The New Cultural Economy

In his recent article for Prospect, Anatole Kaletsky argues convincingly that in order to secure victory in the forthcoming Election Labour leader Ed Milliband must articulate an intellectual strategy based on a ‘new model of global capitalism that has been evolving since the 2008 crisis.’

Kaletsky states that ‘the key characteristic of [Labour’s new] economic model should be collaboration between business and Government’. In his model, public service and enterprise are not at odds, but rather coexist along a spectrum of delivery which serves 3 long-standing left-wing principles: ‘public ownership or control of production, government provision of social services and redistribution of income to limit inequality’.

A global success story

The UK’s Creative and Cultural Industries are, by any metric, a global success story. Whether it is increased visitor numbers at our leading heritage attractions and museums (reported this week by the Association of Leading Visitor Attractions – ALVA UK), innovative work in our theatres or the global export of our computer gaming industry, creativity is an economic powerhouse for a modern Britain.

Sustaining this success requires investment. No industry can survive or grow solely through the exploitation of past outputs. Sustained momentum requires the input of ideas, resources, skills and aspiration from successive waves of new enthusiasts. While a cycle of ‘cultural boom and bust’ may to a degree be inevitable, it ought to be possible to flatten the peaks and troughs with a more enlightened and long-term model for funding cultural services.

The successes of today’s Cultural Economy – the boom in visitors being felt across parts of the industry – may well therefore mask a coming bust based on an underlying trend of underinvestment and retrenchment, the impacts of which will only be felt a decade from now.

In considering how to reverse this trend of outward success and internal attrition, there is a great deal that the Cultural sectors (museums, galleries, visitor attractions, heritage sites) could learn from Kaletsky’s exhortation to the Labour leadership.

Avoiding over-simplification

Much has been made of the twin pillars of entrepreneurialism and philanthropy in discussions about the cultural economy post-2008. In practice, these discussions both essentially centre on the same mandate: “if Government is no longer able (or willing) to fund cultural services at pre-2008 levels through tax receipts, institutions must learn to extract money direct from the consumer.”

There is a simplistic view of this mandate which positions it as a lurch from enlightened and democratic socialism to the misapplication of capitalism and the free market. This is, however, an oversimplification which misses the crucial issue of the real nature of cultural services.

The past 20 years of cultural policy in the UK have been marked by a tendency to homogenise. We have spoken of the Creative & Cultural industries as though they were unified communities with a common set of needs and constraints.

In reality, the provision of cultural services in the UK is remarkably plural. A corollary of the arms-length principle has been a flowering of different styles and models of organisation which sets the UK apart. Indeed, a case could be made that the repetitive heating and cooling of public policy with respect to culture in the UK – particularly in the post-war era – has forged real strength into our cultural institutions.

A practical outcome of this process is that our cultural institutions are already well-engineered to extract money from visitors at different points from the pay-packet to the Lottery ticket to the gift-shop. The shift currently underway in the sector is not ideological or broad-brush, it is museum by museum, leader by leader with each individual organisation responding to its changing environment in different ways.

The argument for public subsidy as an efficient model

Building on Kaletsky’s model, museums, galleries and heritage attractions operate on a spectrum from commercial free-market enterprise to local, highly situated public services which depend strongly on local economies and public subsidy. Again, this plurality is a strength – making our cultural services more resilient by ensuring they are optimised to their specific circumstances. It does, however, mean that high-level policy mandates such as the cuts handed on by Local Authorities fall with equal weight on those who fundamentally depend on subsidies and those who are better-positioned to exploit other sources of revenue.

This dependency is sometimes wrongly characterised as a weakness, when frequently it is in fact the most efficient and cost-effective means of funding these services at a local level. An institution which provides local, highly situated benefits to its local community is best able to yield these benefits to the broadest cross-section where they are subsidised through tax receipts. Any other model necessarily excludes some members of the community, leading to an inefficiency in the distribution of those social and economic outcomes.

There is no other effective or reliable means of redistributing local wealth to ensure that cultural services continue to be open to the many and not the few. Time and again, we have seen that the sole application of the principles of the free market to culture artificially distorts the scope and focus of cultural services.

Not only this,but the costs of extracting money at the door rather than from pay-packets frequently cancel out any perceived economic advantage. Because a one-to-many relationship between a service provider and a customer is inherently inefficient, we lose the economies of scale which are one of the fundamental purposes of taxation.

This polarity between ‘subsidy’ and ‘enterprise’ belongs to the old, pre-2008 economics of cultural production and distribution. There is an opportunity to replace this thinking with a newer, more appropriate model which feels much more like a partnership between business, Government (nationally and locally) and the individual visitors or consumers of cultural services.

From ‘no cuts’ to a better process for change

Any incoming Government post-May 2015 will need to consider how to continue the fundamentals of austerity policy while retaining popular support. The next Spending Round represents a balancing act of spectacular proportion. Critically, it is highly unlikely that any Government between now and 2020 will be able to reverse the broad trend of spending cuts in Local Authorities.

This policy is now so entrenched and the process so well advanced that ‘no to cuts’ no longer looks like a realistic agenda, we have to call for ‘better cuts’ or ‘a more open, collaborative and constructive process for minimising the damage of cuts to local cultural services’.

In place of singular or simplistic narratives, we need to convince the incoming Government of the need to protect culture and art-sector funding where it can be protected, invest where investment is possible and work to mitigate the permanent damage of poorly-applied cuts where it is not.

We have to replace unsubstantiated rhetoric with a new economic model for the equitable future financing of cultural services from public and private sources. In constructing this new economic model we need to consider 5 elements: data, policy intervention, targeted subsidy, promoting cultural enterprise and a systematic programme of tax reform.

Data-driven cultural economics

The current generation of cultural professionals is long on beliefs but frequently short on facts. To win the support of policymakers, the first, and on the face of it, simplest questions we need to be able to answer are ‘how much culture do we need, how much does it cost to provide and what should be the balance of investment from public and private sources to cover this cost on an ongoing basis?’

Since the Digest of Museum Statistics (DOMUS) was discontinued in 2002, there has been no concerted UK-wide effort to gather data about the scale, health or development of the museum community. Although good data exists at a regional level, in Wales and in pockets here and there, the lack of a sector-wide observatory or body of statistical intelligence is a critical weakness in mounting any effective lobby.

It ought not to be beyond the capability of the museum sector, for all its plurality, to work with an academic centre of expertise to develop such a statistical hub for the industry. Doing so would transform the impact and value of our advocacy as a profession.

Understanding the role of cultural policy

The first rule of success in negotiation is only to seek from the opposite party what it is in their power to give. If they can’t make the concessions you need, then they are either the wrong person to be negotiating with, or you need to moderate your expectations.

Many calls have been made with varying degrees of force over the past 4-5 years aimed at securing change in the hearts and minds of policymakers, yet the majority of the damage done to cultural services at a local level is as a collateral fallout from the broader policy agenda of diminishing local Government, which itself stems from Treasury.

So in forming a pro-culture lobby, there is a powerful case to be made for picking the battles we are likely to be able to win (or at least influence). This means setting aside personal perceptions of any particular political group and focusing instead on articulating winnable policy propositions.

In the case of cultural organisations, with all of their acknowledged social and economic value, these winnable propositions abound – philanthropy, local economies, employment, skills, apprenticeships and the digital agenda all present opportune policy lines to which we can attach the case for culture.

Currently, however, the machinery for structured and strategic policy intervention is broken. For it to function effectively, we need to lend the sector’s voice to the pillars of influence (for museums) in this cultural economy – the Arts Council England, the Heritage Lottery Fund and the National museums and galleries.

Targeted subsidy & greater museum freedom

As set out above, even the most hardened neo-liberal would have to concede that there are some circumstances in which the unfettered free market isn’t necessarily the optimal model for delivering services to the public. Given that cultural services are highly sensitive to their local economies, and given the need to maximise the value of cultural participation by maximising its distribution there is a strong case to be made that subsidy through tax revenues and lottery receipts will always form part of the museum funding mix (in the UK at least).

This is not a model based on distributive social justice, although free access is a natural outcome, but rather based on good economic sense. Participation in culture benefits the economy by helping people to become more economically productive, therefore it makes practical sense to use tax revenues and lottery receipts to maintain maximal opportunity for participation.

To an extent, targeted funding from taxation has been demonised in the prevailing political and economic narrative. Subsidy has deliberately been manoeuvred until it becomes synonymous with dependency, and yet the two are not the same. Tax-and-spend is an organised system of distributive economics that has formed the basis of our own success, as it has in many other countries for countless generations.

For it to be effective, however, any administration needs to ensure that what it gives through taxpayer subsidy is not taken away through layers of bureaucracy. Subsidy without freedom is simply the best way to manufacture dependency, while at the same time hobbling the very value it is intended to create.

In developing a post-2015 policy narrative around the financing of cultural services in the UK, it is important both to demonstrate that an efficient model will always depend to some extent on subsidy, that this subsidy will always need to be interventive (to ensure equitable distribution of opportunities for participation) and that the value of this subsidy is maximised by ensuring museums’ freedom to invest and exploit the outcome.

Promoting cultural enterprise

Most museums in the UK are already enterprising in their culture – as mentioned above, the cyclical ‘boom and bust’ of cultural economics means that most are already finely-tuned to maximise revenues from different sources according to the prevailing climate.

There may well be a strong desire to encourage museums to be more enterprising. In reality, however, the earning potential of any individual museum is not some arbitrary fact – it is strongly sensitive to the local market, comparative services, the nature of its collections, its brand and so on.

The way to encourage museums to increase the proportion of their revenues from non-grant-in-aid or public sources is not simply to state the expectation, nor to provide external ‘catapult’ financing. It is to support a progressive programme of culture change. The former may deliver short-term revenue, but this is often at the expense of medium to long-term stability. The latter is very much more about improving the museum’s internal capacity to predict and anticipate the phases of boom and bust.

This agenda is already well-established in museums – programmes such as the Arts Council England’s Museum Development Programme are seeking to nurture exactly this kind of core organisational change to promote the long-term resilience and sustainability of our museums.

Systematic tax reform

When it comes to giving, tax matters. Time and again, evidence shows that a mature and effective system of corporate or private giving hinges on the development of a favourable tax climate.

Capital investment in cultural philanthropy without a matching programme of tax reform is a sticking-plaster, not a cure. Reformers often speak of migrating UK museums into a ‘US-style culture of philanthropy’ while conveniently forgetting the 30-odd years of progressive tax reform (not to mention the broader social context) which gave rise to it.

Without a systematic programme of tax reform in the UK (over and above Gift Aid and the Acceptance in Lieu Scheme), it is unlikely that philanthropic giving will ever reach a level (certainly outside the major conurbations) whereby it could replace diminishing subsidies from public funding.

Of course, tax reform is unpopular in the context of the prevailing political winds but again there is a strong economic case to be made. How much more efficient (and constructive) is it to engineer tax incentives for companies to support cultural programmes than it is to centralise tax revenues and use them to shore up those self-same services?

A call to the new Government

No Government wants to preside over the rape of UK culture. While museums (locally and nationally) may not make the list of policy priorities, they are near to the sensibilities of British voters. Nor is it necessary – at roughly £0.3-0.4bn annually, the public expenditure on museum subsidies through DCMS is already minimal relative to other public budgets. Factoring in spending through arms-length bodies and other sources, cultural spending is somewhere around 0.04% of annual Government expenditure.

That 0.04% unlocks such a vast array of benefits, socially, economically and in terms of secondary contributions to the creative and tourist economies that it would be a lunatic administration that allowed them to disappear. Not only on a simple cost-benefits basis, but also more broadly on the loss of the sunk investment in developing them (and the very much higher potential cost of rebuilding them in the future).

Any incoming administration stands to gain huge reputational capital by protecting the integrity of the UK’s heritage as an asset, at a far lower marginal cost than the building of roads and railways. It is incumbent on cultural organisations to develop winnable policy propositions and the evidence to support them. Armed with these, there is very significant potential to re-establish the rules of engagement between the Government and the UK sector based on a much more enlightened and collaborative model, and one which works to mutual advantage.

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