Political Party Financing and its Effect on the Masses Perception of the Public Sector:

RUNNING HEAD: PARTY FINANCING AND THE MASSES PERCEPTION Political Party Financing and its Effect on the Masses Perception of the Public Sector: A Comparison of the United States and Sweden Emily Simonson University of Minnesota, Twin Cities

PARTY FINANCING AND THE MASSES PERCEPTION 2 Abstract There is a limited amount of research on political financing that specifically compares rigid twoparty and multi-party systems, as observed in the United States and Sweden. There are different approaches to political party financing, including both public and private funding. Laws differ in the United States and Sweden and how these laws are practiced and used also differ. There are implications that public and private funding influence the perception of the masses attitudes towards the public sector in regards to corruption and political autonomy. This paper synthesizes prior research of public and private funding and prior comparisons of voter perceptions of the government in the United States and Sweden. The discussion section offers recommendations of how to build on the current body of literature.

PARTY FINANCING AND THE MASSES PERCEPTION 3 Political Party Financing its Effect on the Masses Perception of the Public Sector: A Comparison of the United States and Sweden The field of political party finance is underrepresented in the current body of literature on political science (Fisher & Eisenstadt, 2004). Money in politics is important because it buys what is not or cannot be volunteered (Fisher & Eisenstadt, 2004, p.1) and contributes to the issue of political equality (Fisher, 1999). Opinions on whether public funding is necessary for a democratic society varies and there are, of course, advantages and disadvantages to either choice. An additional dimension is whether to regulate if political parties should be able to accept funding from corporations. In the United States, funding is provided publicly; and privately through Political Action Committees (PACs), since direct donations from corporations are illegal (Federal Election Commission, 2011). In contrast, we find in Sweden that the main sources of funding for political parties comes from public and private funding, specifically income from party membership and lotteries (ACE Electoral Knowledge Network, 2016). Additionally, in Sweden there is no law regulating donations from corporations or special interest groups (GRECO, 2009). The purpose of the paper is to compare and contrast the way the United States two-party and Sweden s multi-party political systems are funded, and use this information to explain differences in their citizens perception of their government. I hypothesize that the way political parties are funded affects the individual s cognitive dissonance from their government, and that the more a government is privately funded by corporations, whether it be directly or indirectly, the more corrupt an individual will view their government.

PARTY FINANCING AND THE MASSES PERCEPTION 4 How the United States and Sweden s Political Parties are Funded Political parties can be funded in the United States through both public and private funding. The Presidential nominee of both major parties is eligible for a public grant of $20 million for campaigning and this is funded through the Internal Revenue Service (IRS) (Federal Election Commission, 2011). It is illegal to accept donations from corporations, but corporations and labor organizations may establish PACs where they can raise voluntary contributions from a restricted class of individuals and use those funds to support federal candidates and political committees (Federal Election Commission, 2011). Regular PACs are able to donate to candidates and engage in independent spending that expressly advocates the election or defeat of a clearly identified candidate for federal office (Briffault, 2012, p. 1647). There are also Super PACs which are partially funded by corporations and unions but are vastly made up of contributions from wealthy individuals. There is no limit on how much an individual can donate independently to a politician which before Citizens United v FEC was unlimited. The purpose of a Super PAC is to support or oppose candidates through independent expenditures, but they do not make direct contributions to any given federal candidate (Briffault, 2012, p. 1647). Public funding from the State and the Riksdag [Sweden s national legislature and decision-making assembly] are significant sources of income for parties at the national level in Sweden (GRECO, 2009, p. 7). The goal of public funding is to provide political parties with an opportunity to pursue political activities without becoming dependent on other sources of contributions. In Sweden, the public funding system is considered to be a major contributor to the functionality of a democratic system. However, it is only the parties that are represented in the Riksdag that receive aid, approximately EUR 22 million. In addition to receiving state funds, Riksdag-represented parties also receive what is called basic financial support, and then there is

PARTY FINANCING AND THE MASSES PERCEPTION 5 supplement financial support that is based on the number of seats held in the Riksdag. The set amount is EUR 153,500 per year. [and] the supplement is EUR 5,100 per year and member (GRECO, 2009, p. 7). For special information campaigns during general elections, the Riksdag allocates approximately EUR 1.35 million to be distributed among the political parties. This system gives the upper-hand advantage to parties that are already represented in the Riksdag. However, those political parties that receive at least two and a half percent of the total votes in one of the two most recent parliamentary elections will receive State contributions. In regards to private funding, most is provided through membership fees, lotteries, income from property, collections, publications and donations (GRECO, 2009, p. 9). Additionally, there are not any bans on donations from legal persons or organisations with or without close links to the party, such as trade unions and other interest groups (GRECO, 2009, p. 9). There are no parties [that] receive contributions from companies (GRECO, 2009, p. 9). There is, also, no limit on the amount or periodicity of private donations and anonymous donations are permissible. It is curious as to why political parties would not accept private contributions from companies. The reason is that the party leaders in the 1970s agreed to refuse such contributions and that tradition continues to be implemented in the modern Swedish political atmosphere (ACE Electoral Knowledge Network, 2016). Swedish political parties are becoming more reliant on state funding and private funding from lotteries and income from property (GRECO, 2009) because membership in political parties has been on a general decline, which weakens the relationship between political parties and their citizens, causing them to become more dependent on state funding (Ballington, 2003) rather than membership fees, which make up only five to ten percent of parties profits (ACE Electoral

PARTY FINANCING AND THE MASSES PERCEPTION 6 Knowledge Network, 2016). In the 1950s, political party income relied on membership fees for as much as 25% of their profit (Krouwel, 1999). The Advantages and Disadvantages of Public and Private Funding Public funding is often perceived to be a necessary cost for a democratic society because it helps keep political parties stable (ACE Electoral Knowledge Network, 2013). It also helps limit the influence of special interest money, and subsequently curbs corruption because it decreases the likelihood of them feeling the need to accept interested money from donors who want to influence their policies, rhetoric, or voting behavior in the legislature (ACE Electoral Knowledge Network, 2013, p. 31). It can also reduce corruption because it increases transparency in the party and candidate finance, leaving the voters more opportunity to hold the party accountable. However, it should be noted that through a public funding system, the taxpayers may be forced to support political parties whose views they do not share and this takes away resources for other things such as infrastructure and education (ACE Electoral Knowledge Network, 2013, p. 30). In addition, it may cause certain established parties and candidates in power to continue to remain in power because it may be more difficult for new political parties to gain representation. Despite these disadvantages, we find that in both the United States and Sweden implementing policies for public funding of political parties and/or candidates. In contrast, if we imagine a system that only has private funding, then those parties that support the wealthy s interests will have an upper hand because ultimately they have more money than working-class people (ACE Electoral Knowledge Network, 2013). The working-class and those living in poverty are unable to donate large amounts of money to political parties, and this results in having their interests underrepresented in the government. However, private funding facilitates for a more direct relationship between ordinary citizens because the political party

PARTY FINANCING AND THE MASSES PERCEPTION 7 depends on membership fees, donations, and voluntary labor which, in theory, will make the political parties more inclined to serve their party members interests. However, there is an issue of political parties that represent the working-class because those members of working-class parties will not have access to the resources or funds to donate as much time and money for their party as the economically advantaged would. In the United States, large private or corporate donations have become increasingly important (Ballington, 2003, p. 134). This is a sharp contrast to Sweden wherein we find the oath to not accept donations from corporations still remaining in place as an unwritten law from the 1970s. This influence of private and corporate interests in United States politics has a negative impact on the voter s perception of their government, as will be addressed shortly. How the Masses Perceive Their Government There has been an overall trend for the decline of trust in the government in both Sweden and the United States (Miller & Listhaug, 1990). Transparency International evaluates countries each year by the perceived level of public sector corruption using a scale of 0 (highly corrupt) to 100 (very clean). The United States scores a 76 on the perceived corruption scale and is ranked 16 th. In contrast, Sweden has some of the lowest levels of perceived corruption while having less rigorous regulation over political contributions (Institute for Democracy and Electoral Assistance, 2012). In fact, Sweden scores 89 on the scale of perceived corruption and is 3 rd in rank tailing 2 points behind the top-ranked country, Denmark (Transparency International, 2015). There is a marked difference in how the political systems operate in the United States and Sweden since the former has a two-party dominated system and the latter has a multi-party system. A multi-party system is friendlier to the formation of new parties and presumably represents a larger proportion of the country s citizens (Miller & Listhaug, 1990). It would be

PARTY FINANCING AND THE MASSES PERCEPTION 8 logical that theoretically we would expect trust in government to remain higher in political systems where citizens feel that their preferences are represented in the political arena.a rigid party system, however, would promote the growth of political alienation among people who become discontented with the established parties (Miller & Listhaug, 1990, p. 364). In Sweden, Miller & Listhaug (1990) found that voters who felt ideologically distant from their preferred party exhibited higher levels of distrust. In the United States, it was found that voters exhibited more neutral attitudes towards the two major parties, the Republicans and Democrats. However, this may have adverse consequences as it may [represent] alienation in the sense of meaninglessness (Miller & Listhaug, 1990, p. 374). On the contrary, neutral feelings towards the Swedish political parties were not found to be correlated with distrust of the government. How Funding Affects Perception of Government Theoretically, it would be logical for financial misconduct and lack of transparency to contribute to a negative perception of the government. Often it is the wealthier groups in the United States that are represented beyond the proportion of their number (Fisher & Eisenstadt, 2004, p. 1). This can be attributed to the lack of limits that an individual can donate indirectly to support or oppose a political cause via Super PACs. If direct closure is given regarding party and/or candidate funding then confidence is more likely to be prevalent among the ordinary citizen (Fisher & Eisenstadt, 2004). Since there is general discontent seen in both the United States and Sweden, it suggests that the level of political autonomy an individual feels is low in both countries. However, the lack of a correlation between neutrality and distrust of government in Sweden suggests that the masses do not feel as politically alienated from their politicians as their American counterparts do. I argue that the reason for this difference is due to how the political parties are funded. Super PACs

PARTY FINANCING AND THE MASSES PERCEPTION 9 give an unfair advantage to and disproportionate representation of the wealthy elite in the United States and this creates the cognitive dissonance, and ultimately neutrality, observed in the masses. Cognitive dissonance is a psychological concept that is said to be experienced when an individual holds two inconsistent cognitions, or beliefs, simultaneously (Berkowitz, 1969). Cognitive dissonance in this context represents the belief that the individual believes they live in a democracy where their vote matters, but, also, holds the opposing belief that they live in a political system where the wealthy exert the majority of influence over political decisions. Super PACs also make the masses feel as if they cannot make an impact within their political party. This creates alienation and ultimately leads to discontent and distrust in the political system (Gamson, 1968). This forms a perceived notion that one lacks power and influence over their political system, and that it simply exists but not to serve them. This is what creates the feeling of neutrality. There is a feeling of indifference between them and what is going on their country s political sphere. As stated earlier, the Swedish multiparty system has agreed to not accept funds from corporations. Therefore the masses do not perceive the parties to be influenced by the elite to the same degree as observed in the United States. This creates a less hostile attitude towards the government and ultimately the Swedish public sector is viewed as less corrupt than the United States. In addition, the more publicly funded multi-political party system forms a more proportionately represented society (Granberg & Holmberg, 1986). Discussion The findings of this research suggest that there is a relationship between how political parties are financed and the degree to which the masses view their public sector as being corrupt. However, more in-depth research is needed before drawing any conclusions regarding whether a true relationship exists. Such research should compare more multi-party and rigid two-party

PARTY FINANCING AND THE MASSES PERCEPTION 10 structured-systems and see if similar trends appear. If a democratic society is the goal, then it is important for the masses to have confidence in their government and the way that campaigns are run so that cognitive dissonance and a feeling of indifference does not form. Fundamentally, the United States and Sweden are different since the former has a rigid, two-party dominated system while the latter has a multi-party system. However, distrust is found in both governments, to a lesser extent in Sweden. This may be because there are more opportunities for alternative and revolutionist parties to gain power within the Riksdag. In a democracy, it is important for the masses to feel proportionately represented in order to maintain trust in the elected officials and political parties. The current body of literature on distrust in the government is outdated, and future research could survey Americans and Swedes on their perceived political autonomy and distrust in the government, in addition to asking them about their knowledge about how their government s political parties are financed. It would be interesting to see whether there is a statistically significant relationship between those three factors.

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