Selling both gold and money; German party funding goes weird

How best should political life be funded? The question is hardly new, and it should come as no surprise that it’s received coverage on this blog before (see here and here). For some the introduction (or expansion) of the state funding of politics is one way of fighting the influence of big business in political life. For others state funding brings with it more problems than it solves, and it’s subsequently viewed more sceptically. The more interesting work moves beyond this and tries to work out how different funding regimes can lead to different types of corruption (see here). Be all that as it may, debates as to how politics should or shouldn’t be funded have taken on a peculiar new dimension in Germany in recent weeks. And this debate has done plenty to muddy the decidedly murky waters yet further.

Germany has a system of party funding that comprises three basic elements. Party members pay subscriptions, individuals and corporate entities can donate money directly and parties that poll above 0.5 per cent of the vote in national elections receive subsidies from the state. Some parties rely particularly heavily on membership dues, others do better in terms of the donations they receive whilst some are particularly reliant on state funding. Table 1 illustrates the balance per category for each of the main parties represented in the German parliament (as of 2011).

Table 1

Party Funding in Germany

Who gets what and how (in per cent)?

Party Membership Dues Public Subsidies Donations Others*
CDU 28.46 31.65 15.47 24.42
SPD 30.51 27.23 7.77 34.49
FDP 21.64 39.77 19.30 19.29
Left Party 33.92 42.31 6.64 17.13
Green Party 21.73 37.50 13.04 27.73
CSU 27.57 28.11 15.95 28.37

Source; Bundestags-Drucksache, 17/12340

* Most of this money (around 55m Euro in total in 2011) is made of by contributions from elected officials such as MPs, MEPs, local councillors and members of regional parliaments (MdLs).

Germans (and Germany-watchers) regularly dissect the traditional arguments about the virtues of this system (see here for a good summary of the main issues). Are smaller parties over compensated? Does the not inconsiderable state subsidy make life just a little too easy for the parties? Do parties with free-market ideologies (such as the FDP in this case) benefit unduly from donations from business? And so on. The focus none the less tends to be on the traditional parties. Every once in a while there will be a piece in a Sunday supplement about the challenges that micro-parties face, but the attention of both the popular and academic world tends to remain on the big six. Two rather peculiar developments in the Autumn of 2014 have changed that just a little.

In October 2014 the Alternative for Germany (AfD), a new and spikey right-wing anti-Euro movement that entered the European Parliament in 2014 (having narrowly missed entering the federal parliament in Berlin the year before), began selling gold in its online shop. They sold it in the form of gold coins (the 490 Euro replica German Mark coin was particularly popular – it sold out within days) and gold bars. In the first 11 days of business the party had managed to persuade over 800 people to part with their cash to the tune of around 1.6m Euro (see here, in German, for more on this).   Even the AfD was surprised by the uptake.

The AfD’s metamorphosis in to a gold-selling business has had a direct and an indirect effect on its coffers. On the one hand the profits flow directly in to the party’s bank account and help it carry out its activities. On the other hand it also means that it can claim more money from the state.  Why?  The party is currently entitled to claim around 5m Euro on account of the votes it has received in recent elections, but it can only get that if it can illustrate that it has raised the same amount of money itself.  If it can’t, then it will only get funds proportionate to what it has raised (so, if the AfD raised 4m Euro from members’ contributions, donations and other business, it could claim 4m of the 5m it is theoretically due from the state). So, the more gold it sells, the more money German taxpayers give the party.

It didn’t take long for a reaction to the AfD’s money-making wheeze to materialise. Protests were lodged, investigations were undertaken. Indeed, the Bundestag’s administration conducted a thorough enquiry in to whether the AfD’s behaviour in any contravened Germany’s ‘Party Law’. Much to the consternation of the President of the Federal Parliament (effectively the Speaker), Norbert Lammert, it didn’t and the gold-selling continued. Cue lots of head-shaking from the German political class. Lammert, meanwhile, called for the Home Affairs Select Committee to change the law precisely to outlaw this type of shenanigans.

If that wasn’t enough, the current law was made to look even more ridiculous in early December. Another party, ‘Die Partei’, found an altogether different way of getting the state to fund its activities. The ‘Partei’ is rather like the Monster Raving Looney Party (MLP) in the UK, taking a light-hearted, satirical look at all things political. The major difference to the MLP is that on account of Germany’s electoral system the ‘Partei’ only needs relatively few votes to make it in to parliaments – and this it did in 2014, sending Martin Sonneborn to the European Parliament after polling a mere 0.6 of the vote.

‘Die Partei’ is well known for coming up with schemes and ideas that are aimed at making others look just a little silly.  So we perhaps shouldn’t have been surprised when the Partei announced that if the AfD could sell gold, then it could sell money. The Partei announced that for 105 Euro you could buy 100 Euro from them, for 25 Euro, meanwhile, you’d get 20 Euro. Much to the Partei’s surprise, 80,000 Euro has already landed in the party’s account, and orders totaling over 163,000 Euro have come in. Following the same logic as the AfD, the 5 Euro profit on every transaction moves the party that little bit closer to claiming the 240,000 Euro it claims it has access to from state coffers (see here for more on this).

Whether the ‘Partei’ actually sees any of that money remains to be seen, but one thing is for sure; ingenious actors can make even the most well-thought through system look like the proverbial ass. The German party-funding regime is short on neither laws nor judicial attempts to interpret them, but that hasn’t saved it from two parties trying (successfully) to ‘play the game’. What can we learn from this? Firstly, party funding regimes never stand still as rational actors do their level best to get the most (in financial terms) out of them. Secondly, normative assumptions about what is and what isn’t appropriate behaviour will differ considerably; for some the AfD and ‘Die Partei’ are chancers bringing the system in to disrepute, for others they are simply quicker and more nimble than their bigger, more established opponents who may well be unhappy simply as they themselves didn’t think of similar schemes first.  Is, in other words, selling a victoria sponge at a summer garden party any different to selling gold on the open market (or indeed cash to those who want to pay more for it than its face value)? The method (selling something for profit) and the end product (that profit flows to your party of choice) are the exactly same.  One thing is none the less for sure – it’ll be worth watching how the German political class deals with these unconventional challenges to the party funding regime.

Dan Hough

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