Democracy survives and flourishes on views and ideas. It thrives on debates involving such views and ideas and to that extent needs platforms from which these ideas and views may be given voice and representation. It is here that political parties form an important cog in the wheels of democracy. Practice of democracy requires well functioning political parties which may act as platforms from which different sections of the society may get its voices heard. In a democracy, this exercise of giving voice to various views and ideas culminates into that grand spectacle of adult franchise which like any other modern exercise involves huge monetary expenditure for which these parties invariably turn to the corporate world and thus begins the unholy nexus of politics and business. Many problem plaguing various democracies, like Naxalism and other insurgencies in India and gun control laws in USA, have been blamed on this unholy nexus of politics and business. The corporate donors donate huge sums of money but extract their pound of flesh by influencing the policies of the government resulting in flawed and distorted policy making which fuels discontent and taints the credibility of institutions of democracy.  This alleged bias eats into the credibility of institutions of democracy and hinders its functioning. This nexus is also self-perpetuating to the extent that anyone wishing to enter into the political arena in a democracy has to get entangled into this nexus.

Statement of problem

Given the magnitude of the exercise of adult franchise and the day-to-day functioning of political parties, the requirement of huge corpus cannot also be wished away. Therefore, what we need is a model where the financial needs of these political parties are adequately addressed and this unholy nexus is also broken so that policy making is not influenced in any non-democratic manner. Some solutions have been proposed for this problem, state funding of elections is the most prominent amongst them. However, this solution faces some problems. First amongst them is the problem of equitable distribution of funds amongst various parties as various parties may have varying requirements. It is difficult to decide which party should get what amount of funding. Even if this problem is not intractable, there is another which seems to make this solution completely unworkable. This relates to the unsustainable burden which such funding shall bring on the exchequer as elections happen too frequently in this country for the state to support the massive expenditure incurred during such grand democratic exercise of adult franchise. Also, the political parties do not only need funds during elections but they need it for their day-to-day functioning as well which in itself is a considerable amount. So even if state funds the election campaign the parties will still be in need of considerable amount of money for which they will have to fall back on corporate donations.

Therefore, we need to devise a sustainable model which achieves the dual purpose of securing finances of the parties and shields them from any unwanted business influence.

Need for a Paradigm Shift

In my opinion one such model, which ensures liquidity of parties without creating the business-politics nexus could be corporatisation of political parties. This shall entail introducing some market values and practices in the field of politics and therefore requires a radical shift in the way politics and political parties are perceived. Michael Sandel in his book, “What money can’t buy-moral limits of market”, notes with some apparent concerns that we are fast moving from a market economy to a market society. He argues that market sentiments are fast intruding into such aspects of public life which were traditionally reserved for other non-market values and raises obvious and valid questions against such intrusions. Although I agree with his general thesis, I am inclined to make politics an exception for a larger cause of making the democracy work better. Such corporatization shall be yet another instance of market values crowding out the non-market values in a domain which traditionally belonged to the latter values. But unlike many other areas this one, in my humble opinion, needs such crowding out.

brief outline of the model

In this model political parties may be incorporated as companies with people as their shareholders. These political parties may be public limited companies or privately held. The privately held companies may fund its political companies through their own money whereas the public companies may approach the public to subscribe to its shares and generate funds through such subscription. The funds generated by subscription of shares may be used by these companies to fund their expenses. Any money received from such subscription shall be properly recorded in the books of accounts of such political companies. These books of accounts shall be subject to scrutiny of some credible authority (preferably CAG) to examine whether they are being maintained properly or not. The more prominent decisions shall be taken in the board meetings, the minutes of which shall be duly recorded. All decisions in relation to the expenses shall be adequately disclosed to ensure utmost transparency. In return of the subscription, the parties may reward the shareholders through payment of dividends or other means and this reward shall vary according to the performance of the party. The shareholders shall not be getting any ownership rights in the functioning of the political parties and shall only be rewarded in monetary terms for their subscription. This way, we ensure the functional autonomy of the parties as they can continue taking decisions in the manner they currently do. To further encourage people to subscribe to the shares of political parties, a market may be developed for the trading of these shares to give it some liquidity. There will also be a ceiling up to which one individual may subscribe to the shares. This shall ensure that financial motivations do not trump other relevant considerations of the people when it comes to actual voting.

It is expected that the shareholding of all political parties shall be diverse and will cut across traditional ideological lines as the subscription shall not be motivated by sense of affiliation to an ideology but the actual chances of success of a political party. For example, today I might still support the congress ideology but would not like to bet my money on it for I understand that if elections were to be held today, the party shall in all likelihood suffer a thrashing defeat. It is also unlikely that financial exposure of this kind may influence the voting as in a highly fragmented society like India where it is difficult to predict the election fortunes

Some Concerns

Such a model, like every other radical idea begs many questions. A majority of these questions shall be regarding the procedural issues, like who shall regulate these political companies, what shall be the level of accountability, what set of laws will apply to them. Addressing all such questions shall be beyond the scope of this essay as a whole body of laws may be developed to address these procedural concerns. I therefore, shall restrict myself to some concerns with regard to the viability of the idea itself. To that extent there are 3 major problems which need to be addressed before the model can have an in-principle approval and an earnest inquisition into procedural framework may be undertaken. These problems are what I call the problem of participation, the problem of selective welfare, the problem of complete marketization of politics and the problem of monetary rewards.

The problem of participation

This problem refers to a potential and highly likely situation where a majority of people living in destitute in this country shall never be able to subscribe to the shares of these parties and this may lead to massive non-participation. However, the concern is slightly misplaced as the model does not require participation from every citizen of this country either. A political party may generate the requisite fund even when a mere 1% of the population subscribes to its shareholding. For example, assuming that a political party issues shares at a value of INR 10 which is subscribed by 10 lakh people, it will generate INR 1 Crore for the party. In a country like India with a population running into 100 crore, this should not be too difficult.

The problem of complete marketization of politics

There is also a fear that financial exposure to some parties may influence the voting of people and lead to marketization of politics. However, this again is extremely unlikely to happen for couple of reasons. Firstly, in this highly fragmented polity that we have, people shall not put all their eggs in one basket and in all likelihood be subscribing to many parties. This will mean that their financial exposure is to every party and will be a common factor in the choice and therefore decision to vote shall then continue to be influenced by traditional factors. Secondly, it is not necessary that to reward their subscribers a party necessarily have to be in power. So long as the party has significant presence in the representative bodies, it can generate income (like through public fee explained below) to reward its subscribers and once the subscribers understand this, the subscribers shall vote irrespective of its financial exposure. Even assuming that this is not the case, these concerns may also be ameliorated by putting a cap on the maximum subscription which an individual can have so that his voting is not influenced by monetary concerns alone.

The problem of Selective Welfare

This problem refers to a possibility where the political parties shall have the tendency to work only for the welfare of its subscribers and ignore that section of the society which does not subscribe to its shares. A prima facie look at the idea and the consequent model may raise such suspicion but a little thinking through suggests otherwise for couple of reasons. The subscribers to shares shall in itself not constitute a class as the subscription shall be heterogonous and shall be representing any specific interest group in itself and thus developmental plans or strategy may not be framed targeting this group specifically. Even otherwise, any party shall ignore the interests of non-subscribers (which shall be significant in number most of the times) at its own peril as in all probability their votes shall matter in the eventual performance of a party.

The problem of monetary rewards

 This concerns the problem of rewarding the subscribers so that they have an incentive to subscribe. This problem may be addressed through some innovative thinking. We may think of legalizing lobbying on the lines of USA which can help political parties generate some money to reward their subscribers. We can also impose some sort of public fee (which shall be some percentage of the total value of the project) on every project approved by the government. The money so received may be transferred to a common account and distributed amongst all the parties on the condition that it shall only be used for distribution to the subscribers.


It has been long since market exploited politics, it is time to reverse the trend. I strongly believe that its time that we started enforcing the virtues of transparency and accountability by adopting some market values rather than merely expecting them from institutions of public importance by persisting with the socialist models. Such a shift in our thinking and approach shall go a long way in curbing many malpractices in general and strike at the root of business-politics nexus in particular. Market politics after all is not a bad idea. It is time that the element of “by the people” in the government “of the people, by the people and for the people” is very small and if the government has to be truly democratic then people need to contribute beyond their hitherto restricted role of just casting a vote.

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