Creativity and Competitiveness:
Art in the Information Economy
Harry Hillman Chartrand
WE LIVE IN CHANGING TIMES: in a time of transition from old ways of earning a living; of old ways of relating to one another, and of the old place of Canada in a world that is fast becoming smaller and ever more challenging to past prejudices and preconceptions. In this age of confusion, it is easy to overlook truly important developments and fail to separate their factual from fictitious implications.
The emergence of the so-called "Information Economy" [l], propelled by computer chips and satellites, is a modern myth that has surfaced in public consciousness during the last generation. Like all myth, it contains both fact and fantasy. It hides as much as it reveals. It has mesmerized us with marvelous new gadgets processing information faster and faster, but without apparent concern for what is being processed. It is like a verb in search of a noun.
If this myth is to become a reality, if its human face is to appear, then another facet of the Information Economy must be cut and polished through the grinding of public policy debate: the role and contribution of Art. To assist in this consciousness-raising, this paper will address four interrelated questions:
1. What is the Information Economy
What is the Information Economy?
Through the course of history, the sources of national wealth have changed and expanded.  Once upon a time, only farming, fishing and mining were considered productive. During the Industrial Revolution, manufacturing became the principal source of both national wealth and employment. At the end of the 20th century, the service industries have become the largest employer. (70 per cent of Canadian employment .in 1989 compared to 40 per cent in 1946)  and information has become a new source of national wealth. Economic history can thus be seen as the progressive shift from production of material goods towards production of services and information. 
To a degree, it can be said that Canadian economist Harold Innis was the father of the Information Economy. He was the first to recognize communications as an economic staple. Beginning with analysis of the Canadian economy evolving through a progression of export staples from fish to fur to wheat , Innis turned to the economic impact of communications. [6,7] One of his students and colleagues, Marshall McLuhan, took Innis's insight, first to "the medium is the message", and then to human consciousness evolving in response to new electronic media.  At the end of his career, however, McLuhan also returned to Innis with exploration of the impact of the alphabet. 
Today, it is generally accepted that the so-called information Economy is the leading edge from which national wealth flows. Information and knowledge, i.e. organized information, provide the basis for national comparative advantage and specialization in the world economy.  Phrases like "computer literacy", "research and development" and "science and technology" have become incantations in the public policy debate about the Information Economy, power phrases that highlight the shortcomings of the existing economic order and point the way to a more competitive future for Canada.
But the Information Economy is substantially different from previous economies. For one thing, the production process for new knowledge - generally called "research" - is unlike the routinized methods used to mine coal or make an automobile. As well, those who produce new knowledge, e.g., scientists, are often rewarded for being first to publicly share the good news, while those who apply new knowledge for profit treat it as a private good to be protected from competitors.  Information and knowledge can also be much more easily stolen than can an automobile or a steel factory. Different laws are required if markets are to buy and sell information effectively. A new public policy perspective is required if a nation is to foster and promote production of information and reap its economic benefits.
The Information Economy also involves much more than scientific and technical knowledge which has so far served as the focus of public policy debate. It involves more than production of information, and more than information for the purpose of producing material goods.
Philosophically, if organized information constitutes knowledge, there remains another level in the information hierarchy: "wisdom". The "information explosion" has become a cultural artifact. New knowledge systems or databases have sprung up like mushrooms in many fields of endeavour. But it is an open question whether wisdom has increased. We know more and more about how to do things, but less and less about what is worth doing.  This may reflect increasing societal controversy about values and experience in the information-knowledge-wisdom hierarchy of human understanding.
On a more prosaic level, the Information Economy means monetarization of information.  It does not promise a Golden Age of free-flowing information.  In fact, in its earliest stages, it has meant that information once freely available is now more, not less, costly. As well, the Information Economy involves consumption of information, something too often overlooked. Because of such oversights, the contribution to and role of Art within the Information Economy have also been underestimated or simply ignored.
Art has been described in many ways. It has been called the use of sensuous media to represent the underlying nature of reality; the manifestation of pleasure or emotion; a psychic symbol or symbol of feeling; a free, self-gratifying activity resembling play; a demonstration of the inner workings of the universal will; direct intuitive vision.  But within an Information Economy Art can most easily be understood and explained in contrast to Science.
If Science is the study of the outer, material world, then Art is the study of the inner, subjective world of the individual. If Science has a "pure" research or "knowledge-for-knowledge's-sake" sector that is "value-free", then Art has a corresponding "art-for-art's-sake" sector that is "value-laden". If Science generates information usefully applied to improving the physical comfort and well-being of people, then Art generates information that can be usefully applied to improving their inner comfort and well-being as well as their relationships, e.g. national identity.
If Science is systematic and formulated knowledge, then Art is experiential knowledge, i.e., one learns by doing. Thus Art retains apprenticeship and craft traditions of master classes lost to the rest of the economy. If Science generates technology of the head, then Art generates technology of the heart. This comparison is not as far-fetched as it may appear at first sight. The word "technology" comes from the Greek meaning "reasoned art".
Art and Science are the most information-rich sources of production in an Information Economy. But, while the contribution of Science is, widely recognized, that of Art is generally ignored. To put contributions of Science and Art in perspective, consider that after defence products (resulting from scientific research), the largest net export of the USA is entertainment programming emerging from Art. [l6] The global entertainment industry is estimated at $150 billion per year, and growing at a rate of fifteen per cent annually. [l7]
There are, however, significant differences between artistic and scientific information. First, artistic knowledge, particularly repertoire such as scripts and scores, is unlike scientific knowledge. In Science, knowledge depreciates through time, e.g., Newton knew less than Einstein. In Art, however, knowledge tends to appreciate and accumulate. King Tut, Shakespeare and Bach still speak, still sell. In terms of the popular arts, film libraries have now become billion-dollar assets in giant media takeovers such as the recent acquisition of Columbia Pictures by the Sony Corporation. Thus, maintenance of classical repertoire, art forms and works of art provides ongoing inspiration to contemporary creators and standards against which their work can be judged.
Second, while production of information in Science leads to profit through patent protection, information production in Art leads to profit through copyright. In fact, intellectual property rights are the legal foundation for the industrial organization of both Art and Science. An extreme example illustrates the role of copyright in the artistic sector of the Information Economy. Consider a literary work which becomes a play through the licence or sale of copyright. In turn, the play becomes a film which, in turn, is spun off into posters, toys, T-shirts and a soundtrack. Both the film and the soundtrack are broadcast on television and radio. Eventually a book is published about the making of the movie, and then a sequel is produced.
Even museums and archives are related to copyright in that most artifacts and documents they contain are in the public domain, i.e., copyright has lapsed through time. In the future, however, Heritage Design Rights (HDRs) for reproduction of moldings and vernaculars of heritage buildings and sites may provide a new revenue source for historical preservation and conservation. Nonetheless, it is the exploitation of revenue streams implicit in copyright that has made commercialization of Art possible, and it is upon such income that Hollywood has become a global economic force while Stanislaus and His Tractor does not sell even in the Soviet Union.
But even as physical capital, Art is a major asset. Take visual art: between 1969 and 1989, the average rate of return on art as investment was higher than all other capital investments in the USA. According to the Economist magazine in its July 1, 1989 "Economic and Financial Indicators 2", coins provided the best return, gold the worst - demonstrating the investment potential of a combination of aesthetic and scarcity value. Roman coins will 'never be minted again, but the supply of gold will constantly grow.
While Old Masters and Chinese ceramics may be the domain of the wealthy, for the average citizen, after buying a house and car, after paying for the children's education (assuming one has children), the most expensive purchase is the home entertainment centre (HEC) - TV, VCR, CD, DAT - almost all of which are manufactured in Japan or Europe. But the HEC relies on copyrighted software and programming, i.e., information emerging from Art. The increasing linkage between "hardware" manufacturers like Sony and entertainment "software" highlights the increasing interdependence between Art and Science in the Information Economy.
Third, Art, unlike Science, is both information-rich and labour-intensive. This is a helpful combination in a capital-intensive Information Economy threatened by widespread unemployment. There are, in fact, two distinct arts-related employment populations. Together they make up four to five per cent of the labour force, larger than primary agriculture. The one group is the arts labour force, including workers who use arts-related skills in day-to-day jobs - artists and their artificers, including curators, librarians and camerapersons. The rapid growth of the arts labour force demonstrates the accelerating importance of this segment of the Information Economy as an employer. From 1971 to 1981, the arts labour force grew 74 per cent, compared to 39 per cent for the labour force as a whole. Between 1981 and 1986, the arts labour force increased fourteen per cent to 311,610 workers, compared to a six-per-cent growth in the total labour force. According to the Census of Canada, from 1971 to 1986, the arts labour force grew more than twice as fast as the total labour force, 99 per cent versus 47 per cent for the total labour force. 
The other group is the arts industry labour force made up of workers employed in industries like advertising, publishing, motion pictures, live staged events, fine arts schools and libraries. Current estimates exclude the jewellery, fashion and interior design industries. Between 1971 and 1981, the arts industry labour force increased 58 per cent to 236,610 w o r k e r s, compared to a 39-per-cent growth for the total economy. The arts industry was, according to the 1981 census, a larger employer than any manufacturing industry reported by Statistics Canada.  Unfortunately, arts industry employment data from the 1986 census is not currently available. However, by 1985, the arts industry had become the ninth largest with revenues of $11.3 billion, and the third largest with salaries and wages of $3.8 billion, compared to all twenty-two manufacturing industries recognized by Statistics Canada. 
Fourth, Art research, unlike Science, does not take place in the university. With the exception of music and literature,19 Art was never part of the ancient or medieval liberal arts curriculum.20 It was only in the Renaissance that the Fine Arts Academy emerged as a centre for visual arts education.  In theatre and dance, there was no formal university training in the English-speaking world until the 20th century.  The independent status of the music conservatory also serves as evidence of the separate institutional pattern of learning pursued by Art. Therefore, the role of the university in Art, unlike Science, is historically recent and small.
Business and government do not generally recognize that non-profit professional Art is the "research and development" sector for the commercial and applied arts. They do not see non-profit Art as R&D because non-profit performing arts companies, visual and media art galleries, and literati publishing houses are not generally associated with the traditional centre for pure research: the university. In fact, of sixteen major industries in the US, the entertainment industry is the only one that spends nothing on research and development.  In fact, the commercial and applied arts rely entirely on non-profit Art, supported by government and private-sector philanthropy, to provide the new product, talent and technique that create the information edge for tomorrow's profits.
Another addition to the public policy lexicon in the last decade has been the word "competitiveness". Beyond traditional price competition, competitiveness involves corporate and national responsiveness to changing technologies and markets. It involves quality of output and customer service. It also involves the collateral issue of national education policy, particularly with respect to literacy, mathematics and science.
Competitiveness has become an issue partially in response to the relative decline of the North American economy since the Oil Shock of the early 1970s. Post-war Canadian and American dominance of industries like automobiles and home electronics has given way to Japanese and European pre-eminence. This has had a dramatic impact on the Canadian standard of living. Real salaries and wages in Canada, allowing for inflation, have not increased significantly since the early 1970s. Trade deficits, excluding raw materials and sales of automobiles to the US, have stabilized at historically high levels. This in spite of a significant devaluation of the dollar since 1985 against European and Japanese currencies.
The deteriorating position of Canada in terms of international competitiveness can be demonstrated by two findings. First, with respect to the American market, Canada's share of technology-intensive imports declined from 22.8 per cent in 1971 to 9.4 per cent in 1986.  Second, according to the International Competitiveness Report released by the Swiss-based World Economic Forum in June 1990, Canada ranked eleventh out of 23 countries with respect to product quality. 
The dollar remains low; interest rates remain high but employment is relatively stable because the service sector has continued to grow as consumers buy increasing quantities of better made and better designed foreign products in preference to goods made in Canada. Whether one accepts the conspiracy or the blunder theory of history, as Bob Dylan, bard of the 60s cultural revolution, sang, "Something is going on here, and you don't know what it is, do you, Mr. Jones?" 
To date, public policy debate about competitiveness has tended to focus on three issues: (a) level playing field, (b) innovation, and (c) education.
As with the Information Economy, in public policy debate about competitiveness, the role and contribution of Art have been underestimated or ignored. It has been said that those who do not learn from the mistakes of history are destined to repeat them. With respect to Art, this seems to be the case in Canada today. To demonstrate, each of the three competitiveness issues will be examined and the contribution of Art described. Finally, the specific economic role of Art in overall industrial competitiveness will be outlined using the examples of product design and advertising.
The issue of a level playing field assumes, among other things, that some countries are protected from "fair" competition by non-tariff barriers and ways of doing business that are alien to free-market economies. This argument is favoured by some business and government officials in the US. They argue that cultural differences make it difficult, if not impossible, for Canadian and American business to compete in, for example, Japanese and other East Asian markets.
Whether it is in retail trade or in the social compact between labour and management, such societies are often considered so alien that "normal" business practices are not possible. Thus, in Buddhist cultures, one should never touch the top of another person's heal, nor should one show the soles of one's feet. This is bad taste taboo. Similarly, in Islamic cultures, one should not consummate a business deal by sending the client a. case of Scotch; unless one wants to be publicly flogged. The response by some American businesses is that other cultures should be more rational and businesslike - that is, become more like us!
Beyond explicit eccentricity, this is bad economics. Adam Smith, the father of economics, recognized the role of the cultural matrix in economic behaviour.  He knew the Spanish economy was Spanish and the English economy was English. Elsewhere I have noted how market economics lost its original sensitivity to culture and became an abstract discipline void of cultural context.  If culture is a factor in economic behaviour, as suggested by Smith, then Canadians must become aware of cultural bias implicit in our own society. A case in point is public funding of Art.
From the beginning of Western civilization, the relationship between Art and the State has occupied the minds of philosophers, statesmen and dictators. Plato and Aristotle were convinced that Art, unguided by censorship and control, would destroy the State. Fear of the potential of art-for-art's-sake continued through the Middle Ages. In Umberto Eco's medieval tale The Name of the Rose, it is Brother Jorge's fear of the power of comedy to endanger the authority of the Church that feeds a tale of murder and causes the destruction of a great library the collected enlightenment of an age by the fires of censorship.
Through to the modern age, the State has generally exercised careful, considered control over Art. Louis XIV used Art to glorify himself and his alter ego, the French State. In Nazi Germany, all modern means of artistic expression - from radio and television to the motion picture - were harnessed in the service of a cause so evil that colour film of the Nuremberg Rallies has never been released to the public by the American Government, which holds negatives and positives in protective custody. What in scratchy black and white is ancient history is, to the modern eye, a symbol of the power of Art to serve evil in living colour. Art is not summum bonum; it is not "all good" any more than physics is.
In Western Europe today, the State is still the architect of cultural life, treating Art like other social responsibilities of government such as health, education and welfare. In Eastern Europe and the Communist Bloc until recently, Socialist Realism defined the relationship between Art and the State: socialist in content and realist in form. All else was counterrevolutionary, and offending artists were class criminals. In fact, only English-speaking countries separate Art from the influence of the State. Why?
It was because of Cromwell and the Puritans, who excised art and music, laughter and gaiety during the English Civil War of the mid-1600s. Black and white was all that God would tolerate in His Commonwealth, this land England. With restoration of the monarchy, however, Art took savage revenge with a hedonism unparalleled in the history of English Art - Tom Jones, Fanny Hill and Restoration plays are examples.
The scar left by the power of Art, first controlled and then unleashed, helps explain English ambivalence towards Art. Furthermore, until the republican revolutions of the late 18th century, English-speaking countries were the only ones in which the Commons controlled public spending. And the Commons were simply unwilling to support "aristocratic indulgences" such as Art.
The only exception was Art lotteries. The first collections of the British Museum were funded through a lottery approved by Parliament in 1753. Modern use of lotteries to support Art, beginning in the 1970s, is not therefore without precedent.
Thus, between the 1640s and the Second World War, the official policy of public support to Art in all English countries, including the US, was "no support". At the end of the War, the English world was faced with clear evidence of the power of Art in the hands of Hitler and Stalin. This led to modification of traditional hands-off through a unique English compromise: the arm's-length arts council, funded by, but independent of, the State.
Such councils exist only in English-speaking countries. They reflect historical English cultural bias against Art. Over the last decade, these councils have become increasingly controversial. The Arts Council of Great Britain, the oldest national arts council, created in 1945, has recently been regionalized. The Australia Council has been displaced by direct government grants to the Sydney Opera. The Canada Council is financially frozen in a fifteen-year battle with government over political and administrative differences. The US National Endowment for the Arts, born in controversy, continually hovers on the edge of destruction. In fact, public funding of Art at arm's length from political influence is a very fragile flower with unique and recent English cultural roots.
This anti-Art bias has, as will be demonstrated, implications for Canadian competitiveness. Many cultures do not have such ambivalence towards Art. For example, in most European countries, conflict between Art and the State appears resolved. The State accepts Art as a public responsibility. It pays well for culture (including language and Art) as part of an integrated national defence. There is no arm's length between Art and the State. They have also been relatively successful in marrying Art and industry. Thus it is IKEA furniture from Sweden, not Canada (the largest timber producer in the world), that has successfully combined aesthetic and utilitarian value at an affordable price and opened a 240,000square-foot store in New York.  Thus, with respect to the cultural dimension of a competitive level playing field, it can be said, "People who live in glass houses shouldn't throw stones."
Second, the need to enhance industrial innovation is a theme particularly strong in the Canadian debate. The Economic Council of Canada and others have come to recognize innovation as critical to future economic growth and development.  In this regard, a 1985 survey of senior executives in a number of countries showed that only 43 per cent of Canadians considered innovation an important issue, compared to a world average of 90 per cent.  Commentators have also noted the critical difference between R&D and innovation, and the success of Japan and Sweden with respect to the latter.  While R&D can easily be expropriated by competitors, the ability to apply R & D - generally called innovation - is where profits emerge.
There are three ways in which Art fosters industrial innovation. First, Art promotes a psychological and social climate in which industrial innovation and diffusion of new technologies can more readily occur. Art sensitizes entrepreneurs, managers and employees to the context of change and enhances their ability to respond in a positive and constructive manner.
An avant-garde of contemporary artists stretches the envelope of established values and views which sometimes distasteful to the public, sometimes eagerly embraced - always strives to be new and innovative:
Culture has become supreme for two complementary reasons. First, culture has become the most dynamic component of our civilization, outreaching the dynamism of technology itself. There is now in art as there has increasingly been for the past ten years - a dominant impulse toward the new and original, a self-conscious search for the future forms and sensations, so that the idea of change and novelty overshadows the dimensions of actual change. And second, there has come about, in the last fifty years or so, a legitimization of this cultural impulse. Society now accepts this role for the imagination, rather than seeing culture, as in the past, as setting a norm and affirming a moral-philosophic tradition against which the new could be measured and (more often than not) censured. Indeed, society has done more than passively accept innovation, it has provided a market which eagerly gobbles up the new, because it believes it to be superior in value to all older forms. Thu our culture has an unprecedented mission: it is an official, ceaseless search for a new sensibility. 
Second, there is the related issue of industrial location. While traditional industrial location theory suggests companies locate in a particular community for access to markets, raw materials and energy supply, beginning in the 1960s many companies began to locate according to the amenities available in a given community, e.g., good weather, easy access to cultural, educational and recreational facilities, etc. In this regard, it has been said, "What sunshine is to Florida, theatre is to London."
The tendency to make industrial location decisions according to a community's amenities has been amplified by the shift from traditional smokestack manufacturing to high-tech industries. Observers suggest that jobs now follow people in high-technology industries rather than people following jobs. To attract and retain scarce, highly trained high-tech workers, companies and communities must offer an attractive quality of life, including Art:
An increasing number of businesses ...find that the cultural ambience of a community influences whether executives and workers including marketers, of course - want to work and live there. In recruiting, companies frequently emphasize two matters very much related to the arts: the cultural facilities of the community in which the companies are located, and the corporation's involvement in the arts. 
Construction of cultural facilities in communities across Canada during the last decade partially reflects the perceived need to increase cultural amenities to compete for the industrial location of new companies. Cultural facilities have gained importance in economic development plans of many communities because corporations, urban planners and developers are attaching: added significance to the physical and social environment of the workplace itself. 
Third, Art plays a role in maintaining a diversified industrial structure by acting as a focus for small-scale entrepreneurial business. The artist, by nature, is a risk-taking entrepreneur who does not readily submit to organizational goals:
In consequence ...the artist functions as an independent entrepreneur... or...as a member of a very small firm which he can dominate or in which he can preserve the identity of his work. A few industries the motion picture firms, television networks, the large advertising agencies - must, by their nature, associate artists with rather complex organizations. All have a well-reported record of dissonance and conflict between the artists and the rest of the organization ...Frequently the problem is solved by removing actors, actresses, scriptwriters, directors, composers, copywriters and creators of advertising commercials from the techno-structure ...and reconstituting them in small independent companies. The large firm then confines itself to providing the appropriate facilities for producing and more importantly - marketing, exhibiting or airing the product. Similarly painters, sculptors, concert pianists and novelists function, in effect, as one-man firms or, as in the case of rock, dance and folk music groups, as small partnerships and turn to larger organizations to market themselves or their products. 
In high-tech and other industries employing "creative" personnel, increasing recognition is being given to the need for small entrepreneurial business to cope with an economic environment characterized by rapid technological change and the need for innovation. The arts industry was the first to adopt such an industrial structure.
The poor performance of students in international comparisons has fostered a "back-to-basics" movement in both the US and Canada, with particular emphasis on literacy, mathematics and science. The comparative failure of the Canadian educational system has occurred in spite of a high level of spending which in Canada, as a percentage of Gross Domestic Product, is higher than in the US or Germany.  But it is not just a failure with respect to science education that contributes to the Canadian problem of competitiveness.
English-speaking culture has never been comfortable with an education. In Britain, until 1814, the Statute of Artificers regulated training and employment in the craft guild tradition. In that year, responding to the de-regulation or laissez-faire temper of the time, Parliament abolished the Statute. In short order, the guild system collapsed; the labour market became flooded with unskilled workers. By 1835 the quality of British production, particularly in textiles, had declined to the point that the British Board of Trade appointed a Select Committee to investigate. The Committee called for the marriage of Art and Industry in order to maintain British competitiveness with European rivals who actively promoted Art and Design. The result was the establishment of the first school of design at South Kensington in 1836. 
Similarly, in 1870, Massachusetts became the first American state to make art education a requirement in the public schools through passage of the Drawing Act. The Act resulted from pressure from Boston manufacturers who argued that European students were trained in design and drawing, and therefore American manufacturers suffered a competitive disadvantage.  Within two decades, the same argument served to introduce art education into Canadian schools. 
During this period, the most eminent economist, Alfred Lord Marshall, explicitly recognized the importance of Art to economic life when he wrote that "it is every day more true that it is the pattern which sells the thing".  Since the Great Depression of the 1930s, however, the contribution of art education to national income was, in effect, forgotten in Canada. Amnesia partially resulted from the triumph of the Pestolozzian tradition in art education - creativity and expression which displaced the economic rationale. The success of this upper-class concept also reflected the impact of the art-for-art's-sake movement which in the mid-19th century began to withdraw from what many artists considered the dehumanizing effects of the Industrial Revolution.
There is another relationship between Art and the Information Economy. Just as the physical sciences are the source of physical technology, Art is the source of what can be called design technology, or, in French, la tecbnologie conceptuelle. The contribution of design to the economy is elegance, a term also used in economics, mathematics and the physical sciences. It expresses Occam's Razor, a guiding principle of the scientific method: the fewest assumptions for the maximum explanation. Elegant also means "ingeniously simple and effective", or "more for less".
Aesthetic design is different from technical or functional design such as a more efficient automobile engine. Its impact on consumer behaviour involves what has been called "the best looking thing that works".42 If a consumer does not like the way a product looks, he or she may not even try it.
The fact is that the best looking things that work tend to come from abroad. When the design advantage of Europe43 and Japan is combined with the wage advantage of the Third World, then Canadian producers are left with a narrowing mid-range market. This combination of design and wage disadvantages partially explains the de-industrialization of Canada. Improved productivity through robotics and new technology may lower costs of production, but only improved design will secure for Canadian producers a competitive share of the growing, up-scale, "Yuppie" market.
Beyond product design, Art plays another critical role in the Information Economy: advertising - perhaps the most pervasive and persuasive aspect of the information Economy. It is generally forgotten that advertising is the informational lubricant of the market economy. And advertising, to a great extent, involves the application of the literary, media, performing and visual arts to sell goods and services. Actors, dancers, singers, musicians, graphic artists, copywriters and editors are employed to sell everything from soup to nuts, from cars to computers, from beer to toilet paper. In fact, more artists are employed through corporate advertising than through corporate giving to non-profit Art. The manipulation of the emotions of consumers through advertising, the reasoned application of Art to place products in a positive context,44 highlight the role of Art as the technology of the heart within the Information Economy.
The economic role of Art was identified by the Royal Commission on the Economic Prospects of Canada when it reported:
There is, then, another aspect to culture, namely good taste, good design and creative innovation, that should enable smaller industrial economies to compete effectively in the world economy ...In this endeavour, higher quality implies an organic relationship between business and engineering, on the one hand, and design and craftsmanship on the other...High quality products, technologies, plants, homes, cities and locales require the longrun supply of artists ...governments must support ...the arts. The long-term return from investment ...is real and substantial. In the absence of strong public support of this sector, Canada will not reap these benefits. Governments at all levels should increase their contribution to their respective arts councils. 
According to The Concise Oxford Dictionary "creativity" derives from "creative" meaning "inventive, imaginative; showing imagination as well as routine skill". It has been recognized by many observers that the psychology of the creative process is an area of clear commonality between Art and Science.  In both, creativity occurs when an individual steps beyond traditional ways of doing, knowing and making. Thus the process which brings advances to Science - those leading to new paradigms cum Thomas Kuhn's The Structure of Scientific Revolutions  - is a process of human design comparable to artistic creation. It is not logical induction or deduction which work well within an existing paradigm.  As well, the norms of artistic design are inherent in the creative act - in the process, not in the object. The parallelism between artistic and scientific creativity highlights why vigorous Art fosters scientific and technological innovation in the broader economy.
Whether in the basement inventor, experimental scientist in white lab coat, choreographer, novelist, painter or playwright, it is the creative act that generates the new knowledge that fuels the Information Economy. At the core of this new economy is the buying and selling of new ideas, inventions, styles and techniques. The market for creativity constitutes what I have called elsewhere the Fourth Sector of the modern economy.  The first sector is farming, fishing and mining; the second is manufacturing; and the third is services.
The most important law affecting Art and creativity is copyright. Copyright and other forms of intellectual property legislation are justified as a protection of - and incentive to human creativity which otherwise could be used freely by others. In return, the State expects creators to make their work available to society as a whole, and that a market will be created in which such work can be bought and sold. But while the State wishes to encourage creativity, it does not want to foster harmful market power. Accordingly, the State builds in limitations to the rights granted to the creator. Such limitations embrace both time and space. Rights are granted for a fixed period of time, and protect only the fixation of human creativity in material form. 
Intellectual property rights provide the legal foundation for the industrial organization of Art and Science.  But legal systems are the product of specific cultures. For example, in French-speaking and most Western European countries, droits d'auteur or author's rights are the core of what in English-speaking countries is called copyright. Such rights are rooted in the republican revolution of the late 18th century, and the Rights of Man movement. In the Communist Bloc, until recently, the situation was similar yet different. While moral rights of the creator were recognized through one-time awards, all subsequent rights reverted to the State.
Moral rights are not, however, the historical root of copyright in the English-speaking world. Rather, in the 15th century, with the introduction of the printing press, Tudor monarchs began to grant to approved printers the right to copy approved works, i.e., copyright. Thus, the roots of copyright are censorship and feudal grants of commercial privilege.  These residuals of feudal and crown law did not vanish with .the advent of democracy. On the contrary, they survived in attenuated form to plague democratic law and government. Obsolete in practice; they still influence the spirit of the law. 
Yet another tradition exists among aboriginal peoples. Native copyright has not yet been embodied in statute and is based on an alien collectivist understanding of creation. To tribal peoples, a song, story or icon does not belong to an individual but to the collective. Rights are often exercised by only one individual in each generation, generally through matrilineal descent. There is, however, a proposal before the US Congress to convert Amerindian Art into "inalienable communal property". 
The sale of intellectual property across national borders is restricted by various devices including the Manufacturing Clause in the US Copyright Act, which requires that no book by an American author be sold in the US unless it is printed in the US (Canada is currently exempted from this clause). France imposes the most sophisticated barriers to intellectual property: if one enters Canada with a computer tape, tariffs are applied to the value of the physical tape; if one enters France with the same tape, tariffs are levied not on the value of the tape, but on the value of its contents. If, for example, computer software developed for the US market is sold at marginal cost in the French market, then equivalent French-based software will be undercut in terms of price, and the competitiveness of French intellectual property will be reduced. If this principle were applied to American film and TV programs, they would be exposed to tariffs at the cost of production. Sale in a foreign market at less than that price would be dumping.
The significance of this Fourth Sector is reflected in the hard-nosed American negotiating position leading to the Canada-US Free Trade Agreement, the similarly tough American posture in current GATT discussions, and the recent genuflection of newly industrialized Asian tigers to American interpretation of international intellectual property conventions. From video piracy to art fraud, from trade mark and patent infringement to copyright abuse and theft of registered industrial designs: while hiding behind headlines about agricultural subsidies, the American government has demonstrated that international competitiveness increasingly depends on abstract intellectual properties, the economic rights associated with them, and the ability to enforce legally these rights.
Traditional intellectual property legislation is subject to international convention. Canada is thus required to extend national treatment to foreign citizens, both individual and corporate, if rights are embodied in the Copyright Act and if foreign states extend the same rights to Canadians. There exists, however, a class of intellectual property rights not covered by convention: so-called parallel rights, which are becoming increasingly common in the US. Such rights include droits de suite, i.e., rights of following sale for visual artists. Early in his or her career, an artist sells a work which is subsequently resold at a much higher price. With the right of following sale, the artist is entitled to a percentage of the increased sale price. This right has been created in California and New York and declared constitutional by the courts even though it applies only to citizens of those states. Another American example is the Chip Protection Act, which provides copyright-like protection for integrated microchips to prevent "reverse engineering", i.e., a competitor's taking a chip apart to discover its design and then creating a similar chip. American business groups and a bipartisan coalition of Congressional leaders are also pressing for legislation to provide tenyear copyright-like protection for product designs as small as the curve on an automobile bumper. 
A more far-reaching example exists in the Republic of Ireland, where all copyright income earned by residents is exempt from personal income tax. This has led a large number of authors to take up residence in Ireland. Even Canada has adopted some parallel rights, such as Public Lending Right, which highlight a related issue: market failure with respect to intellectual property. All citizens gain through the diffusion of knowledge resulting from the public library system. Authors, however, are denied sales because works are available through libraries. The government of Canada recognized market failure by creating the Public Lending Right program, which pays authors for works held in libraries. Accordingly, around the world, governments are enhancing incentives for creativity through the use of parallel rights, outside of international conventions, thereby avoiding payment or protection to foreigners.
Gilles Paquet of the University of Ottawa has argued that free trade does not mean Canada should give up important levers of government action to manage trade to its national advantage. It only constrains such action. In an Information Economy, he notes, knowledge is a central input and the production of knowledge - scientific, technical and artistic - is a critical economic activity. Government has a responsibility to ensure that production of knowledge is treated as a 21st century equivalent of railroads and transportation infrastructure that made the Industrial Revolution possible. The decision of Canada to exclude intellectual property from the CanadaUS Free Trade Agreement means that the government either recognizes the role of such policy instruments in an Information Economy, or has reserved judgement. 
This decision provides a window of opportunity for development of policies and programs to encourage knowledge production in Canada. One possible vehicle is parallel rights. Such rights are a means by which the government of Canada, or the provinces, can provide compensation and create incentives for knowledge production that are restricted to Canadians. Funds similar to the Public Lending Right program could be developed to ensure that Canadian creators receive a just and fair economic return on their work. This approach would represent a shift away from a supply-side policy of direct grants to producers (called, by some, "artistic welfare") towards demand-side policies which compensate producers for the use of their work by consumers but for which the market fails to provide a just or adequate return.
One immediate example is Performers' Rights for Canadian performers whose works are broadcast. To avoid foreign criticism and countervail measures, compensation for the "re-use" of the work of Canadian artists should be available only to individuals, not to corporate entities, i.e., they should be nontransferable. They should not become commercial rights bought and sold in the marketplace.
Similar Canadian parallel rights, restricted to individual creators, could be developed for patents, registered industrial design, and trade marks. The rationale is the creativity haven of the 21st century, analogous to the, tax, haven of the 20th. If creativity, in all domains of human endeavour, is the ultimate means of production in an Information Economy, then international economic competitiveness in the 21st century will focus on competitive national and regional policies conducive to creativity and exploitation of associated intellectual property rights.
In a more philosophic vein, a community, region or nation will eventually run out of critical raw materials and lose comparative advantages which have been the traditional source of personal and public wealth. Only creativity can conjure up a substitute to turn lead into gold, sand into silicon chips, or a first novel into billions in the form of book, movie, T-shirt, toys, records, tapes and other ancillary sales and royalties.
With foresight, we can anticipate the inevitable, diversify local economies, and, most importantly, create a civic climate which stimulates new ideas, market innovations, progressive change and development. Today, there are as many people in Canadian regional centres as in ancient Athens, Renaissance Florence, or Shakespearean London. All that is lacking is a civic psychic alchemy that cultivates talent and genius. How much is one Edison or Armani worth to a national, regional, or local economy if he or she is attached to that community by ties of care and culture? As the Japanese say, "An obligation not felt is not an obligation."
The 1990s will, I believe, see a change in local, regional and national economic planning - a shift from the "tax haven" strategy of the 60s, 70s and 80s aimed at attracting manufacturing industries through the use of costly tax concessions towards a "creativity haven" strategy. Such a policy, is aimed at promoting and retaining local talent and attracting the best minds from afar by creating a community or country in which such talent wants to live, love, work and belong. The instruments of such a strategy include tax and fiscal policies, and, most importantly, innovative use of intellectual property rights of all types to reward creators for their contribution to the Information Economy.
If Canada, through these or other policy measures, comes to recognize the role and contribution of creativity - artistic and scientific - to the competitiveness of the Information Economy, then Leonard Cohen could be right when he sings, "First we take Manhattan, then we take Berlin." 
1. Porat, M.U., The Information Economy, US Department of Commerce, Washington, DC, 1977.