Friday, December 15, 2006

The moral hazards of Liberal fundraising

The Globe has a story today about how the Liberal Party is going to hold fundraisers to pay off the collective leadership debts of all leadership candidates. On the face of it, this seems like a nice show of unity. But, on deeper thought, it obviously invites a moral hazard, especially if candidates are given money proportionate to their debts. The only way the party can avoid this is by distributing the dollars entirely evenly between the candidates (i.e. total raised/# of candidates), or, even better, by giving them a share of the money equal to the their first ballot placement (i.e. total raised*share of first ballot). If the money is distributed proportionate to debt, then it just encourages behaviour like Bob Rae's (borrow tonnes of cash from corporate donors) and discourages action like Michael Ignatieff's (work your tail off through countless small fundraising endeavours).

I am glad that there is unity in the Liberal party. It's good for them and good for our democracy. But unity shouldn't overcome reason, and there seems little justification, in my mind, for rewarding foolish behaviour during the leadership race. If they do, expect to see a lot of blown banks after the next race.

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