Free-for-all, free for none: Campaign financing in Newfoundland and Labrador

The past year has shaken Newfoundland and Labrador’s political parties significantly. Former Premier Kathy Dunderdale’s resignation prompted the Progressive Conservative Party to begin searching for its new leader; the Liberal Party elected its new leader following a long and expensive campaign; and infighting forced the New Democratic Party to perform a leadership review, scheduled for this May.

Chaos at the top of Newfoundland and Labrador’s three major political parties happened to spark debate about provincial campaign financing rules. In the Liberal leadership race, candidates could accept donations of any amount from individuals, corporations, and unions, had no spending limits, and did not have to disclose the origin of donations made to them. Election rules are similarly scant. There are no donation limits, although there are spending limits: candidates can spend roughly $4.30 per elector in each district.

In a democracy, candidates must convince voters why they are suited to govern and campaigning allows the former to provide the latter with information necessary to make a decision at the ballot box. Winning requires candidates to compete with each other and persuade voters in their direction, whether by connecting with them through advertisements, lawn signs, websites, phone calls, or knocking on doors. Politicians need money to make these connections, though, which is why strong financial support is a primary determinant of candidate success.

Unlimited campaign contributions harm Newfoundland and Labrador’s democracy. They allow candidates to rely on a few large donors for support and, in some instances, permit those donors to fund their own campaigns. In many ways, small groups have more influence over policymakers than do individual voters. Reciprocity, however, is instinctual, and even if it was not, politicians must keep their donors happy if they depend on them for re-election. Moreover, unlimited campaign financing allows affluent candidates to use their personal wealth as an electoral advantage.

The lack of rules governing leadership races is of even bigger concern. In the most recent provincial by-election, candidates were permitted to spend $42,278. This is a large sum of money, but it is not insurmountable for candidates with some of their own money, a respectable donor base, and party support. But the “capital requirement” of a leadership bid is prohibitive for all but the wealthy. In the Liberal Party of Newfoundland and Labrador’s 2013 leadership race, for instance, two candidates spent over $400,000. Much of this came from their own pockets.

Only candidates willing to spend large sums of their own money, or those with donors willing to fund their campaigns, stand a chance to lead one of the province’s main parties, which gives wealthier individuals an advantage or holds leadership accountable to large donors. (Moreover, leadership candidates do not have to disclose their donor lists, exacerbating the situation.) Until the situation ceases, parties will not have an incentive to reduce their own spending or contribution limits to reasonable levels.

The problem is not, strictly speaking, that wealthy people have too much power in politics. Even if corporations, unions, and individuals represented the interests of those without their own wealth to spend on campaigns, their ability to almost singlehandedly fund campaigns makes politicians more accountable to a few voices than to many. Without contribution limits, groups representing people control elections rather than people themselves. This weakens the connections between voters and democracy’s outcomes.

The Government of Newfoundland and Labrador should, therefore, institute a campaign financing regime, similar that of the federal government. It should cap contribution limits, extend its financing laws to leadership elections, and ban corporate and union donations. Taking these steps would make democracy in the province less accountable to money and more accountable to voters.

Michael Sullivan is a 2013-2014 Atlantic Institute for Market Studies’ Student Fellow. The views expressed are the opinion of the author and not necessarily the Institute


Trade is Aid?

Every now and then I question whether or not I make the right choice by not exercising my citizen duty to vote in elections. While I am not a fan of the Conservative Party, I certainly am not a fan of the Liberals or the NDP. I often wonder if I should be more pragmatic and subscribe to ‘strategic voting’ by supporting the party of least damage. It doesn’t take long until my position is reaffirmed. Today is one of those days where I am reminded why I never vote Conservative.

Recently, our Finance Minister Jim Flaherty announced that tariffs on more than 1,000 items imported from 72 countries will be increased in 2015. The move will transfer $1 billion dollars from the economy to the federal budget. Any sensible economist would know that the true damage to the economy due government inefficiencies and the nature of tariffs as a tax are surely greater than $1 billion dollars. It is expected that the import tax will raise prices by an average of three percent on popular products including electronics, clothing, shoes, and appliances.

The rationale for this is brutal. Canada maintains a preferential tariff regime which has not been updated since 1974. According to Flaherty, “It was meant to help developing countries. Countries like Hong Kong and Singapore, we were giving them preferential tariffs while their per capita GDP was higher than Canada’s”.  The idea is essentially that tariffs would not be applied on developing nations to the same extent as they are applied on developed nations. The government would altruistically not tax consumers on imports from these countries as a form of foreign aid. This thinking is based on the belief that trade is a zero sum game where allowing exchange with less developed economies means sending a portion of our economic pie away to foreign nations so they can grow. The extent of Flaherty’s anti-market bias is apparent when he argued, “we should not be subsidizing by a preferential tariffs, countries that are no longer in that category of being underdeveloped countries. This includes the BRIC (Brazil, Russia, India, China) countries and they’ve been removed from the list.” Apparently BRIC countries have been ripping us off by becoming more efficient at producing things Canadians want. Good thing the free market Conservative Party is here to save us from our own choices!

Markets are a spontaneous self-ordering system with voluntary exchange at its core. Voluntary exchange dictates that in order for a transaction to occur, both parties must see a personal benefit or else the transaction would not have occurred at all. Trade is not aid. Trade is a mutually beneficial two way street where both parties leave feeling better off. It does not matter whether we are trading with people poorer or richer than us, we are better off either way (and so are they). There is no such thing as a preferential tariff. Tariffs only block and distort preferences. They prevent individuals from engaging with one another in their most desired way and in doing so; they raise the cost of living on everybody. People now have to spend more for the same thing. While, it is understandable that it is unfair that imports from less developed nations face higher taxes than those from more developed nations, the solution is not to bring everybody down to the same high tax level. The small-government thing to do is to instead lower taxes for everybody. Our preferential tariff does not need to be updated. We don’t need to re-examine how to effectively implement a policy based on fallacious premises. We need to obliterate the policy all together.

-Ian CoKehyeng