Arguments for Private Financing
There are solid reasons why money from private sources is viewed by some, especially those on the political right, as more desirable than money from the public treasury. If a political party or a candidate for elective office is obliged to collect money from individual supporters, then the very act of fund-raising will lead to greater participation and to more effective organisation than if the money for campaigning has been provided on a plate by the state.
Private financing is desirable too because it avoids the pitfalls of public funding. Publicly-funded parties tend to become over-bureaucratic; they are governed from the top, since it is the senior officials who receive and administer the state aid; they rely too little on their members. Moreover, the allocation of public subsidies between the parties is usually determined not on the basis of an objectively just distribution but on the bargaining power of the various party leaders in smoke-filled rooms.
Since there are so many interpretations of fairness, see Level Playing Field, Fairness, each party will argue for a definition of 'fairness' that serves its self-interest. In practice, minor parties whose support is needed to form a coalition ministry - such as the German Free Democrats - will be able to obtain an unfairly large allocation of public funds. This is seen in the allocation of public money for the German political foundations linked to each of the main political parties, see Political Foundations.
Arguments Against Private Financing
First, private financing is blatantly unfair. In societies with great disparities of wealth, it is possible for a few millionaires and billionaires to contribute a larger total than a mass of poor donors. Moreover, if the super-rich are able to finance their own election campaigns, they will gain an unfair advantage and the legislature will be manned by an excessive and untypical group of millionaires.
Second, private contributions may lead to political corruption. Businessmen will make political contributions in return for public contracts and other benefits, see Illegal Financing.
Third, many private payments do not come from individuals but from institutions such as business corporations. Individual shareholders rarely have a say in the decision by the board of directors to make or to withhold such donations.
A Compromise View
Private contributions are more desirable than public subsidies provided that they are given in relatively small amounts by individual electors. It is large private donations - especially secret ones - that give rise to problems. Systems of regulation should therefore encourage small private donations by devices such as tax reliefs and matching grants, see Tax Concessions and Matching Grants.
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