The FEC is allowing ‘foreign entities’ to donate to U.S. referendum campaigns. That’s a problem.

The FEC is allowing ‘foreign entities’ to donate to U.S. referendum campaigns. That’s a problem.

Most critics are missing the biggest concern

By Dov H. Levin

Yesterday at 6:00 a.m. EST

This month, the Federal Election Commission revealed that it had ruled that foreign private donors may contribute to state referendum campaigns, despite the 1971 Federal Election Campaign Act, which banned foreign nationals and entities from donating money or giving other material aid to a candidate or party in a U.S. election. To get there, the FEC ruled that ballot initiatives are not “elections” under federal law.

Pundits and politicians including Charlie Pierce at Esquire and Sen. Marco Rubio (R-Fla.) responded with disbelief and outrage. Many argued that this would encourage foreign powers such as Russia to intervene in U.S. domestic politics.

My research suggests that those worries are probably overblown — but that this ruling could enable private foreign corporations to influence referendums for their own profit.

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Foreign powers will not meddle in the U.S. more because of this decision …

In my book, I researched how and why governments are able to intervene in other countries’ elections and the effects of such meddling. I undertook for this purpose an in-depth archival analysis of seven cases in which a government seriously considered such meddling. I also constructed and examined a data set (PEIG) that compiled information about every time either the United States or the U.S.S.R./Russia intervened in another nation’s elections between 1946 and 2000.

Here’s what I found: Foreign governments tend to interfere in other countries’ elections when two conditions exist. First, the government believes that a significant candidate or party in that other country’s election would endanger the government’s interests; and second, another significant candidate or party in that election agrees to collude with the foreign government.

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Once a government decides to meddle, the next question is what exact methods it should use and whether it should do so overtly or covertly. The answer depends on the needs of the local candidate or party it wants to help and whether they think that citizens would react poorly to the foreign government’s help. For example, the U.S. government intervened covertly in the 1969 Thai elections largely because the side that it was aiding demanded complete secrecy, claiming that if the voting public found out, the leak would destroy it. Here’s what governments do not care about: the election laws in the country they are targeting. Neither the government nor the candidate or party brings the law up for discussion.

Naturally, the target country’s laws or regulations could indirectly affect the foreign government’s efforts, under certain circumstances — for instance, if those laws made particular activities easier or harder to carry out.

But the new FEC decision would not have such an effect. If, for instance, Russia used a state-owned firm like Gazprom to openly donate to one side in a referendum, that would technically be legal now. But, regardless of legal technicalities, any observer would be able to spot the connection to the Russian government — and opponents would most certainly pounce on that link, emphasizing it in campaign attacks. Most Americans would probably recoil from such outright foreign meddling, especially by a country many perceive as an adversary — and the donation would lead to a domestic backlash that would hurt rather than help Russia’s cause. Knowing that, the Kremlin — and other foreign powers — are highly unlikely to try something like this in a U.S. referendum.

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Of course, Russia could try to avoid backlash by using a foreign shell company to finance one side. But it would be easier, more effective and just as feasible to hide donations through a U.S. shell company, which was already possible.

… but it’s harmful for other reasons

The FEC’s ruling will make it easier for private foreign corporations to meddle in U.S. referendums. Such companies are far more sensitive to legal concerns, since the U.S. government can easily punish them for breaking U.S. laws, whether through the U.S. courts or with other tools such as targeted sanctions. Most foreign corporations avoid getting involved in any way in the domestic politics of their host countries. Nevertheless, some corporations are willing and have plenty of motives for trying to influence various nations’ politics, overtly or covertly. For example, in 1971, Gulf Oil secretly donated $3 million to South Korean presidential candidate Park Chung Hee, which Park’s campaign used to buy votes.

If donations needn’t be secret, unscrupulous foreign firms have fewer limits on their attempts to influence potential markets or improve their products’ competitiveness. In fact, companies are already doing so: The ruling came in response to a foreign mining company’s donation to block a ballot initiative that would have added regulations on water pollution in mining. Or an unethical European tech firm could try to kneecap its competitors by subsidizing a California referendum that would undermine Silicon Valley companies’ business models or R&D efforts. Some members of Congress say they’re planning to undo the FEC ruling by passing a law against such donations. They may wish to emphasize their desire to prevent foreign firms from unduly influencing American decisions.

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Dov H. Levin is an assistant professor in the department of Politics and Public Administration at the University of Hong Kong and author of “Meddling in the Ballot Box: The Causes and Effects of Partisan Electoral intervention” (Oxford University Press, 2021). The views expressed in this article are those of the author and do not necessarily reflect the views of the University of Hong Kong or of the department of Politics and Public Administration.