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What Are the Different Methods of Campaign Financing?

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  • Written By: Gregory Hanson
  • Edited By: A. Joseph
  • Last Modified Date: 22 July 2014
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As modern elections have become more and more expensive, the issue of campaign financing has become controversial and hotly debated. Although laws on campaign financing vary greatly between democracies, there are essentially three general approaches to the problem. Public financing systems use government money to pay for elections. Private financing systems rely on contributions from individual or corporate donors to fund elections. Hybrid systems seek to balance these two types of funding, and they combine some elements of each.

Private campaign financing has the advantage of allowing individuals and interest groups to express their views and preferences through their political contributions. Private financing systems frequently require candidates to invest a great deal of time in fundraising, either directly or through proxies such as political action committees or political parties. There are close relationships that develop between large donors and candidates, so private campaign financing can lead to corruption or can suggest corruption to voters even when none exists. One common solution to this problem is the adoption of disclosure laws, so that voters can identify the source of political contributions.

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Public campaign financing is intended to level the playing field between candidates and to restrict the ability of small-but-wealthy groups to influence the outcome of elections. This type of financing is sometimes handled by directly allocating money to candidates and is sometimes managed through a media tax, which requires that media outlets provide a certain amount of time or space for the use of political candidates. Public campaign financing does still generally restrict access, however, because most systems employ a threshold test of some sort to exclude marginal candidates from receiving financing.

Hybrid campaign financing attempts to split the difference between these two styles of financing, combine public and private funds and rely on some level of regulation to manage private contributions. The United States has historically employed a system of matching funds, under which presidential candidates receive federal money equal to the amount of private money that they can raise. Hybrid systems generally allow but limit direct contributions from individuals or organizations in an attempt to minimize the impact of small, wealthy groups.

Critics can cite examples of difficulty with each of these systems of campaign financing. The Russian elections of 1996 were largely privately financed, but many political scientists saw them as models of corruption rather than free speech. The public side of the hybrid system employed by the U.S. in 2008 showed signs of strain, as Barack Obama opted not to participate. There is no consensus on which system of campaign financing is superior.

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