Economics United Kingdom

In an era of austerity, reasons to fund the arts

Culture is a social language that we would be dumb without

John Maynard Keynes, the cultured economist, and his wife, the ballerina Lydia Lopokova

It is 70 years since a British government last had to take the arts seriously. In December 1939, in a world darkened by war, winter and blackout, a small group of civil servants and educators met to discuss the crisis in the arts. Great museums and galleries were empty, their contents packed off to safety from bombing. The theatres were shut, orchestras about to disband. The committee agreed that it was essential “to show publicly and unmistakably that the Government cares about the cultural life of the country. This country is supposed to be fighting for civilisation.”

In 1940, with an initial budget of £50,000 (about £2 million in today’s values) the Council for the Encouragement of Music and the Arts, mother to today’s Arts Council, was born. The Daily Express thundered: “What madness is this? There is no such thing as culture in wartime.”

No one pretends we are back in 1940. Our museums are jammed with visitors from all over the world. The West End has had its best year ever. London has too many orchestras. In 1940 there were civic museums and concert halls outside London, but now Britain enjoys a cultural infrastructure second to none, thanks to a National Lottery whose receipts have risen since the recession.

Yet the arts feel under siege. The Department for Culture, Media and Sport (DCMS) has to cut £88 million from this year’s spending. Deeper cuts are expected after the comprehensive spending review in the autumn. No wonder the Arts Council England (ACE) is desperate for help in making its case. After decades of public and private initiatives, reports, conference and consultations, we are still looking for a “rational” argument for funding the arts.

Perfect storm

One rational reason for not decimating cultural funding is that we are heading into a perfect storm. The strength of the British cultural economy is its well-balanced mix of private and public money. In 2008/09 the average earnings profile of an organisation regularly funded by the ACE was 47% box office, 31% from the arts council, 12% from local authority sources and other public funding, and 9% from trusts, foundations, donors and business sponsorship. National museums and galleries on average manage on one-third government money, one-third earned income and one-third fundraising and sponsorship.

This balanced economy gives organisations security to plan, but they have to be responsive to their public. And now things are beginning to wobble. Recession reduces disposable incomes, the assets of trusts and foundations shrink, business sponsorship dwindles, local authorities have to cut back, and the Treasury demands savings from the DCMS. Rationally, the resource with the longest purse—the government—should not withdraw support when others begin to fail.

But this is a short-term argument. There needs to be a case that stands up in good times or bad. Since the 1980s we have become used to hearing about the economic importance of the arts: they create employment, stimulate expenditure, attract tourists. Consultants have become adept at showing that a cultural facility has a “multiplier effect”: the money spent on it spreads its sweetness and light far out into the local economy. In the 1990s the “creative industries” were invented, a benign penumbra of business activities such as advertising that use cultural means to achieve commercial ends. The DCMS claims that the field of its responsibilities (including sport) accounts for 10% of gross domestic product.

There is no doubt that the arts have economic effects. Cultural investment is an important driver of urban regeneration. Glasgow’s year as European capital of culture in 1990, and Liverpool’s in 2008, are headline examples. But the Treasury doesn’t buy it. They can see through the “multiplier” calculations of the cultural boosters. They understand the meaning of “opportunity cost”. The money spent on artistic steel and glass could have been spent on an arms factory—and created more employment.

It was to compensate for the increasingly threadbare nature of the economic argument that in the 1990s a second line of advocacy was developed. It too is essentially instrumental, except that this time the benefits of arts funding are social. The New Labour government liked this argument, and directed that the arts council should use the arts “to combat social exclusion and support community developments”. The ACE found itself having to meet targets for health, education, employment and the reduction of crime—not truth, beauty or a sense of the sublime.

No one would deny that arts participation brings benefits. But they are even harder to prove to the number crunchers at the Treasury. It is difficult to demonstrate a value-chain between art and social enhancement, and difficult to measure the social enhancement itself. Ministers for culture became embarrassed by this, and in 2008 commissioned Brian McMaster’s report, Supporting Excellence in the Arts: From Measurement to Judgement, which was intended to signal a move away from targets. Unfortunately “excellence” is a concept without content. It may be judged in relative terms, but it does not lend itself to the Treasury’s idea of measurement.

To convince the public, and not just the government, an argument has to be made that shows that the arts are worth funding, in and for themselves. That calls for a more sophisticated form of cultural economics than is currently recognised at the Treasury. There is a market for culture, but culture does not depend on the market for its existence. The experiences the arts offer—pleasure, terror, insight, knowledge, release—are individual and hard to quantify, and these intrinsic aspects come before any attempt to translate them into economic terms.

To use the language of the 18th-century economist Adam Smith, the value of the arts “in use” precedes their value “in exchange”. Once something is deemed desirable, the market can indeed establish its commercial price. But although the market can trade in the products of culture, it cannot express the value of culture as a process, or what it does.

A cultural economics that captures the value of the arts has to understand value in use, and that involves broader ways of understanding ourselves and our world, for instance, anthropology and environmentalism. The value in use of the arts is that they help a society make sense of itself. They generate the symbols and rituals that create a common identity—that is why art and religion are so closely linked. Like religion, the arts give access to the spiritual. Art is a link to previous generations, and anchors us to history. Culture is a social language that we would be dumb without.

These anthropological arguments show why the government, as guarantor of the public realm, should take responsibility for ensuring that everyone has access to this language, and that it is both preserved and developed. For, as the environmentalists argue, it is necessary to intervene when a resource is at risk. The precautionary principle tells us we have a duty to future generations to ensure that our cultural assets are passed on to them. We also have a selfish interest in sustaining the richness and diversity of those assets. Creativity occurs through the interaction of different forms—life forms, or art forms.

When the market fails

Culture creates social capital, expressed as trust generated by a shared understanding of the symbols that the arts generate, and a commitment to the values they represent. It sustains the legitimacy of social institutions by ensuring that they are accepted, not imposed. Societies with an equitable distribution of cultural assets will be more cohesive, and more creative. Wellbeing, which is the true end of economic activity, depends on the quality of life that culture sustains. The word “culture”, after all, means “growth”.

Social capital—like economic capital—requires both regulation and investment. That the educated and well-off have greater access to the arts is not an argument for abandoning intervention to secure a more equitable distribution of cultural experience. Rationally, the government should be putting more funding into the arts because of the social capital they generate. There is a sound economic argument that when the market fails to provide certain kinds of goods thought useful, then it is necessary to intervene—health and education are the usual examples. The economics of the arts are particularly prone to market failure, for it is not easy to make the advances in productivity that technology facilitates in manufacturing. A symphony played on a synthesiser is not an efficiency gain.

It seems particularly ironic, then, that the creator and first chairman of the post-war Arts Council was the economist John Maynard Keynes. He believed that in a recession, governments should stimulate the economy. He also understood the use value of the arts. The decision taken in 1940 that led to long-term funding of the arts was not taken on economic grounds, or for reasons of health, social inclusion or the prevention of crime. But it was a rational decision, based on a rational argument: that we are supposed to be fighting for civilisation.

The writer is professor of cultural policy and leadership studies at City University London

More from The Art Newspaper


29 Sep 10
22:13 CET


Let's first consider a society’s creative nutrition as it informs an individual's comfort with risk. New ideas are fluid. Their very nature defies convention. A community with high creative nutrition flexes with change and moves with grace toward adaptation. Conversely, communities with poor creative nutrition are less skillful at anticipating change. Thus, they are destined to reactive strategies and are less effective at adaptation. When you fuel your constituents' creative nutrition first, a culture of risk taking takes root and, silently, shapes the space for "new". Habits form to welcome new ideas that conspire to innovate in the face of change. Our "culture climate" is at a pivotal point in this economy. We must re-dedicate ourselves and support high creative nutrition to both attract AND retain the finest minds in our nation and others. We are well on our way in preserving our high creative nutrition thanks to the minds at play in the London and here in Raleigh. LA.McClymont

31 Jul 10
7:44 CET


please what is the painter that made the portrait of Keynes and his wife ?

31 Jul 10
7:45 CET


Art has never been so bland and meaningless in UK. I guess the Establishment wants to transform London in an arty Disneyland Paris. Look at Tate Modern, it is entertainment for the masses and the tourists.

14 Jul 10
14:22 CET


Terrific article. Thank you. While there is a compelling case for public funding, access to those funds should consider management efficiency and effectiveness. Well managed organizations are far more likely to achieve the very positive outcomes you reference in the article.

12 Jul 10
15:44 CET


Interesting article - one i will share with many - but there is another side of the arts - It seems to the uninformed that the "arts" always has its hand out for funding which i agree is needed to sustain the quality of the museums and art institutions - but artists have a great economic impact when they are allowed the freedom and space to do so. In the l980-90 in Santa Fe - the artists themselves were one of the main economic drivers of the town - the artists lived - produced art- sold art then spent what they made in the town. Now outsiders have taken over an 80 year old art colony and most income derived goes elsewhere. Should we not open up a narrative on how artists themselves can be a economic stimulus to an area - if they have (as it used to be in sf.) a viable platform from which to work their own magic and and given the freedom to develop their own collectors? Should we re-look and revise the artist in studio sales and art colony concept?

12 Jul 10
15:44 CET


Bravo, Robert, Ruskin would be proud of you.

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