Professor of Political Science
Department of Political Science
Université de Montréal
3150, rue Jean-Brillant
Phone: (+1) 514-346-6111 #20322Read Denis' publication(s)
PhD (Université de Montréal)
Researcher and coordinator
Alejandro Angel Tapias,
PhD (Université de Montréal)
Department of Economics and International Relations
Universidade Federal de Santa Catarina
Ph.D. in Political Science
Université de Montréal
M.A. in Political Science
Université de Montréal
The Research Project
The Asset Declarations of Government Officials and Members of Parliament and the Political Economy of Transparency in the “Varieties of Capitalism”
The income and asset declarations of elected and senior public officials have become important transparency instruments and benchmarking indicators in the fight against corruption in political institutions (OECD, 2011). These asset declarations aim to prevent corruption, most commonly defined as the misuse or abuse of public office for private gain, and help manage possible conflicts of interest in public administrations (World Bank, 2012). They generally detail sources of income, investments and involvement on the boards of companies, with a goal towards discouraging politicians from lending their support to laws or programs from which they might personally benefit (Martini, 2011). Asset declarations can also serve to highlight cases where the disclosure of public officials’ salaries don’t mesh with their lavish lifestyles (Rose-Ackerman, 1996).
Very little research has been carried out to date concerning politicians’ income and asset declarations. The first such studies were conducted in the United States in the 1960s, but the disclosure of asset declarations at the international level is a relatively recent phenomenon (Burdescu et al., 2009). Since the 1990s, and driven by international organizations, some 80 countries have introduced laws and regulations governing the income and asset declarations of their public officials, a term that designates certain senior government officials as well as politicians from the executive and legislative branches of government (OECD, 2005). The United Nations Convention against Corruption, which took effect in 2003, calls on all Member States to implement financial disclosure policies for public officials (Burdescu et al., 2011; Webb, 2005). The data collected by Djankov et al. (2010) and the World Bank – which serves as a starting point for this project – indicates that of the countries that have introduced legislation governing politicians’ income and asset declarations, only 46 require the complete or partial publication of the contents of the declarations. Moreover, publication does not provide a guarantee of relevance relative to the actual information provided in the declarations. Indeed, there are significant differences in how countries choose to approach the issue (Messick, 2009). For example, as concerns politicians’ investments, debts or real estate holdings, some declarations only require that officials check either yes or no, without providing any further detail. Similary, other declarations only provide broad general categories for politicians’ net worth (e.g. $500,000 or less, $1 million or more, etc.). According to Djankov et al. (2010: 195), declarations that require more detailed and varied information on politicians’ assets are mainly found in wealthier countries that have a richer “quality of government” and are, for the most part, OECD democracies. This study primarily focuses on the situation in these 30 odd countries. Continue Reading …
Research Questions and Theoretical Perspective
In which democracies are politicians more or less wealthy? Are right- or left-wing politicians generally wealthier? From upper or lower houses of parliament? In which societies is wealth inequality between politicians and citizens more or less pronounced? Until now, politicians’ income and asset declarations have mainly been studied from the standpoint of their effectiveness in fighting corruption (Rossi et al., 2012). This is notably the case of Transparency International (TI) rankings, as well as research on “good governance” and “quality of government” indicators, which examine and compare anti-corruption policies, such as income and asset declarations, with the specified purpose of identifying “best practices” (OSCE, 2004; Thomas, 2010; Rothstein, 2011). This projet distinguishes itself from that angle of research by proposing instead to examine income and asset declarations with a view towards profiling the assets of politicians in OECD member countries. Asset declarations that are made public provide original reference material to study the issue of politicians’ wealth, which has become the subject of major public debate in advanced capitalist democracies. In the wake of the Occupy movement, a growing number of studies have linked a perceived increase in the number of government policies favouring the rich to the increased presence of politicians among the richest “one percent” (Torija 2013; Callahn and Cha, 2013). This is particularly the case in the United States, where, for many years now, Congress has been routinely described as a “millionaire’s club” (Fowler, 2007). By some calculations, while only one percent of Americans are millionares, this figure usually inflates to between 40 and 50 percent for Members of Congress (Gilens, 2012: 235). In 2008, the Opensecrets.com website evaluated the average net worth of senators and representatives at US$18 million and US$6 million, respectively. Until very recently, it was impossible for researchers to establish with any certainty if such net worth figures were atypical or, rather, indicated the American political economy’s shift toward a “plutocratic” or “oligarchic” model (Bartels, 2008; Winters, 2009), as for a long time the United States stood alone in requiring that its political elites publicly disclose their assets. However, today this is no longer the case. A growing number of countries now require that their politicians publicly disclose their assets. It’s this still untapped data that this project intends to assemble. Our principal objective is to provide more solid empirical and theoretical foundations for the important questions raised by critics of the “one percent” about the genuine fairness and impartiality of political institutions, in light of the increasing concentration of economic wealth. Before we can begin to accurately examine the impact of personal wealth on politicians’ choices, it’s important we first gain a better understanding of just who the richest and poorest politicains are, and where they are based.
There are empirical, theoretical and practical benefits to this chosen approach. Firstly, the assumption that politicians are often members of the richest “one percent” should be put to the test. On a theoretical level, the projet examines these issues with the aim of testing the robustness of approaches that see in the presence of the many millionaires in U.S. politics a reflection of the particular liberal market brand of American capitalism (Bartels, 2008; Birchfield, 2009; Hacker and Pierson, 2011; Pontusson, 2005). From this perspective, the large number of politicians in Congress who belong to the wealthiest class simply replicates, at the level of political representation and via feedback effects, the greater concentration of wealth created in recent years by the action – or inaction (drift) – of governments in liberal market economies (Hacker, Thelen and Pierson, 2013). Yet the existence of this “regime effect” has never been called into question by American political scientists, as for years the United States was the only country in which data on politicians’ wealth was widely available. It was impossible, under such conditions, to prove the theory, or determine if other countries followed the American free-market model, as suggested in studies of globalization and convergence (Drezner, 2001; Williamson, 1996). But the data contained in the most comprehensive asset declarations now allow us to continue this work.
Hypotheses on the Complementarity of Political and Economic Institutions
“Varieties of capitalism” theory is based on the premise that institutions play a role in the economy in concert with one another – rather than in isolation from one another – to produce “national models,” conceivable as specific combinations of complementary institutions (Streeck, 2009; Streeck and Thelen, 2005). This notion of complementarity suggests that the existence or functioning of each institutional arrangement in a specific area is legitimized and strengthened by other institutional arrangements in other areas (Crouch et al., 2005; Höpner, 2005). In this project, two forms of institutional complementarity are examined. The first is the strong link between liberal market economies and institutions in majoritarian democracies, and the close association of coordinated market economies with institutions in consensus democracies (Birchfield, 2009; Lijphart, 1999; Iversen, 2005). At this stage of the research, our intention is to compare income and asset declarations in order to determine whether majoritarian or consensus democracies apply the strictest requirements of transparency in the asset disclosure statements of their political elites.
Politicians in parliaments and governments are the very people who pass laws and introduce rules governing the diclosure of their assets. Yet, these same politicians must negotiate the power dynamics and balance of power between the executive and legislative branches, which differ substantially in majoritarian and consensus democracies. The work of Lijphart (1992; 1999) and others demonstrates that majoritarian democracies are characterized by the concentration of executive power in a cabinet formed by the majority party in parliament, whereas consensus democracies are charactertized by the sharing of executive power in multi-party coalitions (Samuels and Shugart, 2010; Ticchi and Vindigni, 2010). Power and responsibility are more centralized in majoritarian democracies, and more dispersed in consensus democracies (Bonoli, 2000; Pierson, 1994; Weaver and Rockamn, 1993). This project starts from the assumption that these differences are instrumental in determining the willingness of politicians to adopt strict rules governing the disclosure of their assets. Research shows that politicians don’t like to disclose their personal wealth or that of their families (Messick, 2009). In deliberations about asset declarations, politicians routinely oppose their right to privacy against the public right to transparency, which some reject as a form of “voyeurism” (Le Coz and Foulkes, 2013). Politicians’ personal wealth, when substantial, can sometimes prove to be an obstacle to those seeking elected office (Cambell and Cowley, 2013). Some see an example of this in Mitt Romney’s failed presidential bid in the 2012 U.S. presidential election (Newport, 2012). Consequently, according to most analyses, politicians generally resist calls for transparency in disclosing their personal assets and only agree to do so under duress, when scandals threaten to undermine the political system (Mackenzie, 2002; Rosenson, 2005). But scandals, which are viewed as exogenous variables, cannot alone account for politicians’ readiness to adopt rules governing the disclose of their assets (Saint-Martin, 2008). Research should also examine the ways in which scandals affect the balance of power within institutions. Indeed, in both majoritarian and consensus democracies, we find that politicians prefer not to disclose their personal wealth. However, the difference is that the two systems do not grant politicians the same ability to organize and collectively resist such measures that are deemed intrusive (Schickler, 2001). In majoritarian democracies, politicians are seen as less able to resist the adoption of asset declaration legislation than their peers in consensus democracies as, contrary to the latter, they face a majority that is able to impose its preferences in order to restore its credibility when scandal strikes one of its members. This key difference would serve to explain the putative “lag” of European consensus democracies (Hyest et al., 2011: 32; Kroh, 2013), relative to the pioneering role of the United States and United Kingdom (both majoritarian democracies) in the disclosure of politicians’ asset declarations.
While institutions in majoritarian and consensus democracies may have an impact on the timing of proposed reforms, they do not account for the substance and transparency of asset statement disclosure measures adopted by politicians in reaction to scandals. Once politicians in power decide to act on the matter, how do they define the parameters of their response? How do they come to determine what they consider to be an appropriate level of transparency? The assumption we aim to examine further is that politicians’ levels of understanding of asset declarations and transparency often depend on developments in the corporate governance of economic institutions. According to this hypothesis, standards of transparency in corporate governance serve as benchmarks for politicians in the disclosure of their assets. This serves to introduce the second form of complementarity examined in this project: the close correlation of governance models and the exercise of authority in political and economic institutions (Culpepper, 2011; Jacoby, 2004; Roe, 2003). According to the “varieties of capitalism” approach, this correlation reduces “transaction costs” and facilitates better coordination between economic and political institutions (Hancké, 2011); it stems from institutional and normative isomorphism processes that push organizations to change and gradually become more compatible with the dominant characteristics of their environment (DiMaggio and Powell, 1983; Saint-Martin, 2013).
Since the Enron, Parmalat and other scandals, transparency measures have been at the heart of corporate governance best practices developed to empower shareholders and recalibrate their relationship with senior management (Coffee, 2005). Driven by the adoption of anti-corruption conventions by the OECD (1997) and United Nations (2003), a growing number of companies have introduced voluntary “codes of conduct” and corporate disclosure measures (Argandona, 2007). These often include an obligation to disclose senior business executives’ bonuses and salaries, as well as donations and gifts received from, and made to, politicians and business partners. These transparency measures were developed by economic and political institutions in reaction to the erosion of confidence of shareholders and citizens (Transparency International, 2012). In this drive for legitimacy, free enterprise – the model regarded as “superior” or more effective – has long been a reference point for the reform of political institutions (Saint-Martin, 2004). Yet this model is not the same in liberal and coordinated market economies. Many studies have demonstrated how “winner-take-all” majoritarian democracies complement and bolster corporate governance modes in liberal market economies. These modes place all the power in the hands of senior management and limit the “voice” of shareholders in resource management decision-making (Cioffi, 2006; Goyer, 2006). Similarly, in consensus democracies, the corporate governance modes of institutions in the political sphere are more rooted in the social dialogue and collective bargaining traditions characteristic of coordinated market economies (Gouvrevitch and Shinn, 2005), and transparency in corporate governance has generally been weaker than in liberal market economies (Vitols, 2001). As such, if politicians use corporate governance as a “barometer”, one would normally find less transparency in the asset declarations of politicians in coordinated market economies than in those of liberal market economies. One indicator that can be examined to study these marked differences is the level of representation of politicians on corporate boards. In countries where declaration of interest guidelines are enforced, many require that politicians disclose details of their participation on corporate boards (including the company name, position held, term of office and compensation). Research on politically connected firms suggests that the numbers of politicians who are active on corporate boards will vary depending on transparency requirements relating to their asset declarations (Facco, 2006: 377): the stricter the requirements, the less likely they are to be active on corporate boards, and vice-versa. The data collected in the context of this project will serve to enrich these findings and help determine if politicians in coordinated market economies are more involved on corporate boards than their counterparts in liberal market economies. It also presents an opportunity to further explore the natural tendency of politicians to interpret issues of transparency and asset disclosure in political institutions based on their experiences in the governance of economic institutions.
Overall then, this project aims to ascertain if transparency in asset declarations – and the disparities in wealth between politicians and citizens that they bring to the fore – hang on different institutional foundations than the “varieties of capitalism”. This approach takes an opposite position to that of TI rankings and research on good governance indicators, which examine and compare anti-corruption policies, such as income and asset declarations, with the specified purpose of identifying “best practices” (Andrews, 2008). These analyses tend to disconnect practices from their surrounding context and organizations with which they interact. Consequently, they lose sight of a significant portion of the reasons for which these practices are so often perceived as “better” than others. The validation of a “regime effect” like the one that is anticipated by this project will serve to underscore the complementarity of transparency and anti-corruption measures in political and economic institutions.
Methodology and Implementation Plan
This project’s greatest challenge is without question the construction of a reliable and comparable data set on the wealth of politicians and their involvement on corporate boards. To this end, the project focuses on OECD democracies that, according to Djankov et al. (2010), impose the strictest transparency requirements in the disclosure of politicians’ assets. These countries’ public records are increasingly accessible online, which bodes well for the project. For example in France, asset declarations of members of the executive branch that were made public on the government’s website following the Cahuzac affair in Spring 2003 indicate that, in addition to President Hollande, eight of 37 government ministers average assets and investments worth more than one million euros. In the United Kingdom, the declarations of cabinet ministers indicate that in 2010, 23 of 29 ministers were millionaires, including the Conservative prime minister and his Liberal Democrat coalition partner. The richest member of the British government reported total assets of 10 million British pounds sterling, while in France the wealthiest minister reported a net worth of 6.5 million euros. In Greece, the richest minister is worth 3.4 million euros.
These figures give an idea of the research potential of a database built from the information contained in the most transparent public records. In several countries, TI takes an active part in the application of measures aimed at monitoring the wealth of public officials and access to information requests to public officials. TI headquarters in Berlin are collaborating on this project. TI, Group of States against corruption (GRECO) and World Bank databases are together being used to cross reference and supplement the data extracted from public records. This project’s first research question is to determine
which countries have the most comprehensive financial disclosure systems. The following indicators are being used to answer this question: disclosure statements on real estate property, investments, debts, income, expenses, bank accounts, gifts and travel, involvement on corporate boards, and enforcement mechanisms. The project’s first hypothesis is that the transparency of public officials’ asset declarations is likely to be greater in majoritarian political systems than in consensus ones. Hence, country rankings are being compiled following the Lijphart model, pursuant to its numerous applications, as previously examined. Each transparency indicator is being assigned a ranking value, thereby making quantitative regression analysis possible, to test the hypothesis of a “political system” effect. The second phase of the project involves extracting data on politicians’ net worth and their involvement on corporate boards, using the most transparent public records available, as noted earlier in this paper. This is the project’s most important phase, for which a considerable part of the budget is being allocated. This work requires dedicated teams of multilingual research assistants. The monetary values collected are being recalculated and standardized in US dollars in order to determine where the wealthiest – and least wealthy – politicians are based. Another task is measuring the net worth of adults, as well as household wealth, in order to compare these figures to politicians’ net worth. Our overall objective is to gain a better sense of the disparities of wealth between representatives and those they represent; a measure of what Bartels in the United States terms “income-based disparities of representation” (2005: 1). Credit Suisse publishes a Global Wealth Databook that calculates average wealth per person by year and by country. This anaysis is useful towards assessing the wealth gap with politicians. This research project is being undertaken in close consultation with colleagues who specialize in inequality meaurement, for the purpose of developing appropriate indicators. In the project’s third phase we intend to explain the variations in observed trends. This is the most theoretical phase of the project; the one that drives our proposed course of action. The central assumption is that the differences we note are “regime effects” caused by the complementarity of majoritarian and consensus political systems on the one hand, and liberal and coordinated market economies on the other. The Hall and Soskice framework concerns advanced capitalist democracies, and these are by and large the same countries we find in the cross section of OECD countries examined for this project. A number of qualitative case and comparative studies were undertaken to put this theory to the test. Given that the public disclosure of asset declarations is a relatively new phenomenon in many countries, the data collected from public records only allows us to take a “snapshot” of politicians’ wealth (roughly between 2000 and 2010). Nonetheless, from a methodological standpoint, this snapshot is acceptable as is allows us to verify the anticipated strong correlation between the “varieties of capitalism” and politicians’ wealth.
This ambitious and innovative research project will unfold over a five-year period. Its main purpose is to provide a stronger empirical and theoretical basis for the fundamental normative debate raised by critics of the “one percent” regarding the fairness and impartiality of political institutions, in light of the growing concentration of economic wealth. Hence, the project falls well within the scope of the SSHRC’s priority thematic area of “Innovation, Leadership and Prosperity”. The project’s expected outcomes will serve to advance knowledge on the factors that account for transparency in the administration of political and economic institutions, as well as the relationship between income inequality and political representation in advanced democracies.