Corruption in campaign finance Flashcards
(12 cards)
What are the goals of politicians?
- Once in office they may have a goal of staying in office
- Attracted to be a politician because they’re attracted to a financial goal related to gaining that position. In many contexts people are incentivized to become politicians as there’s an avenue to make money.
- Ideological goals- desire to change public policies for the better. But if this is your motivation to enter politics, you still need to win an election to change policy.
All of these goals boil down to the same thing. You need to get elected or re-elected, regardless of your goal which means you need to run a campaign so need funds
UK case study on campaigns being costly
Countries with the most expensive campaigns are India and the US seen in th Economist 2014 & Brazil is quite close behind. The UK’s elections are not super costly among advanced democracies or high income democracies, but the UK parliamentary election in 2017 cost about 39 million.
- The biggest expense was on unsolicited material to electors which is the leaflets that come through your door and cost £13 million across the election.
- Parties are spending money on advertising in newspapers or social media.
- Market research and canvassing. Market research might be holding focus groups to know what voters want so that parties can offer voters the policies that are most popular. Canvassing is going door to door to talk to voters about voting in the elections.
The reason that UK elections are not super costly is because we have quite stringent laws on how much candidates can spend during elections. So it doesn’t really matter how much is donated to you, because you can only spend a certain amount.
In other countries there are no limits on spending, and if you have no limits then this really escalates the cost of elections.
What makes campaigns costly in low and middle income countries?
Politicians have to try & provide information to citizens on what the policies they’re gonna enact.
- Unlike in advanced/high income democracies candidates are expected to provide private benefits to voters. This means providing cash/electronics or fertiliser to farmers. Call this vote buying. The dominant narrative now is that these private gifts are given to signal something about the candidate (shows they care about you)
- Candidates are expected to provide club benefits to local organisations, so they might be expected to make donations to churches/schools. In a lot of lower & middle income countries, you might see the construction of a small hospital or classroom & it might say this was provided by MP from their own money. Expectation that politicians & political candidates have to provide these local kind of public goods.
Running as a parliamentary candidate in a low middle income countries is extremely costly because not only do you have to do all the things that a candidate would in the UK, but you would have to do all of these other things to have a chance of winning.
Where do politicians finance their campaigns
- State funding. In some countries it might make up 80% of what parties & candidates are spending. Taxpayers’ money set aside to provide funding for political parties & then political parties will give this money to their candidates.
- Individual contributions- regular people give a donation to a party
- Firms donate- in some countries it’s not allowed
- Bribes and kickbacks especially for the politicians who are already in office. Research suggests on average the more you can spend in an election it does translate into votes
If you’re an incumbent there is always a temptation to use your position in office to gather more money so that you can outspend your competitors and get reelected.
How could political finance reform reduce illegal money in politics?
Top down solutions means changing legislation to try & restrict the flows of money into or out of parties.
Flows of money into parties is changing either who can donate & the level at which firms can donate & changing how much the state gives as if you want to ban private donations you would then increase state funding.
Changing the flow of money out you can so limit party spending or not limit it but make it transparent.
Political finance reforms typically aim at trying to reduce the role of private money. They clarify the legal status of campaign finance activity and enhance the risk of discovery (make everything transparent)
How does Rose-Ackerman say we can make political finance reforms
- Reduce the time of campaigns- why the US is so expensive
- Spending limits on candidiates- like the UK
- Ban firms from donating to parties/individuals- Lithuania & Brazil
- Strengthen disclourse rules- increasing transparency
- Provide public funds for campaigns
Why do firms donate to a party or candidate?
Grossman and Helpman 2001
- Electoral motive- they want the candidate to come into office whose policies are close to them. Firms care when govs become very strict about regulating environmental damage as it directly impacts them (Trump deregulating benefits them as they can make more profit). So you can try and select politicians who are already like-minded.
- Try and use money to influence how politicians see policy. Or influence to win public contracts
Summarise Lithuania’s ban on corporate donations and its effects
Baltrunaite 2019
Banned corporate donations to parties in 2012. Prior to this, 43% of total party finance was from private donations & 14% of Lithuanian GDP comes through public procurement.
Idea is prior to reform, firms could either donate or not. Meant your chance of winning a public contract, was affected.
Results- Immediately see companies that were contributing had better chances of getting contracts. The premium from donating is about 5%. This dissipates over time until, after the ban, with the advantage of winning going to essentially zero, within about a year of the ban coming in.
The law on public procurement is that you should award contracts on a competitive meritocratic procedure. If everything was fair & competitive, we shouldn’t see this advantage before the ban. Shows they took donations into account.
2 ways in which this favouritism occurred.
- The contract design channel- even before bids come in for the public procurement the way in which we word the advert already favours a particular firm. Might put a clause in that you can only bid if you are a company whose revenues are over this amount & your headquarters is based in this part of the country etc. So the more clauses we add it reduces the pool of firms who are able to apply.
- The information channel, and that is what she finds evidence for. Donating firms were receiving auction relevant information. Means those firms the politicians wanted to give the contract to were receiving information about the identities & the bid amounts of the other firms who were competing. The evidence she has from this is that before the ban, the margin by which the donating firms were winning was smaller than non-donating firms. The other piece of evidence of this special information channel is that after the ban, these donating firms essentially put forward bids that were 24% lower than non contributing firms. So now that corporations can’t donate to parties & they’ve been using this as a channel to win contracts they panic after the ban that they won’t win contracts through their connections so they need to lower their bids to be competitive.
Summarise the political Finance Reforms in Paraguay and its effects
- Introduced subsidies for campaigns (state funding to parties)
- Outlawed the use of state resources and gov facilities for campaigns. Meant using public buildings for rallies or the candidates driving public vehicles to get around (see a lot in low and middle income countries) was not allowed as it wasn’t fair because it made it harder for the competitor to compete because they don’t have access to it.
- It required parties to publish financial accounts.
Top-down solution to corruption. How much of this reduction was driven by the reform & how much was driven by a perception of reduced corruption is unclear. It could just be that the reform changed perceptions about corruption.
However, they say that some things started happening after the reform. For example judges started to impound official vehicles for misuse of public resources in municipalities which suggests this reform was having actual consequences.
They conduct interviews with politicians, and say they started to worry voters will punish them if they were caught in scandals & if caught worried they would lose re-election. The interview data the scholars collected suggested as state subsidies came in it relieved the pressure on candidates to get money through other means. Less incentive to engage in corruption.
What are the goal of bureaucrats
- Advance their career. So they engage in corruption on behalf of politicians because that bureaucrat wants to be promoted
- For personal wealth (self-enrichment) which is the same for politicians
- Engage in corruption in low & middle income countries on behalf of politicians because they want to change where they work. Most developing countries have pockets of wealth usually around the capital, and then there’s more remote/rural areas where the disparity in the GDP/ income per capita of people is really stark. So high levels of income inequality within countries can mean that one of bureaucrats’ main motives is to engage in corruption so they could potentially get the politicians who are in control of transferring them to work nicer richer parts of the country.
The traditional model of bureaucratic corruption is a bureaucrat is going to engage when their wage is low and the probability of being caught is low. More for self-enrichment than anything else.
Can bureaucrats always take bribes?
The traditional model of bureaucratic corruption assumes bureaucrats have a motive and an opportunity to take bribes. But many bureaucrats, especially bureaucrats that deal with public procurement transactions are not working as individuals but on committees.
Bureaucrats often work in teams and are monitored by politicians. The model assumes bureaucrats are making their calculus in a vacuum, but actually they are engaged in these relationships with politicians.
These models only think about a bureaucrat being punished if they engage in corruption but if we think about politicians’ motives and bureaucrats as being in a work relationship with politicians, these models can’t account for the fact that bureaucrats might be punished by politicians for not engaging in corruption.
Summarise corruption in public procurement in Ghana
Brierley, 2020
There were 216 local govs at the time of the study. The local govs were the main providers of local infrastructure (roads, schools, health clinics) in Ghana. They roughly get about a million dollars to engage in infrastructure developments to benefit the population. The issue is there’s loads of corruption in the local governments.
The survey was across 80 local governments and found that 46% of bureaucrats reported corruption. The most interesting thing about this is most of the corruption benefited not the bureaucrat, but the politician. Local politicians were capturing this money to spend on their campaigns, even though it was bureaucrats who were doing this on the on their behalf.
Corruption in procurement isn’t possible without the help of bureaucrats because it’s an inherently administrative and bureaucratic process.
Argue in this paper is that when we think about bureaucrats’ incentives & about politicians and bureaucrats being engaged in a working relationship ultimately politicians have some control over bureaucrats. Politicians can put pressure on bureaucrats to engage in this corruption on their behalf.
Study shows that in districts where the local politician (mayor heads each local gov) when this mayor is able to easily transfer (change work location) bureaucrats we see the highest level of corruption.
See over 50% of bureaucrats say that their district is engaging in corruption, and when we see when the mayor isn’t able to transfer them, so we see corruption reducing in half.
Says that when bureaucrats have more autonomy/can’t be controlled as easily by politicians we see less corruption, but when politicians have this ability to control the careers of bureaucrats and control their lives by, for example, enacting geographic transfers we see higher levels of corruption.
