Chapter 2 The Global State of Democracy 2017 Exploring Democracy’s Resilience Chapter Money, influence, corruption 5and capture: can democracy be protected? © 2017 International Institute for Democracy and Electoral Assistance This is an extract from: The Global State of Democracy: Exploring Democracy's Resilience International IDEA publications are independent of specific national or political interests. Views expressed in this publication do not necessarily represent the views of International IDEA, its Board or its Council members. The maps presented in this publication do not imply on the part of the Institute any judgement on the legal status of any territory or the endorsement of such boundaries, nor does the placement or size of any country or territory reflect the political view of the Institute. The maps have been created for this publication in order to add clarity to the text. References to the names of countries and regions in this publication do not represent the official position of International IDEA with regard to the legal status or policy of the entities mentioned. Applications for permission to reproduce or translate all or any part of this publication should be made to: International IDEA Strömsborg SE-103 34 STOCKHOLM SWEDEN Tel: +46 8 698 37 00 Email: [email protected] International IDEA encourages dissemination of its work and will promptly respond to requests for permission to reproduce or translate its publications. This publication has received support from International IDEA’s Member States through the Institute’s core funding. Grateful acknowledgement is made to the governments of Sweden and Norway, whose generous support made this publication possible. Text editing: Kelley Friel Cover illustration: Michael Tompsett, <http://www.michael-tompsett.pixels.com> Design and layout: Phoenix Design Aid Printer: Trydells Tryckeri, Sweden ISBN: 978-91-7671-129-3 Chapter 5 The Global State of Democracy 2017 Money, influence, corruption and capture: can democracy be protected? Exploring Democracy’s Resilience Money, influence, corruption and capture: can democracy be protected? Scandals involving money in politics have affected countries in every region of the world, from Argentina to France to the Republic of Korea. These events fuel distrust in democratic institutions and actors, and undermine the integrity of the political system by making the policy process vulnerable to capture. While money is a necessary component of political life, big money provides a disproportionate advantage to a selected few, and creates an uneven playing field for women and marginalized communities. Furthermore, current policies that are intended to provide a counterweight often fall short: they have a limited scope, and the institutions that are supposed to enforce them are marred with constraints, while political parties face little accountability. A wider, holistic approach is needed to better equip democratic political institutions to resist the negative influence of money, to empower citizens and to encourage accountability. This chapter explores how democracy can be protected from the pernicious influence of money in politics, using case studies on Peru, Georgia, Moldova and Ukraine. Written by also being investigated for illicit enrichment Catalina Perdomo and Catalina Uribe Burcher (Kidd 2016). In 2015 allegations of former Moldovan Prime Minister Vladimir Filat Soharto and Sokarno, both taking up to USD 260 million in bribes authoritarian, needed money. Where (Herver 2015) led to the removal of his does a political leader get the money? parliamentary immunity (Gherasimov Whether he gets money from outside 2017). In the Philippines, the ‘pork barrel the country or from a local oligarch and scandal’ was exposed in 2013, and several his network, he becomes a puppet. senators who used resources from the Priority Development Assistance Fund for almost —B. J. Habibie, Indonesian President, 1998–99 10 years to finance ghost projects were put (Bitar and Lowenthal 2015: 159) in jail. An estimated PHP 10 billion (USD 200 million) was lost in this fraud (Carvajal 5.1. Introduction: a world of scandals 2013). In South Africa, an investigative Around the world, scandals involving money report published in November 2016 accused in politics are delegitimizing democracies. President Jacob Zuma of allowing the wealthy In mid-2016 Argentina’s former secretary Gupta family to exercise undue leverage, for of public infrastructure, José López, who instance by influencing the appointment of occupied the post for 12 years (2003–15), key cabinet positions such as the minister of was arrested after trying to smuggle USD finance (Al Jazeera 2016). 8.9 million in cash to a monastery. He was 126 International IDEA Chapter 5 First Edition 2017 Money, influence, corruption and capture: can democracy be protected? In the Republic of Korea, President Park BOX 5.1 Geun-hye was impeached in 2017 amid allegations of entanglement in a corruption scheme masterminded by one of her associates, A resilient democracy is a protected democracy Choi Soon-sil. Among other things, Choi When misused, money can have a corrosive influence on democratic actors, apparently used her political muscle ‘to institutions and processes by undermining the level playing field for political pressure companies for millions of dollars participation, enabling corruption and policy capture, and affecting trust in in donations to two non-profit foundations (and the legitimacy of) the political system. A resilient approach to monitoring she controlled’ (BBC News 2017c). In 2017 the effects of money in politics includes adopting innovative, holistic and integrity-enhancing systems that go beyond the narrow scope of political in France, Les Républicains’ presidential finance. candidate François Fillon dramatically torpedoed his campaign prospects after the A holistic approach to the challenges posed by money in politics includes a combination of improved anti-corruption mechanisms, new oversight press revealed he apparently channelled more instruments led by a variety of social and political actors, and enhanced than USD 900,000 in public funds into his political party regulations. Improved anti-money laundering systems, vibrant private accounts. He was accused of several civil society and media that can effectively function as watchdogs, and wrongdoings, including falsely registering crowdfunding efforts to raise small donations as a counterbalance to big money can go a long way towards advancing these efforts. his wife as his ‘assistant’ and paying himself from money reserved for staff (Lloyd 2017; Zaretsky 2017). In Brazil, President Michel policy research or training party members is Around the Temer became the first sitting head of state forgotten or undermined as political scandals world, scandals to face corruption charges, which were later overwhelm the public. involving money dismissed by the Chamber of Deputies in politics are (Lopes 2017a; Watts 2017). These types While this chapter acknowledges that money delegitimizing of allegations are not new in the country. plays an important role in enabling political An earlier case involving the international operations, it focuses on the negative effects democracies company Odebrecht revealed, as part of of ‘big money’ or large resources pouring into ‘Operation Car Wash’, how this enterprise politics, drawing on recent developments in allegedly bribed and provided illicit campaign different regions of the world. It explores financing to Peruvian former Presidents the extent to which political finance Alejandro Toledo and Ollanta Humala and regulations—which are mostly focused on Brazilian former President Luis Ignacio Lula parties and elections—can tackle the negative da Silva, as well as many other politicians in effects of money. The review supports the region (BBC News 2017b; Casey and calls to protect the integrity of democratic Zarate 2017; Cowie 2017). politics throughout the political cycle, on a permanent basis. This protection includes Corruption scandals affect perceptions of integrity-enhanced mechanisms for political democratic politics. They cause citizens to competition that focus on public officials’ lose trust in political parties, politicians and vulnerabilities to corruption—conflict of institutions, and inspire protests or deep interest, lobbying activities, their assets, indignation. People often relate politics to bank and tax secrecy rules and transfers, corruption and self-enrichment (Edelman parliamentary immunity norms, protections Insights 2013). Even when money is poured for whistle-blowers and the freedom of legally into politics, the disproportionate weight the press. Policy responses to the negative large donors have over public decision-making influence of money in politics should exacerbates an already poor public perception therefore seek to protect public policy using of politics. The fact that money is an important strategies that address corruption and promote resource for communicating to constituents, the effective oversight of elected officials and running successful election campaigns, making political parties. Such a holistic and integrity- stronger political organizations, supporting enhanced approach involves political parties, 127 Chapter 5 The Global State of Democracy 2017 Money, influence, corruption and capture: can democracy be protected? Exploring Democracy’s Resilience Policy responses oversight agencies and regulators, as well as and organize supporters. This is particularly to the