Campaign Finance: Feeding Democracy

Campaign funding legislation has triggered a debate on transparency vs donor privacy. Is there a reasonable compromise to protect the right to privacy?

Emerging Risks in Campaign Finance

Free and fair elections are a great litmus test for true democracy. The “fairness” of donor money has always been questionable due to its potential to influence future policy. According to the Institute for Democracy and Electoral Assistance (IDEA), more than 55 per cent of countries specifically target policy capture by limiting large private donations and 32 per cent limit overall campaign expenditures.

While money is critical to campaigning, higher expenditure is no guarantee for a victory in a true democracy. This can be seen in 2016 when Hillary Clinton lost to President Trump despite spending twice as much. By comparing campaign finance in the oldest continuous democracy against one of the newest and largest democracies, we can obtain a better understanding of the means to tackle corruption without infringing on individual rights to privacy. 

On the Money Trail in the Oldest Democracy

The United States has a hybrid approach to campaign finance with oversight by the Federal Election Commission (FEC). Though public funding is an option to candidates, it restricts their access to any other sources which unsurprisingly, has led to a drastic reduction in the use of public funding. Aside from self-funded campaigns like that of Tom Steyer and Michael Bloomberg in the 2020 Democratic Primaries, political fundraising usually involves Political Action Committees (PAC), Super PACs, certain tax-exempted social welfare groups and small individual contributions less than $200. Super PACs are the only anonymous contribution source with no limits on expenditure ($1.06 billion in 2016 cycle), but they are not allowed to directly coordinate with any candidate or party. On the other hand, PACs have restrictions on collections and expenditures per cycle but are allowed to coordinate with campaigns during the election. 

The concept of a super PAC was born out of the “Citizens United v. FEC,” case where the U.S. Supreme Court ruled that political speech under the Fourth Amendment was protected irrespective of media form. However, they also noted that when contributions exceed normal limits, the recipient cannot have any direct contact with the political activities of the fundraising group. This was done to limit a candidate or party’s exposure to influence by a single individual or corporation. 

The Indian Initiative: A Bond Between Donor and Party

India has taken a different route towards election finance with the introduction of electoral bonds in 2018. While substantial funds to run a successful campaign are being expended by almost all candidates, the sourcing remains hazy. Electoral bonds are anonymous interest-free bearer bonds of ₹10,00 to ₹ one crore issued by State Bank of India (SBI) and verified at the time of purchase with donor KYC compliance. These can be given only to registered parties who have more than one per cent of the vote in the preceding Lok Sabha election. Due to the donor discretion provided, these bonds were able to raise nearly ₹60,000 crore ($8.65 billion) in the 2019 Lok Sabha elections, with BJP leading at 45 per cent and Congress following at 20 per cent. 

Transparency vs Privacy: Disclosure in a Polarized World

Individuals and companies are hesitant to openly support any idea that contradicts mainstream ideologies or that of supercharged, closed political environments like universities. This fear of past affiliations or choices being used in hiring decisions, investment opportunities, or social exile is very real in the never-forget nature of the internet. Thus, there are two main considerations in the transparency of election finance-- the recipients’ sources and expenditures, and the donor’s contribution and potential influence. Indian electoral bonds address the first issue while American super PACs address the latter.  

Transparency will help clear the fog of corruption in politics, but in that clarity, are we socially ready to gracefully accept all opinions in a society built on free speech? There should be nothing wrong with being politically or financially associated with an idea and in turn, the party or candidate that reflects this ideal. However, some of the risks of association with ideas outside the mainstream conversation include, the doxing of children, lost business opportunities, boycotted products and services, and long term damage to personal relationships. This societal censorship is  what leads to surprising election results at the final poll of a supposedly free and fair election

Assessments

  • New technologies like cryptocurrency, online voting, and digital media campaigns have made it easier to expand grey areas of foreign funding and criminal investments. Corruption in elections can be combated by increasing voters’ access to election data and making this data comprehensive, searchable and comparable to ensure transparency. 

  • Foreign funding in elections is manageable if bonds or PACs are tied to exclusively domestic financial instruments which can only enable transactions through validation of KYC or Social Security Numbers, as well as verification of resident status at the point of purchase. This gives the SBI or FEC the responsibility of third-party verification and opportunity to record and encrypt this data for any future litigation in case of corruption charges. 

  • The need for transparency in elections should not violate the personal safety, digital reputation, employment/business opportunities of those who partake as voters and financial contributors. Voter privacy is a right that may need to be extended to some forms of election financing if the society at large is too polarised to protect their right to a particular ideology. Only donor contributions above a certain amount should be traceable back to the donor, to protect those without the means to shield against any backlash in their daily lives. 

  • The emergence of a politically interested, ideologically flexible, intellectually diverse, voting generation Z may disrupt the nature of partisan politics. Considering the amount of data collection in the demographic, their evolving views on privacy and disclosure could transform the landscape of campaign finance soon. 

Image design: Chris Karedan, Synergia Foundation

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