4 hours of fundraising a day: What does it cost to get elected?

Sascha: [00:00:34] From Equity Mates Media. Welcome to the dive. I'm your host, Sascha Kelly. Guess what? It's election season. Australia is heading to the polls in a couple of weeks. America is voting on primaries for the midterm elections. Over the weekend, the U.K. went to the polls for the local elections, and France has just re-elected Macron over Marine Le Pen. And when it's election time, it's also fundraising time. The two go hand in hand. And let's not be naive. Money matters in politics. So it got us thinking. Just how much money are we talking about and where is it coming from? Does it change in different parts of the world? It's Monday, the 9th of March. And I want to know across the world. How much does it cost to get elected? To do this, I'm joined by my colleague and the co-founder of Equity Mates Alec, Renehan. Alec, welcome. 

Alec: [00:01:27] Hi, Sascha. Looking forward to this one.

Sascha: [00:01:28] I know you are. I know you have a keen interest in politics, but I'm going to be very clear out of the gate. This is not a political podcast. We're not making a political point. We are looking at donations and elections from a business angle. 

Alec: [00:01:41] That's right, Sascha. We're a business podcast. We're a money podcast. And this is an issue that cuts across all sides of politics wherever you're listening. So this is about the structure of the system. 

Sascha: [00:01:52] Okay. So first question, I want to know how much it costs to get elected in different countries around the world. I mean, do you even have that information for me today? 

Alec: [00:02:01] Yes. So it can be difficult to come by. But luckily for us, watchdogs and media organisations have done a lot of the work for us here. 

Sascha: [00:02:09] I love it when your homework is already done. 

Alec: [00:02:10] Let's start with Australia. That's where we're based and the Grattan Institute expects that politicians will spend almost $500 million trying to get elected in 2022. Clive Palmer, our eccentric mining billionaire alone, is $100 million of that, but 500 million pales in comparison to the US in 2016. Hillary Clinton alone spent three times that $1.4 billion and Donald Trump spent just shy of $1 billion in 2020 a record year in the US. Looking at all of this spending combined across the presidential election and the congressional elections, $14.4 billion. 

Sascha: [00:02:53] I can't help but think about how many really lovely houses and boats and jewellery and makeup I could buy with that 14 billion. It's just a staggering amount of money. But that's the number across the board. So let's focus down on what it hypothetically would take to win one seat. How much for Sascha? For Melbourne 2022. How much is it going to cost me? 

Alec: [00:03:16] Well, it differs where you're living in the world, but Sascha, 2022 let's start with Australia and the Sydney Morning Herald and The Age have done some great reporting and they've concluded that to win a marginal seat at the upcoming election, you need to spend between 1.5 million and $2 million.

Sascha: [00:03:35] Okay, that's more than I've got. 

Alec: [00:03:38] That's how much you've got to raise. Now, Zali Steggall, an independent candidate who unseated a previous prime minister in Tony Abbott. 

Audio clip: [00:03:46] This is also an opportunity for a new beginning in Australian politics, a beginning for honesty. 

Alec: [00:03:54] She raised 1.1 million in 2019, so that's sort of the number you're talking about a million, 2 million to win a seat in Australia. 

Sascha: [00:04:03] Wow. Well, that's a lot more than I have access to right now. But hey, it's good to know what I have to aim for if I'm going to start that second career.

Alec: [00:04:12] Sascha, if you moved over to the US and rather than Sascha Melbourne, 2022, it was Sascha, New York 2022, you'd have to spend a lot more open secrets. An organisation that tracks money and politics over in the US found to win a Senate seat, you'd have to spend $10.5 million and to win a House seat, you'd have to spend $1.7 million. Now that is how much you would have to raise as the candidate. But in America, they have super PACs, which are big money outside groups that basically run a second campaign. 

Sascha: [00:04:45] A super PAC is a legal vehicle for people or businesses or both to pool their wealth to spend on electoral politics.

Alec: [00:04:55] Open secrets found that when you factored in outside money, it took the average Senate seat from $10.5 million to $19.4 million. Let's turn to the UK. 

Audio clip: [00:05:06] All these donations are vetted in the normal way in accordance with rules that were actually set up under under the Labour government. So we vet them the whole time. 

Alec: [00:05:15] Which surprisingly is cheaper than both America and Australia. The numbers from the UK Electoral Commission after the 2018 campaign show that Labour spent £11 million to get 259 members of Parliament elected. So a little less than 45. Thousand pounds per MP. And the Tories spent about £60,000 per MP. The Greens, who have one member of Parliament, spent about £300,000. 

Sascha: [00:05:43] That's so interesting. I wonder whether it's actually land mass and the concentration of media in the UK is much smaller. They just don't have to spend on such a wide variety of of things. 

Alec: [00:05:55] Now I'm no UK politics expert, but the spending ramps up a lot when the seats are contested. If we go back to our Australian example, 1.5 million to 2 million is for a contested seat. But the Sydney Morning Herald and The Age concluded if you're running in a safe seat, you would spend about a 10th of that. So perhaps there's a lot of safer seats in the UK that aren't being really hotly contested between the parties.

Sascha: [00:06:22] Interesting. Okay. So £300,000 is a little less than the equivalent of $400,000 in the US. It's still a lot of money. I mean, this is still masses of money changing hands every election season. Why does it cost so much? 

Alec: [00:06:38] Like it or not, elections are expensive. Advertising, the T-shirts, clothing and feeding volunteers. It all adds up and someone has to pay for it. So if we're not publicly funding our election campaigns, it's got to be privately funded. And if we don't want just millionaires and billionaires running, there has to be some level of fundraising. 

Sascha: [00:06:59] I guess when you put it like that, it makes a lot of sense, but it's still kind of depressing. 

Alec: [00:07:04] It is depressing, and we're not alone in being a little bit depressed by it. The majority of voters hate this system, this idea that the politicians have to shill for donations, and it's become a central issue for a number of political campaigns. 

Audio clip: [00:07:17] I don't take corporate PAC money should I don't take PAC money of any kind. 

Alec: [00:07:22] But the politicians themselves also hate it. Having to beg rich people and companies for money can't be fun. 

Audio clip: [00:07:28] I hated raising money. I hated it. It's painful, frankly. They continually ask people for money. 

Sascha: [00:07:38] Let's move to who is actually donating. Who is funding these multi-million dollar runs for elected office in the. 

Audio clip: [00:07:45] 2018 election cycle, conservative billionaires Charles and David Koch spent almost 400 million. 

Sascha: [00:07:51] Bucks. 

Alec: [00:07:51] Well, look, Sacha, wherever there are deep pockets, there will be politicians asking for a donation. 

Sascha: [00:07:56] It's so cynical. 

Alec: [00:07:59] I think it's also true. Wealthy people, companies, political organisations, politicians will ask them all for money. And there are some mega-donors, some really well known ones. Gina Rinehart in Australia, Charles Koch in the US. But when it comes to companies, the majority of them are actually donating to both sides. In Australia we reviewed the Australian Electoral Commission's data on donations. We found 54 publicly listed companies or subsidiaries of public companies that had donated in the last financial year and the overwhelming majority of them donated to both sides. 

Sascha: [00:08:33] That doesn't surprise.

Alec: [00:08:34] Me. Afterpay donated $70,000.50 4% to Labour, 46% to Liberal visa donated $163,000, 52% to the Liberal, 48% to Labor. Sportsbet donated $143,000.60 2% to Liberal, 39% to Labor. Sascha, you get the idea. 

Sascha: [00:08:55] I do get the idea and it's really interesting seeing where the split lies. 

Alec: [00:08:59] Yeah, and it's not just Australia. Companies around the world are donating to both sides of politics in America. Researchers looked at the biggest donors in the Fortune 500 and their donations between 2007 and 2017. A similar story emerged. Altria, the tobacco company, donated $1.7 million, 38% to Democrats, 62% to Republicans. IBM donated $2.6 million, 69% to Democrats, 30% to Republicans. And Boeing donated $2.8 million, 55% to Democrats, 44% to Republicans. Sascha listed companies play both sides. 

Sascha: [00:09:38] So I like a theme that you kept saying is how both parties were playing both sides. So my natural assumption is that it must be about access. Is cash for access illegal? Is this one of those grey areas where it's really hard to prove that the money changing hands is for access to these politicians?

Alec: [00:09:57] Well, to start with, cash for access is definitely not illegal. If the cash is properly reported, political donation and the access is a politician engaging with their constituents. This isn't money in a briefcase delivered under the table. This is out in the open as much as political donations are out in the open. So, no, it's not illegal. And, you know, when you ask these companies why they do it, it is it is because of that. There is a reason that they decide to donate to both sides. And it's because if they need to pick up the phone and speak to someone who can make a decision if. I need to make their case to someone. They can do that. There's certainly people that would say that these companies have an influence, but that's incredibly hard to prove. Some will say it's about influence, but at the very least it's about access. 

Sascha: [00:10:46] With this amount of money changing hands. There must be immense pressure on political candidates to be raising money because this isn't money that you just have in your back pocket. 

Alec: [00:10:56] So much pressure. Sascha, leaked documents from the Democratic Party recommend 4 hours of fundraising calls a day. It's pretty amazing. And to help facilitate this. American political parties have literally built call centres, call centres where elected officials go to make phone calls to rich Americans and corporate leaders to ask for donations. 

Audio clip: [00:11:18] They've got cubicles and they've got a headset, and they often have a minder who sort of sits at their shoulder and makes sure that they don't take too long on each call.

Alec: [00:11:26] And it's no surprise politicians on both sides of the aisle hate it. 

Audio clip: [00:11:30] The first week I was down here, we were having a committee hearing in education, and my chief of staff at that time came in and said, You have to leave. You know, we went into the anteroom and I said, Where do I have to go? And she goes, You have to go make phone calls. And I looked at everyone, this is my first hearing, and you're coming in and asking me to leave. How am I going to learn anything. 

Alec: [00:11:52] If the people that you're spending 4 hours a day calling wealthy Americans, their issues are the ones that are going to be front of mind and the ones you keep hearing about. 

Sascha: [00:12:02] Yeah. So this goes back to the cash for access, not strictly being illegal, but obviously it does have an impact on what your elected representatives are going to be bringing forward in terms of legislation. 

Alec: [00:12:14] Yeah, at least what they're going to be hearing about. You'd like to think that that they can still focus on what's most important. 

Sascha: [00:12:19] Every day that we peel back of this story is making me more cynical, and I'm just finding information that I didn't really want to hear. But it is really important. So let's take a quick break. Let's reset. And then I'd like to explore maybe the good news story, what some countries are doing to reduce the cost of getting elected. Welcome back to the Dive. I'm Sascha and I'm joined today by my colleague Alec Manahan. And we are talking about the cost of elections. Before the break, we spoke about this cost around the world. We did a bit of a world tour and how potential politicians actually go about raising that money. A lot of what we spoke about was the U.S. So that leads me to the question, Alec, is America the most expensive country to get elected in? 

Alec: [00:13:24] In a word, yes. The 2020 election came in at $14.4 billion, which is in a league of its own. When you look at other elections around the world, the next most expensive country would be India. The Centre for Media Studies reported that India and Indian politicians spent 5 billion on their 2014 election campaign. Now, to be fair, India has 814 million voters, which is a little bit more than America's 150 million voters. So this is where political scientists look at a cost per voter metric, and you'd never guess which country tops the list. 

Sascha: [00:14:04] Look, I'm terrible at guessing games, so can you go just straight to telling me what it is? I don't think I get this.

Alec: [00:14:10] I don't think you would have got Papua New Guinea. No analysis from Australia's Department of Foreign Affairs and Trade estimated that Papua New Guinea reached the highest cost per voter in the 2012 election. 63 USD per voter. We should say some back of the envelope maths. Since that time it looks like the US has retaken the crown. $14.4 billion divided by 150 million voters is $96 per person. For context, we spoke about India's election. $4.9 billion divided by 814 million voters is $6. So that just puts it into context how big the US is at the moment. 

Sascha: [00:14:50] Can I ask what is Australia's cost per person? Yes.

Alec: [00:14:54] So the University of Melbourne did that work for us and they found that Australia reached $15 per voter in 2016. 

Sascha: [00:15:02] Okay. And the global average about five. 

Alec: [00:15:05] Well, that. 

Sascha: [00:15:05] Makes me feel a little bit better. Obviously $96 per person is a huge amount of money to be spending to get out the vote. Literally what a country is doing to reduce the costs, because obviously America's going in the other direction.

Alec: [00:15:19] A lot of what you can do isn't reducing the cost. It's shifting who pays for it, rather than politicians having to ask wealthy people and companies for donations. Countries are experimenting with public funding of elections or rather than politicians having to pay for, you know, media and airtime TV ads, radio ads. Countries are experimenting with granting certain amounts of time to political parties. Two examples show us what's possible in this space Germany and Mexico. So let's start with Germany. Europe's largest economy, 62 million voters and largely publicly funding their elections. 

Audio clip: [00:15:59] Candidates vying to succeed Chancellor Angela merkel have faced off in one last televised debate ahead of Sunday's election here in Germany. 

Sascha: [00:16:06] So when you say publicly funded election campaign, I'm imagining that is a pot of money that's set aside by the state and then using some kind of discretionary means, they're dividing that amongst the different political parties. 

Alec: [00:16:22] Yeah, more or less. The state funding is based on, I quote, rootedness in society. And basically, the German government calculates how many votes a party has won in the last European elections, the last federal elections, and the last state elections, and then how much it's received in membership contributions and donations. And then it basically allocates money on the back of that.

Sascha: [00:16:46] So, Alec, they've got the European Union, they've got their federal government and then have local that seems like a really fair way to split the money to me. I can't really see what would go wrong. 

Alec: [00:16:55] I mean, criticism focuses around how party centric the the whole system becomes it's not like an independent candidate can point to previous votes in the European election and get government funding. So that is one criticism. The other criticism is that some of the parties that get government money are not exactly desirable to the government. You could say the neo-Nazi National Democratic Party of Germany received €350,000 in taxpayer money in 2020. If they got votes, if they have membership, it's tough to exclude that. The German government did try took them to court, but that's the drawback of this policy.

Sascha: [00:17:36] Okay, Alex, so I can understand how there is a negative side to this, because initially I kind of thought this would be a great solution because you're moving away from the individual and moving towards a collective party. 

Alec: [00:17:46] It becomes less about the American billionaire funding your campaign and more about the party that is supporting your campaign. But in some ways it does just shift what you need to do from raising. Billions of dollars from companies and donors to navigating an entrenched party bureaucracy and party elites. 

Sascha: [00:18:05] And before we move on to Mexico, you mentioned German TV. Now, the only thing I know about German TV is Inspector X, which I had to watch in high school. So it's not about him, is it? 

Alec: [00:18:16] That is a throwback to a show I haven't thought about in a long time. Shout out, Inspector. I hope you're doing well. So, no, that's not what what I wanted to talk about with German TV, but there's a big difference in the way TV advertising works in Germany. Each party is allocated a certain amount of airtime on the two public TV networks based on their vote share in the last election and the number of members in their party. So again, rather than having to buy a lot of TV advertising airtime, it's allocated to your party based on your rootedness in society, which is a model that I quite like. Apparently does. They still do buy ads on German TV and German radio, but far less ads. And according to the Washington Post, there were no negative ads. Some things to like in that.

Sascha: [00:19:04] Absolutely look alike. My main disappointment is that you didn't read rooted in society in the original German, because I think that would have been a great thing to hear on about Gazprom. But we did promise that we're moving to Mexico. So what did they do in that part of the world? 

Alec: [00:19:20] So in Mexico, their election campaigns are also publicly funded. Parties receive taxpayer money on a proportional basis based on the representation that they have. There are 67 million voters in Mexico. So, again, not a small country, not a small electoral system. And for that reason, it costs over $2 billion in public money to run a presidential election campaign. So that's the other side of it. If the $2 billion isn't coming from private donors, it's coming from taxpayers. 

Sascha: [00:19:51] Can I say that perhaps the negative on this side might be something that and, you know, my sporting knowledge is not great. But in the same way that the draught works, if you're allocating money on the proportional basis, then once you have a majority, aren't you just always getting more money and therefore building a weighting system that's just favouring one party all the time?

Alec: [00:20:14] That's exactly right, Sascha. In in some ways, these systems, both in Germany and in Mexico, entrenched the biggest parties there, the biggest parties, so they can get the most public money, which gives them the biggest advantage in Germany. They also get the most public TV time. That gives them an advantage. I would challenge that argument, though, and say if we look in countries where we have private donation systems America, the UK, Australia, the big parties are still pretty entrenched there. They're still attracting the most donations, they're still attracting free media of volunteers, all of that. And it's not like they're getting disrupted any time soon. 

Sascha: [00:20:52] Well, Alec, I think that's a good place to leave it for today, if it was possible. You've made me more cynical about the political process. That's a conversation for another day. 

Alec: [00:21:02] I think the unfortunate thing about this episode is we didn't get to finish it with this is a country where it works perfectly. And the fact is there's not a country where it works perfectly. It's all about trade-offs. And and I guess Germany have decided that their tax dollars can go to an election and in return they get no Clive Palmer figure. 

Sascha: [00:21:21] Alec, you promised that this wouldn't be a political focus and I think that's just a small sliver of an opinion sliding in there. Thank you so much for joining us for today's edition of The Dive. Wherever you are listening, why don't you just take a screenshot of your Spotify on Apple Podcasts and shared on social media so we can say thank you. If there's a story that you want us to talk about, then make sure you contact us. We are on the email. Our email address is the dive at Equity Mates dot com or to shoot us a message on social media. We're going to be back in your feed later in the week. Thank you so much for joining me, Alec. 

Alec: [00:21:56] Thanks, Sascha. 

Sascha: [00:21:57] Until next time