Campaign finance and the Effects of spending

1. Campaign finance and the Effects of spending Dr. Matthew Wall. Political Campaigns. Week 4

2. Topics addressed in today’s talk • Why study political finance and campaign spending? • Where and how do political parties and candidates get their money? • Trends in campaign finance – sources and regulation. • Does spending win votes in elections? Is all spending equally effective?

3. Why Study Campaign Finance? • Democratic ideal of equal input of all citizens in the democratic process. • Reality (in capitalist systems) is one of unequal distribution of income in society. • Campaigns cost – require expertise, staff, production of media content (in some systems) buying advertising, as well as cost-intensive ‘hardware’. • Understanding where parties get the money to pay for these items can help to understand subsequent events. • What is the alternative? Are party finances simply the ‘costs of democracy’?

4. Why Study Campaign Finance? • As academics, we have a role in publicising and debating campaign finance issues. • Campaign finance regimes determine who can pay, how much, what can be spent, and what has to be declared. • Note however, that there is no ‘perfect system’ and rules require enforcement – which involves resources and political will. • Who guards the guardians? Campaign finance influences and is influenced by the political system.

5. Why Study Campaign Finance? • Rules and regulations (or lack thereof) regarding campaign finance have been lined to corruption in political systems. • However, it is a slippery world at best – and proving a ‘corrupt’ payment can be near-impossible in practice. • Charles Haughey, former Irish PM, famously admitted taking large sums of money personally from various private interests, but denied that it ever influenced his decision-making. • Even when ‘above board’ or formally legal, unbalanced party financing can have strong negative impacts for democracy.

7. Why Study Campaign Spending? • One of the few readily available and relatively ‘hard’ sources of data on campaign activity. • Allows us to empirically examine the effectiveness of political campaigns. • One of the best handles on the question of public susceptibility to campaigning.

8. Campaign finance – sources of income. • ‘Internal’ sources: • Membership dues – fee paid by party members. • Monies generated via events such as pub quizzes, lotteries etc. • Fees paid to party by office holders (more typical of left wing parties) • Income generated by party enterprises such as newspapers or research servies.

9. Campaign finance – sources of income. • External: • Donations from individual non-members. • Donations from firms/corporations. • Donations from semi-affiliated organisations, for example, donations from unions. • Donations from other organisations, including interest group organisations.

10. Campaign finance – sources of income. • State: • ‘Indirect’ typically via tax write-offs being given for donations to registered parties/candidates. • ‘Direct’ subsidies to the party and/or candidates (the latter typically come in the form of subsidised campaign spending). • Public funding regimes typically link funding levels to vote/seat performance, though all parties over a set quota of support will usually receive a basic allowance.

11. Campaign finance – sources of income. • Trends: • 1) Decline in ‘internal’ funding: • One of the most notable consequences of the decline in party identification discussed in week 2 has been a decline in party membership figures. • With fewer members, parties cannot raise as much money from this avenue. • Nonetheless, some countries such as the Netherlands and the UK feature a larger portion of party funding from this source than others.

12. Campaign finance – sources of income. • Trends: • 2) A decline in levels of ‘external’ funding. • This is typically due to regulatory changes either excluding or limiting the extent of corporate donations that can be made (e.g. such donations are now banned in Belgium). • 3) An increase in levels of public funding to make up for these shortfalls and often as compensation for legislation limiting levels of external funding.

13. Campaign finance – sources of income. • Trends: • Overall, trends 1-3 have lead to greater levels of public funding in politics from the mid-1980s onwards across Western Europe. • However, this is certainly not universal- and in the USA we have recently seen the opposite trend since the Citizens United ruling. • Debate ongoing – is increased public funding of politics a good thing? • Does it decrease corruption? ‘Topping up’ argument. • Does it make for ‘cartellised’ party systems (evidence seems to point to success of new parties) • Does it take pressure of parties in terms of connecting with the public? • It certainly is typically unpopular with voters!

14. Campaign Finance Regulation • Varies considerably from country to country. • Regulation typically involves: • 1) Bans and limits: • Restricts who can contribute, how much they can contribute, as well as how much money can be spent on campaigning and how that money can be spent. • Can foreign entities contribute to campaigns? • Can corporations contribute to campaigns. • Are there party and candidate campaign expenditure limits? • Are there limits on how campaign monies are spent? (e.g. can candidates/parties buy advertising on TV, radio etc.?)

15. Campaign Finance Regulation • 2) Disclosure and reporting rules: • Do parties/candidates have to submit public accounts? • How detailed are these accounts? • Do these accounts identify individual donors? (Often, only donors over a specified limit will be identified in such accounts).

16. Campaign Finance Regulation • Competing visions of what parties are and what rights they should have: • 1) Autonomy/privacy of parties as voluntary private organisations (Swedish model – voluntary sharing of party accounts). • 2) Transparency – special obligations of parties given their special roles (German model – mandatory and detailed reporting of accounts). • 3) Advocacy – public require a specialised agency to regulate campaign spending – transparency alone is not enough (USA, UK, Ireland, France). • These competing ideals often captured in both statue and constitutional law governing parties.

17. Campaign Finance Regulation • Enforcement: • 1) Is responsibility clearly attributed? • 2) Does monitoring authority have adequate resources to fulfil its function? (e.g. Electoral Commission of India) • 3) What sanctions are available and are they typically imposed? • 4) Existence/prevalence of loopholes in the legislation – money donated for ‘party building’ etc. may fall outside of regagency remit.

18. Does spending win votes? • Given that parties and candidates do spend so much money, we might assume the answer is ‘yes’. • However, difficult to prove. • 1) So many simultaneous factors in any given election. • 2) Endogeneity issue in studying spending effects.

19. Does spending win votes? • Given small numbers of parties and candidates in presidential elections – spending effects have been difficult to identify. • Scholars have mostly focused on candidate campaigns in single-member district races.

20. Candidate-level effectiveness – existing literature • Major finding from the literature in a range of contexts is that spending matters – candidates’ chances of success are positively related to their levels of expenditure in the campaign. • Finding very widely replicated: USA, UK, Canada, France, Australia, Brazil, Korea, Japan, Ireland, Belgium.

21. Candidate-level effectiveness – existing literature • A secondary finding is that incumbent spending tends to be less effective than challenger spending. • This is usually explained by the fact that incumbents have a higher apriori recognition in the electorate – consequently spending by their campaigns does not have as much of an impact. • Example: Sinn Fein ‘Inkgate’ story. • However, this effect is less pronounced in systems where incumbency advantage is less: e.g. Belgium.

22. Candidate-level effectiveness • In our research in Ireland, we wanted to deepen this literature by looking at not just whether overall spending was related to success, but whether specific types of spending were more successful than others. • Also, we wanted to see if certain patterns of spending were more successful than others – specifically – we were interested in whether spending was concentrated in certain areas versus being dispersed across a wider range of tools/activities.

23. 2007 Irish GE study (Sudulich and Wall, 2010) • Irish campaigns represent a departure from many of the norms of campaigning. • 1) Unusual electoral system (PR-STV), placing considerable emphasis of candidates. • 2) Unusual party system. • 3) Rather old-fashioned campaign practices (Marsh, 2002 ‘none of that post-modern stuff around here). High level of face-to-face contact (over 60% of voters consistently report having met personally with at least 1 candidate during the campaign).

24. 2007 Irish GE study (Sudulich and Wall, 2010) • Why? • Because the literature on campaign development points to a growth in the diversity of activities and tools that can be part of a political campaign. • We were interested in how candidates balanced their limited resources across different activities and tools, and whether this balance effected their chances of being elected. • Our intuition was that campaigns that balanced spending across a larger number of activities would reach a more diverse audience, and hence be more successful, than campaigns that focused on fewer activities.

25. Available data • We employed publicly-available campaign spending data collected by the Irish Standards in Public Office (SIPO) Commission, which collected spending returns from all candidates in the 2007 Irish general elections (n = 470). • As well as reporting overall expenditure levels for each candidate, SIPO’s data breaks campaign expenditure into several sub-categories. It is this feature of SIPO’s data that allows us to examine the effects of spending over different categories of expenditure as well as to measure campaign spending diversification.

26. Available data • We note that returns only covered a limited time period, and that variance was limited due to spending limits imposed on candidates. • The categories into which expenditure was broken down were: • Advertising. • Marketing. • Publicity. • Campaign workers. • Posters. • Other electoral material (flyers, handoutsetc). • Campaign workers.

27. Available data • Spending data were combined with candidates’ party affiliation, incumbency and the election results. • We sought to analyse whether spending patterns influenced election results at the candidate level, controlling for party affiliation and incumbency. • Analysis – OLS regression – dependent variable: candidate vote share.

28. Analysis 1 – what type of spending mattered? • Our analysis indicated that spending on ‘pre modern’ electoral ‘hardware’ in the form of posters and other electoral material, was the most effective form of electoral spending in the 2007 Irish campaign. • Modern/postmodern spending instruments such as advertising and marketing were unrelated to success. • Note that these results come from a model where overall spending was controlled for.

31. Analysis 2 – spending distributions • In the second half of our analysis – we were interested in how spending was distributed across the categories. • To measure this, we used the Herfindahl-Hirschman (hereafter HH) index. A common measure in economics – where it measures market concentration. • This index allows us to distinguish spending patterns that are evenly spread across several categories, from those that are mostly concentrated in 1 or 2 categories.

32. Analysis 2 – spending distributions • We found that the effects of spending distributions were conditional on the overall amount spent. • For high-spending campaigns – diversification paid off. • High spending campaigns that spread their spending were more successful than those that did not. • This effect is reversed for low spending campaigns.

33. Analysis 2 – spending distributions • Our conclusion – a certain ‘minimum spend’ is necessary for any given campaign tool to be effective, if you have low resources, it makes sense to concentrate these into fewer areas of expenditure. • On the other hand, there is a law of diminishing returns in each category of expenditure, so if you have significant funds, it makes sense to spread these over a wide range of tools.

34. EU election spending • More recent work in progress on EP candidate expenditure. • We find that candidates who spend more in this context (second order election, list-based system) were still more likely to win. • ‘Sinatra inference’.

35. Conclusions • Regulation of political expenditure is multifaceted and involves trade-offs. • In terms of hard evidence, the ‘money matters’ hypothesis is one of the best-supported in political science. • New research is looking into new contexts, and deepening enquiry into the money-votes link.