Party Finance Regulation: Causes, Instruments and Impact

• Author: Zdravko Petak - Hrvoje Matakovic
• Position: Full Professor, PhD, University of Zagreb - Faculty of Political Science, Lepusiceva 6, 10000 Zagreb, Croatia - PhD, Croatian Science Foundation, Ilica 24, 10000 Zagreb, Croatia
• Pages: 98-114

ACTA UNIVERSITATIS DANUBIUS Vol. 11, no. 1/2015

98

Party Finance Regulation: Causes,

Instruments and Impact

Zdravko PETAK 1, Hrvoje MATAKOVIĆ 2

Abstract: Money has a symbolic and practical value in political competition and just b ecause the

money is i mportant in politics, it can threaten democracy if its role is not adequately regulated. The

basic features of party finance regulation will b e shown in this paper: causes, instruments and impact.

The regulation of party finances began in 1960s and the causes of the party finance regulation were

different: in addition to the prevention of corruption scandals related to political parties and party

finance, regulation of party finance has also been introduced to strengthen fair political competition,

empower voters and strengthen political parties as effective democratic actors. To achieve this whole

range of policy instruments was developed, whose scope extends from ways of regulating th e

possibility of bu ying votes, to limit election campaigns expenditure costs. However, impact of p arty

finance regulation is not unambiguous since, due to the regulatory traditions and cultural attitudes,

similar instruments of party finance regulation produce different results in different political systems.

Keywords: party finance; regulation; political party; corruption

1. Introduction

The beginning of party finances dates back to 19th century and the emergence of

modern political parties. Political parties emerged within the modern political

systems as organisations that institutionalize the fact that modern society, despite

the guaranteed equality of rights for all citizens, exists as a collection of unequal

individuals; therefore, with establishment of political parties state is transformed

into a political system in which parties perform important functions and

parliamentary democracy is established as a pluralist democracy (Prpić, 2004, p.

XI). The forms and methods of party financing are one of the central problems of

structure, functioning and efficiency of modern democratic regimes; because of

1 Full Professor, PhD, University of Zagreb - Faculty of Political Science, Lepušićeva 6, 10000

Zagreb, Croatia. Phone: +3851.4642.000. Corresponding author: zpetak@fpzg.hr.

2 PhD, Croatian Science Foundation, Ilica 24, 10000 Zagreb, Croatia. Phone: +3851.2356.601. E-

mail: hmatakovic@hrzz.hr.

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their ambivalent character and the intermediary position, political parties are

institutions through which modern political systems are mostly exposed to

corruption (ibid., p. XIX).

Collecting and spending political money has several possible consequences:

1) The electoral equality is often influenced by money in politics - if its distribution

is uneven, uncertainty of elections will likely be compromised.

2) The inevitability and indispensability of money in politics gives donors

possibility to acquire political influence, which may endanger the equality of

citizens if economic power became a major factor in the electoral competition only

those who have the economic power would be able to gain political power.

3) Political contributions are opening a multitude of possibilities for finding

dishonest or illegal “common interests” between donors and politicians, which

finally can lead to privatization of policy maker’s decisions (Casas-Zamora, 2005,

p. 2).

Money has a “symbolic and practical value in political competition” (Burnell,

1998, p. 7) and just because the money is important in politics, it can threaten

democracy if its role is not adequately regulated. The basic features of party

finance regulation will be shown in this paper: causes, instruments and impact. The

regulation of party finances began in 1960s and the causes of the party finance

regulation were different: in addition to the prevention of corruption scandals

related to political parties and party finance, regulation of party finance has also

been introduced to strengthen fair political competition, empower voters and

strengthen political parties as effective democratic actors. In developed

democracies instruments of party finance regulation involve a whole range of

policy instruments, whose scope extends from ways of regulating the possibility of

buying votes, to limit election campaigns expenditure costs. Impact of party

finance regulation is not unambiguous since, due to the regulatory traditions and

cultural attitudes, similar instruments of party finance regulation produce different

results in different political systems.

2. Regulation

There is no consensus in academic circles what is exactly meant by regulation

(Scott, 2006, p. 653). Seeing regulation as “rules issued for the purpose of