In the debate about reforming the system of party finance in New Zealand, there is often an assumption made that business is a significant actor in party politics or that some political parties are surviving only on the largesse of such corporations. In some ways this was once the case in NZ politics, but it's decreasingly the case. This posting argues that business intervention in politics is not as significant as the proponents of reform suggest. Certainly, National and Labour have both reported less interest from big business in making donations. [Read much more below]
Traditional role of business in NZ politics
Business interests have traditionally played a substantial role in resourcing New Zealand’s political parties, especially those of the right. In the 1970s and 1980s the major parties became more dependent on the largesse of business. More recently the traditional patterns of business donations have been interrupted by the changing ideological nature of the party system and the Labour Party now receives similar business funding to National.
Significant corporate intervention in the 1980s
The declining ability of the parties to obtain funds from their members, together with the increased professionalisation related to the decline in membership, has meant the business community became a much more significant supplier of resources. That business interests became the life-blood of New Zealand political parties in the 1980s is confirmed by the former Prime Minister Geoffrey Palmer:
Political parties are kept viable by donations from the business community. Financial donations from rank and file members are quite inadequate for the day-to-day running of a modern political party let alone for financing election campaigns. The 1987 and 1990 election campaigns of the Labour Party were financed by extensive donations from the business community. The Labour Party campaign received at least $3 million in 1987 (Palmer, 1992: p.138).
As well as cash donations, parties receive financial aid from companies in other forms. Such benefits-in-kind that are often not disclosed are those company resources put at the disposal of political parties such as employees, cars, computing systems, and office space. A significant example was the jet that business giant UEB provided to the Labour Party in 1987 to transport Prime Minister David Lange around the country (Frontline, 1989). The National Party, too, allegedly had its campaign plane funded in 1987 and 1990 by the Carter Holt company (Dominion, 1995b: p.2). Likewise, during the 1987 general election campaign, millionaire-businessman Bob Jones published and distributed 400,000 pamphlets in support of the Labour Party (Jones, 1990b).
Donations recorded since 1996
It is difficult to ascertain the exact levels of business donations to parties. Both party and donor usually try to keep their transactions secret. However, since April 1996 political parties have been required by law to disclose to the Electoral Commission all donations over $10,000. Although large donations come from a number of sources, the Electoral Commission’s figures give some indication of the level of business support, as most donations over $10,000 tend to be from businesses and businesspeople. In first the seven-year period of the disclosures regime, donations over $10,000 have amounted to $7,528,659:
Total Donations Declared
Year Total Donations
1996* $989,152
1997 $466,596
1998 $309,355
1999* $3,649,572
2000 $189,436
2001 $365,597
2002* $1,558,951
Total $7,528,659
Source: The Electoral Commission
Note: Election years are marked with an asterisk.
These figures – averaging about $1 million per year – do not seem to be terribly extravagant. Even in election year, they suggest an average of only about $2 million is given. In contrast, the Electoral Commission alone allocates over $2 million dollars to political parties at each election, to be spent on broadcast advertising in the few weeks leading up to the election.
These relatively low donations suggest the idea that political parties are surviving only on the largesse of corporations might be something of a myth, and arguably such donations are generally becoming less the ‘life-blood’ of the party system, as other forms of funding become more important. Generally in the 1990s, corporate funding of political parties appears to have decreased. Both National and Labour have reported less interest from big business in making donations. In a 1999 interview, the general secretary of the Labour Party, Rob Allen, complained that ‘the corporate sector has not in any way played a part in elections in the way that they used to’ (Allen, 1999). Likewise, British party finance specialist Michael Pinto-Duschinsky has illustrated this trend by pointing out that in Britain, ‘The proportion of Conservative central income derived from corporations declined from about three-fifths in the 1970s to one quarter in the early 1990s’ (Pinto-Duschinsky, 1998).
The decline of class politics = decline of business donations
This decline in business donations is mirrored by a worldwide trend related to the decline in the saliency of class cleavages in politics. Business does not act in the same collective fashion that it was once more inclined to. The industry associations that have in the past played an overtly political role now intervene in politics on a more pragmatic basis, often donating to parties with influence instead of the parties that they might be more traditionally or ideologically aligned with. Pinto-Duschinsky has also argued that since the 1950s collective business funding bodies have had a lesser role in funding political parties:
Corporations are now more likely to contribute on an individual basis and without the intervention of intermediary bodies. Advantages that could accrue to the donor business itself seem somewhat more likely to be the motive for political payments in the modern era than general considerations of class struggle (Pinto-Duschinsky, 1998).
It seems that when class politics was at its height, businesses in Western countries felt more obliged to confront what they saw as the dangers of Soviet-inspired communism, and therefore aided those movements that would counter such perceived threats. With the demise of the communist states and the related decline of class politics in general, there is less need for business to financially back their ‘parties of capitalism’. According to Pinto-Duschinsky,
The system of corporate versus trade union funding of politics probably reached a peak at the time when political conflict itself was based predominantly on class lines, with a party of business and of the middle classes competing against a party of the workers. Since the 1960s, the economies of Western countries have developed from an industrial to a ‘post-industrial’ stage (Pinto-Duschinsky, 1998).
Therefore just as fewer citizens today align themselves to political parties through membership or stable voting, businesses are increasingly keen to promote an image of corporate political independence. This is not just for the benefit of public relations, but also to appease company shareholders who increasingly question the economic utility of political donations. See also Fisher (1999b: p.88), who argues that this corporate political independence is particularly the case in Britain, where surveys covering the late 1980s and early 1990s show that ‘only around 12% of the top 1000 companies and 6% of the top 4000 companies made a political donation’ (Fisher, 1999: p.88). Fisher has also found that in Britain ‘donations as a proportion of profit have tended to be very small (a mean of 0.1%)’ (ibid).
In New Zealand there has been a definite breakdown in the classic donation patterns, and the class-bias in favour of the National Party has become much less pronounced, if not reversed. As detailed in later posts, Labour has in recent years actually been the main recipient of business donations.
Business donates pragmatically rather than politically
More significantly, the broader trend is for businesses to donate to several parties across the party system rather than just to the parties of the right. [Businesses are now less inclined to donate solely to the National Party. According to Mulgan, ‘Fletcher Challenge donated $50,000 to both National and Labour in 1990’ (Mulgan, 1997a: p.254). According to Electoral Commission records, in 1997 the National Gas Corporation gave $15,000 to Labour and $35,000 to National. In 1998, the Natural Gas Corporation gave $27,500 to both National and Labour. In 1999 AMP gave $15,000 to both National and Labour. Brierley Investments gave $25,000 to Labour and $50,000 to National. Clear Communications gave $15,000 to both National and Labour. The National Gas Corporation gave $30,000 to both National and Labour. Saturn Communications gave $20,000 to both. Tower Ltd gave $11,000 to each. Transalta gave $20,000 to Labour and $25,000 to National. TV3 gave $25,000 to both Labour and National. In 2000 Westpac Trust gave $15,000 to both main parties. In 2001 Westpac Trust again gave $15,000 to both parties. Ericsson Communications gave $20,000 to both parties. Contact Energy gave $25,000 to both parties. In 2002 Sky City Casino gave $40,000 to both main parties.]
This is something that presidents of both National and Labour agreed upon in 2002. National president Michelle Boag stated, ‘It’s clear to me that organisations of a business nature… certainly tend to donate right across the political spectrum. That is my experience’. Her Labour counterpart, Mike Williams, declared, ‘I think almost all of the people who make anonymous donations directly, probably make equal donations to both major parties’ (quoted in Revington, 2002: p.34). Likewise, according to the Labour Party general secretary in 1999, Rob Allen, ‘90 percent of the corporates that give to politics give in an even-handed fashion as corporate citizens... And 5-10 percent, not even 10 percent, probably 2-5 percent choose to give hugely to one side of politics’ (Allen, 24 May 1999). Some view such even-handedness as an indication of fairness or ‘public service’ (Mulgan, 1997a: p.254). There are also alternative explanations which are not related to the perceived altruism of business, but to the idea that business interests recognise the old models of politics have broken down. In this situation businesses opportunistically vary their contributions according to electoral circumstances, giving more to National and Act when these parties have a high probability of winning power, and to Labour and the left parties when National’s chances are low. The existence of this pragmatic approach is confirmed by one former National Party campaigner who says, ‘Businessmen are fundamentally pragmatic people and giving money to losing causes isn’t something that’s high on the list’ (quoted in Vaughan, 2003: p.6). On the other hand, donations are probably given to parties in opposition because – equally pragmatically – donors take a longer-term view of ‘not wanting to anger the party in opposition because it may be back on the treasury benches before too long’ (Vaughan, 2003: p.6).
Bibliography
Allen, Rob (1999) Interview by author. Tape recording. Wellington, 24 May 1999.
The Dominion (1995b) ‘Cook Islands Inquiry Looks Set to Reverberate in Political Arena’, Dominion, 2, 7 August 1995.
Fisher, Justin (1999b) ‘The Situation in Britain’, in The Funding of Political Parties: Europe and Beyond, K D Ewing (ed), Bologna: Clueb.
Frontline (TVNZ) (1989) For the Public Good, TV One, TV One, 29 April 1989.
Jones, Bob (1990b) ‘Programme Scandal and Abuse’, Dominion, May 1990.
Mulgan, Richard (1997a) Politics in New Zealand, second edition, Auckland: AUP.
Palmer, Geoffrey (1992) New Zealand’s Constitution in Crisis: Reforming Our Political System, Dunedin: McIndoe.
Pinto-Duschinsky, Michael (1998) Administration and Cost of Elections (ACE) Electronic Publication, http://www.aceproject.org
Revington, Mark (2002) ‘Pay and Display’, Listener, 32-34, 22 June 2002.
Vaughan, Gareth (2003) ‘What Sort of Businessman Would Give Money to a Political Party?’, The Independent, 20 August, 6-7.
