Many citizens have a strong sense that there is too much money in politics and that the system needs cleaning up. This partly explains the high levels of political distrust in many countries, including established democracies. Despite frequent reforms enacted with the purpose of minimizing wealthy donors’ influence upon the political process, corporate donations to political parties persist. This practice is often protected by parties themselves, who argue that further restricting such contributions would threaten the right of businesses to free speech and the autonomy of parties to fundraise from sources of their choosing. Naturally, what is of concern in this equation is whether businesses expect – and receive – policy favours in return for their donations. It has long been difficult for researchers to empirically analyse this link, largely due to the murkiness of party finance accounts, as well as problems of endogeneity – does a company donate to a political party because that party consistently votes in their interest, or vice versa? Exploiting the opportunity provided by new databases emerging from the UK and Australia, it is possible to begin to disentangle this relationship and study the association between donations and policy outcomes.
I conduct a time-series analysis by connecting datasets tracking industry donations to political parties from 2006-2018, with datasets tracking the parliamentary voting record of all MPs in the same period. By creating an over-time measure of each party’s likelihood to vote in line with the interests of various industries (energy and resources, finance, media, property), I test whether and to what extent industry donations correlate with votes for policies favourable to that industry. I also make use of the variance between funding regulations in all eight Australian states and territories, to explore whether measures such as caps on donations, disclosure requirements and greater provision of public funding have had the intended effect of mediating the influence of donations upon policy outcomes.
Nested within prominent theories of institutional corruption, this paper provides insights into the effects of political donations from powerful industries upon substantive democratic representation. It further offers a novel methodological framework for future studies aiming to explore such linkages. This research has strong implications in a broader European context, as it sheds light on the policy results of the quid pro quo relations between industries and political actors understood to be present in most political systems. Specifically, the interactive comparison between state funding laws and their mediating effects on this phenomenon may prove particularly relevant to federal European countries, such as Germany, Austria and Belgium. In sum, this paper is a much-needed empirical contribution to the largely theoretical scholarly discussion regarding the link between corporate financing of politics and policy-making.
