A Sisyphus’ task? State control and civil society oversight monitoring on political finance

Bruno Wilhelm Speck, 13th IACC, Workshop contribution, Financial Sector

by Prof. Dr Bruno Wilhelm Speck,

from Universidade Estadual de Campinas, Brazil

Political finance is a necessary feature of political competition and must not cause damage to democracy. Modern democracies require resources to finance campaigns and strong party organizations. To keep the system functioning, political parties ideally resort to engagement of party activists and sympathizers. However, modern politics require a high degree of professionalism in management. Many services of modern campaign finance cannot be delivered by voluntary engagement. To cover the costs of running modern party organizations, recruiting and training new political leaders and reaching out to voters in election campaigns parties and candidates typically resort to considerable amounts of monetary and non-monetary resource. Without these, free and informed competition for political office would not be sustainable.

Modern politics face the challenge of reconciling the presence of money in politics with the risks it poses to democratic values and to good governance.

Risks stemming from money in politics

Political finance comes in a variety of currencies. The three main ones are government resources, mainly used to promote reelection of those in office e; financial support from private donors and, as the third and most recent currency, political communication through media. These currencies are overlapping in part.

While money is required to foster political competition, its role in politics can undermine the tenets of democracy. Depending on where money comes from, how it is distributed and what it is spent on, it can transmute from a blessing into a curse.

Money can distort the electoral process, due to the source and distribution of funds, the management of resources and expenses, as well as the motivation linked to donations.

Risk no. 1: Distorting competition between candidates

Where resources are unfairly distributed between candidates, the electoral contest may be distorted. Incumbent candidates may abuse state resources to fund their campaigns. This distorts political competition or definitively blocks the process of democratic alteration of leadership. Candidates representing powerful economic interests may conduct sophisticated campaigns while their competitors stand for less well off constituencies are cut off from communication to their voters. Resources for electoral competition may even be diverted from campaigns and pocketed by candidates or campaign finance can be used as a channel for money laundering.

Risk no. 2: Diminishing the role of citizen

Political finance might also be looked at from the citizens’ perspective. Campaign funds may be used for improper purpose like vote buying, anesthetizing the critical role of voters. Both corporate donations and state resources can contribute to crowding out the role citizens play in the political system. Individual citizens’ campaign contributions, as an expression of political participation, can hardly compete with the substantial amounts of funding that private companies are able to provide. The political class might also be able to extract generous rents for funding elections and parties without the knowledge and consent of the citizenry.

Risk no. 3: Mining integrity of representation

Beyond these risks, political finance has an impact on policy making, once candidates have taken office. Private donors may require privileged treatment in return for generous donations. This could range from tax exemptions and other donor-friendly regulatory measures to preferential treatment in public contracting processes. In those countries where foreign contributions are allowed or de facto occur, political finance can have a distorting impact on foreign policy decisions. As such, political finance potentially affects the direction and quality of public policies and whether these respond to broader collective or rather specific private interests. If money becomes a primary channel for buying influence, poor communities find themselves at the loosing end. The direct impact of political finance on the behavior of officeholders is of course often difficult to assess. But the suspicion of undue influence has an impact on the credibility of the system of representative democracy as damaging as a proven causal relationship.  

How have regulations addressed these risks in the past?  

Given these risks, countries with a long democratic tradition have established different sets of regulations. The two main targets of regulation are the abuse of government resources to stay in office and the damage large private donations can cause to democracy.

·         Abuse of state resources – a challenge not to underestimate

The abuse of state resources has been tackled by prohibiting the unilateral use of state resources, by building an independent civil service and, more recently, by specific regulations constraining governments spending leeway during election campaigns. The latter include specific rules on public procurement, employment of civil servants, government advertising in election years[1] or general rules on fiscal responsibility.[2] In addition, many countries with a presidential regime have limited consecutive reelection of the government in power.[3] All these measures have not fully eliminated the abuse of state resources, which still distorts elections in many countries. To some extent, the advantage of officeholders is considered inevitable and private campaign contributions are considered a necessary means to counterbalance such advantage. In fact, in countries dominated by government parties, private donations are often the only way to allow smaller parties to gain presence.

·         Regulating private money – keeping up Sisyphus’ spirit

The role of private money, considered often as a prerequisite as well as a risk for democracy, has been addressed by different regulatory tools, including bans and limits on private finance, exclusion of undesirable sources, leveling the amount of private donations and/or limiting the connection between candidates and donors. Similarly, some countries have established ceilings on the overall amount of campaign costs, which has an immediate impact on the level playing field for candidates and collateral effects on other aspects of campaign finance. In countries where some kind of regulation concerning the role of private resources is in place, these regulations vary from timid to more ambitious. At the same time, the capacity of state control to effectively force parties and donors into abiding by these rules varies widely. A main challenge of reforming political finance regimes is to develop sound regulations to minimize the above mentioned risks coming from private donations. When moving from scenario A to D (graph 1), many countries get trapped in ineffective regulations due to lack of effective oversight (scenario B, e.g. Argentina). Another risk is a deadlock of poor regulation due to lack of political will to reform (scenario C, e.g. Brazil). Both unrestrained influence of money on politics and a rule representing a mere facade cause citizen’s political cynicism.   

( view graph 1 in attached document)

·         Public subsidies – a remedy if correctly dosed

Public subsidiesand regulations guaranteeing free access to services have been an approach widely cultivated as a means to support parties in their essential task of organizing political competition and limiting the dependence from large private funds. However, in most counties the amount of public resources has not been able to effectively replace the role of private money. And even countries spending considerable amounts of public resource to fund parties and campaigns have not been spared from facing political finance scandals. The Flick Scandal in Germany and the Seat Scandal in Spain unveiled that high public subsidies could at best mitigate, but not ban the risk of influencing political decisions by political donations.

·         Medias roles in political competition – cutting deals, supporting candidates and informing the public

The regulation of the role of media has been at the heart of many reforms, focusing on the different roles of media as a channel of information and a carrier of campaign ads. While some countries trust freedom and pluralism to produce a balanced role of media in political competition, others opt for regulating the role of media, establishing rules for a balanced approach in election campaigns. Regulation of its role in political competition ranges from guaranteeing access to media advertising for political proselytism, leveling the playing field by regulating space and price for media ads to providing free radio and TV time. TV ads being one of the most expensive items of modern elections campaigns, free airtime as a form of indirect public subsidy have played an important role for reducing the costs of, and the pressure to fundraise for, political campaigns.

·         State agencies controlling political finance –  independence, power and capacity

Finally, countries have regulated state control bodies, establishing autonomous agencies in many countries and vesting them with the power to investigate and impose sanctions. Even in established democracies, after a century of political finance regulation, the role of independent and effective state oversight has received recognition only in the last decades.[4] Independent regulatory agencies have been installed as a cornerstone for guaranteeing free and fair elections in many countries. Many of these new agencies face the challenge of expanding their focus from managing the electoral process to monitoring the financial background of elections. Independence, technical preparation for the job, sufficient resource allocation as well as ample legal investigative and sanctioning capacity are the main challenges these agencies face.

State control and social oversight: conflicts, cooperation and complementarities

In the past, political finance regulations have very much focused on the regulatory capacity of laws and state oversight bodies. Recently, social oversight has gained a growing relevance. In many countries social control has developed into an institution by its own right in the last decades. The efforts of civil society organizations and the press to engage in the issue of political finance bear on different origins. On one side organizations involved in electoral observation have enlarged their scope of attention. Recognizing that campaign finance is a vital aspect for assessing if elections are free and fair, international and national elections observers have dedicated more attention to the question. Still, the focus is basically on the impact on the electoral process, neglecting the aspect of political finance between elections. On the other side organizations dedicated to corruption control have discovered that many corrupt deals originate from campaign finance schemes. The central question for these organizations ought to be the post electoral favors as a consequence of political donations. However, in practice the question of electoral and post electoral risks linked to political finance becomes inseparably intertwined.

What do civil society organizations do? The scope of civil society organizations work on political finance has been documented recently. Examples of activities include activities of voter education, alerting voters about the long term costs of vote buying and other forms of manipulating the will of the citizen. An additional category of activities focuses on voter information on candidates and parties in general, and if possible on political finance. In countries where official data is scarce, CSOs resort to collecting these data themselves. In other countries they analyze, translate and disseminate data on candidates in general and on election finance to the public.

Apart from informing voters, few CSOs work with parties, donors and state agencies. In Peruand Colombia CSOs have engaged in training political parties to abide by the new laws on political finance. In Braziland Chilenongovernmental actors have developed special projects informing corporate donors about their rights and duties in campaign finance. International initiatives have called companies to apply rules of transparency regardless of the national law. This effort of disseminating general standards on political finance beyond national legislation is present also in efforts to convince candidates to voluntarily disclose information on campaign finance.

Two fields of additional monitoring efforts are the role of media in elections and the use of government resources. Media monitoring, either focusing on political advertising or on balanced journalism, can reveal important aspects of resource allocation of political contenders, while equally shedding light on the question of neutrality of media.

The question of abuse of government resources has always been part of election monitoring efforts, focusing on the use of official vehicles and mobilization of servants in election campaigns. However, recently the focus of such observation has been enlarged into monitoring the use of government advertising for political purpose.

The relation between state control and social control includes complementarities, but also competition and asynchronies. Complementarities prevail where civil society organizations report misbehavior, thus providing useful input to state control agencies. Given the limited capacity of state agencies to monitor extensively what happens on the ground. This channel of information is vital where peer review between parties came to a still stand due to a pact of mutual protection among political contenders. Contrariwise, social oversight depends on state control agencies. For social control to happen efficiently, data on political finance needs to be disclosed to the public. Depending on the law and on how state control agencies implement these rules, CSOs themselves can develop their role translating this information to the public.

A key role of state agencies is guaranteeing compliance with the law by different actors involved in the process of political finance. This includes detecting transgressions, investigating the facts and sanctioning misbehavior as prime mechanisms of state control. The downside of this power is that in many countries laws on political finance are very permissive in terms of preventing corruption risks and the powers of state agencies are limited.

Social oversight follows a different logic. Besides the above mentioned instrumental role reporting misbehavior to state agencies, social control aims at empowering citizens to sanction political actors by withdrawing support and manifesting their discontent. Such empowerment translates into informing citizen about political finance during the electoral process. However the legal framework for such disclosing is still limited in most countries where the law that does not require concomitant rendering of accounts. Thus, informing citizens may include independent data gathering by nongovernmental organizations or translating public data into an accessible format. Empowering the citizenry also requires shaping social norms towards a clearer understanding of what behavior is acceptable and what is not. While state control is bound to the laws in place, social control may develop different standards of acceptable behavior. This is an opportunity and a challenge for social oversight.

When assessing the corruption risks of political donations influencing elected officeholders, state agencies face the challenge of providing proof for the causal link between a political donation and a favor rendered. This connection is difficult to establish, due to a series of factors. First, private donations per se are mostly legal and unlike bribes, the transfer itself does not provide any evidence for a corrupt deal. Second, the usual time gap between a campaign contribution and a future favor paid back by the elected officeholder makes it difficult to establish a causal link between both actions. Finally, elected officeholders have wide discretionary power, are not obliged to give reasons for their decisions and answer to their voters. This bundle of factors makes it hard to prove the motivation for a given decision goes back to a campaign contribution rather than to the defending the public interest.  

Again, social control operates on a different logic. A reasonable doubt about the causal connection between donations and retributions might be sufficient to activate mechanisms of social sanctions. Since officeholders are answerable to the citizenry, CSOs have a vital role in providing evidence on how campaign finance might be linked to decisions by officeholders. A large donation by a company in combination with an increased share in public contracts might be sufficient for voters to withdraw support from the government. A party accepting political contributions from a branch of economy (e.g. timber, weapon, polluting industries) in contradiction with the declared political priority (conservation, disarmament, environment) may be punished by the voter for this contradiction.

Flaws in the law and poor performance of state control institutions are additional areas where CSOs have a vital role. Where state control does not comply with its role of guaranteeing the rule of law, CSOs often evolve into role of control-of-controllers. Confronting state agencies with the flawed character of the data provided by parties and candidates may force the former into a more proactive behavior. State control is often activated by criticism it suffers from civil society.

Finally, civil society organizations have a vital role in the debate on legal reforms. Political parties making the rules on political finance intrinsically legislate on their own behalf, a constellation characterized as a conflict of interest. Thus, the voice of independent experts, of academy, of state agencies bringing in the technical expertise and of CSOs defending the public interest is vital in the debate on reforming political finance laws and regulations.



State control

Social oversight


Guarantee compliance with the law

Empower citizen to give or deny support to parties


Law and regulations

Expected standards of behavior


Investigative and sanction misbehavior

Produce and disseminate information on political finance and political behavior


Depending on reporting of misbehavior

Poor performance

Depending on disclosure


Political, civil, criminal sanctions

Protest and withdraw support

Corrupt links between donations and favors

Hard to proof causal link

Evidence for possible link between donation and political decision

Contribution to reform debate

Technical expertise

Defending the public interest


Social control and state agencies are closely intertwined when it comes to transparency. Only a strong state agency can enforce reporting and disclosure requirements. This includes collecting such information from parties and candidates, verifying its accuracy and guaranteeing disclosure to the public in a user friendly way. Here and there the press and civil society can collect information and confront oversight bodies with data submitted. But this punctual process cannot substitute the role of state agencies to collect comprehensive datasets and scrutinize as well as sanction noncompliance with the law. Although the role of social control in supporting state agencies is important, it cannot substitute the role of state agencies capable to enforce compliance with the law.

[1]As an example see the New Zealand Auditor-General’s report on Government and parliamentary publicity and advertising, June 2005. Similar concerns have been brought forward in Australia. In Canadathe Civil Society Organization Democracy Watch has raised the issue and requests regulation (http://www.dwatch.ca).

[2]The following countries introduced fiscal responsibility laws: New Zealand, Sweden, Bulgaria, Estonia, Poland, United Kingdom, Euro Area, Argentina, Chile, Peru, Brazil, Colombia, Ecuador, India, Venezuela(Kopits 2007).

[3]In a few countries (Mexico, Costa Rica) this rule extends to the Legislative.

[4]In the USAthe Federal Election Commission has been introduces only in 1975.

docA Sisyphus’ task? State control and civil society oversight monitoring on political finance

Brazil 2012

Brazil 2012

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