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Aug 21, 2013

Money, politics and the campaign arms race: corporates outspend citizens

Australia's campaign donations regulations are among the most lax in the world. Freelance journalist Jacqueline Ning says despite political will for change it remains a largely unregulated area.

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Prime Minister Kevin Rudd has flown in United States President Barack Obama’s digital strategist to help with his campaign and made an American-style appeal for donations. It begs the question: just how much has money got to do with campaigning and the democratic process in Australia?

Lots. Australia is even more laissez-faire than the US when it comes to politics, the media and money. In the US, foreigners can’t donate, the disclosure threshold is $200 and corporations should only donate a little over $30,000 through an intermediary committee. In Australia, anyone (corporations and foreigners included) can donate any amount. If it’s not more than $110,000, donors can remain anonymous. In fact, they can remain anonymous no matter how much they give, so long as it’s given to an “associated entity” of a political party.

The federal government, followed closely by state governments, is often among the top one or two advertisers in Australia, according to Graeme Orr, electoral law academic at the University of Queensland. In 2007 it was reported the NSW government spent more on advertising than McDonald’s or Coca-Cola. And the investment continues to grow. Campaign expenditure no longer starts and ends in an election year, says Orr, but is an ongoing and tightly orchestrated marketing exercise. The Coalition, for example, spent close to $100 million on advertising in the 2004 election year, but over the period between 1996 and 2005 it spent almost $700 million. In his book The Law of Politics, Orr noted that “in relative terms, money politics in Australia is not too far behind America”. None of this large-scale investment in advertising comes with a legal requirement for truth.

Unlike Commonwealth cousins in the United Kingdom, Canada and New Zealand, Australians don’t place expenditure limits on politicians or third parties (lobby groups) — yet many are in favour of such limits, including the Australian Labor Party, Australian Greens and prominent unions and academics.

As it stands, there can be no spending caps in Australia, due to a surprising High Court ruling in 1992. Bans on paid political advertising exist elsewhere, such as the UK, Japan and Israel, and free airtime is not only commonplace in many democracies but has been depicted as fundamental to the ousting of Chilean dictator Augusto Pinochet in 1988 (as in the 2012 film No). Political academics continue to call for a review of this case, noting its ramifications have cast a “long shadow” over political finance reform. 

Campaign expenditure is not the only area considered a “freedom of expression” in Australia; political donations are too, so there are no limits to the amounts parties may receive. If each dollar has the power to shape opinions via media expenditure, it’s pertinent to ask who can contribute to the political funds of a democracy.

First and most obviously, citizens can. For every first preference vote a party receives (assuming the party polls more than 4% of the total vote — not an easy task for new parties), it will be allocated a set amount of public money. Secondly, foreigners can make political donations. In 2004, the largest individual donor to Australian politics was not an Australian but Lord Michael Ashcroft of the UK, who donated $1 million to the Liberal Party. Countries such as Canada, New Zealand, Japan, Brazil and even the US ban all gifts from foreigners. In Australia, there have been proposals to do likewise (separate bills in 2010 and 2013) but these failed to pass parliament.

“Australia’s campaign finance sector is even more relaxed than in the US. Without expenditure or donation caps, regulation only really occurs by way of disclosure.”

Thirdly, trade unions and corporations can donate. This is banned in Canada and France, and for a long while it was also banned in the US, until a 2010 ruling allowed corporate funds to be channelled through “political action committees” (PACs). These cannot donate more than $32,400 per year to national parties. Australia’s regulation of corporate donations (or lack thereof) is most similar to that of the US, except there are no limits to how much can be donated.

In short, non-voting entities regularly finance Australia’s political process — far more than its citizens do. While foreign companies donate tens of thousands of dollars to parties each year and trade unions contribute a significant albeit diminishing proportion of the ALP’s income (about 10% in 2001-2002), by far and away the greatest source of political donations is the corporate sector. It would be fair to say that although the corporate sector donates to all major parties, from a theoretical left-wing, right-wing perspective, it aligns itself with the Coalition. Sally Young and Joo-Cheong Tham noted in a 2006 report for the National Australia University that “there is a serious danger of corruption […] due to the parties’ reliance on corporate funding. This is most apparent with the Coalition.”

Major contributors to political parties in Australia include banks, gambling proprietors, property developers, construction companies, military contractors, pharmaceutical companies and the mining sector. The Australian Shareholders Association has publicly opposed corporate donations, arguing companies don’ give without expecting something in return.

Australia’s campaign finance sector is even more relaxed than in the US. Without expenditure or donation caps, regulation only really occurs by way of disclosure. Basically, companies declare their financial gifts to the Australian Electoral Commission, which publishes the details on its website (each state has an electoral body similar to the AEC). But Young and Tham say that “disclosure schemes do nothing to combat […] dependence. Indeed, by publicising the reliance of the major parties on corporate money, they may have perversely assisted the normalisation of corporate contributions.”

Voters and journalists can’t access information related to political donations up to as long as 19 months after the donations have been made, as the data is only released in February of each year — after elections are held. Donations made in the lead-up to the last election (2010) might not have been made public until 2012. Timeliness (or lack thereof) has a major impact on newsworthiness and the interest of journalists to look for questionable political donations. The result is an overall disinterest in sifting through the various lists on the AEC website.Even if parties frequently published their donations, it still wouldn’t be easy to appreciate the size and number of total donations. For one thing, political parties don’t have to reveal gifts that are below the disclosure threshold. For a while this threshold was $1500 per annum, but in 2006, when the Howard government had a majority in both houses of Parliament, it was increased to $10,000, indexed for inflation. It is currently at $12,400. Unlike in other countries, this threshold does not apply to the sum of all donations to the same party; it applies to each division within the party — states, territories and the federation. That means that $12,399 can be donated nine times to a party without the need for disclosure. That’s $111,591. In Canada and the US, the total threshold is $200. The ALP and Greens want the threshold reduced (attempts to do so in 2010 and 2013 failed); the Coalition does not. The ALP continues to disclose gifts above the old threshold, even though it is not obliged to.

Another reason it is impossible to know the extent of political donations is the use of “associated entities”. These are basically fundraising organisations for political parties; they invest money and receive donations on behalf of the party. Each year, they need to report to the AEC how much they made/received, but they don’t have to break this figure down to specify donations and donors, meaning that corporations et al can remain anonymous. Associated entities are major contributors to political funds, accounting for 40% to 90% of revenue, depending on the year.

With such easy loopholes, it’s a wonder why any of the entities reporting to the AEC (political parties, associated entities, third parties and donors) would break any of its few existing rules. Nevertheless, compliance with the electoral authority is often lacking, perhaps because the AEC is seen to lack teeth. There have been next to no prosecutions by the AEC in over a decade, though there have been numerous reporting breaches in that time (such as 17 political parties that failed to lodge a disclosure return by the 2008 deadline). One explanation may be a lack of resources, with the AEC largely occupied in its role as election administrator, rather than political finance regulator. Elsewhere, such as in the US and UK, those two roles are seen as separable and are undertaken by different organisations. The AEC’s penalties for breaches were created in 1983 and are not indexed to inflation, meaning their real value in 2013 has decreased to a fraction of their intended determent value. The fines range from $1000 to $10,000. By way of contrast, the Canadian electoral authority can not only serve fines but deregister a political party, liquidate its assets and lay criminal charges.

There is a notable grey area in Australia’s disclosure scheme (one the AEC likely has a hard time investigating), and that’s the difference between a “gift” and a “service”. This is especially relevant to fundraising events, such as when guests pay to attend a political party dinner function.

The pitfalls of the campaigning arms race have been recognised since 1984, when public funding and political donation disclosure laws were first introduced in Australia. The most recent report into the matter, by the Joint Standing Committee on Electoral Matters in 2011, recommended the following changes to electoral law:

  • Banning all gifts from foreigners;
  • Reducing the disclosure threshold back to $1000 and applying this to the sum of gifts to party divisions;
  • Moving to six-monthly reporting cycles (instead of annual);
  • Requiring donations of more than $100,000 to be reported within two weeks;
  • Including fundraising events in the definition of gifts; and
  • Exploring options to restrict third party political expenditure in the lead-up to an election.

The ALP, Greens and independents are in favour of electoral law reform, but the Coalition opposes it, as expressed in their response to the report. To date, none of the bills addressing the issues raised by the JSCEM has been passed, meaning that Australia continues to be one of the least regulated democracies when it comes to campaign expenditure and donations. The cosy arrangement between the media and political parties’ reliance on corporate donations is arguably not healthy for any nation.

*This is an edited version of an article that originally appeared on CitizenJ

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7 thoughts on “Money, politics and the campaign arms race: corporates outspend citizens

  1. JohnB

    Jason, I have just viewed CPGG’s four clips. They are interesting, but have some of the details confused.

    For example, the Alternative Vote section of CPGG’s U-tube series. It is not correct, because it moves all of the eliminated candidate’s votes to a single recipient, whereas in practice they are distributed in accordance with the elector’s instructions (preferences). That is why it is called Preferential Voting in Australia.

    Regarding the Kiwi MMP system, there are a great many possibilities when it comes to design of an MMP voting system. The major problem is that there is no guarantee that any of the second half of the elected members will be local, ie from a particlar elector’s electorate, so it only goes part way toward the ideal.

    Second, by allowing the parties to select the order of their candidates, it is open to corrupt back-door deals. A better option would be for a party’s candidate with the highest popular vote to be declared the winner of the next seat, thus cutting the party shennanigans down to a minimum.

    Third, it results, as in the example, in a bloated assembly with more members.

    Fourth, it may, as in NZ, result in segregation of voters (electors) into classes. The Maori seats in the NZ government are such a class. There are arguments for and against, however I tend towards favouring a classless society, where everybody’s vote is equal and everybody (and their grandkids, etc) is neither discriminated for or against.

    The Hawaiin islands are deeply racist in the way that they are governed, with the rules varying from island to island. At one extreme lies broad areas where >50% native ancestry is a condition for residence and for real property (land) ownership. One result of this can be exclusion of a wife and children from their home, village and school immediately upon the death of the father, if his death leaves only <50% native family members. This is not uncommon, for example if the father is 62.5% native (5 great grandparents)and the mother is 25% native (2 great grandparents).

    I am from a family whose heritage and countries of birth include China, Northern Ireland, England, Latvia, Germany, Italy, Greece, Russia (Pre WWII), Australia, Lebanon and NZ.

    Citizenship and voting rights are extremely precious, so every effort should be taken to ensure that every citizen's vote is fully and equal to every other citizen's.

    Of course, that means that I favour the common Australian electoral systems over FPTP. Unfortunately, Australia is a Commonwealth of States, with a couple of Territories added on, so the value of our votes in the Senate are skewed in inverse proportion to population, but that is a small price to pay. If the alternative was a single Federal House of Parliament with no Senate and FPTP single Member electorates of equal population, the result would be very much less fair.

    Australia is (federally, at least) pretty much free of gerrymandering of electorates, due to the existence of an electoral boundaries commission which is essentially free of political interference.

    In short, Australia's electoral systems may not be perfect, but they are the envy of a large portion of the world.

    I will let your comment in favour of Swiss popular democracy go with only one comment: We are lucky not to have such a thing, because decisions made en masse on the village green are going to resemble FPTP in their outcome.

  2. Jason Best

    Jacqui, there is a Youtuber named CGPGrey who did a great series called ‘Politics in the animal kingdom’ which gives a really good explanation of the differences between various methods of democracy and their respective problems.

  3. JohnB

    Jacqui, I suggest that you start with Wikipedia. Try “electoral systems” or “voting systems”. I have not done so, but there’s sure to be plenty.

    The issue with 2-party systems is that the alternates are essentially extreme polarity (eg Tea Party Republicans) or extreme similarity (eg centre of the road Republicans Vs moderate Democrats, or the Australian federal tendency to copy each other’s policies (Liberal/Labor).

    Note, however, that the Nationals espouse very parochial policies during elections, then stay silent for the next three years. The Coalition of Lib/Nat is a marriage of convenience only.

    IMHO, the agrarian socialist Nationals survive federally as a party only because they are an essential adjunct to the Libs in the Senate, where the pretence of States’ rights gives the hayseed electors somewhere to vote that is not from the hated capital cities i.e not Green, Liberal or Labor.

    BTW, I don’t live in a city – I live on a small farm, miles outside a country town, with a good friend as my local state representative. And he is a National. We don’t often talk politics.

  4. Jacqui Ning

    John, wish I had your clear understanding of the system. I for one would like to find an idiot’s guide to the sliding scale of democracy (from representative, 2 party – to genuine multi-party – to direct referenda). I know Switzerland has a mix of referenda with representative. If you know of any online resources that are short & to the point, please post.

  5. JohnB

    ZA,

    The answer to your question lies elsewhere. First Past the Post elections, as in Britain and USA, will always tend towards two party systems.

    It is only when alternatives such as multiple representative electorates (eg Senate elections) or preferential voting (eg House of Reps) are used that there is a real chance for emergence of third parties.

  6. ZA

    Arguably this is the most important article I have seen so far this election. However , despite strong controls in those other Anglo/English speaking Countries mentioned why is it that they still have an electoral outcome of more or less a 2 sided, 2 dominate party system?

  7. klewso

    How much is Murdoch donating to his cause – the election of his Limited News Party – by way of the monetary value of such a positive PR campaign?

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