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The rich are getting richer in America’s political system. That is one conclusion in a paper authored by Kennedy School assistant professor Filipe Campante. His study examines the dynamic created by the interrelationship between campaign contributions, economic inequality and voting patterns.
Q: Please discuss how you designed and tested your model of wealth and political participation.
Campante: The starting point is the observation that individual campaign contributions are hugely important, and that the most fruitful way to think about these contributions is to think of them just like voting — as a way of expressing political preferences. People vote and they also give money to campaigns in order to express their political preferences. Once I settled on this idea, I developed a model of politics in which individuals can vote and can contribute money to campaigns. You also have political parties who want to get elected and want to implement certain kinds of policies, trying to set up their platforms in order to attract the most votes. And they use the money they collect to fund get-out-the-vote operations, political advertisements and other things that can help them get votes.
So this is the basic model that I developed, and its explanatory power can then be assessed by the testable predictions it generates. It predicts the breakdown of the link between inequality and redistribution that comes out of standard theory, and more specifically it also generates a bunch of predictions having to do with how the distribution of income and wealth affects political behavior — for instance, that more inequality is associated with a larger amount of contributions, and that this larger amount would essentially benefit the party that is less friendly towards redistribution. So these are all things that we take to the data, and check if they actually are supported.
That’s essentially what I did. I took these predictions, using the data on U.S. campaign contributions, specifically in the context of the presidential elections in the year 2000, and it turns out that these predictions actually obtained a good amount of support.
Q: What do your findings say about the current American political system?
Campante: I think the key insight from my analysis is that the role of money in politics is very important, but the mechanism through which its influence happens is probably not the one most people have in mind.
Most people would think about “all these big corporations and this big money that is buying up our politicians and are keeping the ordinary folks out of the process.” But that is only part of the story, and perhaps not the more important part, because actually — as political scientists Stephen Ansolabehere, John De Figueiredo, and Jim Snyder have noted — the real puzzle when you look at the data is how little corporate money you have in U.S. politics when you consider how hugely important and valuable government decisions and policies are to corporations in general. The answer to this puzzle, in addition to the legal constraints that are imposed on corporate money, is probably the fact that you have all this money coming from individuals and citizens, from the “little guy” so to speak, that actually helps keep in check the influence that any single individual or any single corporation could exert on the political system.
If you are concerned about the role of money in politics, you can take a glass half-full or glass half-empty approach, because on the one hand you can say, “wow, that’s great that you have the money coming from the little guy that is keeping the corporate money, the big money in check.” But on the other hand, you may be a little disheartened if you think that even in a world where big money is kept in check and no single corporation or individual can tilt the political balance on its own, it’s still the case that money talks and money talks loudly. You do have a wealth bias in the sense that wealthier individuals have a greater weight in policy outcomes than poorer individuals have. And that comes simply from the fact that even though big money is kept in check, money is still needed in politics and wealthier people are better sources for this money, so political parties will have an incentive to try to cater their policies towards those rich people. It’s as if the support of wealthier individuals counts for more because not only do they bring their votes, but they also bring their money that can help political parties obtain other extra votes.
So which one you pick is a matter of debate, but I think the message is that money matters and it matters in ways that go much beyond what is typically considered to be the heart of the issue here.
Q: In what ways could the American political system be changed in order to reduce inequality and increase the political power of the less wealthy?
Campante: The main policy message I would like to emphasize is that there are no easy solutions if you are concerned with the role of money in politics and what that implies in terms of inequalities stemming from the political process. If it were only about the role of big corporate money in politics, proposals such as the McCain-Feingold campaign finance reform legislation and similar types of proposals focusing on corporate money would actually have a better chance of succeeding.
But when individual contributions are considered, then the picture gets murkier because you would have to impose significant constraints on individual political participation. In particular, my analysis reveals that if you are to restrict individual campaign contributions, what matters is not the absolute size of the limits that you impose — whether it is two-thousand dollars or fifty dollars — but the size of these limits relative to what people would be willing to contribute had there not been any limits. And the data show that for this to be the case, limits would have to be very strict.
So you have to confront tradeoffs that have to do most importantly with the idea that you would have to restrict individual political participation in important ways. We have goals that conflict and that is perhaps the most important policy message that comes from the analysis.
Q: Can you surmise how other political systems would compare to the U.S. in terms of economic inequality and political participation?
Campante: Even though I haven’t pursued a more systematic comparison between different political systems in that regard, I think a nice feature of this framework is that it actually enables us to undertake meaningful comparisons between different countries on the effect of inequality and political participation.
For example, it is typically assumed that wealthier people are intrinsically more likely to participate in politics because that is what happens in the U.S., but that’s not the case in other countries. Thus in my model we don’t have to assume this, and the relationship between wealth and participation is revealed as an outcome of the model. So we can compare different institutional settings and try to understand why you have different empirical relationships between the income and wealth distribution and political participation.
You have countries in practice where this link is very tenuous, such as Japan or India. Sometimes it can even be negative. Actually what my model would predict is that if you have a country where the role of money in politics is less pronounced than in the U.S., then you actually expect that you would have less of a link between inequality and political participation because in my model the rich do participate more than the poor in equilibrium. But that’s not because they are more mobilized in any intrinsic way, but that’s precisely because they are more valuable supporters because of the money that they can bring. Political parties will spend more effort to mobilize relatively wealthier individuals, so wealthier individuals participate more because they are more mobilized by political agents and not so much because they are more inclined towards politics in any intrinsic way.
So I think this enables us to systematically analyze this type of cross-country difference without having to resort to ad-hoc assumptions — such as assuming that in some countries the rich are more likely to participate, but in others they are not that much more into politics than the poor are.
Q: Do you see any surprises in the current U.S. presidential primary race both in terms of campaign contributions and political participation, especially considering the fact that many of the candidates who are spending the most money do not seem to be getting high returns on that money?
Campante: What’s most striking to me is the fact that the Democrats are out-fundraising Republicans in this particular campaign, which is actually breaking the pattern that we’ve seen from previous elections.
What the theory would suggest is that you would see an advantage for the Republican Party in raising money precisely because of their political positions, but we are not seeing this in this primary season. I think this stresses the point that campaign contributions are a way in which individuals and citizens try to manifest their political preferences. And because the Democrats in this campaign seem more excited about candidates and about their prospects than the Republicans do, I think that’s what’s behind this break with the trend we’ve observed in this campaign.
When you think about how the big spenders may not be getting that much bang for their buck in this campaign, I think it ’s not that surprising because the impact of money is more subtle than what people might think. It’s not so much that you can translate money directly into support. Money is something that can help a candidate try to get votes, but not in a simple vote-buying kind of way. It’s a much more complex thing than that, and the other factors in the zeitgeist at this moment are probably going against many of the big spenders. So a lot of the feeling that the electorate seems to be most keenly displaying right now is going against the big spenders in this case.
Perhaps the right question would be not “why aren’t they winning even though they are outspending their opponents?” but rather “how badly would they be doing if they weren’t spending as much as they are?”
Interviewed by Doug Gavel on January 8, 2008.
Q. Is it possible that people are just hedging the bets? A certain group of people, I think, will always fund the likely winner (in this case the Democratic Party candidates) no matter the policy of the candidate and no matter how far the candidate's policies are from the individuals' own politicial preferences. One reason could be that no matter who wins, there will always be jobs and contracts to award. How much does this sort of hedging affect the trends in campaign contributions in the U.S.?
Answer from Prof. Campante: This is another instance in which the conventional wisdom about campaign contributions can be misleading. First of all, we should keep in mind that these individual contributions are really small — the median value is $500 for presidential elections, and it is very hard to think that this amount will buy you favors with the president. Of course, one can think that maybe you don’t expect to buy direct access to the president with that, but simply to be in good terms with some friend of yours who is raising money for the campaign. Perhaps you even expect this to translate into future jobs and contracts, because of your friend’s role in the campaign… However, if you are really hedging your bets, you should be giving money to both sides, and not just to the “likely winner,” since there is uncertainty as to who is going to win. At the very least, if this hedging were quantitatively important, you would thus expect to see a lot of people doing just that. As it turns out, only about 1% of the individuals listed as campaign contributors in the 2000 election cycle, for instance, donated money to both parties. (Keep in mind that the 2000 election was one with rather extreme uncertainty as to the likely winner…) In sum, I don’t doubt that some people might be thinking in these terms, but that’s a tiny minority of contributors. It may well be that the likely winner has an advantage in fund-raising, but the data suggest that this is by-and-large due to the fact that the his/her supporters are probably more mobilized and engaged as a result of the favorable scenario.
Q. I just read your interview on Money and politics. Thank you for the thoughtful insight. I just have a quick question. Is there any difference in the influence of the money if it comes from CEO of a company or the company itself? My assumption is that there is a little difference since the CEO (high net worth individuals in general) and company might have aligned interests. What do you think?
Simba M., New York
Answer from Prof. Campante: I guess many shareholders out there would disagree that the interests of the CEO and the company are so tightly aligned… Joking aside, I think you are correct in that what matters are the interests of the person who gets to decide how much and to whom to give money. In that sense, even when we are talking about corporate money we are talking about the decisions of individuals (or small groups of individuals), and more often than not they are throwing their support behind a certain party or candidate because the latter’s platform and policy views are more closely aligned with those individuals’ interests and preferences. The logic behind contributions from corporations is thus closer to that of individual contributions than one might think at first. Having said that, the possibility of controlling the resources of an entire corporation certainly adds a lot of firepower to any individual’s contribution possibilities, and would tend to skew the system even more heavily in favor of those (typically wealthy) individuals who control the allocation of corporate money. In sum, there is a difference between a world in which corporate money is left entirely out of the process and one where it is not, because the distribution of resources in the latter will tend to be more skewed, and policy outcomes are likely to respond to that.