Money in Politics: Labor

[Opposition leader] Albanese agreed that Australia should introduce a cap on political donations at the federal level, arguing that such a measure is “common sense” because “democracy shouldn’t be for sale”.

A political donations cap, as I have noted in other posts, is a strong form of reducing the impact of money on politics (which for me is ‘having stronger regard to donors than voters’).

Our challenge is that we laud strong market returns and lobbying expenditure has extremely strong returns.

In addition, we have the prisoner dilemma in that not taking the money (or seeking to limit contributions) opens up the issue that the other side will take the money and use its power to block the legislation.

It is an interesting challenge in that we are saying what is not for sale and what is for sale. We want the market to drive solutions and choices in many parts of our lives but we want the market to stay out of the politics.

We understand that there is an incentive for businesses and wealthy individuals to attempt to influence policy. Even small changes can have major private benefits. One study, in the energy sector, estimated the average returns from lobbying expenditures to be over 130%. Try to get that reliably from R&D, passive index funds, hedge funds, real estate or venture capital!

So we have a highly beneficial to private interest and a classic prisoner dilemma in that there is a first mover disadvantage of pursuing political donation caps.

In prisoner’s dilemma, repeat games make it less tenable to pursue the strategy that damages your counterpart the most but what if the contributors see this as an ongoing single game with no implications for what happens next.

It may because of the nature of climate change response that we have a prisoner’s dilemma. The trajectory required means that some industries are not going to exist and they know that. So it is a single game of prisoner’s dilemma. So they give as hard as they can to influence policy because they are afraid of the current outcome not future outcomes..

We want the fossil industries to ‘play fair’ but we misunderstand that there is both selection and incentives at play. Incentives we know but we may discount selection (i.e. belonging to a like-minded group) so that we assume that the people in the fossil industries want to be part of a new group (either green energy or ex-workers).

That may be a weakness and I am not sure that a political donation cap alone is going to change as much as we would like.