While it would cost the public exchequer a bomb, still, time is ripe for India to have a national election fund. Given that India’s current political finance system is completely broken and laws and institutional processes requiring to bring transparency and accountability in politics are a light year away, the minimum purpose that the state fund would serve is to lay ground for these missing elements.

national election fund, India, political parties, corruption, anti-corruption, national exchequer, state funding, public subsidies, financing of elections, Niranjan Sahoo

In a special address to the gathering of academics and poll practitioners on 20 September, former Chief Election Commissioner T.S. Krishnamurthy proposed the idea of a national election fund (NEF) to reduce the role of big money in the country's democratic process. Coming from the known critic of state financing model, the proposal merits a serious introspection. Of course, Krishnamurthy is not the original proponent of NEF. The idea was first mooted in 1989, by former Prime Minister V.P. Singh. He set up the first multi-party commission, under the then Law Minister Dinesh Goswami, to study the issue and recommend steps for its realisation. The United Front government followed it up by appointing the Indrajit Gupta Committee in 1998 that pitched for partial funding of elections. In the aftermath of the demonetisation drive last year, Prime Minister Narendra Modi too had shown keenness to debate the idea of state funding for India.

The idea of state funding of politics is not unique to India. According to global democracy watchdog International IDEA, roughly 116 democracies (68%) have embraced some form of state subsidies for political activities. Western democracies like the United States, United Kingdom (UK), Germany, Finland and Italy have been experimenting with state funding for many years. Within Asia too, many countries, including Japan, South Korea and Israel, have adopted public funding model. The pioneers in introducing state subsidies for political parties were, however, Latin American countries like Uruguay, Argentina and Costa Rica. Uruguay introduced state subsidies in 1920s which was later borrowed by Costa Rica and Argentina. Now more than seven Latin American democracies have state funding.

Key State funding rationales

The public financing model is being widely propagated for its anti-corruption claims. The anti-corruption theorists rest their claim on intuitive and historically verifiable indicators, where election contributions (in some instances) including legal ones, function as a kind of legalised bribery that constrains political actors from acting independent. [i] This is the key reason why analysts push for public financing of elections to mitigate "the importance of private money" by keeping "the big money out of politics." Public finance can help protect the political process from direct, quid pro quo kickbacks or corruption. State funding for them is an affirmative, rather than just a restrictive, system that seeks to prevent corruption, promotes diversity among candidates and acts as public service to whole rather than donors.

Of course, the original theoretical assumption for public financing traces its roots to the philosophical strand represented by John Rawls and Donald Dworkin. For them, public funding aspires to establish "equalising influence" — an effort that goes on to ensure that certain powerful groups or individuals do not exercise undue influence in the electoral processes. According to this school of thought, the political equality demands the concept of "equal political influence", meaning no citizen have more power over the political process than other citizens. In other words, the equality view of public funding rests on one central fear that left to themselves, political actors will transform economic power into political power and thereby violate the principle of political equality.

The original theoretical assumption for public financing traces its roots to the philosophical strand represented by John Rawls and Donald Dworkin. For them, public funding aspires to establish "equalising influence" — an effort that goes on to ensure that certain powerful groups or individuals do not exercise undue influence in the electoral processes.

To sum up, there are three broad assumptions that clearly emerge from the above philosophical underpinnings surrounding the public financing argument.

First, the anti-corruption argument and keeping "big money out of politics" demand State to take appropriate steps to address the political finance challenges facing political parties and candidates.

Second, public financing is necessary to "equalise influence" and promote competition (create a level playing field for parties and candidates with less resources vis-à-vis with parties and candidates with ex ante equality).

Third, strong public interest rationale demands public financing of elections as they benefit democracy and serve common good.

Claims vs. evidence

How do evidences measure up against the claims made by the votaries of public funding? The evidence emerging from the global experiences raise plenty of doubts over the effectiveness of public financing scheme also. On the key goal of bringing down electoral expenditures and reducing the role of private money, most pointers from the global experiences indicate a picture that is far from being rosy. For instance, countries like Italy, Israel and Finland that embraced public funding in the previous decades are yet to witness any visible reduction in election expenditures. Similarly, in the case of the United States, election expenditures continue to soar. In fact, the Obama years witnessed two of the most expensive presidential elections. Only a handful of countries like Germany and Japan have been able to reduce their poll expenditures to some reasonable extent. Yet, successes in these countries have come largely through strict transparency and disclosure norms, elaborate regulatory mechanisms and public scrutiny of expenditures by parties and candidates.

In terms of checking the growing plutocratic influence on party finance and corruption, the results are not all that encouraging either. [ii] For instance, in the cases of Israel and the US, as noted above, public subsidies have not reduced the reliance on big private donations. Similarly, in several Latin American countries — particularly Brazil, Argentina, Colombia, Ecuador and Costa Rica — public subsidies have proved rather ineffective in limiting the role of business in the political financing. In these countries, public subsidies not just failed to replace the need to attract private donations but became additional source of income for the parties.

However, there are few successful examples. For instance, Canada, which introduced public subsidies as a part of a whole set of reforms, including election spending ceilings and tax incentives for smaller contributions, has been able to reduce the role of corporate money in party financing. In Sweden, generous public subsidies, which far exceed private donations, and minimal state intervention in party affairs, have been successful in reducing the temptation of parties to seek anonymous funding. In both the cases, it is necessary to understand that other factors were also responsible for the resultant effect than mere introduction of public financing option.

Has state funding helped in motivating new entrants and promoted electoral competition? The jury is still not out. Evidences from the global experiences suggest that public subsidies fostering competition depend on how public subsidies are distributed. In countries like Russia, it has been used to stifle political competition and promote authoritarianism. In fact, the 2001 public funding law in Russia has led to a situation where it is almost impossible to challenge the ruling party. [iii] It has led to creation of a cartel party. However, in some other countries like Canada and Finland, the results are modestly positive. In these countries, where public subsidies were introduced to reduce proliferation of parties, many new parties have emerged. In some instances, particularly in the cases of Israel, Italy and Mexico, introduction of public subsidies has brought greater competitions by enabling entry of newer parties and providing smaller parties with funds to compete with incumbents. [iv]

Has state funding helped in motivating new entrants and promoted electoral competition? The jury is still not out. Evidences from the global experiences suggest that public subsidies fostering competition depend on how public subsidies are distributed.

There were also peculiar experiences, particularly with regard to parties that have certain ideological preferences, like the left or parties with socialist leaning. It is widely known that these entities find it increasingly difficult to compete with right-wing parties due to the fact that huge private funds are readily available to the latter. In some ways, the introduction of public subsidies is helping those political entities as evident in the case of Uruguay.

Lessons for India

From an Indian policy perspective, however, it would make sense to pay close attention to the success stories. The success stories of Canada, Sweden and to some extent Japan, tell that an effective public funding model has two elements: reduce the dependency on corporate or private money (by strict restrictions on expenditure limits, strong regulations, disclosures, etc) and infuse white money through state funding or incentivising various other funding options, including tax free donations/loans, matching funds, etc. Yet, as seen from the Canadian example, the success to a great degree has been because of strict transparency and disclosure norms, elaborate regulatory mechanisms, and public scrutiny of expenditures by parties and candidates.

In this regard, India's present system of campaign finance laws and institutional processes are a light year away from meeting those preconditions for state funding. India's broken political finance regime, accompanied by a lack of clear rules on transparency, disclosures, and absence of a strong and effective regulatory agency, make it an unsuitable candidate for public funding. Yet, these are the precise reasons why India needs to embrace state funding model to fund its politics. Given the fact that in nearly all countries that have introduced public financing option, the reforms have been preceded by a regulatory regime of transparency and disclosure and regulatory body (in many cases empowering existing electoral commissions) to go after the violators. India's underdeveloped and slack political finance regime and missing regulatory body could receive big push from the new scheme. [v]

Another advantage is, by providing "floor level fund" to everyone, state fund scheme can be very helpful for smaller and newer political entrants. For various factors, India has seen a huge proliferation of political parties — formed on ethnic, religious and other parochial grounds. However, due to the growing costs of elections, many of them find it difficult to put up a decent campaign. It is here the public funding of elections, especially if that is channelised through candidates, can come very handy to promote competitions between candidature and can help bring internal democracy within these parties. Public funding, if implemented properly, can strengthen lower levels of party units to a situation where they can demand democratisation. It can therefore solve the problem of concentration of power in the hands of few and creation of dynastic politics. Importantly, if public funding is used as a lever, it can help the state in securing compliance from parties on all these issues.


References

[i] Bradley A. Smith, The Sirens’ Song: Campaign Finance Regulation and the First Amendment, 6 J.L. & POL’Y 1, 6 (1997).

[ii] According to well-known campaign finance expert Michael Pinto-Duschinsky, “there is ample evidence from around the world that public funding is not an effective cure for corruption.” See Marcin Walecki et al., “Public Funding Solutions for Political Parties in Muslim-Majority Societies”, IFES and USIP (2009).

[iii] Grigorii E. Golosov, “Russia” in Checkbook Elections: Political Finance in Comparative Perspective, ed. Pippa Norris, Andrea Abel van Es and Lisa Fennis, 2014.

[iv] Kevin Casas-Zamora, “Political Finance and State Funding Systems: An Overview,” International Foundation for Electoral Systems, Washington, 2008.

[v] For a detailed analysis, see Niranjan Sahoo and Rajendran Nair, Lessons from Global Experiences: Can India learn from Others? Common Cause, Jan-March 2017, http://www.commoncause.in/publication_details.php?id=507

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