Political systems

Political finance

The funding of political activities is a key issue for ensuring good governance and combating corruption. It is also a complex moral and legal issue. The resources below consider how politicians and their parties can best be funded and what are the most effective financial safeguards for ensuring 'free and fair' elections in a given country.

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Party finance: disclosure and controls

Many controls have been suggested to curb corruption in political finance. These include public financing of political parties and the introduction of limits on contributions, spending and campaign time. Full public disclosure of party accounts is increasingly demanded, but there is little legislation to enforce such transparency. Inevitably, the success of all these controls depends on the establishment of effective monitoring bodies.

International Institute for Democracy and Electoral Assistance, 2003, ‘Handbook on the Funding of Parties and Election Campaigns’, International IDEA, Stockholm
Achieving sustainable democracy requires attention to the financing of politics. How can funding best be managed to ensure that different parts of society have an equal opportunity to participate in political processes and decisions? This IDEA handbook examines examples of political financing from around the world and proposes some ‘best practice’ guidelines.
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Kupferschmidt, D., 2009, 'Illicit Political Finance and State Capture', Discussion Paper, International IDEA, Stockholm
What are the effects of illegal and improper financing on politics? This paper suggests that illicit political finance is a key contributor to democratic governments’ underperformance and loss of credibility. International actors should help transitional democracies to: (a) understand why the problem is arising; (b) raise awareness of it; (c) develop knowledge and tools to defend key institutions; and (d) where appropriate, create new laws, policies and institutions.
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Office of Democracy and Governance, 2003, 'Money in Politics Handbook: A Guide to Increasing Transparency in Emerging Democracies', Technical Publication Series, US Agency for International Development, Washington D.C.
How does money impact on politics? How can transparency in emerging democracies be extended? This handbook is the first publication by United States Agency for International Development on the topic of political finance in emerging democracies. It’s purpose is to increase understanding of this obscure and sensitive topic. It aims to create awareness of the issues and benefits of open finances and suggests practical technical options that encourage disclosure as a methodology for strengthening democratic political processes.
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Pottie, D., 2003, 'Party Finance and the Politics of Money in Southern Africa', Journal of Contemporary African Studies, vol. 21, no. 1
How are political parties financed in southern Africa? What implications does political funding in the region have on the democratic process? This paper offers a comparative survey of the legal and institutional framework within which party funding takes place in southern Africa, with more detailed assessment of Zimbabwe and South Africa. Its analysis of the structure of party resources in the region reveals a potentially volatile combination of regulated public support and a laissez faire approach to private donations.
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Fischer, J., Walecki, M. and Carlson, J., eds., 2006, ‘Contemplating Political Finance Reform in Post-Conflict Environments’, Conclusion in Political Finance in Post-Conflict Societies, IFES, Washington, D.C.
What are the fundamental steps necessary for creating a viable political finance system in post-conflict societies? This concluding chapter from an International Foundation for Electoral Systems (IFES) publication presents lessons for post-conflict political finance reform. To become legitimate and effective, a post-conflict political finance system must be integrated and weighty. International donors should therefore include political finance within the legal framework of a post-conflict political process as a key administrative and funding priority.
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GSDRC, 2008, 'Political Party Financing', Helpdesk Research Report, GSDRC, Brmingham
The methods of party financing used in Africa are primarily individual donations, private sector donations, public funding, and foreign donations. There are advantages and disadvantages to each. In general, it is considered that a combination of both private and public funding is beneficial. It is recommended that private funding be regulated, with requirements for disclosure and potentially a cap on the amount. For public funding, some form of equitable allocation is desirable.
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Campaign finance

The National Democratic Institute for International Affairs (NDI), with DFID funding, established the African Political Party Finance Initiative (APPFI). During 2003 and 2004, the APPFI researched political finance practices in 22 emerging democracies around the world. Their findings were published in the book below:

Bryan, S. and Baer, D. (eds.), 2005, 'Money in Politics: a Study of Party Financing Practices in 22 Countries', National Democratic Institute for International Affairs, Washington D.C.
Corruption relating to political party financing represents a serious threat to democracy and economic development. This study, by the National Democratic Institute for International Affairs, analyses the current practice of political party financing in 22 countries worldwide. Legal reform aimed at tackling corruption – if supported by donors - will only be effective if accompanied by adequate enforcement mechanisms and parallel efforts to promote accountability and internal democracy within political parties.
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Vote buying

Most literature assumes that the major risk in political finance is that individuals can exert inappropriate control over politicians' decisions by supporting them financially. However, the reverse can also be true as vote buying in various forms is a widespread phenomenon in many developing countries.

Schaffer, F., 2002, 'What is Vote Buying?', paper presented at conference on Trading Political Rights: The Comparative Politics of Vote-Buying, Centre for International Studies, Massachusetts Institute for Technology, Cambridge
Vote buying is a widespread phenomenon. It is usually viewed as a purely economic exchange in which the voter sells his or her vote to the highest bidder. Yet, does this view correspond to reality? What does 'vote buying' mean? What different forms does it take in different locales around the world? This paper, presented at an MIT conference, examines vote buying from the perspective of both candidates and voters. 
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Callahan, W., 2000, 'Political Corruption in Southeast Asia', in Party Finance and Political Corruption, R. Williams (ed.), Palgrave, London
Corruption works differently in different political economies and political cultures. Reforms to combat corruption must address local specificities to ensure they are not counter-productive. Following the Southeast Asian economic crisis, this chapter explores political corruption in Thailand, the Philippines, Indonesia, Malaysia and Singapore.
Full document: available via document delivery. Please see document summary.

Guidance for donor governments

Financing parties in developing countries has many risks for international development donors, for example, appearing partisan or losing money to corruption. However, in many countries, effective multi-party democracy depends on all parties accessing enough money to be able to operate. The resources below give guidance to donor governments.

Department for International Development, 2001, 'Political Party Financing: Problem, Solutions and Action', DFID, London
Political party financing can distort the electoral process and is a major motive for corruption in both developed and developing countries. What are the links between corruption and political finance? This paper by DFID tackles this question, discussing solution options and action strategies. The pressures for corrupt financing in developing countries are related to the lack of legitimate sources of finance and to various anti-democratic party activities, such as vote buying. Corruption can occur in both multi-party and single party election systems. Under both systems the electorate can develop the expectation that their vote will be bought.
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Mathisen, H. and Svåsand, L., 2002, 'Funding Political Parties in Emerging African Democracies: What Role for Norway?', Chr. Michelsen Institute Report R 2002:6, Bergen
This paper from the Chr. Michelsen Institute identifies some problems in the development of political parties in Africa and indicates how funding may contribute to resolving these problems. The paper presents some models of foreign political funding and discusses the pros and cons of such funding: the German, the American, the British, the Dutch, and the Swedish models are assessed. It also reviews the status of the Norwegian parties’ involvement in party supporting activities in new democracies, and addresses some problems which should be avoided if Norwegian funding for parties is introduced. Political funding is understood as the way that political parties and individuals running for political office raise funds for election campaigns and for maintaining themselves as organisations.
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Useful websites

• Each year, Transparency International publishes their Global Corruption Report. In 2004, the report focused on political corruption. The full report, including multiple country data is available online.
• The International Foundation for Election Systems (IFES) has a programme on Political Finance.

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