Democracy and money: the dangers of campaign finance reform

• Andrew Norton
• The Centre for Independent Studies

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07 June 2011The rules of Australian politics are in the process of being rewritten. NSW and Queensland have imposed radical new restrictions on political campaign donations and expenditure, with more to come in NSW. Federal Parliament is considering less significant reforms, but the government has announced a further wide-ranging parliamentary review of campaign finance regulation.

The stated goals of campaign finance reform are to restrict the ‘undue influence’ of private money on political and policy outcomes, and to prevent the loud voices of wealthy organisations and individuals drowning out other views.

But the actual effects of campaign finance reform are to protect those in power from criticism and accountability, and make political activity so complex and bureaucratic that it poses significant risks for ordinary citizens.

This gap between goals and effects is due to a mix of questionable assumptions and practical difficulties.

The idea of ‘undue influence’ assumes an already-known public interest threatened by donations or campaign spending. However, in a liberal democracy the ‘public interest’ is not known before or above the political process. Politics is instead a continuing debate about the public interest. In practice, most political debates are conducted in a grey area where private interests intermingle with broader justifications such as assisting the needy, protecting jobs, or saving the environment. Banning or capping donors and campaign spending means those in power manipulate these debates to suit their own interests.

In NSW, the former Labor government selectively banned donations from industries it disapproved of, including tobacco, property development, and for-profit liquor and gambling. The dubious distinction between for-profit and not-for-profit liquor and gambling is a sign of how quickly this process turns to favouritism. It is a dangerous precedent that should concern the staff, customers and shareholders of controversial industries, from carbon-intensive energy to junk food. The new NSW Coalition government proposes banning all organisational donors.