 Samples, John, 4, 12 Sarkozy, Nicolas, 188–89 Scala, Dante, 92 Scalia, Antonin, 43–44, 61 scandal. See corruption and scandal Scarrow, Susan E.: electoral economy model of, 16t, 18–19, 23, 25–26, 108, 122, 126, 157–58, 160, 167, 169, 221; on partisanship in campaign finance activism, 65–66; on public funding of parties, 165, 177, 202–3, 215n3; on public opinion, 158, 171 Schmitz, Hans Peter, 85 secrecy and dark money, 59–60, 62 secular change. See outdated campaign finance systems Senate Majority PAC, 89–90 Seniors Coalition, 75 Serbia, 206f, 207t, 208, 210t, 211t, 215–16n7 Service Employees International Union, 79 Sierra Club, 73, 75 Simmons, Harold, 76–77t

single-candidate super PACs, 46 Skinner, Richard, 46, 48 Slovakia, 206f, 207t, 210t, 211t, 212, 215–16n7 Slovenia, 206f, 207t, 210t, 211t, 213, 215n5, 215–16n7 Smith, Bradley, 4, 62 Smith, Jeff, 91 Social Democrats (SAP) (Sweden), 182–83, 185, 194–96 Social Democrats (SDP) (Germany), 190 Socialist Party (PS) (France), 184, 192–93 soft money, 36–37, 41, 53–55, 57, 74–75 Soros, George, 54 Sotomayor, Sonia, 67n3 Spain, 206f, 207t, 208, 210t, 211t, 215–16n7 SpeechNow.org v. Federal Election Commission, 41–42, 51, 61–62 states’ roles, 2–3, 63–64 Stevens, John Paul, 40, 58 Stigler, George, 8 super PACS, 45–48, 54f, 55–57; coordination with candidates by, 46; disclosure requirements of, 46, 49f; elections of 2012 and, 79; ephemerality of, 99; functional differentiation among, 89–91; fundraising capabilities of, 86; partisanship of, 66–67; rates of expansion of, 46, 67n4; spending on elections by, 47t, 72 Supreme Court. See US Supreme Court Sweden, 3, 178, 196–97, 207t, 215–16n7; debates on reform in, 185–89, 193–96, 197n10; eligibility thresholds in, 207t, 210t, 211t, 213; funding sources in, 183t, 184–85; introduction of public funding in, 206f; NGOs in, 194–95; public support for regulation in, 26; transparency requirements and sanctions in, 180, 181t, 182–83, 187, 193–96; voluntary disclosure agreement of, 189, 195–96 Sweden Democrats, 189, 194 Swift Boat Veterans, 48, 78 Switzerland, 205–6 Taft-Hartley Act of 1947 (U.S.), 39 Target Corporation, 55 Tavits, Margit, 215n3 tax-exempt 501(c) nonprofits, 48–53, 55–57, 66–67, 74; conservative spending by, 51–53; electoral

spending by, 50f, 51–53; Page 241 →issue-advocacy by, 74; liberal spending by, 51, 52t Thatcher, Margaret, 163 theories of campaign finance regulation development, 2–4, 15–23, 108–10, 157–60; cartel theory, 16t, 17–18, 28nn10–12, 108, 157, 168, 200–205, 221; on competition between parties, 3, 201–2; consideration of constraints on politicians in, 3; electoral economy theory, 16t, 18–19, 37–39, 66–67, 108–10, 122–24, 157–58, 169, 221; elite discourse theory, 16t, 19–22, 132, 137, 142–47, 159–60, 178; on ideological motives of deregulation, 108, 123, 220–22; on the motivation of the courts, 21–22, 34, 44–45; normative institutionalism theory, 16t, 19–22, 155–57, 167–72, 222; on practicality response to outdated systems, 16t, 22–23, 222–24 Thomas, Clarence, 12–13, 44 Tillman Act of 1907 (U.S.), 67n2 trade associations, 49, 50f, 74 traditional PACs, 54f, 55–57 Transparency International, 179, 188, 189, 194 transparency obligations, 177–83, 224; in France, 179–80, 181t, 182, 191–92; in Germany, 180–82, 187; in Great Britain, 153, 162–63, 166–67, 172n2; in Sweden, 180, 181t, 182–83, 187, 193–96 Transparency of Lobbying, NonParty Campaigning, and Trade Union Administration Act of 2014 (Great Britain), 166–67 Turnbull, Malcolm, 137–38 Ukraine, 205–6 unincorporated associations, 162, 172n2 Union for a Popular Movement (UMP) (France), 184, 188–89, 192–93 Union for French Democracy (UDF) (France), 184 union spending. See labor union spending United Kingdom. See Great Britain United States, 1–3, 33–67; birth of super PACs in, 45–48; candidate-centered politics of, 221–22; Congressional polarization in, 63–64; exceptionalism narrative of, 222; FEC inaction in, 34–35; Federal Election Campaign Act (FECA) of, 35, 43; First Amendment arguments in, 34, 39–44, 62; interest group spending in, 22–23, 33, 35, 47t, 48, 71; as outlier in campaign finance, 24–25, 71, 220–25; party funding sources in, 212–13; polarized public opinion of, 179; tax-exempt 501(c) nonprofits in, 48–53. See also Bipartisan Campaign Reform Act of 2002; Citizens United v. Federal Election Commission decision; consequences of U.S. deregulation U.S. Chamber of Commerce, 51, 79, 86–87, 90 U.S. Court of Appeals for the District of Columbia Circuit: SpeechNow.org v. Federal Election Commission, 41–42, 51 U.S. District Court for the District of Columbia: Republican National Committee v. Federal Election Commission,

57 U.S. Supreme Court, 19; American Tradition Partnership v. Bullock decision of, 42–43, 67n3; Austin, v. Michigan Chamber of Commerce decision of, 41; on BCRA provisions, 37–39, 41; Buckley v. Valeo decision of, 35, 40, 43, 44, 60, 121; California Medical Association v. Federal Election Commission decision of, 40; consequences of decisions of, 45–67; Davis v. Federal Election Commission decision of, 39, 44, 61; Federal Election Commission v. Wisconsin Right to Life decision of, 37–39, 51, 56, 59–63, 75, 101n1; First National Bank of Boston v. Bellotti decision of, 40–41; ideological voting patterns of, 34, 39, 43–45; insulation from public accountability of, 62–63; McConnell v. Federal Election Commission decision of, 12–13, 37, 41, 57, 62–63; McCutcheon et al. v. Federal Election Commission decision of, 43–44, 58, 101; personnel changes on, 62–64. See also Citizens United v. Federal Election Commission decision Page 242 →Valpy, Michael, 14 Venice Commission Guidelines (OSCE), 204, 215n6 veto points, 160, 170, 196–97 voting rights, 222–23 Walsh, Joseph, 93, 94f Warren, Elizabeth, 68n6, 100 Warsi, Sayeeda, 165 Welfare for Politicians? (Samples), 12 Were You Born on the Wrong Continent? (Geoghegan), 24 Wert, Justin, 55 West, Allen, 94f Western Europe, 177–97, 216n12, 220–22; advocacy for regulation in, 19, 27, 175, 178, 201; comparative studies of, 26–27, 177; convergence of funding systems in, 177–80; corruption and scandal in, 180, 187–89, 196–97; Council of Europe Recommendations for, 179–80, 185, 194, 204, 205; debates on reform in, 185–89; eligibility thresholds in, 206–9; increases in eligibility thresholds in, 212–13; introduction of public funding in, 205–6; lack of deregulatory moments in, 177–78, 196–97, 201, 207; legal parameters of public funding in, 200–215; party funding sources in, 183–85, 212; political and social models of, 24; public opinion in, 178; reductions in eligibility thresholds in, 209–12; transparency obligations and sanctions in, 177–83, 187 Will, George, 4 Wilson, James Q., 80–81, 101nn4–5 Winning Our Future, 68n5 Wisconsin Right to Life, Federal Election Commission v., 37–39, 51, 56, 59–63, 75, 101n1 Witko, Christopher, 11 Yates, Stephanie, 85–86 Young, Lisa, 131, 221; on Canadian reforms, 25–26, 112, 126; on electoral advantage theory, 12, 19, 131

Young, McGee, 81