If you introduce state funding for political parties into an already corrupt system it is not going to work. Adding clean water to poisoned water makes no sense.
What is the difference in the role money plays in election campaigns in established democracies and transition countries?
Somebody has to pay for politics. You cannot have a political system without any money involved. Elections are expensive, political parties are expensive to run. Money has to come from somewhere because otherwise democracy would not survive as a vibrant system. The major difference between established democracies and transition countries, I would say is, if you look at the investment people make in politics then, in transition countries it very often is short-term investment with some particular interest involved. People invest in politics because they want quick results; some people look at politics as an excellent way of enriching themselves. In fact, in many Central European countries politics is a much more profitable investment than the one you make in the stock market. If you get elected as a politician you have access to some confidential information, from which you could benefit. Hundreds of politicians have become millionaires as a result of being elected.
In other words, in transition countries, politics is viewed as a form of business?
Yes, unfortunately that is the case in many Central European countries. Certainly in the nineties, many people were looking at politics as a way to become wealthy. Even in western democracies you still have cases of individual corruption, people abusing offices. None of the countries is immune to problems caused by the relationship between money and politics. Every single democracy has had a period of systemic corruption where most of the money was coming from undesirable sources. In the UK, a major company was making contributions to the Labor Party and then asking the prime minister to influence the decision of the Romanian president so they could win a tender. In France, the Elf company was accused of corrupting almost every single president in Africa and paying for the private divorce of President [Francois] Mitterand. So, there have been many cases, but somehow the countries have been able to introduce mechanisms to increase transparency and accountability. In transition countries, the process is just starting. In my opinion, Latvia is a good example of how you could quickly reform the system and establish a good enforcement agency, KNAB [Corruption Prevention and Combating Bureau]. Now you are going through the process of implementation, and this is where you have problems.
Could you give examples of the mechanisms that ensure transparency and accountability in party financing?
Every regulatory system consists of three basic blocks; it could be compared to a pyramid. The first and the most important thing is internal party control. Political parties have to know where they take their money from and they have to be accountable for it. In Central Europe, political parties do not have strong internal control mechanisms. Party treasurers are very often told to accept money from certain donors, in many parties in Central and Eastern Europe maybe only three or four individuals know where the money is coming from. Regular members are not aware of it; this is not a topic discussed at party conventions; it is not discussed internally during a campaign. So, that is one thing that is missing, strong internal party control.
The second most important component is an independent, strong and powerful law enforcement agency, which can collect, review, audit and investigate all financial cases and also fine political parties and candidates in cases of non-compliance. It is very important to emphasize that such agencies have to be independent, financially and operationally. They have to receive substantial amounts of money to conduct controls, because audits and investigations are expensive. But they also have to have operational independence; they cannot be told, which party they should audit, which party they should penalize. They have to be accountable to the parliament and citizens, but they cannot be used as a mechanism for a ruling party to oppress opposition. And again, in many Central European countries such agencies are only just being created. I would like to stress that Latvia is a positive example; you have one of the strongest agencies in the whole region and probably one of the top three agencies in Europe. Two other agencies I could use as an example are in France and in the UK.
The third component, the top of the pyramid is supervision by civil society organizations and media. Without external control you could have collusion between the two components at the bottom of the pyramid. You could have an agreement between the parties – all right, we will not attack you so long as you do not attack us; enforcement agencies will not punish parties too harshly because then politicians will not pass their budget for the next year, etc. Without civil society and media monitoring how the system is working and investigating corruption cases the system will collapse, sooner or later. You have to have a referee who is monitoring how the game is conducted. If you look at western countries, every single scandal happened as a result of media investigation. The Watergate, the [Helmut] Kohl scandal, all of it was a result of journalists investigating and producing evidence. It was a galvanizing factor for law enforcement agencies to investigate some of those cases. Also a factor, which forced politicians to reform the system. I think Latvia is an amazing example of what journalists and NGOs can do.
Is it? From the inside, it seems that our civil society is weak…
If you look at the number of press articles published and the details they describe, if you look at the recommendations NGOs make, I would never say that NGOs and media are weak in Latvia. They might not be as powerful as they would like to but the fact that they can raise these issues is a good sign. In one of the neighboring countries, Ukraine, an investigative journalist [Georgiy Gongadze] who started asking questions about funding for president [Leonid] Kucma, was kidnapped and beheaded. We still have many cases in Eastern European where journalists are not allowed to ask the questions media in Latvia are asking, not to mention NGOs monitoring party funding. Here, in Latvia, all the contributions to parties have to be published on the Internet, on KNAB website within 10 days. This is amazing compared to some other countries, where detailed information is not available at all or is published a few months after elections.
You mentioned the basic components of the “control pyramid”. But what about legal restrictions that the state imposes? For example, the campaign spending cap. Some parties in Latvia want to abolish the limits.
There are three points to look at. Firstly, very recently, the Council of Europe made recommendations on reform of party funding systems. The recommendations clearly suggest that all member states should adopt spending limits. So, a spending cap is slowly becoming a European standard. If parties are thinking about abolishing the limit this would actually go against the best practices in Europe.
But these recommendations are not binding, are they?
The Council of Europe is not the European Commission; it has the soft law mechanism. The word “should” is the strongest they would use in a recommendation. But, of course, it is as binding as the membership in the Council of Europe; it is a European democratic standard. The second point is, I am in favor of spending limits although they are very difficult to enforce. Limits introduce a certain level of equality. Imagine, what would happen in a system where basically you are allowed to spend as much as you want on a campaign? You would have an indirect vote-buying; you would be organizing very expensive concerts with Madonna performing; you would give people t-shirts; you would pay for excellent food and drinks. Elections would become a market place. A spending limit is one of the major factors preventing elections from becoming a market place.
The third point, in the long-term, political parties will benefit from spending limits. In the short-term, political parties see spending cap as an obstacle. They think, why are we prevented from winning the office, why are we prevented from spending all the money we can get from our oligarchs and donors? In short-term they are not interested in limits. But, if they thought about long-term prospects, they would see that they would not have to focus on collecting those millions of lats. It would be much easier for them to conduct political activity because they would not have to spend all the time collecting contributions. They would be able to actually focus on their service, on politics, instead of conducting an arms race. In many Eastern European countries you can see this race we are familiar with from the days of the cold war. If you have 100 rockets, I will have to have 120, etc. Money becomes the main focus of the campaign.
What would be implications for Latvia if it abolished the spending limit?
The implications for Latvia would be that, within next few years, elections could become so expensive that 99.9% people would not be able to afford to run for office in this country. Is it a participatory democracy where the absolute majority of people cannot afford to stand in election? It is not. It becomes an oligarchic state.
You said that enforcing spending limits is hard work. What are the most efficient ways of monitoring the compliance?
Some pessimists say, what is the point of regulating the spending if money will find it’s way anyway. If you have so much money in the system and block one option for spending it, people will always find a way around it, they are creative. You should not be surprised that it [the third party political advertising] happened in Latvia. It was as predictable as the sun rising in the morning — with the spending limits and KNAB enforcing it, parties will find a way around. It shows that democracy in Latvia has reached a certain level of maturity. Politicians will always hire the best lawyers to find roundabout ways. This is why countries like the UK also regulate spending by a third party. During the campaign period, if you want to be involved in political discussion, in political advertisement, you have to register as a participant. You do not have to run for an office, but if you want to criticize or support a party or a candidate, then you have to register and there are certain limits for your spending.
Some people would argue that restrictions of third party advertising violate freedom of speech. But, without restrictions, elections are not about ideas and programs, but rather about rich individuals coming and putting 10 000 dollars on the table and buying TV advertising. We have to recognize the fact that, when it comes to money and its role in elections, if you allow very rich individuals to buy as much advertising as they want they are basically monopolizing political discussion.
So, this is what is happening in established democracies. Once you have introduced campaign limits you also have to block other ways of spending money. Of course, we will never get a perfect system. This is why all this exercise in regulating money in politics is an exercise in what we call the damage limitation. The aim is to create as many preventive measures as possible, eliminate the most corrupt politicians and make sure that elections are clean and credible. But we will always have cases of individual corruption.
But how do you create the criteria for spending limits, both for political parties and third parties?
First criterion is the period when you want to speak on this issue. The campaign period is the period when all political discussion is focused on elections. So, everyone who wants to talk during that period has to obey the rules. The second criterion is the content of what you are saying. If you are saying that the European Union is a wonderful thing then some may argue this has nothing to do with elections, but other could say that you are supporting some pro-European party. Which is why it is important to define what is actually the topic of discussion. The easiest way to do it would be to say, every advertisement, which supports or opposes a political party or a candidate should obey the limits. You do not want to block all discussion about human rights, abortion, and gender equality, the EU enlargement. Organizations should be allowed to address the issues they are concerned about. However, if you as an individual want to release advertising saying that Marcin Walecki is a dreadful candidate who beats his wife and does not pay taxes, then it is a political advertising and it needs to be regulated. So, the second criterion would be naming a candidate or a party in positive or negative way. And the third criterion is who is doing it. In my opinion, you should be very careful that organizations that are not allowed to contribute to political campaigns are also banned from placing such advertisement during the campaign. This is the question people in Latvia will have to look into, who is allowed to participate in such campaign.
How could we regulate the third party advertising?
Just like other democracies are doing it. You come up with the criteria on who is allowed to advertise without registering, who has to register, and what are the limits. This is a standard in many established democracies. Of course, somebody will take such regulation to court and will argue that this is a limitation on freedom of speech. But court ruling are a natural part of this process. Most European courts actually say, in order to make elections clean and credible, we have to limit the influence money has on political parties and candidates.
And how do you calculate the amount of party spending limit? Our parties say, we have 20 santims per one voter, and that is not enough.
A very good point! In many Central European countries, some of the reforms happened without public consultations and sufficient research. I do not even know how this amount, 20 santims, came about. But if politicians criticize it, they criticize their own work, because the parliament was the one passing these laws. I do not believe that issues like spending limits should be set in stone. They have to be reviewed. The best practice is in Canada, where all issues related to party funding and election campaigns are reviewed every three or four years. I do not see anything wrong with changing these limits as long as there is an honest and transparent discussion and the parliament decides what is the best for the country. If politicians argue that the limits are too low, let them produce arguments and evidence. If they come up with a good campaign budget and argue that it is very difficult to run a professional campaign within this limit, I do not see anything wrong with the parliament changing it. But if it is done behind closed doors, without any public discussion, and without NGO and media participation, in order to give better chances to one party or another, then this is not very healthy for democracy. The limits could and should be reviewed, but in a transparent and accountable way. But what criteria could you use for setting the limits?
One criterion you can use is how much it would cost to communicate with every voter you want to reach. How much would it cost to produce one leaflet, one poster, one TV ad? You could get academics to calculate how much a party needs to produce, for example, one million leaflets or 2000 posters. How do you estimate the cost? By consulting advertising agencies, which will be able to tell you what is the minimum benchmark for reaching voters.
What are the advantages and disadvantages of funding political parties from the state budget?
Usually, it takes me five to six hours to describe the advantages (laughs). The three most important advantages are as follows. Firstly, diversification of the funding sources. Diversification means that, if you are a political party or a candidate, you do not have to turn to this one individual, this oligarch and say, listen, Sasha, I need money for my campaign, you will benefit when I am elected. You do not have to rely on rich individuals, you have an alternative — you receive money from the state and you are accountable to citizens, voters and the state. Who pays the piper, calls the tune. If you only have private donations and all of them come from rich donors, you do not necessarily represent the interests of an average citizen, the interests of your voters. State funding provides politicians with an option to say, see that door? I do not need your money!
Secondly, once you have introduced public funding you allow political parties to conduct activities they would normally not carry out. Money can go to think tanks, to offices, youth organizations, and party congresses. The state can specify on what exactly the money should be spent. Private donations are usually spent on campaigns. I am not aware of cases in new democracies where parties would spend private donations on building party infrastructure. Unfortunately, most of it is used on electoral wars and battles.
And the third positive thing about public funding is that, actually, public funding offers young people and women access to politics. In politics dominated by private funding, eventually, only rich individuals can afford to participate in politics. This is what is happening in the US, which is a system based, almost exclusively, on private funding. To become successful in politics, you have to have an amazing network of donors, people ready to contribute thousands of dollars to your campaign and you have to run this fund-raising activity for years before you actually enter serious politics. So, unsurprisingly, there are very few women in the US Senate.
Could you give some examples of where the system of public funding works well?
I can tell you about my favorite system and the system, which failed. The system, which I helped to create in Poland, I am actually very critical of now. In the late nineties, we were arguing that we have to remove oligarchs from our political system. One of the ways of removing them was to introduce significant public funding. Political parties in Poland now receive about 80 million euros for the four years they are in the parliament. It is a lot of money, it allows you to run a professional campaign, to maintain offices all over Poland and you do not have to rely on large private contributions.
Does this apply to all parties?
No, not all of them. Every party, which receives more than 3% of votes, gets funding, and every party, which has at least one member of parliament or member of Senate also gets money to pay for the campaign. The system is designed so that parties that do not make it into the parliament are still given the second chance. The threshold for getting into the parliament is 4%. But you do not give every party the same amount of money. Because, if you do, the next day you will have dozens of new parties wanting to register. This happened in Nigeria, where 35 new parties wanted to register immediately after the funding became available. A similar thing happened in Bosnia. You have to have some thresholds. Probably, the best way to calculate these thresholds for campaign reimbursement is to count the votes. For example, if a party receives 10 000 votes, it will get 10 000 lats, if 50 000 votes then 50 000.
For routine activities, the best systems are Canadian and German systems of matching contributions. If you make a contribution to a political party, you can receive a tax return and the party receives a matching contribution from the state. They have this system to encourage small donations. The system we have in Poland where parties receive the money regardless of the number of donations they receive, created the situation where parties do not even care about private contributions. They rely almost entirely on public subsidies and are not interested in asking people to give them money, which is a dreadful thing. Parties become very detached from supporters and voters. Parties have to have some private funding also; they cannot depend on the state entirely.
At the moment, there are only two countries in Europe, which do not have public funding for parties, Moldova and Latvia. Moldova is going to change the system this summer and Latvia will remain the only one. But moving from 100% private funding to 95% public funding would not be advisable. Then the parties could say, we do not need private contributions anymore. This would be another extreme.
But people are reluctant to give money to political parties, because they see them as corrupt.
The issue of public funding is very similar to the issue of death penalty. In almost all European countries, public opinion actually supports death penalty. In almost all democracies, public opinion is against public funding. Views are very strong, when in comes to politics. An opinion poll in Poland showed that there were more people who believed that there is a life on Mars than there were people who believed there is such thing as an honest politician. People, quite rightly, say, why should we pay for corrupt politicians? But what the public does not understand is that the choice is between public funding, where all the money is on the table, everyone knows how much money parties are getting, and the process is controlled, or non-transparent, illegal public funding under the table in the form of abuse of state resources. Public opinion is not aware that illegal public funding is happening, and always has been. At the end of the day, when you have a public tender, who is paying for it? People pay for the corruption. Money, which belongs to the state, to the citizens suddenly becomes the private property of parties that have access to office. People cannot see that it is cheaper to have a transparent and controlled public funding that to have illegal abuse of state resources.
In some countries, they have done massive public awareness campaigns. For example, in the UK, thanks to such campaigns, people, for the first time, are going to say, we prefer regulated, transparent political parties. We asked people in Poland, would you be willing to contribute two zlotys, which as roughly 0.5 lats, to political parties if this helps eliminate corruption related to their funding, 58% people said ‘yes’. But when we asked should political parties receive funding from the state budget, only 17% answered affirmatively. You see, if you show people the connection, they will say yes.
What you need is a good public control first and only then you can have public funds for political parties. If you introduce state funding into an already corrupt system it is not going to work. Adding clean water to poisoned water makes no sense; the water will remain poisoned anyway.