Dark money

Funds from hidden sources are warping democracy with increasing and devastating effect. Peter Geoghegan follows the money.

Activists in New York City protest against the influence of ‘dark money’ from the billionaire Koch brothers on many areas of political decision-making, including healthcare. ERIK MCGREGOR /SIPA USA/PA IMAGES

In mid-November, The Wall Street Journal published an interview with US petrochemical tycoon Charles Koch. The timing was apt: Koch, and his late brother David, had spent more than $1.5 billion over four decades to push the Republican party to the libertarian Right. Now the GOP’s candidate, Donald Trump, was refusing to accept that he had lost the White House.

Koch, now 85, cut a contrite figure. He said he regretted the partisanship that his money had done so much to produce. As he wrote in his new book, ‘Boy, did we screw up.’

If irony had not died when Henry Kissinger won the Nobel Peace Prize, it would surely have keeled over at Charles Koch’s words. The billionaire can be described as the grandfather of ‘dark money’, an American neologism for an increasingly global phenomenon: funds from unknown sources that influence our politics. This money gets into the political system in an increasing variety of ways, from loopholes in election law and online campaign fundraising through to anonymously-funded, agenda-setting pressure groups. The sums involved are enormous: in the 2020 US election cycle some $14 billion was spent across all races, with $6.6 billion on the presidential battle alone. Much of this went through largely anonymous ‘political action committees’ (PACs).

In Britain, money has long played a determining role in politics. The ‘rotten boroughs’ of the 18th and 19th centuries were notoriously crooked, and their tiny electorates could be bought by influential patrons. In spite of electoral reform in 1832, money has continued to corrode the political system in myriad ways. Fast forward to November 2020 and a damning National Audit Office report found that firms with political links to the Conservative party were 10 times more likely to receive lucrative contracts as part of the British government’s pandemic response. 

British politics is comparatively low-spending, especially when set against the United States, but there is plenty of evidence that the American model of hidden finance and clandestine influence has traversed the pond. Britain, as the US political analyst Anne Applebaum notes, ‘has become a place where untransparent money, from unknown sources, is widely accepted with a complacent shrug’. The relatively small sums involved can make it even easier to get access to the top table of British politics.

Even relatively meagre sums can shift the political needle and generate highly effective lobbying operations

How it works

The dark money playbook is straightforward. Take advantage of shady campaign financing; circumvent electoral rules where you can; and draw on a network of supportive thinktanks, a receptive media run by a handful of magnates, and hard-line caucuses within the long-established political parties. Similar strategies and tactics are increasingly employed across much of the world: from the Vote Leave campaign in the UK playing fast and loose with electoral law during the Brexit referendum, to the international influence campaign underpinning the rise of the populist Right in Europe and beyond.

During the 2018 Brazilian general election, companies supporting far-right candidate Jair Bolsonaro spent millions of dollars on WhatsApp messages. Widely circulated false reports accused Bolsonaro’s leftwing rival of, amongst other things, handing out baby bottles with penis-shaped tops at schools to combat homophobia. Bolsonaro’s victory came in the wake of the all-engulfing ‘Carwash’ corruption scandal, involving the bribery of politicians and their parties on an industrial scale by construction giant Odebrecht and other corporate players.

In Peru, corruption has been endemic in politics for decades, with four ex-presidents either in prison for graft or being investigated for it. Alberto Fujimori is serving a 25-year sentence for human rights abuses, corruption and running death squads in the 1990s, while another corrupt former president, Alan García, killed himself in 2019 rather than face arrest.

Why it matters

What’s so bad about political campaigns not declaring the source of their funds? Does dark money actually matter? It does, profoundly. Even relatively meagre sums can shift the political needle and generate highly effective lobbying operations. Small purposeful groups are adept at taking control of policy in ways that are very hard to see for those not regularly involved in politics. In Britain, a nexus of libertarian thinktanks and transatlantic media moguls turned a ‘no-deal’ Brexit from what was in 2016 an outlandish proposal into a more or less explicit government policy option.

Most influential rightwing thinktanks in Britain, such as the Institute of Economic Affairs (IEA), do not declare their funders (although we do know, thanks to investigative journalism, that they have in the past received money from oil, gambling and other interests). These thinktanks maintain that corporate donors do not dictate their views. Whether BP or big tobacco is giving them money, they insist, does not change their core commitment to economic freedom and small government.

That is of course a reasonable position to take, but it ignores the pernicious way in which undeclared corporate donations buy privileged access to the political system. Dark money gives these small, unrepresentative groups a marked advantage, pays for slick and articulate reports and polished media appearances, and accentuates the risk of the public sphere being captured by vested interests. In 2020, senior representatives from a number of libertarian thinktanks, including the IEA and the Adam Smith Institute, were appointed as advisors to Britain’s international trade secretary Liz Truss. 

Financing the culture wars: Polish nationalists protest against LGBT rights in Warsaw. Millions of dollars of ‘dark money’ from rightwing US Christian evangelical organizations are funding social conservative agendas around the world. KACPER PEMPEL/REUTERS

Perfectly legal abuse

Dark money has gone hand in hand with the rise of digital disinformation. Behind Brexit, Trump and a host of other unforeseen ruptures is a paradigm shift in the nature of political communication. The digital world offers voters the opportunity to live in echo chambers where their political prejudices are confirmed and reinforced daily. As politics is increasingly mediated through Silicon Valley tech giants, falsehoods and mistruths spread at lightning speed. So far, few political leaders have been willing to back down from a digital arms race in which every potential advantage is seized upon. 

Nigel Farage’s Brexit Party is a textbook example of how the communications revolution has changed politics in ways we are still struggling to understand. Inspired by Italy’s Five Star Movement, the Brexit Party topped the poll in the 2019 European elections after running a sophisticated online campaign that tapped into widespread anger that Britain was still in the EU, nearly three years after the country had voted to leave. This pop-up party was governed by a constitution that gave Farage almost complete control. Tens of thousands of people donated online through PayPal, with minimal checks. The electoral regulator warned that the Brexit Party’s online fundraising could allow donors to evade the rules banning foreign contributions to British politics.

If the problem was just one of laws being broken, there would be a simple solution: tougher enforcement. Increase fines until the pips squeak. Introduce the threat of jail time. Former Trump fixer Michael Cohen was given a three-year prison sentence in 2018 for violating campaign finance laws during the presidential campaign.

But the corruption of democracy is as much about perfectly legal abuse as it is law-breaking malfeasance. American religious funders, for example, have during the past decade quietly pumped tens of millions of dollars into reactionary conservative campaigns across the world.

An investigation published in October 2020 revealed that US Christian groups, some with close ties to Donald Trump and Steve Bannon, had spent at least $280 million of ‘dark money’ to fuel campaigns against the rights of women and LGBTQI+ people across five continents. A large proportion ($90 million) went to Europe, followed by Africa and Asia.

Action to take

What can be done about this dark money corroding our politics?

There is a strong case for placing limits on individual donations. The surest way to reduce the power of money in politics is to replace a handful of super-rich donors with large numbers of smaller contributions. If, in the UK for example, the maximum donation was £10,000 ($13,600) a year, political parties would be forced to rely on a far wider, and more inclusive, donor base.

A ban on donations from individuals who are not domiciled in the country and who are non-resident for tax purposes would help too, as would preventing the use of shell companies to hide the true source of donations. Offshore firms – such as that used by British insurance magnate Arron Banks to bankroll his Brexit campaigns – should be barred from making political contributions. Political parties could be forced to publish the names of significant donors that also attend private party events.

The stick needs to be used as well as the carrot. Thinktanks should be forced to declare their donors and ineffective lobbying registers be completely overhauled. Silicon Valley tech giants need to be reined in, their quasi-monopolistic power broken up.

But reversing the impact of decades of dark money is easier said than done – as Charles Koch has discovered. While the ageing plutocrat was telling the Wall Street Journal that he hoped that US citizens would ‘all use this post-election period to find a better way’, senior Republicans that he had funded were repeating falsehoods about electoral fraud denying Trump victory.

Perhaps, when you spend a fortune undermining democracy, you shouldn’t be too surprised at the results.

Peter Geoghegan is Investigations Editor at OpenDemocracy. His latest book is Democracy For Sale: Dark Money And Dirty Politics, published by Head of Zeus.