Skip to main content

Political Financing

Political Financing

The study of political financing

The state of knowledge


The acquisition and retention of political power require material resources and human energies. Money is the most important medium for transferring command over material resources. Its command over human energies varies among societies at different stages of development but is of great importance in all political systems with competitive popular elections. Political financing, therefore, comprises the processes through which money is used to channel resources and energies for political purposes.

Modern studies of political financing have been concentrated in systems where important social decisions are made in competitive elections. They have been little concerned with how money is used as a source of influence in authoritarian regimes. In the democracies, observation and analysis of political financing have focused principally on the activities of candidates, political parties, and other participants in election campaigns, including organized interest groups and parallel-action organizations. Lobbying activities have usually been treated separately. The financial aspects of the political process have been given greatest attention in the United States. In other nations, however, especially in western Europe but not only there, certain phases of political financing have increasingly become objects of study.

The study of political financing


In systems where political financing has been studied, money flows through many reaches of the political process. Focus upon money per se involves, directly or by implication, all aspects of the political system. Features of the conversion of economic power into political power are revealed, for example, by analysis of the sources of political funds. General questions of voting behavior are encountered by analyses of the uses to which funds are put in election campaigns. Tracing the flow of funds projects the student into analyses of human motivation, political participation, the character of influence, and the structure and operation of political party systems. The widespread attempts to regulate political financing lead to questions of constitutional authority, of the social requisites for enforceable law, and of public under-standing and attitudes. Historical topics of political philosophy and complex questions of explanatory theory pervade the scrutiny of political financing.

Since money is an agent, standing in place of the goods and services into which it can be converted, arbitrary boundaries on its definition are introduced to make its study feasible. These boundaries can be strategically altered as the data available and the character of the political system being studied permit. In past research, distinctions have been made between contributions of cash and contributions of goods or services. The latter have often been excluded from analysis. Also usually separated from analysis have been the general effects of economic power, as felt through many channels in the society—control over credit sources, impact on the mass media of communications, influence emanating from the hierarchical structure of segments of the economic system, and such. Moreover, the personal wealth of candidates is frequently difficult to isolate from the superior development of personal political abilities that those resources may have helped to develop; hence it, too, has often been excluded from the analysis.

The quality of available data has profoundly affected the study of political financing. Much more is known in some nations than in others about the grand architecture and operational details of political financing. In all systems, to varying extents, empirical knowledge of desired scope and reliability is lacking. Absence of records and deficiencies in such records as exist partially account for this lack. Inducements to secrecy, because of the character of transactions in political financing and the public suspicion aroused by them, obstruct impressionistic as well as hard, empirical analysis. The complexity of the relevant data, given the implications of political financing for entire political systems, further compounds the difficulties of interpretation. The subject has at times suffered from both sweeping, oversimplified imputations and excessively narrow attempts to assemble dependable data for analysis.

The study of political financing has also been shaped by the different incentives of the students. Reform sentiment seeks to alter practices, often in accordance with ideological assumptions about the proper functioning of the political process. Such sentiments have originated both with practitioners and with others. Political interests directly engaged in competitive politics concern themselves with the subject in order to gain or maintain conditions they consider advantageous to themselves. Some study of the subject is politically neutral, directed simply toward better understanding of political behavior. Thus, the study of political financing may serve as a tool of political analysis, a means to political objectives, or a combination of both.

Evolution of the study

The broad development of political finance research is revealed by the changes that have occurred over the years in the primary purpose of study, in the scope of concern, in the kinds of data and how they were employed, and in the intensity of comparative analysis. After an almost exclusive concern with public policy, students of political finance have increasingly been examining the subject simply for what could be revealed about the behavior of political systems.

From a narrow focus on formal campaign committees, attention has widened to embrace many of the other aspects of the political process affected by political finance. From a heavy reliance on quantitative data submitted in official reports, analysts have made more and more use of information gathered by depth interview, survey research, direct observation, and other empirical means. After a long period of exclusive concern with political financing in single nations, comparative analysis across the boundaries of political systems has emerged. In the United States, where over the years most political finance research has been produced, this mounting sophistication can be traced through four chronological phases.

(1) Until the 1920s data and commentary were largely found in public documents and in the writings of journalists such as the muckrakers of the progressive era. Congressional testimony, state and federal reports, and the discussion they inspired constituted the bulk of inquiry and interpretation.

The first effective concern was felt for public employees who were subject to financial assessment by political leaders responsible for their jobs. Some evidence of existing practices was assembled in the move for protective legislation. Attempts were later made to determine total sums spent in certain political campaigns and the amounts and sources of campaign gifts. Interest in the subject increased with the belief that large donations to political parties gave unwarranted influence in government to the individuals and corporations supplying the funds. State and federal legislation was directed not only at age-old abuses, many of them (such as bribery) long contrary to the common law, but also toward limiting the sources of funds and the amounts and kinds of expenditures. It was directed too toward providing publicity to campaign accounts, on the theory that public knowledge of political financing would have a purifying effect on the practices followed and would give voters important information to assist them in deciding which parties and candidates to support. Proposals for public subsidies to help meet campaign costs were generally ignored.

In 1926 James K. Pollock published the first scholarly treatment of political financing in book form, Party Campaign Funds. He was concerned with the formulation of wise public policies for the regulation of campaign funds and placed heavy faith in the efficacy of forced publicity. He focused on favoritism in government and emphasized a conception of selfish interests in conflict with public interests. The analysis was confined to practices of party campaign committees and used data drawn chiefly from official party financial statements and the findings of Congressional committees. Pollock cited the shortage of dependable data as a serious obstacle to the creation of effective public policy. The categories of description included the volume of expenditures, the fund-raising methods, the sources of funds, the uses of funds, and the state and federal legal controls.

(2) In 1932 a second phase of study opened. Pollock published what long remained the only book on campaign finance outside the United States, Money and Politics Abroad. Practices in Great Britain, Northern Ireland, France, and Germany were examined. Pioneering attention was given to auxiliary and nonparty organizations, and the main sources of data were direct observation and interviews. New categories of analysis were added: e.g., the effect of expenditures on the outcome of elections, the handling of funds within parties, the impact of money on a total political system, the general identification of controlling interests in a state. The main purpose was still to discern effective controls of political finance, but broader understanding of the whole party system was sought as a means to that end. Each nation was treated descriptively, separately, and differently, without attempt to develop concepts for comparative analysis.

Also in 1932, the first of a series of writings by Louise Overacker appeared, Money in Elections. While essentially policy connected, it professed to formulate a “theory of parties” in order to state, although not necessarily solve, problems posed by political financing practices in the United States. Overacker accepted political pressures as inherent and was chiefly concerned with whether prevailing practices prevented voters from adequately expressing their wants and protecting their interests. She viewed the use of money in elections as a byproduct of popular government and reached the strong conclusion that legislative efforts to limit the volume of election expenditures should be abandoned. Overacker put her faith in publicity of campaign accounts. She included the financing of nomination campaigns in her inquiry, analyzed the sizes of contributions, identified economic and family connections of contributors, set down categories of motivation underlying campaign giving, made certain analyses of trends over time, along with certain comparisons between nations, and otherwise expanded the focus and depth of analysis. Overacker’s writings on political finance, culminating in 1946 in Presidential Campaign Funds, especially illuminated the sources of political contributions, including the newly important labor movement, and exposed the defects of the Hatch acts, adopted in 1939 and 1940, in their attempts to regulate political finance. She relied mostly on data from official reports and public investigations.

(3) The difficulties of obtaining usable empirical data have always limited the number of scholars willing to study political financing. In the United States usually no more than one major worker has been active at a time. In 1953, at the University of North Carolina, a program of research was initiated designed to engage the energies of many persons, expand the range of inquiry, make larger amounts of varied, dependable data available, and use the scrutiny of political finance as an avenue to study of the general political system. The chief resulting publication was The Costs of Democracy (1960), by Alexander Heard. The study viewed solicitation, donation, transmission, and use of political funds as forms of political participation, to be evaluated with other forms of political participation—e.g., campaigning and voting –as parts of the intricate network of relationships that constitute government and politics in the United States. The complex of activities involving political financing was viewed as one set of the evolving mechanisms by which representation of interests in the politics of the United States is achieved.

In this framework financial and nonfinancial influences in the outcome of elections were delineated; a typology of motivations for financial participation in politics was presented; and measures of the financial involvement of various types of groups and associations, including the underworld, were offered. The significance of fund solicitors as a type of political activist was evaluated. The flow of funds through and between political organizations was traced and analyzed, with special attention to the character of party cohesion revealed. The significance of political financing in the recruitment and winnowing of candidates for nomination was appraised. Throughout, efforts were made to bring a maximum of qualified data into use, to identify meaningful trends in political practices, to detect causal relationships, and to interpret for its public policy significance the experience and changing context of public regulation of political finance. This work and the studies associated with it were national in focus, although Heard drew on foreign experiences to give perspective to United States practices.

In 1958 an organization devoted exclusively to the study of campaign finance was established in Princeton, New Jersey. The Citizens’ Research Foundation, with a small staff under the direction of Herbert E. Alexander, extended some of Heard’s approaches and initiated new ones of their own. Through its publications series, its own research, its assistance to anyone studying the subject, and the accumulation and dissemination of information, the Foundation kept a steady focus of attention on political finance in the United States and contributed in many significant ways to the continuity and development of its study.

While scholarly concern with political finance was evolving in the United States, western Europe for a long time was the only other major area in which research into the subject was seriously pursued, and much of the work there was isolated and unrelated. Earlier hypotheses, by theorists like Max Weber, were never seriously tested, and research has been focused quite differently in the several countries. In Britain the most extensive investigations of recent years were historically oriented, analyzing changes in the techniques of political finance as related to the widening of the franchise, changes in elite recruitment, and the development of party organizations in the nineteenth century. In Germany a large part of the extensive literature was addressed to legalistic problems of constitutional interpretation and regulations, although numerous monographs and articles also used empirical data to evaluate political finance practices in the German Federal Republic. Some research endeavors were offshoots of interest-group studies. The greater disclosure of financial data by European trade unions and socialist political parties made possible the analysis of political financing activities of various labor movements. Certain highly controversial political questions, like the relationship of German business to the Nazis in the early 1930s, stimulated other islands of research. Some information, as well as normative evaluation, was also developed by a number of official commissions set up to advise governments on possible regulatory legislation. Such commissions submitted reports in the 1950s in Sweden, Norway, and Germany.

(4) In the early 1960s an attempt was made to prepare for more-broadly comparative analyses of political finance. Efforts were begun to develop common frameworks for studies of political financing in the United States, Europe, and non-Western countries. A number of studies were commissioned that for the first time presented system-wide descriptions of the processes of political finance in a number of Asian democracies, particularly the Philippines and India. The range of nations for which minimal information became available was enlarged through article-length studies of political financing in Italy, Israel, and Australia. These overview studies, constructed within the same basic framework of inquiry, together with similar articles on Great Britain, Japan, and West Germany, were published under the editorship of Richard Rose and Arnold J. Heidenheimer (1963). In his accompanying “Comparative Party Finance: Notes on Practices and Toward a Theory,” Heidenheimer (1963) developed concepts that could be used in measuring and explaining differences in political financing between political systems and argued the relationships between levels of expenditures and stages of economic, social, and political development. The emergence of comparative studies made clear the need for more generalized conceptual terms. Moreover, the introduction of nonWestern data and the use of developmental concepts widened the horizons of investigators. The move toward comparative studies spanning continents, and perhaps ultimately spanning centuries also, forced recognition of the need for greater stress on the general theoretical significance of analytical and descriptive studies.

Research outside the United States

In 1966 the “research map” of political financing was unevenly charted. Apart from the United States there were three major nations in which the principal dimensions of political financing had been substantially explored. These were West Germany, Great Britain, and Japan, although in the latter two cases analyses were based mainly on information from official reports filed by the participants themselves. In an intermediary group of countries, some Western, some Asian (including Israel, Italy, Australia, Canada, the Philippines, and India), the search for hard data and functional analysis had begun with some promise. In certain groups of countries, like the small democracies of western Europe and the more stable Latin American countries, with only a few exceptions little attempt had yet been made to assay and develop political financing data. The least amount of inquiry had been attempted in the new democracies of Africa and Asia. There the study of political finance, although necessarily focused on different structures and techniques, may eventually prove fruitful.

With regard to contemporary practices, more had become known about political financing in West Germany than in any other country except the United States. Research was stimulated not only by scholarly curiosity but also by partisan interests. The political parties had stakes in differing patterns of financial support and in conflicting interpretations of constitutional requirements. Struggles over enactment of disclosure requirements, tax deductibility provisions, and the role of “conveyer” and “sponsor” associations helped to keep the subject timely, throwing up much raw information in the process. The Germans developed a comprehensive system for public financing of political parties, under which in 1964 some 50 million marks were paid annually to the three major parties from the budgets of federal, Land, and local governments. This development not only led scholars to important reinterpretations of the German party system but also provided a new model of political financing practice that itself stimulated further study.

In Great Britain following World War ii, the conditions of political finance appeared satisfactory to most, except some followers of the Labour party, and were given relatively little study. Many scholars and politicians felt that few improprieties were committed and that few distortions of representative government resulted, a radical change from practices that prevailed in the nineteenth century. British law imposed a rigid limit on expenditures made on behalf of a candidate in his constituency during an election campaign. The effectiveness of the limit bred satisfaction with the system, and most research in political finance was based on official reports of these constituency expenditures. The growth of central-organization campaign activities, however, not limited by these controls and not covered by official reports, led eventually to a mounting desire for more extensive knowledge of British campaign finance. In Great Britain, as in other places, the increased importance of mass communications and the increased role of organized interests in general efforts to shape public opinion brought realization that the British controls over candidate expenditures during the limited campaign period constituted regulation of but a small share of significant political expenditures.

The state of knowledge

Knowledge of political finance can be viewed at three levels: descriptive, interpretive, and theoretical. After four decades of scholarly study, knowledge of political finance at all three levels had advanced substantially in the United States and was appreciably greater than corresponding knowledge in other nations. The greatest progress had been made in assembling and ordering descriptive data. These led to new interpretive insights into particular segments of political finance, and the broadened range of inquiry during the 1950s and 1960s made possible the development of typologies and of limited, empirically based generalizations about some aspects of the subject that had not been offered previously. No comprehensive, abstract theory seeking explicitly to account for all phenomena of the subject appeared, but a number of unifying themes emerged from the diverse inquiries of Heard and his associates, e.g., the ultimate primacy of votes in a society with a free election system, the multiple sources of influence over votes, the limits imposed by a pluralistic political system on any single source of power, and the multiple manifestations of social and economic power.

Information about the processes of political financing was detailed and well documented in many particulars, especially the volume and sources of contributions and the volume and purposes of expenditures in certain kinds of elections. Financial relationships between many party and campaign units had been traced and understood. The differential roles of certain significant participants in the processes of campaign finance had been identified. Political giving, as part of the syndrome of political involvement of individuals and groups, had been explored. The roots of effective and ineffective legal controls had been probed, and experimentation with new forms of regulation occurred. Expertise of certain kinds had been developed sufficiently to make possible the evaluation of innovations in soliciting procedures and in other campaign practices. And, over-all, many financial linkages between social structure and political structure had been delineated.

Election expenditures

Data and understanding were technically more complete in the United States at national political levels than at state and local levels, an inevitable concomitant of the federal governmental system and the decentralized party structures of the United States. For the presidential election year 1964, for example, over $26 million in expenditures through national-level campaign organizations could be clearly identified, made up of cash outlays plus debts. These expenditures were substantially higher than in previous recent presidential election years. The division of expenditures between the parties has generally favored the Republicans by a ratio of about 60 to 40, although in 1960 the division was about equal. Fluctuations in the purposes for which expenditures were made by national-level organizations could be charted, revealing, for illustration, not only the relatively stable emphasis given to both organizational and communications activities over the decades but also the displacement of the communications medium dominant at a particular time by another, i.e., newspaper advertising by radio, radio by television. The relative importance of donations of certain sizes could be traced: usually about two-thirds of the amount received by both parties in individual donations at the national level is in sums of $500 or more.

The $26 million accounted for in 1964 by national groups constituted, however, only a small portion of the total cash spent in all nomination and election campaigns that year, probably $200 million in all. In the large states millions of dollars were spent in the presidential race. Where competition was heated, a candidate for governor or United States senator might find over a million dollars spent on his behalf. But below the national campaign level the reliability of data varied greatly from one state and locality to another, so that in only a few specific places could trends be followed from election to election. Generally, at state and local levels the number of reporting and receiving officers, the frequency of reports, and their variable accuracy and completeness made the summary and analysis of data too laborious for regular use. Many funds employed in political finance, moreover, went unreported in official accounts, thus requiring the use of much supplementary information from other sources.

Party structures

The effects of political finance practices on internal party structures, and the reverse, had been increasingly studied. For example, the system of special finance committees organized openly and solely for solicitation purposes by the Republican party in the United States for years contrasted sharply with traditional practices in most units of the Democratic party. In the latter, fund raising was a function of regular campaign committees or of special small cadres of individuals, well placed to give or solicit funds, who operated largely out of public view. The Republican finance system consistently displayed greater technical proficiency and less secrecy in its operations than did Democratic practices. In both parties political solicitors became recognized as critically important communications links, representing the views and needs of candidates to donors and reflecting the interests of donors to parties and public officials. Techniques of fund raising changed rapidly in the United States in response to changes in income tax and gift tax laws, in per capita disposable income, in the tools of solicitation, in public attitudes, and in other conditions that affect who gives and how much.

Legal limitations

The futility of the legal ceilings imposed on individual political gifts and on expenditures by individual campaign committees had been demonstrated. The federal and state governments in the United States had generally pursued repressive and negative approaches in seeking to regulate political financing, prohibiting or limiting various types or amounts of contributions and expenditures. Reliance on public disclosure of campaign accounts as a disciplining influence on candidates and parties had proved disappointing to most of its advocates. Direct and indirect governmental subsidies had increasingly found favor with students and practitioners as a way of helping to meet campaign costs while avoiding some of the pressures of private financing. Four states adopted statutes permitting limited deductions of political contributions in computing personal income taxable under state law. The U.S. President’s Commission on Campaign Costs, a bipartisan group appointed by John F. Kennedy in 1961, recommended tax concessions to encourage more-widely-dispersed popular financing of presidential campaigns.

At all three levels of knowledge postulated above—descriptive, interpretive, theoretical—greatest future progress in understanding political finance lies through systematic comparative study. This progress will require the development of many standard categories of information about political finance in diverse institutional and cultural settings. It will require sophisticated concepts and units of measurement of a type that have not characterized study of the subject in the past. The mere acquisition of certain types of desired data may in many places prove impossible. The type of material that constitutes relevant data varies from one setting to another. Common functions appear in different guises, and seemingly similar phenomena may, in their particular contexts, have quite different significances. The advances already made at a conceptual and theoretical level by students of comparative political systems offer stimulus and promise to students of comparative political finance.

The effect of the processes of political finance on the recruitment of political leadership requires special attention. The financial aspects of nomination and prenomination processes have been examined in the United States, for example, yet they remain relatively obscure and their revision seems beyond the purview of most proposals for change. The character of commitments that result from acceptance of financial support requires categorization, and the conditions which prompt financial support instead of other forms of support need delineation. The illumination of these two features of political finance is essential to an understanding of the sources and exercise of political power. Inevitably, the study of political finance will be affected—sometimes encouraged, sometimes obstructed—by its implications for political controversy.

Alexander Heard

[See alsoBudgeting; Conflict of interest; Parties,political; Political participation.]


Citizens’ Research FoundationStudy. → Published since 1960. A series of studies of diverse aspects of United States campaign finance, many of them written or edited by Herbert E. Alexander, the director of the Foundation.

Congressional Quarterly Almanac. → Published since 1945. Publishes annual summaries of certain campaign finance information filed by candidates and political committees with the U.S. Congress.

Gwyn, William B. 1962 Democracy and the Cost of Politics in Britain. London: Athlone. → An analysis of the evolution of British practices.

Heard, Alexander 1960 The Costs of Democracy. Chapel Hill: Univ. of North Carolina Press.

Heidenheimer, Arnold J. 1963 Comparative Party Finance: Notes on Practices and Toward a Theory. Journal of Politics 25:790–811.

Overacker, Louise 1932 Money in Elections. New York: Macmillan.

Overacker, Louise 1933 Campaign Funds in a Depression Year. American Political Science Review 27:769–783.

Overacker, Louise 1937 Campaign Funds in the Presidential Election of 1936. American Political Science Review 31:473–498.

Overacker, Louise 1941 Campaign Finance in the Presidential Election of 1940. American Political Science Review 35:701–727.

Overacker, Louise 1945 Presidential Campaign Funds, 1944. American Political Science Review 39:899–925.

Overacker, Louise 1946 Presidential Campaign Funds. Boston Univ. Press.

Pollock, James K. 1926 Party Campaign Funds. New York: Knopf.

Pollock, James K. 1932 Money and Politics Abroad. New York: Knopf.

Rose, Richard; and Heidenheimer, Arnold J. (editors) 1963 [Comparative Studies in Political Finance.] Journal of Politics 25:643–811. → This symposium represents the first major project of the International Study Group on Political Finance. Contains many references to professional literature outside the United States.

Shannon, Jasper 1959 Money and Politics. New York: Random House. → A brief historical and prescriptive treatment of political finance in the United States, with a chapter on Norwegian practices.

Sikes, Earl R. 1928 State and Federal Corrupt-practices Legislation. Durham, N.C.: Duke Univ. Press. → The principal early work on legal regulation. Largely historical and descriptive.

U.S. Congress, Senate, Committee on Rules and Administration 1957 1956 General Election Campaigns: Report of the Subcommittee on Privileges and Elections.… . Washington: Government Printing Office→ The most comprehensive report of campaign finances in a presidential election year.

U.S. Congress, Senate, Special Committee to Investigate Political Activities, Lobbying, and Campaign Contributions 1957 Final Report.… Washington: Government Printing Office. → Includes a digest of regulatory recommendations made by Congressional committees from 1905 to 1956.

U.S. President’S Commission on Campaign Costs 1962 Financing Presidential Campaigns: Report. Washington: Government Printing Office.

Cite this article
Pick a style below, and copy the text for your bibliography.

  • MLA
  • Chicago
  • APA

"Political Financing." International Encyclopedia of the Social Sciences. . 29 Apr. 2017 <>.

"Political Financing." International Encyclopedia of the Social Sciences. . (April 29, 2017).

"Political Financing." International Encyclopedia of the Social Sciences. . Retrieved April 29, 2017 from

Learn more about citation styles

Citation styles gives you the ability to cite reference entries and articles according to common styles from the Modern Language Association (MLA), The Chicago Manual of Style, and the American Psychological Association (APA).

Within the “Cite this article” tool, pick a style to see how all available information looks when formatted according to that style. Then, copy and paste the text into your bibliography or works cited list.

Because each style has its own formatting nuances that evolve over time and not all information is available for every reference entry or article, cannot guarantee each citation it generates. Therefore, it’s best to use citations as a starting point before checking the style against your school or publication’s requirements and the most-recent information available at these sites:

Modern Language Association

The Chicago Manual of Style

American Psychological Association

  • Most online reference entries and articles do not have page numbers. Therefore, that information is unavailable for most content. However, the date of retrieval is often important. Refer to each style’s convention regarding the best way to format page numbers and retrieval dates.
  • In addition to the MLA, Chicago, and APA styles, your school, university, publication, or institution may have its own requirements for citations. Therefore, be sure to refer to those guidelines when editing your bibliography or works cited list.