Get a Subsidy or Perish! Public Funding and Party Survival in Eastern Europe Fernando Casal Bértoa & Maria Spirova Department of Political Science Leiden University f.casal.Bé[email protected] [email protected] The Legal Regulation of Political Parties Working Paper 29 February 2013 © The author(s), 2013 This working paper series is supported by the Economic and Social Research Council (ESRC research grant RES-061-25-0080) and the European Research Council (ERC starting grant 205660). To cite this paper : Fernando Casal Bértoa and Maria Spirova (2013). ‘Get a Subsidy or Perish! Public Funding and Party Survival in Eastern Europe’, Working Paper Series on the Legal Regulation of Political Parties, No. 29. To link to this paper : http://www.partylaw.leidenuniv.nl/uploads/wp2913.pdf This paper may be used for research, teaching and private study purposes. Any substantial or systematic reproduction, re-distribution, re-selling, loan or sub-licensing, systematic supply or distribution in any form to anyone is expressly forbidden. ISSN: 2211-1034 The Legal Regulation of Political Parties, working paper 29/13 Introduction 1 Much has been written about the state financing of political parties, its characteristics and its consequences for party behavior. Research has centered heavily on the effects party financing has had on issues of corruption, accountability, and transparency, and for the most part has focused on the regulation of private financing (Roper 2002, 2003; Protsyk 2002; Nassmacher 2004; Pinto-Duschinsky 2002, Smilov and Toplak, 2007). Similarly, studies have investigated the effects high dependence on public financing has had on the development of organizational structures and the internal shifts of power within individual parties (van Biezen 2003, 177–200). More recent research has also looked at the consequences state funding of political parties has on the individual development of political parties and, more generally, on the party system overall (Knapp 2004; Birnir, 2005; Casas-Zamora, 2006; Scarrow 2006; Tavits, 2007; Spirova 2007). In these works, party financing by the state is seen as both a bane and a blessing for the encouragement of strong party competition. Without any state funding, small and private-resource poor parties have little chance of making it in the electoral competition. At the same time, extending the cartelization theory (Katz and Mair, 1995) state funding that is only available to the established parties might, in fact, freeze the existing patterns of competition even more. Research has posited both views on party financing and party system development while the evidence found has been mixed and often ambivalent. We argue that there might be at least two major reasons why existing work might fail to find the expected results. To begin with, the conceptualization of state funding as a constraint of party behavior is often too simplistic. Clearly, a binary distinction between the presence and lack of state funding will only allow for the examination of a very small part of the potential effect of state resources on party development. There are clearly various aspects of the system of party funding –such as what kind of parties get money and how important the money for each party is -- that will qualify any potential link between the funding and party system development. Further, and probably more importantly, as this article will show, the resource availability impacts different parties differently and its beneficial results might be evident only in some individual parties. The most consequential effect, in fact, will be 1 Authors´ note : We would like to gratefully acknowledge the support of the European Research Council (ERC starting grant 205660) in the preparation of this paper. 1 Bertoa and Spirova: Public Funding and Party Survival in Eastern Europe on the parties that fall just under the electoral threshold for parliamentary representation but above the thresholds of party financing. These are parties that do not have other avenues for success as they are not able to gain access to the mainstream political process, but which, through the system of financing, receive money from the state. The availability of financial support, in their cases, will encourage them to look at politics from a more long term perspective and will encourage them to persist in the electoral competition in an unchanged format. These are also exactly the parties that often get excluded as irrelevant by political science research, but it might be exactly where research should try to look for a relationship between party financing and party system development. Taking an endogenous institutions approach to the question of how and why parties persist or change in contemporary democracies, and focusing empirically on 12 post-communist democracies, the article argues that the nature of party financing regimes is an important institutional constraint for the decision of each individual party to persist or not, and thus, also for the characteristics of the party systems as a whole. The results suggest that the availability of financing is of major consequence for the formation, persistence and change of small political parties, but might have much smaller impact on the bigger parties, making it difficult, as suggested to observe a clear aggregate trend. Party Financing and Party Development: Theoretical Arguments Scholars are divided in their views on how party funding regulations have influenced party system formation and development. Some have maintained that the presence of a liberal regime of party funding is expected to negatively influence the stability of the party system by exponentially increasing the number of parties. The logic is that by encouraging parties to form and/or run alone, as well as small parties to seek office in the long run, public funding positively contributes to increase the overall number of parties in the system, therefore, decreasing the degree of predictability-cum-stability in the structure of inter-party competition (Knapp 2004; Spirova 2007; Sundberg 2002; Nassmacher 2009). Other scholars, on the contrary, explicitly or implicitly adopting the “cartelization” thesis posed by Katz and Mair more than fifteen years ago according to 2 The Legal Regulation of Political Parties, working paper 29/13 which existing political parties will collusively attempt to reduce “the impact of those seeking to challenge the political status quo” either by introducing a system of public funding to those parties with a certain level of electoral support or, when already in place, by increasing the legal requirements for having access to those subsidies (Scarrow, 2006:629; Biezen and Rashkova, forthcoming). The idea is that by allowing the monopoly of state resources by the main/relevant political parties and/or discouraging the entry of new parties to the system, public funding can contribute to the cartelization and, therefore, freezing of the party system (Katz and Mair, 1995:15, Biezen, 2004). In empirical terms, while the proponents of the latter current expect public funding not only to stabilize the “vote shares of parties between elections” (Birnir, 2005:932), but also to reduce the number of parties in the system (Booth and Robbins, 2010:641-642) while at the same time being detrimental for entirely new and/or small parties (Scarrow, 2006:629); the first school of thought maintains totally the opposite (Casas-Zamora, 2006: 44-45, 218-219; Koole, 1996:517; Roper, 2002:181 or Tavits, 2007:127). Interestingly enough, if there is one thing in which all the above-cited scholars seem to coincide is in the fact that the less restrictive the system of public funding is (i.e. low payout threshold), the higher the number of (both total and/or new) parties in the system as well as the better for the small parties, and vice versa (Biezen, 2000:337; Birnir, 2005:921; Scarrow, 2006:624; Spirova, 2007:161). We argue that the empirical study of these propositions has been made almost impossible by a failure to properly conceptualize the impact of financing on party behavior. We do that by borrowing the general understanding of party behavior from Spirova (2007) but taking its treatment of party financing as a constraint on party behavior one step further. Spirova (2007) sees party financing as one of the constraints on parties’ decision to form, persist and change. Together with other factors – party’s popularity, electoral thresholds, expected volatility, ideological position, organizational complexity – the availability of resources is expected to determine the likelihood that a party sees a possibility for electoral success. We expand this argument to argue that the importance of the resources available – and thus of party funding – for the party’s decision will vary based on how the party performs/scores on the other factors. In particular, a party that is confident in its electoral performance might not be so dependent on the provision of financial 3 Bertoa and Spirova: Public Funding and Party Survival in Eastern Europe resources in deciding whether to persist in the system or not. The impact of party financing on party thus will only be evident at the party level and even more – in a particular type of party – rendering the aggregate analysis at the system level meaningless. The Model in Brief 2 The proposed understanding of how parties form, choose their electoral strategies, and evolve over time is based on the belief that politicians will define the realization of their goals in electoral terms and form a party only when doing so promises to achieve a target that they have set for themselves. Once parties are formed, they will similarly define the realization of their members’ ambitions in electoral terms and choose electoral strategies that promise to achieve that electoral target best. After an election, and as a result of their electoral performance, politicians will reevaluate and adjust their ambitions, set new electoral targets that reflect these reevaluated goals, and so on.