Public governance

OECD Forum on Financing Democracy and Averting Policy Capture: Remarks by the OECD Secretary-General

 

Remarks by Angel Gurría, OECD Secretary-General, delivered at the OECD Forum on Financing Democracy and Averting Policy Capture 



3 December 2014, Paris, France
(As prepared for delivery)



 

Ladies and Gentlemen:

 

 

Welcome to the OECD Forum on Financing Democracy and Averting Policy Capture. I am delighted to see so many high-level participants from such a wide variety of countries and organisations. Your presence today suggests a growing consensus that policy capture by a wealthy elite through the financing of political parties and electoral campaigns presents a danger to the integrity of our democratic systems.

 

 

I am also pleased that this year’s Forum is organised in cooperation with the Organization of American States and with the International Institute for Democracy and Electoral Assistance (IDEA).

 

 

And I am particularly delighted to welcome back to the OECD our dear friend and former Deputy Secretary-General, Yves Leterme, now Secretary-General of IDEA. It is great to have you back, working together with the OECD to address the issue of money in democracy.

 

 

 

Eroding trust in government

 

 

Six years into the crisis, people’s faith in government is stagnating at record lows. The 2014 Edelman Trust Barometer shows a continuing decline of trust in government to 44%, down from 48% in 2013. Only 15% of respondents in the 27 countries surveyed this year said they trusted their government leaders to make ethical and moral decisions.

 

 

Amongst the main factors cited by respondents to explain their distrust were “wrong incentives driving policies” and “corruption or fraud”. This distrust is driven by a complex interplay of long and short-term factors, from the direct effects of the crisis, to perceived corruption and regulatory failures, to inaction on climate change. But it all boils down to the fact that people increasingly feel that democracy is not working in their favour.

 

 

A key reason for this is the perception that when it comes to politics, money talks. And in many instances this perception has been spot on. We must address the global reality of political financing in order to avert policy capture by a rich minority.

 

 

 

Financing democracy: The global challenge of policy capture

 

 

We need to be aware of the risks that policy capture presents. While there is not yet an academic consensus on whether donations directly influence election outcomes, the possible existence of a causal link between campaign spending and performance in elections should be enough to put us on our guard. 

 

 

Not least, because running an electoral campaign is an expensive business. For example, the expenditure during the 2012 US presidential election cycle cost approximately USD 1.3 billion.

 

 

There is evidence to suggest that policy capture has consequences on business competition in some countries, regions or sectors.  For example, a 2013 academic study in the Journal of Politics indicates that firms specialising in public works projects in Brazil could expect a substantial boost in contracts – at least 14 times the value of their contributions – when they donate to a ruling party candidate and that candidate wins office.

 

 

Research in Hungary, also conducted last year, highlights that top managers of large construction, IT, and healthcare companies supplying public organisations believe that the swings in market shares of companies reflect the changing preferences of the political leadership for well-connected companies.

 

 

And these are just two of the many examples that could be used to illustrate the extent of the problems in our countries and in the world.

 

 

Financial contributions by lobbyists in the political process also present a threat to fair and democratic decision-making in OECD countries. According to the OECD 2013 Survey on Lobbying, as many as 84% of surveyed legislators and 64% of lobbyists are of the opinion that information on the contributions of lobbyists to political campaigns should be made publicly available through a register.



However, out of the surveyed OECD Member countries with a register of lobbyists, information on their contributions to political campaigns are only disclosed in two countries, Slovenia and the United States.

 

The existence of such links between lobbying, political donations and companies’ success in public procurement is deeply concerning. It highlights the risk of undue influence by a privileged group in many of our countries.

 

Our strategic ambition up for discussion over the next two days is to prevent policy capture by developing A Framework on Financing Democracy, which will support the OECD’s broader Trust Strategy. So what is the next step?

 


Achieving lasting change: Developing a policy Framework

 

 

Sticking with the status quo is not an option. Almost all OECD countries have in place laws and regulations on the financing of political parties and elections. However, compliance is limited, with several loopholes existing in regulations.

 

 

These failures erode public trust in government, and where there is wrongdoing, they present a danger to the integrity of our democracies. We need to design new, more effective incentive mechanisms to promote compliance and close loopholes.

 

 

In this respect, the OECD supports multi-stakeholder dialogue to address these issues through the collection of evidence, data, and good practices across countries. In 2014 alone we produced reports on Best Practice Principles in related areas, such as on Regulatory Enforcement and Inspections and The Governance of Regulators.

 


But information-gathering is not enough. In the areas of tax and corruption, the OECD has shown its commitment to addressing the vested interests and wrong practices of the world’s largest companies and high net worth individuals.

 



For example, our work on tackling international tax evasion has been endorsed by the G20 and over 90 jurisdictions have committed to implementing our Common Reporting Standard for the Automatic Exchange of Tax Information. Yesterday, we also released the OECD Foreign Bribery report, analysing the 427 cases concluded since the entry into force of the Anti-Bribery Convention.

 

 

If we are to guarantee the integrity of our democracies in the years to come, we will need a tool specifically aimed at preventing undue influence through the financing of political parties and electoral campaigns. The development of a Framework on Financing Democracy is therefore a highly welcome next step that follows the analytical work carried out in recent years.

 

 

This Framework, which you will discuss tomorrow, aims to map a wide range of risk areas and to provide policy tools to adequately regulate the financing of political parties and electoral campaigns.

 

 

It aims to ensure transparency and promote a level playing field on issues such as: the public funding to parties and candidates; the framework for private funding, spending limits, disclosure and scrutiny on funding; as well as how to ensure solid compliance through independent and efficient oversight, sanctions, and the monitoring of the overall system.

 

 

The Framework we are proposing also focuses on the need to foster a wider culture of integrity in the public and private sectors, with codes of conduct, conflicts of interest rules, and a framework for lobbying and asset disclosure among others.

 

 

In your discussions, I invite you to put forward bold ideas to address questions such as: What are the risks associated with the funding of political parties and electoral campaigns? Why existing regulatory models are still insufficient to tackle those risks? What are the links between money in politics and integrity in the public sector? I trust that this framework will come to provide tangible policy solutions to address these issues in your own countries.

 

 

 

Ladies and Gentlemen:

 

 

Achieving the inclusive growth we need to support better policies for better lives requires that the policy making process itself be inclusive and fair. “It should be the power of our vote, not the size of our bank accounts, that drives our democracy”, as President Obama urged in this year’s State of the Union address. In a democracy, public policy should never be for sale to the highest bidder.

 

 

Let’s work together to deliver a policy tool that can avert policy capture and show citizens that democracy really does work in their favour.

 

 

Thank you.

 

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