Democracy and money: the dangers of campaign finance reform

• Andrew Norton
• Centre for Independent Studies

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Image: Michael Scott / flickr

02 June 2011The paper argues that the practical effect of banning, capping or disclosing political donations is to limit public influence. In a liberal democracy, governments should not select or limit their critics and rivals.

Key points:

• Campaign finance law covers the role of money in politics; this paper focuses on donations to political parties and third parties (organisations or individuals involved in politics without standing for election).

• The most radical campaign finance reform is to ban private money entirely, but this is probably unconstitutional.

• NSW bans particular industries and non-citizens, and the new O’Farrell government is likely to ban all organisations from donating.

• A federal bill would ban foreign-sourced donations.

• More limited reforms cap how much any one individual or organisation can give; this is reform is already in place in NSW and Queensland.

• There are existing national and state schemes for disclosing donations to political parties and third parties; the main issue is whether disclosure should continue to be required above $11,500 a year or reduced to $1,000 every six months.

• One major goal of campaign finance law is to limit ‘undue influence’ of donors on political decisions.

• However, a key issue is how we decide what is ‘undue’ influence; bans on particular donors result in politicians prejudging the issue of whose influence is legitimate.

• A more democratic system lets everyone contribute to the political process, with debate, public opinion and elections sorting out what is in the ‘public interest’ at any given time.

• Attempts to ban ‘foreign’ donors rely on unjustifiable or impractical distinctions, depriving non-citizen residents of Australia of legitimate political rights and/or preventing expatriate Australians from contributing to political activity at home.

• A second major goal of campaign finance law is to not let the loudest and most moneyed voices drown out other voices.

• In practice, campaign finance law makes political activity far more difficult for ordinary people by subjecting them to complex and bureaucratic rules.

• The main beneficiaries of campaign finance law are those who are already in power, as the laws undermine the capacity of others to organise against them.

• A liberal democracy should have minimal campaign finance law; the freedom to give and spend money for political reasons is part of the small-c constitutional framework that diversifies sources of power and influence and holds governments accountable.

Image: 'Falling $Cash$', Michael Scott  / Flickr