The author has declared no conflicts of interest in writing this opinion piece, aside from an interest in campaign finance.
Image Source: The Guardian @ Martyn Vickery/Alamy
In late 2018 the Museum of Australian Democracy, in collaboration with the Institute of Governance and Policy Analysis, released the Trust and Democracy in Australia report. The report highlighted the concerning decline of public trust in Australia's democracy, rapidly depreciating from 71.70% to 40.56% between 2013 and 2018. Simultaneously, the report attributed five significant factors to this decline, including media influence and politician accountability deficits, however the most consistent concern between 2014 and 2018 was the negative public perception of big business's power via campaign contributions to major political parties.
Through this first article of a two-part series, I will focus on why corporate sector firms see an incentive to contribute to political actors' campaigns and how it influences policymakers' decision-making.
While in the second article of this series, the Australian campaign finance system will be examined in-depth and highlight current loopholes that currently allow the private sector to exercise greater influence over political parties than the average Australian voter. Furthermore, the article will examine the campaign finance system of the United States (U.S) and Canada to provide an international perspective on this issue.
Scholars and researchers widely recognise that significant campaign contributions likely influence policymakers' behaviour. The ability to influence policymakers via campaign contributions is a systemic threat to fundamental democratic values of equality, equity, and good governance. The relationship between governments and the private sector through thinly veiled campaign finance laws and systems is likely to result in a disproportionate influence over political decision making, considering the sizeable transactions between the two actors. Therefore, causing primary concern in countries where political campaigns rely heavily on private funding, such as the U.S or Australia, making campaign contributions fundamental for parties to get elected to political office.
Also, the public view these political donations via private sector actors to function as a 'quid pro quo', which could ultimately lead to undue influence over government decision-making. While campaign finance systems such as the Australian Electoral Commission (AEC) or the U.S Federal Electoral Commission (FEC) explicitly ban these 'quid pro quo' exchanges via contributions, it still allows 'reciprocal altruism' to take place. Francis Fukuyama describes ‘reciprocal altruism' in his text, Political Order and Political Decay (2015), whereby an individual confers a benefit on another (i.e., campaign contributions), with no expectations that it would immediately buy a return favour. Yet, in another time and place, the recipient will return the favour (i.e., repealing carbon pricing or introducing corporate tax cuts).
But what incentivises firms to make campaign contributions in the first place?
In economist Russell Pittman's paper Market Structure and Campaign Contributions, Pittman argues that we must look at an individual firm as a rational actor in an economic system, which includes the government as another. Therefore, all firms would like to influence the government activity to benefit themselves, especially in their industry sector where the government's role is substantial enough that the benefits of influence are worth the costs expended, e.g., the mining sector.
In addition to this economist outlook, as Australian major political parties still rely on private funds, campaign contributions from the private sector can theoretically act as a market. This 'demand' market allows corporate sector firms to compete for influence because there is no cap on Australia's campaign expenditure during an election cycle. Political parties can then feel pressured to take large donations from private companies to fight campaigns. Therefore, benefiting corporations as the opportunity cost of not taking donations to a major political party can be deemed too high.
While it is difficult to objectively establish the exact intent behind donations from the corporate sector, researchers can identify strong indicators of influence from the private sector over policy debates from patterns between campaign contributions over time and their coupling with crucial policy decisions.
In 2017 the Australian Institute published The Tip of Iceberg: Political Donations from the Mining Industry paper, which highlighted the growing disparity of contributions made by the mining industry to the two major Australian political parties between 2006 and 2016. During the 2006 – 2007 election cycle, the mining industry produced a total contribution of $345,000 split evenly between the Liberal-National Coalition and Labor party. Yet, during the 2010 – 2011 election cycle, the total contribution dramatically increased to $3,787,584, with 92.4% of the overall sum going to the Liberal Party. This substantial increase in donations to the Liberal-National Coalition coincides with their opposition Rudd Labor governments intent to introduce the 'Resource Super Profit Tax' on the mining sector.
During the 2012-2013 election cycle, there was another prominent spike in campaign contributions from the mining sector, with an overall sum of $2,847,680. This election cycle heavily featured the Liberal-National Coalitions intent to repeal the Gillard Labor governments Carbon Pricing Scheme which was also viewed with contempt from the mining sector. These examples of increasing campaign contributions provide strong indications that mining firms preferred to back the Liberal-National party who opposed both Labor government policies, which would impact the mining sectors ability to increase revenue.
With the evidence presented in this first article, it has been established why the corporate sector sees an incentive in providing campaign contributions to major political parties and how a market for campaign contributions allows these firms to have undue influence over policy-making decisions.