Political Finance and Corruption in Eastern Europe

The Transition Period

Daniel Smilov, Jurij Toplak, Jurij Toplak

• Publisher: Routledge
• Year: 2016
• ISBN:
  9781317078784
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: Political Process
• Index: Politics & International Relations

One characteristic of Central and Eastern European democracies in transition is the lack of stability in terms of accountability and transparency in practices of political party financing. This key volume provides a thorough and well-structured post-communist study of political finance, election campaign and party funding issues within this region, focusing specifically on Central and Eastern European countries. It outlines best practices for political party and election campaign financing, discusses the shortcomings of political funding schemes and highlights the scandals that emerge under investigation. Providing an illuminating analysis of how current regulations of political finance succeed in controlling the rise of political corruption, the volume will be indispensable for anyone interested in the efficiency of regulation in party funding.

Chapter 1 Introduction

Party Funding, Campaign Finance and Corruption in Eastern Europe

Daniel Smilov

DOI: 10.4324/9781315601182-1

Political funding is important from two main perspectives. Firstly, parties and candidates in elections are essential elements of the democratic process. The main goal of legal regulation of party funding is to ensure a viable political system with stable and accountable political parties capable of representing the interests of the voters.

Secondly, party funding is important from the point of view of the currently fashionable issue of political corruption. It is a common belief that the financing of political parties provides fertile ground for the development of corrupt practices. This is a problem that is not confined to Eastern Europe. Established democracies such as Germany, France and Italy have been plagued by corruption scandals relating to political finance, while the USA is notorious for its extravagantly expensive electoral campaigns, which regularly breed accusations of corrupt or illegitimate funding practices.

At present, the popularity of the issue of corruption has almost overtaken concerns about the stability and legitimacy of the party systems in transitional democracies. This seems to be a serious mistake. Concerns for democracy should come first, especially in the context of Eastern Europe. Corruption is certainly a serious flaw in any system of government, but its significance should not be exaggerated. After all, recent attempts to portray corruption as a major cause of the poor performance of democratic regimes, or even widespread poverty, are yet to be fully substantiated.

On the other hand, anti-corruption drives and rhetoric have often led to the destabilization of democratic systems, or have prevented their consolidation. In Eastern Europe, quasi-authoritarian leaders, such as Aleksander Lukashenko in Belarus, have won power by accusing their political opponents of corruption. It is probably no coincidence that in popular perception the present democratic systems are more corrupt than the socialist regimes they replaced. In general, anti-corruption rhetoric can have curious results from the point of view of democratic party competition. For instance, in 2001, Simeon Sakskoburggotski, formerly King Simeon II of Bulgaria, won the elections in that country by exploiting popular mistrust of Ivan Kostov, the incumbent prime minister. Kostov was widely believed to be corrupt, although there was no evidence to support such a belief except for imaginative accounts in the tabloid press.

Thus, the major problem facing policy analysts dealing with public funding in the region is to remain conscious of the tension between anti-corruption and democratic concerns. Whenever there is a need to make a trade-off between the two, it seems that democracy should be given priority, unless there are very strong reasons to the contrary.

This book looks at the issue of political finance, incorporating both campaign finance and party funding, through the twin lenses of democratic consolidation and anti-corruption concerns. Each of the subsequent chapters presents a case study of the legal regulation and the practice of political funding in an East European country. Ten countries are covered: Bulgaria, Croatia the Czech Republic, Hungary, Macedonia, Poland, Russia, Serbia, Slovenia, and Ukraine. The chapters focus on the first decade of the transition period, namely the period between 1990 and the first two years of the new century. Some chapters discuss mainly campaign finance, while others explore the issue of party funding, although it is often difficult to distinguish between these two areas. For the sake of consistency and comparison, the contributors to the volume have followed a rather detailed questionnaire; this explains the similarity in the structure of the case studies.

The book does not attempt to present a detailed, up-to-date description of the legal regulation of the field. This would be an impossible task bearing in mind the constant legislative changes and the level of legal complexity characteristic of this sphere of regulation. Rather, it offers a set of tentative generalizations on the basis of an overview of party funding and campaign finance practices in Eastern Europe during the first decade of transition to liberal democracy and market economy.

I. Political Funding and the General Character of Democratic Systems

The primary function of political funding regulation is to ensure a stable and viable democratic process of representation. Political parties and electoral candidates need to have sufficient resources in order to fulfill their representative function successfully. It is therefore no surprise that national regulation of political finance is tailored to take account of the institutional and ideological specificity of the given democratic system.

1.1 Institutional Specificity

Some of the most important reasons for the divergence among models of political finance are the different separation of powers structures and the different electoral systems used in democracies. The institutional choices that most directly account for the divergence are, on the one hand, the choice between a presidential and a parliamentary system, and, on the other, the choice between a majoritarian and a proportional representation electoral system. Presidential regimes, especially in combination with majoritarian electoral systems, tend to weaken the political parties and boost the influence of individual candidates and representatives in the democratic process. This is especially true of the US, where individual candidates are the central players in (electoral) politics, and in campaign finance in particular. Accordingly, US-type models can be called ‘candidate-centered’ models of political finance.

In Eastern Europe ‘candidate-centered’ models are not widespread, but some federal countries with large populations, such as Russia and Ukraine, come close to this ideal type in certain respects. The most important feature of these models is that, at the federal level, the priority of parties in political funding is contested by individual candidates and by ad hoc electoral associations. In the region, ‘candidate-centered’ models tend to accord well with presidential (or super-presidential) systems of government, in which political parties are, as a rule, weaker than parties in parliamentary systems. This is so because in such systems governments are appointed by powerful presidents and need not rely on the support of a majority in the legislature for their existence. Since political parties are most powerful and necessary when they participate in the formation of a majority government, the heavy pro-presidential and anti-parliamentary biases in the constitutional structures of both Russia and Ukraine weaken the parties in these two countries, obliging them to compete for influence with ‘clans’, ‘oligarchic’ groupings and ad hoc formations of representatives seeking to obtain presidential favors. Indeed, there have been certain tensions between the presidents of each of these two countries and the main parties in the respective federal legislatures: the presidents have preferred to prevent the emergence of strong, programmatic parties, and to rely on the so-called ‘parties of power’, namely groupings of representatives supporting the views of the president.

Not surprisingly, as the chapters on Russia and Ukraine demonstrate, the regulation of party funding and campaign finance has reflected the pro-presidential constitutional bias in the presidential/super-presidential systems of Eastern Europe. Thus, over the first decade or so of transition to democracy, political parties in these countries have failed to enjoy any significant form of state financial aid. Also, they have not been given special privileges in campaign finance matters vis-à-vis ad hoc ‘electoral associations’ or individual candidates, either in terms of registration requirements, or in terms of direct or indirect state aid. On the contrary, state aid, to the extent that it exists, has been channeled through individual candidates. It is no coincidence that the first law on political parties in Russia came into being only in 2001: before that, President Yeltsin tended to see the creation of strong parties in the State Duma as a threat to the stability of his rule; his strategy was therefore to avoid giving political parties any privileges vis-à-vis other public associations through the introduction of special party laws. As the chapter on Russia shows, the adoption of the party law in 2001 could hardly be seen as a radical departure from this strategy, but rather as a creative adaptation of it to the new realities.

In contrast to the ‘candidate-centered’ models, there is a second type of political finance model, one that could be termed ‘party-centered’. As a rule, it emerges in parliamentary systems where legislative majorities based on strong, cohesive parties are needed to support the government. Proportional representation electoral systems tend to facilitate the emergence of the ‘party-centered’ model, although it can exist even in countries with majoritarian electoral systems, as the example of the UK demonstrates. The principal ‘party-centered’ models are the parliamentary systems of Continental Europe and Scandinavia. Most of the countries of Central Europe fit this ideal type. The most important feature of these models is that the political parties are the major actors in terms of political funding: they carry the major burden in respect to the raising of funds, they are responsible for the bulk of the expenditure, and they are the main beneficiaries of state aid. The pro-party constitutional bias of these systems is reflected in the regulation of political finance as well. Where state aid is available, it benefits mostly established parties with parliamentary representation. There are numerous regulations that impose burdens on individual candidates and ad hoc electoral groups in terms of registration and fund-raising for elections. Distribution of in-kind state aid, e.g. free airtime, is also done through the major parties.

The difference between party-centered and candidate-centered models impedes the introduction of detailed, universally binding rules in the area of political finance regulation. For instance, questions such as who should be the recipient of public funding – the political parties or the candidates themselves – have to be answered on a case-by-case basis. The same is true of questions concerning the provision of free airtime on the public electronic media, sanctions in cases of violation of funding rules, and so forth.

1.2 Ideological Specificity

The second major fault line between political finance models concerns the ideological debate between egalitarian and libertarian political views. Libertarians generally believe that the social status quo should be taken as a given and that the state should not attempt to equalize the chances of actors possessing unequal initial resources. If a particular actor has superior financial resources that have been legitimately acquired, he or she can bring these resources to bear in political competition, and in electoral campaigns in particular. In the USA, this libertarian logic is constitutionally entrenched in the principle that ‘money is speech’; this gives unlimited electoral expenditure protection under the First Amendment, as a form of political expression. Therefore, limits on expenditure are prohibited in the USA, and limits on private contributions are acceptable only to the extent that they serve anti-corruption purposes. Models that espouse similar ideological principles could be called ‘libertarian’ models of political finance.

In contrast to the libertarian models, there are ‘egalitarian’ models. These are based on the principle that the social status quo, and especially differences of wealth and financial resources, should be neutralized in the context of political competition. In terms of political finance, this neutralization is done through a variety of instruments, which fall into two major categories: state aid to help equalize the resources of the major political actors and the introduction of expenditure and contribution limitations designed to decrease the influence of wealthy political donors. The German model of political finance relies mainly on the provision of generous state aid for purposes of equalization; the UK model, after the reforms of 2000, relies on expenditure limits with the same aim. Most West European models could be described as ‘egalitarian’ (although to different degrees) insofar they consider state intervention directly affecting the resources of political actors to be legitimate. East European states generally follow this pan-European trend, and also tend to opt for egalitarian regulation of political finance, with a few exceptions, as in the case of Latvia. This ideological egalitarian bias should come as no surprise in the region, bearing in mind the legacy of communism, which placed heavy emphasis on soci...