1. This section provides key definitions and describes the extent and limits of this paper.
2. Democratic regimes and representative institutions are based on free and fair elections. Political parties play a key role in representative government by nominating candidates for office, running governments when they are the ruling party, or holding governments accountable when they are not. Trust in the political system depends on the extent to which officeholders and political parties are responsive to the citizenry between elections. The media, interest groups and nonprofit organizations all find ways of rallying the citizenry to hold politicians and parties accountable between elections.
3. Money is ubiquitous in politics. Election campaigns, political parties, interest groups, nonprofit organizations and the media depend heavily on money, or more broadly speaking on material resources. Both organizing collective action and reaching out to voters, journalists or politicians depends on funding for staff and rent to run offices or for communication services to reach out to citizens. This paper will focus on the money raised and spent by parties to fund political competition.
4. Since the early times of representative democracy politicians have struggled to develop ways of financing political competition that enhance democratic process without putting at risk key values of democracy. The negative effect of money on politics has been denounced by reformers and in the literature. At best, money has been looked at as a necessary evil. The ability of money to enhance the democratic process has deserved less attention.1 We will shed some light on both aspects. For this purpose we will contend that there are three ways in which money affects political competition.
5. Money is a channel of political participation. Donating money is one form to participate in the political process, complementary to giving time, expressing an opinion or other form of collective action. When members pay membership fees to political parties, activists make donations to election campaigns and interest groups fund lobbying activities they participate in the political process, providing the means necessary to run elections campaigns and political parties. By giving their time, providing financial support or engaging in public debate citizens connect to political organizations and campaigns. Through the lenses of equal participation, freedom of expression or accountability financial support has different facets.
6. Money both reflects and shapes political competition. Money enables political parties to recruit and train new political leaders from different social backgrounds and make politics more inclusive. Money allows candidates with new ideas to communicate with voters and challenge traditional political elites and makes politics more competitive. Access to resources for political parties and candidates shapes political competition. Candidates that are well funded are likely to defeat opponents who have less money. The amount of money in a candidate's war chest can determine victory or defeat.2 Within certain limits, the regulation of money in politics can influence the process of political competition, fostering party organizations, setting incentives for new competitors or consolidating existing parties. Again, the appraisal of unequal funding of parties depends largely on what donations represent for analysts of political competition. Scholars reading fundraising as the outcome of candidate performance in gathering support for his race will see unequal funding as a natural outcome of the election race itself. When donations are 1 There are a few exceptions, including Ware/Burnell (2007). 2 Weeks 2008 and Silver 2013 show the basic correlation between campaign spending and vote shares for US House and Senatorial elections. Milyo (2007) explores different possibilities of linking correlation to causal inference. 4 viewed as an external factor influencing politics, funding tends to be viewed as a source of unleveling the playing field of elections.
7. Money influences politics. Parties and candidates are answerable to their donors. Political participation via financial support is ensued by responding to donors. Citizens or organized interests will abstain from donating when disagreements with candidates or political parties arise. Donors’ expectations and the means officeholders use to meet them vary extremely. Where parties or politicians are responsive to a group of donors rather than to other stakeholders or where donations earn financial benefits in dealings with public administration, financial support corrupts representative government. When lawmakers represent or appear to represent financial interests rather than the voters, the voters lose trust in representative government. Benefitting political donors will often include breaking laws by civil servants, thus undermining the integrity of public administration. 1.1 The difficult task of defining political financing 8. Political financing includes financial resources raised and spent by parties in the process of political competition. This core concept develops in different directions, depending on the political system of the country (Figure 1). Where strong
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