We tend to regard transparency as a universal antiseptic in matters corporate and regulatory. Worried about crooked managers? Increase disclosure requirements. Concerned about administrative rulings taken behind close doors? Require open hearings and allow for public comment. Want to know who is paying for your Congressman? Require full disclosure of all campaign contributions. Sunshine Laws are all based on the belief that in the bright light of day, government and markets tend to self-regulate.
But we don’t always want market behavior in public life. For example, voting by secret ballot was unheard of until Tasmania introduced it in 1856. It remained highly controversial for many decades thereafter and was known in the US as the “Australian Ballot”. No US President was elected by secret ballot until Grover Cleveland in 1892. One suspects that our portly President promptly noticed that nearly every voter he met assured him that “I voted for you” and learned to take such statements with a grain of salt.
Secret ballots made campaigns fair because they eliminated unsavory market behavior: the buying of votes with cash. Once votes were secret, vote buying was pointless since the buyer had no way of knowing whether the seller had honored the contract. Politics became more democratic – meaning that election outcomes reflected voter sentiment more and market power less. Today it is unimaginable that we would ask citizens to elect leaders in open meetings (although the tradition persists in some caucuses and we rightly insist that our legislators vote publicly in order to hold them accountable). Secret ballots may have reduced vote-buying, but it did not prevent politicians from selling their votes for campaign “contributions”. Campaign finance reformers fall back instinctively on a belief in transparency and favor full disclosure as a cornerstone of campaign finance reform. There is a powerful argument that this is precisely backwards and that contributions, like votes, should be secret.
Campaign finance reformers concerned about the pernicious role of private contributions on our public leaders seem to have overlooked the simple principle that transparency increases market efficiency and secrecy diminishes it. Most reformers instinctively favor full disclosure as an essential element of campaign finance reform. There is a powerful argument that this is precisely backwards and that contributions, like votes, should be secret. Instead, imagine a simple law, outlined four years ago by two legal scholars at Yale, under which a candidate could only receive funds from a blind trust managed by the federal government. Citizens, companies, parties, PACs, and lobbies could all contribute to any cause, party, or candidate they wish – but their contribution would pass through the blind trust. Candidates would receive the money but would no more know the source of their contributions than they know with certainty who voted for them.
This provision would powerfully change a donor’s expected return on investment. If the candidate to whom you are contributing cannot verify your generosity, you cannot invest with the expectation of any return beyond the benefit of a leader who shares your general political orientation. The need to restrict the size of contributions would be vastly diminished. Why would Big Oil, Big Labor, or Big Tobacco contribute to a campaign if there was no assurance of a payback? And how can a politician pay back a contribution whose source they cannot verify? Of course many citizens and organizations would assure a wide range of politicians of their undying financial generosity. Like voters, they would be rewarded with little more than a warm but secretly skeptical smile. The market for politicians will diminish as did the market for votes – and our republic will never look back.