The State and its Resources

Cartel Theory explains that the elite parties were formed and supported by a network of influential individuals during an era of limited franchise. Consequently, the cadre/elite model did not require intense campaigning and remained largely self-financing. But in light of the expanded suffrage and participation that characterised the era of the mass party, it then became necessary to conduct extensive campaigns and maintain communication channels, supported by a subscription-paying membership. While membership remained an important resource for catch-all parties, support was also found elsewhere to finance the costly professional expertise increasingly utilised for campaigns conducted in non-partisan media networks. The cartel model pursues this approach to an even greater degree; increasingly professional and centrally managed campaigns require substantial finance, which is secured from the available state resources.

Although public funds had already been used to financially support selected parties, state subsidies paid directly to parties, including those outside the legislature, first appeared in the latter half of the twentieth century. The Federal Republic of Germany was the first European country to introduce party subsidies in 1959. This occurred as part of the country's post-war democratisation process, and the special responsibility of parties is enshrined in the Basic Law (constitution) (Ashton, 2006, p.4). Many other western European states followed suit to varying degrees and introduced their own subsidies system shortly afterwards. A key feature of the new approach was that finance was available to all parties that fulfilled certain criteria; as a result, even those parties not represented in parliament became eligible to receive state subsidies (Scarrow, 2006, p.620).

There were two main motivations behind the introduction of state subsidies to political parties. The first is based on a positive view of parties, which considers funding to be a means of support enabling parties to fulfil an essential role as representative of interests, mediator of conflict, and vital component of the continued success of democracy. As new, pro-democratic parties emerge as a result of these subsidies, the quality of democratic competition is improved, since these new parties, through their participation, acknowledge and lend support to the democratic system (Scarrow, 2006, p.621). The second motivation adopts a less favourable view of parties and regards state subsidies as the means by which to address their over-reliance on donations from

corporations and individuals. Subsidies allow parties to operate without excessive obligations toward these sources and thereby help to improve democratic standards (ibid.). However, the rules for eligibility vary from country to country and, moreover, the scope and impact of the subsidy are also difficult to define. For example, even though a payment may be specifically intended to support staff working in the parliamentary party, the same payment might also be of secondary benefit to the extra-parliamentary organisation of that party, in that it can now allow resources previously earmarked for the parliamentary work to be released to fund extra-parliamentary activities (ibid., p.

623).

Although there are different categories of subsidy, the type most closely associated with impact on political competition is the payment intended for extra-parliamentary work; it is also the type of funding often considered effective in addressing over-reliance on corporate/private donations (ibid., p.624). There are three rules concerning the eligibility and payment of subsidies: the first is the payout threshold, which can either apply exclusively to parties represented in parliament, or can also include parties who fail to gain parliamentary seats. Thresholds can be set in different ways, for example, based on candidate nominations and vote total or share (ibid.).

Secondly, the payout principle refers to the basis upon which subsidies are paid. The most common principle is to distribute the available sum according to the voter share of each party fulfilling the threshold criteria. Alternatively, parties might receive a specified amount per share, a system which rewards high voter participation. Furthermore, it is possible for a flat rate to be paid to all parliamentary parties or those who gain a particular number of seats. While this method benefits small parliamentary parties, it does disadvantage the very smallest parties who do not overcome the payout threshold (ibid.).

Finally, there is the payout purpose. In some countries, subsidies come with explicit conditions for their use, although sometimes no specifications are made. Here, too, there may be an impact on electoral competition if the payments are made specifically as a reimbursement for election campaign expenses. This is because small parties could find it difficult to raise sufficient money to finance their campaign up-front, thus restricting the scope and impact of their activities (ibid., p.625).

One of the main criticisms of public funding of parties is linked directly to a main argument of Cartel Theory, namely that it can deliberately constrict competition. Given

that it is usually parties represented in the legislature or in government that determine the eligibility for state subventions (payment threshold) as well as the distribution of the subsidy (payment principle), this valuable resource is not exogenous. As a result, subsidies give politicians a tool which they may use to serve their own self-interest.

In Germany, parties have access to state funding proportionate to their share of the vote. Once in power, ruling parties are able to grant opposition parties a degree of influence, for example in the form of patronage positions. However, even if this patronage is utilised, power remains firmly within the grip of the governing party or coalition. Katz and Mair (1995, p.17) identify Germany as providing favourable conditions for the development of the cartel party type, not least due to the provision of state subsidies and privileged position enjoyed by parties in relation to the state.

Thanks to the decentralised structure of the Federal Republic and the special representative and educational role assigned to parties in the Basic Law, German parties were able to use their dominant position in federal and regional parliaments to expand their influence both within state areas (such as administration and the judiciary) and public services (public media, state universities, public sector businesses). Thus, they created what has become known as the Parteienstaat — a state determined by and characterised by political parties (Detterbeck, 2008, p.30).

This process began in the late 1950s. As the welfare state expanded and economic activity grew, the state and parliament were faced with greater responsibilities and challenges. In response, parliamentary parties expanded their expert and professional staff, which in turn increased the demand for organisational resources (ibid.). German parties are therefore described as ‘self-appointed beneficiaries’ who are anchored in the state and benefit from three major forms of state resources (ibid., p.28). First, salaries and allowances are provided for a team of staff fulfilling secretarial, research and PA roles; secondly, party-affiliated and state-funded political foundations use seminars, meetings, projects and publications to build a linkage between the party and society and provide a source of recruitment; thirdly, there is a system of reimbursement for regional and national electoral campaigns (the payout purpose). Since 1992, this funding has been based on a party's success in elections (payout threshold) and corresponds to membership fees and donation (payout principle) (ibid., p.29).

One striking aspect of this development, and one which is highly significant for understanding the significance of Cartel Theory in the case of Germany, is that it did not take place within the context of a crisis among the parties, such as the network

dilemmas described in Section One. In fact, the parties began to seek additional and alternative sources of income at a time when they had been successful in consolidating their position in the political marketplace. Between 1961 and 1983 only three parties were represented in the Bundestag federal parliament (the CDU/CSU, the SPD and the FDP), while the same parties also dominated the regional parliaments, underlining their stability. Furthermore, both the CDU and SPD, the two largest parties, managed to more than quadruple their membership, which meant they not only gained valuable revenue from subscriptions, but also deepened the reach of their roots in society (Detterbeck, 2008, p.30).

However, the two-and-a-half party system was eventually broken. First, the Greens became an established presence at regional level, and then went on to become a partner in the national government for two terms. Secondly, after 1989, the PDS became a significant force in the eastern states and gained seats in the national parliament, while the Left Party, following the merger of the PDS and WASG, is strongly represented in the Bundestag. Overall, membership of German parties gradually declined over the years (see Section One for an explanation of this general decline) and party alignment decreased across portions of the electorate, both in eastern and western states. This is especially pronounced at regional level, where it is not uncommon for small parties to muster some success, even gaining seats in legislatures, notably in the city-state of Bremen. Therefore, from the 1980s, German parties began to display the conditions Katz and Mair associate with Cartel Theory:

with shrunken support from voters and members, they had to focus on securing state resources in order to maintain their organisational strength. Consequently, their ties to society became looser and more firmly anchored in the state. Nonetheless, it should be pointed out that membership continues to play an important role within German parties.

The CDU and SPD, for example, obtain 20% and 25% respectively of their national budgets from membership subscriptions. Furthermore, since 1994, state funding has been linked directly to membership fees.

Since payment thresholds are most commonly linked to parties' electoral performance, subsidies naturally favour and perpetuate those parties who either hold governmental office or are represented in parliament — in other words legislators — while at the same time potentially constituting a barrier to both parties or electoral alliances failing to meet the set criteria. Nonetheless, even though some countries adopt quite formidable electoral thresholds and maintain a system of state monopoly of financial resources, such tools are not a particularly new phenomenon and add to an array of

long-established state resources at the disposal of parties, including the power of patronage. The extent to which subsidies impact competition has been outlined by Scarrow (2006) and is summarised in the following table:

Table 2.1: The likely impact of public subsidies on party competition

(Scarrow, 2006, p.625)

Cartel Theory asserts that subsidies constitute a barrier preventing newcomers from entering the parliamentary arena and reduce the impact of challengers, such as small or new parties, to the established political constellation. Yet while low payout amounts might be of little consequence to larger parties, if the threshold is set low, even a modest amount of funding could prove to be a vital financial resource to a small party.

In fact, subsidies, especially in a party's formative years, could prove the make or break factor for future survival. Without this resource, a small new party could die out before it has a chance to develop a sound voter base or electoral credibility (Scarrow, 2006, p.

625). On the other hand, if there is a sizeable payout amount with a corresponding threshold, small parties could suffer, as the subsidy would only be available to the larger parties with a substantial share of seats in the legislature (ibid.).

It is quite common for European countries with a system of political subsidies to fix the payout threshold at a lower level than that of the electoral barrier. Moreover, alterations to the threshold display a clear downward trend (ibid., p.627). In Germany, for example, when the subsidies system was first introduced in 1959, the payout threshold required parties to gain seats in the lower house, the Bundestag (i.e., it was set at the electoral threshold). In 1967 the payout threshold was lowered to 2.5% of the list vote and, since 1969, has required parties to gain 0.5% of the list vote for the Bundestag (ibid., p.628).

Citing the introduction of state subsidies for parties in (West) Germany, Koole (1996)

refers to the Etatisierung of party finance and how this created a degree of ³⁵ Chancengleichheit (equality of opportunity), which served to cushion and preserve smaller parties. It was in this environment that the Greens managed to achieve significant electoral success, which, argues Koole, adds to the difficulty of identifying any cartel, perhaps beyond the rhetoric of such challengers themselves (Koole, 1996, p.517). Therefore, taking into account the fragmentation and number of parties to have emerged, any attempt by established parties to keep out newcomers has failed.

The political landscape can be influenced by subsidies in two ways; first, the survival or absence of the newcomer and, second, the precedent this sets for subsequent parties.

A lack of realistic prospects of even a modest measure of success could deter the formation of new parties (Scarrow, 2006, p.629). Furthermore, there are also implications for measuring the well-being of a democracy; the existence of small and unpopular parties lends credence to the more successful parties' claim that having competed against a broad range of parties they genuinely reflect the electorates' general political preferences. On the other hand, increasing numbers of small parties results in what might be regarded as more ‘wasted’ votes, i.e., votes for parties which fail to win seats (ibid.).

Research focusing on European democracies has yet to establish an identifiable link between the introduction of subsidies and the various payout thresholds on the one hand and, on the other, the proliferation or survival of small parties, even among those countries such as Germany, where the threshold was lowered . The data obtained in ³⁶ comparative analysis of these countries therefore does not support the assertion that subsidies stifle and squeeze out small, marginal parties. However, despite the absence of hard evidence of a conspiracy among established parties to exclude challengers by introducing subsidies, it can nevertheless be argued that the specific nature of financial resources, even if they do not actually prevent the emergence of newcomers to the party system itself, still puts them at a distinct disadvantage and therefore impedes their entry into parliament and other positions of power (Katz and Mair, 1996, p.531).

For example, subsidies paid after the election are of little help to small parties struggling to run their election campaign. Subsidies can even involve an element of risk for small new parties. German parties confident of achieving the required share of the vote are able to apply to the Federal President for an advance payment on the subsidy.

From the French ‘état’, meaning ‘State’; in other words, party finance became increasingly

35

state-orientated.

See Scarrow, 2006, pp.631ff.

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This advance is invested in producing a bigger and better election campaign with the aim of enhancing the parties’ electoral performance, on the understanding that the subsidy amount is to be paid back should the party fail to achieve the payout threshold.

Therefore, tempting though the advance funding might be for small parties, it also means they are potentially faced with the ruinous scenario of having to pay back the entire amount if the campaign fails to attract the sufficient voter share (Ashton, 2006, p.6).

In addition, large and established parties are in the fortunate position of attracting financial resources in addition to their direct subsidy, even though private donations may be outlawed (Scarrow, 2006, p.635). Small parties are unlikely to enjoy this wealth, and find it difficult to make significant inroads into the competitive political environment, unless one of their campaign issues becomes increasingly significant and thus a strong mobilisation platform, or if there is a crisis among the established parties themselves.

Finally, a system of direct subsidies that favours the participation of small parties (a low payout threshold for example) might result in the party competitive environment remaining fragmented. In this case, there are several small parties that have few prospects of electoral breakthrough (because of the higher electoral threshold), but are nevertheless sustained because they qualify for direct subsidies. This too could potentially provide a tool with which established parties maintain a cartel. The reason for this is that the subsidy provides political opponents with an incentive to organise in small factions and therefore a disincentive to join forces with parties or groups with common policy ground. Consequently, there is a reduced likelihood of opposition uniting in a broad front to challenge the established (cartelised) parties (Scarrow, 2006, p.629).

It is not only financial resources that provide parties with a powerful self-preservation tool. As the volume of electronic media increased, its distribution generally became more restricted and subject to stringent state control and regulation. The result is that parties which have penetrated and become agents of the state were in the privileged position of accessing this information, while parties outside the state had no such guarantee. Given the importance of electronic media as a channel of political communication, its access or denial constituted a powerful weapon in the hands of the established state parties (Ashton, 2006, p.11). Furthermore, parliamentary groups in the Bundestag have the power to approve or refuse applications from smaller parties

who do not quality for full Fraktion status and the privileges associated with parliamentary groups. As Chapter One has explained, following unification, the established Bundestag parties denied this status to both the Greens and the PDS, thereby restricting their access to committees and debating time.

As such, it was the drive to enhance the parties' own positions, allowing them to meet the demands placed on them in terms of organisation and funding, that initiated the adoption of practices associated with the character of the party cartel. This drive was assisted by the emphasis on consensual politics and the relative absence of deep political cleavage between the parties . These conditions eased the path towards ³⁷ allowing the parties to negotiate the shaping of institutions and processes according to their common needs (Detterbeck, 2008, p.30).

In Germany, it is inter-party agreement and cooperation that account for much of the dependence on state resources. By the 1980s, the established parties (CDU/CSU, SPD and FDP) had between them been able to extend the subsidies available to themselves and their affiliated organisations. Ashton (2006, p.11) observes that it was the CDU that introduced the subsidies system, chiefly as a means of obstructing the SPD from entering the federal government. Once the SPD achieved governmental power (in a Grand Coalition with the CDU), both parties maximised the level of state funding due to them. Despite the Greens’ early criticism of this ‘self-service mentality’ (ibid.), the party soon learnt to rely on the same system of funding after it too entered the Bundestag in the 1980s. These subsidies enabled the party to establish its own affiliated political foundation (the Heinrich Böll Stiftung), recruit paid staff and, moreover, support the transformation of activist volunteers into professional politicians.

The PDS/Left Party has also utilised and benefited from state resources. Following the 1998 national election, the PDS qualified for full parliamentary group status and consequently the entitlement to greater financial resources in order to support its parliamentary group, the right to speaking time in parliamentary debates and to participation in parliamentary committees. The PDS also followed the example of other parties and established its own affiliated political foundation, the Rosa Luxemburg Stiftung. Therefore, placing this development within the context of Cartel Theory, the Greens and PDS fitted the description of the 'outsider' parties who ‘proved to be

The PDS/Left Party has also utilised and benefited from state resources. Following the 1998 national election, the PDS qualified for full parliamentary group status and consequently the entitlement to greater financial resources in order to support its parliamentary group, the right to speaking time in parliamentary debates and to participation in parliamentary committees. The PDS also followed the example of other parties and established its own affiliated political foundation, the Rosa Luxemburg Stiftung. Therefore, placing this development within the context of Cartel Theory, the Greens and PDS fitted the description of the 'outsider' parties who ‘proved to be