Democracy before dollars:
The problems with money in Australian politics and how to fix them
There is a deep paradox at the heart of representative democracy: it is a form of rule by the people that distances itself from the people. The central justification for representative government is popular sovereignty. As the Universal Declaration of Human Rights proclaims, ‘(t)he will of the people shall be the basis of the authority of government’. Yet as representative,
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not direct, democracy, there is structured distance between ‘the
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people’ and those who exercise governmental power.
The aspiration of representative democracy is that this distance is bridged by strong mechanisms of accountability and responsiveness, as well as an ethos based on the public interest, all of which seek to ensure that government officials rule ‘for the people'. The obvious risk is that this distance becomes a gulf and that public officials govern for a few, rather than ‘for the people' – that an oligarchy operates rather than a democracy.
It is a startling fact that many Australians believe – and increasingly so – that government functions as an oligarchy. Survey evidence shows that perceptions that ‘[p]eople in government look after themselves' and ‘[g]overnment is run for a few big interests' have risen significantly since the 2000s, so much so that in 2017 more than 70% of respondents agreed with the first statement and more than half with the second.
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And since 2016, there has been a 9% increase in perceptions that federal members of parliament are corrupt (85% saying ‘some' are corrupt, 18% responding that ‘most/all' are corrupt).
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Capitalism vs democracy
These perceptions of oligarchy would have surprised Plato who had Socrates say that ‘democracy comes into being after the poor have conquered their opponents, slaughtering some and
banishing some, while to the remainder they give an equal share of freedom and power'. 5 Surviving the passage
of time is, however, the insight that democracies carry the risk of class domination. But it is the wealthy, rather than poor, who are controlling the levers of power. The most potent danger of oligarchy in contemporary times is plutocracy.
A risk is not, however, an inevitability. Whether democracies warp into plutocracies turns fundamentally on how society is organised. And here, democracy fights with one hand tied behind its back in economies organised according to capitalist principles
– where the means of production, distribution and consumption are privately owned and driven essentially by the profit motive.
This occurs, firstly, because democratic principles are not seen to apply to the private sector – a most significant part of society – even though power is routinely exercised by private entities. Notably, in most workplaces, there is a system of ‘private government' 6
where the power of employers over their workers can often be dictatorial, where, as John Stuart Mill puts it, the great majority are ‘chained . . . to conformity with the will of an employer' 7
– and yet we are socialised to consider this as a realm where democracy should not travel.
And in the ‘public' sphere where democratic principles (popular control; political equality; the public interest) are supposed to apply, these principles are in constant threat of being subverted. Under capitalism, what Albert Einstein considered ‘the predatory phase of human development', 8
‘the members of the legislative bodies are selected by political parties, largely financed or otherwise influenced by private capitalists who, for all practical purpose, separate the electorate from the legislature'. 9
Indeed, businesses have power through direct contributions to parties – and through ownership of the means of production, distribution and exchange. It is power through ownership (private property rights) that gives rise to what Lindblom in the classic study, Politics and Markets, described as the ‘privileged position of business'. 10
This implies tremendous power in the market and in the political sphere.
It is a startling fact that many Australians believe – and increasingly so – that government functions as an oligarchy.
Democratic principles are not seen to apply to the private sector – a most significant part of society – even though power is routinely exercised by private entities.
Businesses have power in the political sphere because political representatives rely heavily on the decisions of businesses for their electoral success. As Lindblom has observed, ‘[b]usinessmen cannot be left knocking at the doors of the political systems, they must be invited in.' 11
These dynamics profoundly shape understandings of the ‘public interest'. For Einstein, they meant that ‘the representatives of the people do not sufficiently protect the interests of the underprivileged sections of the population'. Their effects can, in fact, 12
be deeper – when the ‘public interest' is equated to the demands of the most powerful businesses, the corruption of representative systems by capitalism is well underway, if not complete.
Transparent failures in the funding of political parties
Even barring fundamental reorganising of society, democracies have a range of tools to insulate the political process from plutocratic control. Choices can be made whether to vigilantly guard against the threats of capitalism against democracy; to neglect them and allow them to fester; or worse, to be complicit in the disenfranchisement of the public.
The actions of the political elite at the national level have tended to fall towards the latter end of the spectrum with laissez-faire regulation of political
party funding the most-favoured position.
As a result, Australia's democracy has been seriously undermined in three major ways. First, through secrecy in political funding. While federal political parties are subject to annual obligations where they are required to disclose their income, expenditure and debts, this is not a scheme that achieves transparency – it is a non-disclosure scheme. It is notorious for its lack of timeliness with contributions disclosed up to 18 months after they were made.
For instance, the $1.75 million donation made by the former Prime Minister, Malcolm Turnbull, to aid the Liberal Party's 2016 federal election campaign was disclosed more than 13 months after it was made. 13
In recent years, more than half of the major parties' income is not itemised as a result of a high disclosure threshold (the level at which contributions need to be itemised) which applies to each contribution made (hence, allowing for ‘splitting' of contributions). 14
Such secrecy should not surprise us. Senator Eric Abetz, when sponsoring 2006 amendments that weakened the
Contributors to political parties can give as much as they wish and parties can receive as much as they wish. The result has been a corruption of the political process.
federal disclosure scheme, said that he hoped for ‘a return to the good old days when people used to donate to the Liberal Party via lawyers' trust accounts'. 15
The second way in which Australia's democracy has been undermined by political contributions stems from the fact that at the federal level, there are virtually no limits on political contributions – contributors to political parties can give as much as they wish and parties can receive as much as they wish. The result has been a corruption of the political process.
It is not quid pro quo corruption (where money is directly exchanged for a favourable decision) which is the principal danger, though the shroud of secrecy means we cannot rule this out. The predominant danger is corruption through undue influence. 16
Such corruption occurs when influence over the political process is secured by virtue of the payment of money. In these situations, the essential ingredient of corruption is present: the exercise of power on improper grounds (the payment of money) resulting from the receipt of a benefit.
Such corruption is present with the sale of access and influence by the major parties – what former Prime Minister, Tony Abbott characterised as a ‘time-honoured' practice. 17
Less obvious, but of more significance, is what the High Court has described as ‘clientelism'. As the High Court describes it, clientelism ‘arises from an office holder's dependence on the financial support of a wealthy patron to a degree that is apt to compromise the expectation, fundamental to representative democracy, that public power will be exercised in the public interest'.
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Risk of clientelism clearly arises with the dependence of major parties on corporate contributors and, in the case of Australian Labor Party, its reliance on trade union funds. And it is most emphatically present in the way in which the major parties have actively cultivated business donors with strong links with the Chinese Communist Party Government. The three most notable donors, Huang Xiangmo, Chau Chak Wing and Zhu Minshen, secured access to the highest levels of political office, including meetings with Prime Ministers Rudd, Gillard, Abbott and Turnbull, after donating millions of dollars to their parties. As Clive Hamilton rightly
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notes, ‘(d)onations to political parties are the most obvious channel of influence for the CCP (Chinese Communist Party) in Australian politics'.
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The third way in which laissez-faire regulation of political party funding has undermined Australia's democracy is through unfairness – departures from the ideal of political equality. Corruption through undue influence is bound up with unfairness. Jeff Kennett, former Liberal Premier of Victoria captured this well in relation to the sale of access and influence:
Donations to political parties are the most obvious channel of influence for the CCP (Chinese Communist Party) in Australian politics.
The professionalism of selling time has risen to such a level that it has corrupted the democratic process; it corrupts the principle [that] all people are equal before the law. 21
There is unfairness when power follows the giving of money, as well as when the giving of money follows power. Corporate contributions almost universally flow to the major parties, the parties likely to be in government. And even with the major parties, incumbency can give rise to a significant fund-raising advantage. The coming New South Wales State Elections, for instance, will see the New South Wales Liberal Party having raised more than
three times the amount received by the New South Wales Labor Party, most probably because of its incumbent status.
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With no limits on election campaign spending, such unfairness in fundraising easily translates into unfairness in the electoral contests, with political parties favoured by corporate sponsors enjoying a significant spending advantage.
The very same absence of spending limits enables Clive Palmer to pour more than $50 million into the coming federal election, potentially outspending the Liberal Party and also the Australian Labor Party. With an estimated wealth of $1.8 billion, Palmer's spending shows how big money in elections is small change for the mega-rich.
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The (almost) lawless world of political lobbying
Money influences politics not only through political contributions but also through political lobbying – attempts to influence the political process through communication with public officials. After all, political lobbying is invariably a funded political activity; and political lobbying and political contributions are often deployed as different strategies directed at the same goal of influencing the political process.
Laissez-faire regulation of political lobbying shares the trinity of vices resulting from laissez-faire regulation of political party funding: secrecy; corruption; unfairness. 24
The Australian Government Lobbyists Register25 makes a tepid gesture towards transparency. While it reveals some information about commercial lobbyists (lobbyists who act on behalf of third parties), it fails to fully disclose who is engaging in lobbying, particularly through its exclusion of in-house lobbyists (of companies, trade unions and other non-government organisations). 26
There are other signal defects: the register fails to disclose who is being lobbied; the subject matter of lobbying; and the timing of the lobbying. All this is exacerbated by lax enforcement by the Department of the Prime Minister and Cabinet: there has not been the suspension or removal of registration of a single lobbyist since 2013, despite the Department identifying at least 11 possible breaches. 27
Such lax enforcement does not appear to be problematic for the Department. According to its Secretary, the Lobbyists Register and its Code ‘is an administrative initiative, not a regulatory regime'. 28
In the wake of secrecy comes the risk of corruption and misconduct. This is hardly a remote risk, as the various findings of misconduct made by the Western Australia Crime and Corruption
Political lobbying shares the trinity of vices resulting from laissezfaire regulation of political party funding: secrecy; corruption; unfairness.
Commission in relation to the lobbying activities of former Western Australia Premier, Brian Burke, make clear. 29
Far from it, there is a sense that this risk is growing in proportion to the number of former Ministers and senior public servants who are employed in the private sector after leaving public sector employment (which is known by the technical term, ‘postseparation employment'). This is now a well-established pathway with more than a quarter of former Ministers and Assistant Ministers taking up roles in peak organisations, large corporations, lobbying and consulting firms since 1990. 30
As the New South Wales Independent Commission Against Corruption (NSW ICAC) has observed, ‘(c)onflicts of interest are at the centre of many of the post-separation employment problems.' 31
First, the prospect of future employment can give rise to these conflicts: public officials, including Ministers, may modify their conduct, by going ‘soft' on their responsibilities or, generally, making decisions favourable to prospective private sector employers, in order to improve their post-separation employment prospects. 32
Conflicts might also arise when public officials are lobbied by former colleagues or superiors: it is the prior (and possibly ongoing) association that can compromise impartial decision-making.
The Commonwealth Lobbyists Code of Conduct does acknowledge the risks of post-separation employment. For instance, clause 7.1 states that former federal Ministers and Parliamentary Secretaries ‘shall not, for a period of 18 months after they cease to hold office, engage in lobbying activities relating to any matter that they had official dealings with in their last 18 months in office'.
The inadequacy of this measure is, however, vividly illustrated by the case of Andrew Robb, former Trade Minister, who took up an $880,000 consultancy with Chinese firm, Landbridge, immediately after he departed Parliament. 33
There is at the very least, a reasonable perception of a conflict of interest between Robb's duties when Trade Minister, which included the negotiation of the China-australia Free Trade Agreement, and the prospect of such employment by a firm that would benefit from this agreement. This was a possibility that would have been clearly discussed prior to Robb's retirement from Parliament, given the timing of his retention by Landbridge.
Yet, neither the post-separation ban in the Lobbyists Code of Conduct or its twin in the Statement of Ministerial Standards 34 effectively deals with this conflict: they apply only to ‘lobbying activities' but not to lobbying-related activities such as providing political
There has not been the suspension or removal of registration of a single lobbyist since 2013, despite the Department identifying at least 11 possible breaches.
intelligence; and are restricted to matters in which the former Ministers have had ‘official dealings', a restriction that excludes many matters that would have fallen within Robb's ministerial portfolio but about which he may not have had ‘official dealings'.
And then there is unfair access and influence from failing to properly regulate lobbying. Secret lobbying, by its nature, involves such access and influence. When lobbying or the details of the lobbying are unknown at the time when the law or policy is being made, those engaged in that lobbying are able to put arguments to decisionmakers that other interested parties are not in a position to counter simply because they are not aware that those arguments have been made.
Secrecy, for one, seems to be integral to the power wielded by what has been labeled the ‘most powerful lobby group' – Pharmacy Guild of Australia. 35
The influence wielded by the Pharmacy Guild, particularly through lobbying, 36 has prompted Stephen
Duckett, former Secretary of what is now the Commonwealth Department of Health, to characterise the pharmacy industry as “a classic example of what economists call ‘regulatory capture': the regulator acts in the interest of the regulated, rather than the public interest”. 37
Even without secrecy, unfair access and influence can result from lobbying through the creation of ‘insiders' and ‘outsiders' to the political process. The former consists of a tightly circumscribed group that includes commercial lobbyists and in-house lobbyists of companies, trade unions and nongovernment organisations. The latter is the rest of us.
Not all are equal, of course, within the group of ‘insiders' and here the ‘privileged position of business' speaks with a loud voice. Witness, for instance, the almost ritualistic trips made by Prime Ministers to the New York residence of Rupert Murdoch. 38
Consider too that where ministerial diaries are published (Queensland and New South Wales),
Secrecy, for one, seems to be integral to the power wielded by what has been labeled the ‘most powerful lobby group’ – Pharmacy Guild of Australia
most disclosed meetings held by senior ministers were with businesses or industry peak bodies. 39
And here, unfairness is bound up with corruption when privileged access to the political system is bought, for example, through securing the services of former Ministers. As the NSW ICAC has observed: The problem arises when the lobbyist is someone who claims to have privileged access to decision-makers, or to be able to bring political influence to bear. The use of such privilege or influence is destructive of the principle of equality of opportunity upon which our democratic system is based. The purchase or sale of such privilege or influence falls well within any reasonable concept of bribery or official corruption. 40
A toxic environment
When it comes to money in politics, there is what George Monbiot has identified as the Pollution Paradox:
The dirtiest companies must spend the most on politics if they are not to be regulated out of existence, so politics comes to be dominated by the dirtiest companies. 41
Perhaps nothing more vividly illustrates this paradox in Australia than the vice-like grip that fossil fuel companies have on its politics. The power of the ‘fossil fuel order' 42 or ‘fossil fuel power
network' 43 has been clearly facilitated
by the use of money in politics. For example:
• These companies are amongst the largest contributors to the major parties; 44
• The success of the $22 million adver
tising campaign by mining companies against the Rudd government's resource super profits tax is part of political folklore – so much so that ‘(i) t's now become routine for industry groups to threaten a ‘mining tax style campaign' every time they don't get their way with government'; 45
• Its employees and lobbyists have
included former ALP ministers Nick Bolkus, Greg Combet, Craig Emerson, Martin Ferguson; former National party leaders, John Anderson and Mark Vaile; and former Liberal Party ministers, Helen Coonan 46 and Ian Macfarlane; 47 and
• Published ministerial diaries indicate
that these companies enjoy disproportionate access to Ministers in Queensland and New South Wales. 48
With such power comes profound impact. Under the Howard government, climate change policy was determined by fossil fuel lobbyists (many of whom were former senior public servants) who likened themselves to organised crime through a self-styled label – greenhouse mafia.
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After making political contributions to the Queensland Liberal National Party and the Liberal Party of Australia, and engaging commercial lobbyists, including former Queensland ALP Treasurer, Damien Power and former National Party Queensland Premier Rob Borbidge, mining company Adani secured significant policy concessions for its proposed Carmichael mine (including deferment of mining royalties and compulsory acquisition of land). And perhaps the most singular
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fact – fossil fuel companies have played an instrumental role in ousting two out of the five prime ministers we have had since 2007, Kevin Rudd51 and Malcolm Turnbull.
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The health of our living world very much turns on the health of our democracy.
The dirtiest companies must spend the most on politics if they are not to be regulated out of existence, so politics comes to be dominated by the dirtiest companies.