Political finance covers all funds that are raised and spent for political purposes. Such purposes include all political contests for voting by citizens, especially the election campaigns for various public offices that are run by parties and candidates. Moreover, all modern democracies operate a variety of permanent party organizations, e.g. the Democratic National Committee and the Republican National Committee in the United States or the Conservative Campaign Headquarters, Labour Party Headquarters and the Liberal Democrat Headquarters in the United Kingdom. The annual budgets of such organizations will have to be considered as costs of political competition as well. In Europe the allied term "party finance" is frequently used. It refers only to funds that are raised and spent in order to influence the outcome of some sort of party competition. Whether to include other political purposes, e.g. public relation campaigns by lobby groups, is still an unresolved issue.Nassmacher, Karl-Heinz, The Funding of party competition. Baden-Baden: Nomos Verlag, 2009, p. 31. Even a limited range of political purposes (campaign and party activity) indicates that the term "campaign funds" (used as subject heading in Library of Congress cataloguing) see http://catalog.loc.gov is too narrow to cover all funds that are deployed in the political process.
Expenses for politics Political expenses can be caused by election campaigns run by candidates, candidate committees, interest groups or political parties, contests for nomination or re-selection of parliamentary candidates, training activities for party activists,Examples from the 1976–80 election cycle are given by Adamany, David, 'Political parties in the 1980s'. In: Malbin, Michael J. (ed.), Money and politics in the United States. Chatham, NJ: Chatham House, 1984, pp. 80–81, 89. officeholders or candidates, policy development by parties or party related bodies, current operations of party organizations at the national, regional or local level and efforts to educate citizens with regard to popular initiatives, ballot issues or referendums.
Most frequently and in most countries the organizations that raise and spend money for political purposes are parties (headquarters, branches and chapters). Party headquarters spend on public relations, mass media (including billboards), the expertise of consultants and offices. Local party chapters (e.g. constituency or riding associations), which rely on volunteers (party activists), cover telecommunication and mail charges as well as rent and heating for storefront offices, which they use as their centers of political activity.R. Kenneth Carty, Canadian Political Parties in the Constituencies. Toronto: Dundurn Press, 1991
Sources of funds Political revenue may be collected from small donors or individual citizens ("grassroots fundraising"), who make small contributions or pay party membership dues; wealthy individuals; organizations including businesses, interest groups, professional organizations and trade unions; assessments of officeholders (called the "party tax"); government subsidies; or generally illegal activities including graft, buying access to politicians, offices, honors or titles, extortion of wealthy people and influence peddling). G. M. Gidlund has classified the available options of fund-raising by three categories: Membership, plutocratic and public funding.Gidlund, Gullan M., Partistöd (in Swedish with an English summary). Umea: CWK Gleerup, 1983, pp. 55, 353. As the relevance of signed-up party members and their dues The only example documented in Paul Webb, David M. Farrell and Ian Holliday (eds.), Political Parties in Advanced Industrial Democracies. Oxford, UK: Oxford University Press, 2002, p. 127, is France. For details from other countries see Richard S. Katz and Peter Mair, Party organizations – a data handbook. London: Sage Publications, 1992. can vary among the democracies the terms grassroots fundraising, plutocratic finance and public funding may offer a more adequate general framework.
Grassroots fundraising Many believe that as a normative concept popular government (vulgo democracy) should require that the people at large cover the costs of their democracy. However, this can only be done on a voluntary basis, because all forms of political participation in a democracy are voluntary in principle. At election times many people abstain from voting. Likewise at all times the majority of citizens also abstains from donating to political coffers. Nonetheless, many believe that broad fundraising from small donors is the ideal form of funding. Political fundraisers should try "to exploit the latent giving power in the general population" and make every reasonable effort to raise "significant sums ... collected in small change."Alexander Heard, The costs of democracy. Chapel Hill, NC: University of North Carolina Press, 1960, pp. 251, 250 (i.e. in reverse order). This is especially true for all democracies with a high standard of living for the majority of their citizens.
Popular financing of politics can be an important source of political revenue (as it is in the U.S. and Canada, the Netherlands and Switzerland).For details see Herbert E. Alexander, Financing politics – money and political reform. 4th ed., Washington, DC: CQ Press, 1992, pp. 58–64, 73–5; W. T. Stanbury, Money in politics – financing federal parties and candidates in Canada. Toronto: Dundurn Press, 1991, pp. 213–24, 536–40; Ruud Koole, 'The modesty of Dutch party finance'. In: Alexander, Herbert E. (ed.), Comparative political finance in the 1980s. Cambridge, UK: Cambridge University Press: 1989, p. 206; Ruud Koole, 'Dutch political parties: Money and the message'. In: Herbert E., and Shiratori, Rei (eds.), Comparative political finance among the democracies. Boulder, CO: Westview Press, 1994, pp. 127–29; Ladner, Andreas, and Brändle, Michael, Die Schweizer Parteien im Wandel. Zürich: Seismo, 2001, p. 180. However, it is not a constant and reliable source. The numbers of signed-up party members who pay their dues regularly fluctuates over time wherever democratic parties care to recruit them.Early data in: Maurice Duverger, Political parties – iheir organization and activity in the modern state. London: Methuen, 1954, figure 6; for more recent data see Paul Webb, David M. Farrell and Ian Holliday (eds.), Political parties in advanced industrial democracies. Oxford, UK: Oxford University Press, 2002, pp. 24, 55, 83, 121, 162, 163, 196, 225, 257, 325, 355. Today even the traditional mass-membership parties of the democratic left (Social Democrats or workers' parties) raise less than a quarter of their funds from the grassroots. Collection of small donations depends very much on the current mood of people's emotions towards politics, policies and politicians. A variety of ways are available (nationwide lotteries, direct mail drives, peer, neighborhood or internet solitication, social events at the local level, even yard sales) for grassroots fundraising. Personal (door-to-door or peer group) solicitation was quite frequent in the fifties. Since the 1960s it has been superseded by telethons and computerized mass mailings. In more recent years internet solicitation has played a major role.
Plutocratic finance In the old days landed aristocrats and successful entrepreneurs of the ruling classes supplied the funds necessary for democratic politics.Pinto Duschinsky, Michael, British political finance, 1830–1980. Washington, DC: American Enterprise Institute, 1981, pp. 52–8. Later on, interest groups and others provided money. Although trade unions that funded left-of-center parties were among the suppliers of money, money for campaigns came from a relatively small number of large donors.
In some cases governing parties have abused their powers by rent-seeking. Some have demanded graft for a license or a favor, others ristournes (in Quebec) or tangenti (in Italy) for public procurement. In some times and places, officeholders (including MPs, legislators and councillors) have been expected to pay an 'assessment' on their salaries for political jobs.
Public subsidies After World War II, politicians including Luis Muñoz Marín in Puerto Rico, Gerhard Stoltenberg in Germany, Jean Lesage in Quebec and Tage Erlander in Sweden found a way to put "the costs of democracy" Phrase from the title of Heard, Alexander, The costs of democracy. Chapel Hill, NC: University of North Carolina Press, 1960. directly upon the taxpayer.For some details see Wells, Henry, Government financing of political parties in Puerto Rico. Princeton, NJ: Citizens' Research Foundation, 1961, pp. 16–21; Adams, Karl-Heinz, Parteienfinanzierung in Deutschland. Marburg: Tectum Verlag, 2005, pp. 112–26; Angell, Harold M., Provincial party financing in Quebec. Lanham, MD: University Press of America, 1996, pp. 31–53; Walter, Hanfried, "Staatliche Parteienfinasnzierung in Schweden seit dem Reichstagsbeschluss vom 15. Dezember 1965". In: Zeitschrift des öffentlichen Rechts und Völkerrechts, 1966, vol. 26, no. 2, pp. 371–404.
Most modern democracies (in one way or the other) provide government subsidies for party activity, typically in cash and/or free access to public or private media. India and Switzerland are the most notable exceptions. Public subsidies can be relatively small (as in the UK and USA) or quite generous (as in Sweden, Germany, Israel and Japan), and usually exist side-by-side with private fundraising. Party organizations, parliamentary groups (party caucusses) and candidates are typically the recipients of public support (in cash or kind).For an overview see Casas Zamora, Kevin, Paying for democracy: political finance and state funding for parties. Colchester, UK: ECPR Press: 2005, pp. 30–1.
Although government subsidies are now common in western democracies, such subsidies remain controversial.Michael Pinto-Duschinsky, 'It's their party, and we pay for it'. In: The Sunday Times, October 22, 2006; a brief compilation of pros and cons in: Casas-Zamora, Kevin, Paying for democracy: political finance and state funding for parties. Colchester, UK: ECPR Press: 2005, pp. 28–9. Because matching funds and tax credits depend on financial contributions by individual citizens such support is more compatible with participatory democracy than flat grants that do not require specific efforts by the fundraising organizations.
Taxpayers in continental Europe and non-western democracies (like Israel and Japan) provide higher amounts towards party activity than their Anglo-Saxon counterparts. Many party headquarters in the high-subsidy countries cover between 40 and 60 per cent of their annual budget via public grants. Such heavy involvement of the taxpayer calls for a maximum of transparency for political funds.
Regulation (political finance regime)