What do corporations receive in return for their political donations?

Money makes the world of politics go round and, as recent scandals involving both major political parties have shown, keeping it clean isn’t easy. Our series on Australia’s political finance system examines how it is regulated, how it works and how it can be reformed.

My surf buddy looked sullen. He invested in start-ups and it had been a bad year.

“I’ve lost over $200 million this year,” he said.

“That was negligent,” I said.

“Yeah, my boss thinks so too,” he replied. “But I realized my mistake. I selected companies based on their technology, when I should have selected them based on their relationship with the government. »

His businesses had crumbled and burned while companies with substandard products prospered as government incentive programs supported their take-off.

Pay for access

Government regimes and regulations are essential to the profitability of many sectors of our economy. Economists Paul Frijiters and Gigi Foster to have found the majority of Australia’s rich list have made their fortunes in industries such as mining, property development and banking, where success is based on favorable government decisions.

Even industries whose fortunes are not so obviously determined by political decisions still need to maintain strong relationships with the government.

Governments often don’t understand the bottom line of the industries they regulate; they need the reality to talk to people on the ground. And when they arbitrate between competing stakeholders, their decisions are shaped by who is on their side.

Politicians often argue that lobbying is going to happen anyway, so there’s little harm in demanding donations from those who bid their time. They argue that as long as they raise small amounts of money from many different players, there really isn’t a problem. And they claim it’s a better way to fund election campaigns than using public funds.

Those who disagree argue that the logic of “paying for access” is that people who pay more get better access. The risk, they say, is that big business gets a louder voice than smaller businesses, communities and ordinary people.

Not so diverse

More worryingly, it’s not clear if access is the only problem. Our political donation disclosure regime is so opaque that we don’t really know who pays how much and what they get in return.

But efforts by players to hide the donations suggest we should be wary. The Liberal Party holds its donors closer to its chest than the Labor Party, so consider this graph of Liberal Party revenue over the past decade.

The gap between the first two lines is money that we know nothing about. The laws state that only donations over AU$13,200 must be disclosed, but since the major parties have seven state and territory branches as well as a federal branch, a large donation of, say, A$100,000 can easily be hidden by breaking it up into smaller pieces and giving a part to each branch.

Second, we have the difference between the “Other revenue” line and the “Grants” line. Little information is made public about these payments, but it is supposed to be money the parties receive and not from donations.

Close examination reveals that companies make payments in this category which are numerous multiple greater than their declared donations.

For the past ten years, for example, ANZ Bank has publicly stated that it gives the same donation to each political camp – 50,000 to 100,000 Australian dollars each year. But, in election years, he increases the donation to the Liberals to 150,000 Australian dollars.

But, ‘Other Receipts’ shows the total was up to nine times more than ANZ’s reported donations. This money flowed much more strongly to the Liberal Party and peaked (nearly doubled) in years when crucial decisions were made regarding financial sector reforms.

These payments may be completely legitimate, but based on the information made public, we cannot really say.

Even the reported donations that appear in the lower (blue) line of the chart above are not transparent. Many of the largest donors listed are fictitious organizations, such as the Free Enterprise Foundation, which receive payments from companies and then funnel that money to unnamed political parties, effectively laundering the donations.

Lack of transparency

This lack of transparency makes it difficult to speak with certainty about the impact of monetary policy on government decisions. But looking at the trend lines, we can see worrying signs that suggest donations are being used to appease and punish governments for their decisions.

The Rudd government, for example, received A$85 million on the eve of its first election victory, when companies were keen to be in their good books. But donations dipped to just A$22 million in the 2009-10 financial year. A drop in non-election years is normal, but this drop was extreme and did not resonate with the Coalition.

Interestingly, the drop occurred while Labor was still flying high in the polls and before the Rudd/Gillard splits began; it was then that Labor sought to implement changes to the WorkChoices Industrial Relations Act, banking sector reform and the mining tax.

It was at the end of this same period that then Treasurer Wayne Swan published his famous essay in The Monthly, The 0.01%: The growing influence of vested interests in Australia. He argued that corporate elites were devoting their considerable wealth to attempting to subvert the political process and that “the growing power of vested interests is undermining our equality and threatening our democracy”.

It is clear that having a close relationship with government is an important element of business success in Australia, but the precise role of political donations in this relationship is opaque.

The one thing we know for sure is that in this election campaign millions of dollars change hands, the relationships created by these donations matter and we don’t know as much as we should about political donations .

See the other articles in the series.