CULTURAL ECONOMICS OF ARTS FUNDING:

Five Variations on a Theme

Harry Hillman Chartrand
Introduction, 
Paying for the Arts,
W. S. Hendon, H.H. Chartrand, H. Horowitz (eds)
Association for Cultural Economics, University of Akron, 1987

 

Preface                               

In this book 26 authors from 11 countries - Austria, Australia, Canada, Finland, Hungary, India, Italy, the Netherlands, Sweden, the United Kingdom, and the United States of America - present 25 research papers concerning different aspects of arts funding.  All papers, except this introduction, were prepared for presentation at the 4th International Conference on Cultural Economics and Planning held at Avignon, in the south of France, in May 1986.

Before exploring the range of experience and opinion reflected in these articles, it is appropriate to create a context for considering arts funding in differing national cultures and traditions.  Five variations will be presented on the general theme that the changing role and status of the arts reflects general social evolution.  The five variations are: Culture and Art; Culture and Economy; Art and Law; Art and Economy; and Politics and Arts Funding.

Culture &  Art

The evolution of culture has been characterized by the progressive division of labour and differentiation of social function from a state of non-differentiation in pre-literate communities to higher and higher orders of differentiation.  Today, contemporary culture can be defined as greater than the sum of various differentiated sub-cultures including the arts, crafts, economics, fashion, heritage, language, law, multiculturalism, politics, religion, science, and sports.  Within the arts there has been a parallel development characterized by the progressive "individualization" of the artist from anonymity to celebrity.

In traditional societies, awe and mystery surround the created object into which the creator projects spirit and soul.  In Japan, for example, reflecting an ancient tradition of animism, a sword, being a product of mental work, is regarded not merely as a material object, but as imbued with the author's living spirit.  Furthermore, objects of worship are not limited to visible and concrete things.  Even a word can have a spirit (Koisumi 1977).  In the Occident, only vague hints of ancient animism remain in concepts such as "the moral rights" of creators.

The "numinosity" (Jung 1964) of artifacts among pre-literate peoples reflects an investment of what Carl Sagan calls "extra-somatic" knowledge, i.e. knowlege carried outside of the body (Sagan 1977).  Such knowledge can, by analogy, be considered the social genetic which directs the evolution of human society.  It is the knowledge passed from one generation to another.  Today it is embodied in books, recordings, computer software, and other contemporary ways to transmit "know-how" to future generations.

In pre-literate societies, such knowledge is transmitted orally through the mnemonics of ritual and chant enforced through religious practice and taboo.  The association of rhythmic or repetitively patterned utterances with supernatural knowledge endures well into historical times.  Among the early Arabic peoples, for example, the word for poet was sha'ir, "the knower", a person endowed with knowledge by the spirits (Jaynes 1978).

In such societies, innovation depends upon the insight of the creator and his or her ability to insure the integrity of mnemonic instruction, whether in the form of incantation or epic poem.  Cause and effect are not distinguishable.  It is through the unchanging enactment of ritual that desired results are achieved.  Science and art are one.  How to make something and the thing made are mystically unified.  Process and product are identical.  To name a thing is to magically control it.

In fact, the distinction between economy and culture does not exist in such societies.  To the Balinese, for example, artistic knowledge is not restricted to a special intellectual class.  In fact, the Balinese have no words for art or artist.  Making a beautiful offering, carving a temple gate, or playing a musical instrument, all are tasks of equal aesthetic importance produced anonymously, and done entirely in the service of society and religion with no thought of personal gain (Morris 1982).

How different the case has become in contemporary Western Civilization.  In the Ancient World and during the Middle Ages, the identity of the artist was seldom known.  The great cathedrals were built anonymously by artist engineers who combined the mystical arts and sciences of the guilds.  In the Renaissance, the scientist and artist were still one and the same person, but personal identity became attached to the works of the proverbial Renaissance Man.

Beginning, however, with the Enlightenment and Republican Revolutions of the 18th and the Industrial Revolution of the 19th centuries, a divergence appeared between scientific and artistic ways of knowing.  The Romantics, followed by the "Art for Art's Sake Movement" consciously and deliberately separated the arts from an increasingly industrialized, "de- humanized" society (Henderson 1984: 46).  This led the high arts and the artist to become increasingly isolated from mainstream society (Bell 1976: 13-14).

Within mainstream society, the scientific, utilitarian ethic triumphed in the late 19th and 20th centuries.  The anonymous and ubiquitous industrial "object" displaced the individualized, hand-made, "subjective" work of art.  In the Communist world, this was called "socialist realism".  In the Capitalist world it was called Bauhaus and the international style of architecture.

During this period the increasingly obscure aesthetics of high art, in which the label is the art work (Wolfe 1975), became more and more alien to the average citizen. In the high arts today, the artist has become the "art object" in new high arts disciplines such as "performance art" (Hughes 1981).  In the commercial arts, the "identity" of the artist serves as the basis for emerging and controversial "celebrity rights" which require payment to the artist, or descendants, for the right to imitate the artist's mannerisms or appearance for commercial purposes.  There remains today, however, a fundamental dissonance between artistic and scientific ways of knowing.  To some, this dissonance is a threat to the long-term well-being of Western societies (Harman 1979).

Culture & Economy

In social evolution, economics, as a discipline of thought, emerged in the late 18th century (Smith 1776).  The founding father of economics, Adam Smith, had a strong sense of the cultural matrix of economic phenomena.  By the mid- to late 19th century, however, economics had split into two opposing camps based, at least in part, on conflicting views of the impact of culture, or stage of cultural development, on economic behaviour.  The intensity of this schism between the reformed church of "the science of political economy" called Marxism, and the orthodox church of "Market Economics" is potentially as appocalyptic as the Religious Wars of 15th and 16th century Europe which gave birth to the "secular" sciences, including economics.  The schism also caused political economics to fission into sociology, political science and what can be called Market Economics.  This partially contributed to mainstream economics in the West losing its original sense of culture and becoming an abstract discipline pretending to be unaffected by culture (Boulding 1972: 267).

Not all schools of Western economic thought lost sight of the role of culture.  One school which maintained a linkage with culture was Institutional Economics. It includes the work of American economists John R. Commons, Thorstein Veblen, Wesley Mitchell, and Clarence Ayres, and the work of European economists Max Weber, Sidney and Beatrice Webb, and especially Joseph Schumpeter whose work stressed the influence of class, technological change and institutional setting on economic behaviour (Schumpeter 1942).  To Institutionalists, economic behaviour is subject to the cultural and legal context of a given country and specific period of history (Commons 1926, 1934).

Legal and cultural relativism is also part of the legacy of Canadian economist Harold Innis, particularly in his work on the impact of transportation (Innis 1956) and communications technologies on the economy (Innis 1950, 1951).  He recognized that all scholarship must be grounded in analysis of the radical particularities of time and place, history and geography.  The general takes form and meaning only in the context of the specific.  However, in Innis' time mainstream economists adopted 19th century natural science models and suggested they expounded, like physical scientists, laws that were universal, that held without regard to time, place and circumstance (Carey 1981: 79).  Given 20th century developments in physics concerning the role of relativity, uncertainty and the "wave/particle" paradox of light, Innis knew that mainstream economics must grow beyond 19th century scientific models.

Through his study of communications media, Innis identified a fundamental relationship between culture and communications media.  A culture is restricted in space, but extensive in time, i.e. it has duration, to the extent its dominant communications medium is durable, e.g. stone, clay or parchment.  Alternatively, a culture is extensive in space, but restricted in time, to the extent its dominant communications medium is non-durable but easily transported, e.g. papyrus and paper.  Using this hypothesis Innis attempted to explain the rise and fall of empires through history.  In fact, one of Innis' colleagues, Marshall McLuhan, took this relativism, first to "the medium is the message", and then to human consciousness being fundamentally altered by the emergence of new electronic communication media (McLuhan 1978).  Three examples demonstrate Innisian analysis.

First, acidic paper has been used for more than 100 years.  Books, newspapers, periodicals and other written records fixed in this medium are now disintegrating in libraries and archives around the world (The Economist, February 27, 1987: B-1).  From an Innisian perspective, this implies that European expansion and colonization of the last century would be short-lived because the dominant communications medium was cheap and easily transportable.  In fact, the second British "Empire on which the Sun never sets", was, in historical terms, one of the most extensive in space, but shortest in duration of any major historical empire.

Second, the dominant communications medium today is television which spans the world in an instant, i.e. it is extensive in space.  Television takes the average citizen around the world to spaces and places of which his ancestors never heard.  A question, however, has arisen concerning television's impact on attention span.  Some argue that children do not read because their attention span has been reduced by commercial television, i.e. the medium, while extensive in space, affects the psychological duration of time.

Third, new communications technologies, such as video recording, have made the arts, or the entertainment industry, the largest sector of final demand in the emerging "information economy" (Porat 1977).  These communications media are unusual in terms of Innis' dichotomy between durability and transportability.  First, the new media hardware including direct broadcast satellites, fibre optics, magnetic recording technologies, and the compact disc player are based upon silicon and iron oxide, i.e. stone, which will endure for more than a century.  Production of consumer "home entertainment" hardware is dominated by the Japanese.  Second, the messages conveyed through these technologies are as ephemeral as a ray of sunshine, but cross the globe in the twinkling of an eye.  Programming software production is dominated by the American entertainment industry.  This combination of Innisian characteristics and the division of labour with respect to production of the medium and message suggests the emergence of a new culture unlike any in human history.  Like previous communications revolutions, the emergence of a new communications medium is being accompanied by a breakdown of old ways of communicating, and by a heightened sense of societal "dis-ease".

The impact of the Institutionalist tradition has contributed to a contemporary split between what can be called cultural economics and the economics of culture.  Both are reported in articles contained in this book and in the Journal of Cultural Economics.  Both are necessary for a complete economic appreciation of reality. Cultural economics is the study of the evolutionary influence of cultural differences on economic thought and behaviour.  Accordingly, cultural economics assumes economic behaviour varies according to cultural context.  The seminal and leading exponent of transdisciplinary, relativistic cultural economics is Kenneth Boulding (Boulding 1972).  The economics of culture, on the other hand, is the study of the allocation of scarce resources within the cultural sector.  It assumes objective laws apply to economic behaviour without regard to cultural differences.  It places emphasis on the "scientific" or absolute nature of economics and application of abstract mathematical technique.  The seminal and leading exponent of the positivist economics of culture is William Baumol (Baumol, Bowen 1966).

 

Art & Law

Law emerged earlier in social evolution than economics.  Among other things, law permits or prohibits economic activity, e.g. anti- trust or combines legislation, resale price maintenance, predatory pricing practices, insider-dealing, etc.  Law creates markets where none previously existed, e.g. intellectual property legislation.  It has, however, been only in the last generation that economic and social science research has been admitted as evidence and deemed relevant in courts of law (Mayer 1978). 

Law is rooted in the unique history and experience of a community.  There exist distinct American, English, and European legal cultures which permit or prohibit different kinds of economic behaviour.  With respect to the arts, many types of law and legislation of a statutory, regulatory, and criminal nature affect economic behaviour.  These include censorship, broadcasting and cable television licencing, and copyright.
The most important law affecting art and economy is copyright.  Like other forms of law, its nature and impact on economic behaviour varies according to national experience.  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 (Chartrand March 1985).

An extreme example will illustrate the role of copyright in Western economies. 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 and a soundtrack.  Both the film and soundtrack are broadcast on radio and television.  Eventually a book is made concerning the making of the movie, and a sequel of the movie is then produced.  Even museums and archives are related to copyright in that most artifacts and documents, contained therein, are within the public domain, i.e. copyright has lapsed through time (Chartrand January 1987).  It is through the exploitation of the revenue streams implicit in the grant of copyright that the commercialization of the arts is possible.

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 Revolutions of the late 18th century, and the "Rights of Man Movement".  Following the Communist Revolutions of the 20th century, the case in the Communist Bloc is similar yet different from that in Western Europe.  While the moral rights of the creator are recognized through a one time award, all subsequent rights revert 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 (MacDonald 1971: 14- 16).  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" (Gray 1981: 108).

In English-speaking countries, therefore, copyright is traditionally the legal foundation of industrial organization of the arts.  In European countries, "author's rights" are traditionally intended as a reward for creativity, and royalties probably play a more significant role in the economic status of the artist than in the English-speaking world.  The question does, however, require further research.

Emphasis in copyright on fixation in material form highlights the relationship between Innisian analysis and Carl Sagan's "extra-somatic" knowledge.  In pre-literate societies it was the mnemonics of rite and ritual that encoded extra-somatic knowledge in oral communications media.  The ability to record such knowledge and maintain its integrity in the modern world is a function of technological change in communications hardware and enforcement of an abstract form of property rights called copyright.

 

Art & Economy

The first engine of mass production was not the steam engine but rather the printing press innovated in the 15th century.  The spread of the literary arts by this innovation revolutionized the world and set the stage for the religious and political revolutions of the next 500 years, and for the technological transfer of knowledge between cultures, countries and continents. At the very time that the "Arts for Art's Sake Movement" withdrew from mainstream industrial society in the 19th and 20th centuries, new communications media emerged, including steel engraving plates, photographs, recordings, films, radio, television and video recording, which permitted the commercialization of art through the exploitation of revenue streams implicit in copyright (Hughes 1984).  This process has continued until today when the arts have become a significant factor in the economy.

From an economic perspective there are three distinct segments of the contemporary arts, namely - the fine arts, the commercial arts, and the amateur arts - as well as four distinct disciplines - the literary, media, performing and visual arts.  In each, the creative source is the individual artist.  The fine arts are a professional activity which serves "art for art's sake" just as "knowledge for knowledge's sake" is the rationale for "pure research" in the sciences (Chartrand 1980).  The commercial arts are a profit-making activity which serves "art for profit", and generally places profit before excellence.  The amateur arts are a "recreational" activity that serve to re-create the ability of a worker to do his or her job, or a "leisure" activity that serves to "self-actualize" a citizen's creative potential, and thereby permits him or her to more fully appreciate life.

All three arts activities are intimately interrelated.  The amateur artist, in actualizing his or her talents and abilities, provides an educated audience and initial training for the fine and the commercial arts. The fine artist, in the pursuit of artistic excellence as an end in and of itself, provides research and development for the commercial arts.  The commercial artist, in the pursuit of profit, provides the means to market and distribute the best of the amateur and the fine arts to an audience large enough and in a form suited to earn a profit.

Collectively, these three types of artistic activity make up the arts industry including advertising, broadcasting, motion pictures, performing and visual arts, publishing, sound, and video recording.  Compared to manufacturing industries, the Canadian arts industry in 1983 was the largest with full-time employment of more than 234,280; the 5th largest with salaries and wages of $3.1 billion; and the 10th largest with revenue of $9.2 billion or 2.5% of GNP (Research & Evaluation November 1986).

But there are four significant influences of the arts which extend beyond the arts industry itself.  First, census data indicate that more arts- related professionals are employed by corporations, stores and other business enterprises outside the arts industry than inside (Research & Evaluation January 1984).  In fact, the arts have become a significant factor of production, specifically with respect to design  (Royal Commission 1985,114-115), advertising and marketing throughout the modern economy.

Second, three fundamental demographic changes - increasing levels of education, participation of women in politics and the labour force, and aging of the population - are contributing to a rapid increase in participation in arts-related activities (McCaughey 1984).  This, in turn, is altering the nature of consumption (Chartrand July 1986).

Third, the new communications technologies provide performing artists with something that only literary and visual artists enjoyed in the past - life after death.  This is a life not as a ghost on another plane, but as a shadow on the silver screen.  There may never again be a Richard Burton, but his image, his voice, and his performances will now endure, like the plays of Shakespeare, as part of the social genetic, the extra-somatic knowledge that is the "stuff" of culture.  It is this characteristic of the arts, the maintenance of a collective linkage with the past, which distinguishes the treatment of capital in the arts from other sectors of the economy.  In other sectors, new capital and technology displaces the old. In the arts, the images and words of cultures and civilizations, long buried by the sands of time, enrich and inspire contemporary creators of today (Boulding July 1986).

Fourth, the arts are the most dynamic segment of contemporary western society - the avant garde of social change.  The arts, even more than technological change, embody the impulse toward the new and original, a self-conscious search for the future forms and sensations to the point that the idea of change and novelty overshadows the dimensions of actual change.  The artist no longer, as in the past, affirms a moral-philosophic tradition but rather searches for a new sensibility, a search which society actively encourages.  What is imagined in the mind of the artist today, becomes the reality of tomorrow (Bell 1976: 33-35).

 

Politics & Arts Funding

Politics and statecraft emerged much earlier in social evolution than did economics.  Kings, princes and popes supported the arts for purposes of glorification and nation-building from the beginning of history (Wilhelm 1967).  In the 19th and early 20th centuries the works of the Nationalist composers such as Chopin, Wagner, Grieg, Sibelius, Liszt and others served as a focus for nation-building in Western Europe. Accordingly, funding of the arts, specifically the non-profit fine arts, reflects a stronger connection with political traditions than with economic theory.  Analysis of different political traditions permits definition of a four-fold taxonomy of different roles for the State in funding the non-profit arts.  These are the Facilitator, the Patron, the Architect, and the Engineer (Chartrand, McCaughey 1985).

In the United States of America, the political and legal tradition has been one of separation of church and state, free market competition, and private philanthropy.  From the American experience, a distinct role for government in arts funding can be identified: the Facilitator.  The Facilitator funds the arts through tax expenditures made on behalf of individual and corporate donors, i.e. donations are tax deductible.  The Facilitator supports diversity within the non-profit amateur and fine arts.  The status of the artist is defined by private patrons.

In the United Kingdom and the Commonwealth, a tradition of constitutional monarchy and common law has led government to distance itself from the arts to protect them from direct political interference.  In creating the Arts Council of Great Britain after the Second World War, the government wanted to avoid the pre-war system of State support existing in Russia and Germany where official art was imposed by Ministers of Culture (Education, Science and Arts Committee 1982: xxx). Government also recognized that within the arts community there was "a desire to run one's own show and deep rooted mistrust of bureaucratic interference" (Hutchinson 1982: 15).  This distancing of an activity from political influences is the "arm's length principle".  It is a general public policy principle which serves as the basis for the system of "checks and balances" deemed necessary in pluralistic democracies to avoid undue concentration of power and conflict of interest, in both the public and private sectors.  Accordingly, its application to arts funding is but an example of a general public policy principle applied to a specific policy issue. 
From the British experience, one can identify the second role for the State in arts funding, the Patron, which funds the arts through arm's length arts councils.  Government determines the aggregate level of support to the arts, but not which organizations or artists will receive support.  The Patron tends to support professional excellence in the non-profit fine arts.  The status of the artist is defined by peer evaluation in the Patron State.

The Western European tradition of arts funding has been interventionist, reflecting the role the medieval church and the absolute monarchs of the 17th to late 19th centuries.  Such monarchs created national artistic institutions, and from this experience one can identify the third role for the State in support to the arts: the Architect.  The Architect funds the arts through a Ministry or Department of Culture. Granting decisions are made by bureaucrats.  The Architect supports community standards in the amateur and fine arts as part of its social welfare policies, along with health, education, and welfare.  The status of the artist is defined by membership in official artist unions in the Architect State.

The Czarist tradition of "autocracy" combined with Communist ideology has led most Communist Bloc countries to fund the arts through direct ownership of the artistic means of production (Kay 1983).  From this experience one can identify the fourth role for the State in support to the arts, the Engineer, which owns all the means of artistic production.  The Engineer supports political standards of excellence; it does not support the process of creativity.  Funding decisions are made by political commissars to further political education, not artistic excellence.  The status of the artist is defined by the Party.

A convergence is now occurring between these four roles (Schuster 1985). For example, creation of the National Endowment for the Arts represented a shift from a Facilitator to a Patron role for the American government.  While in financial terms the Endowment, and private foundations, provide little support to the arts compared to tax expenditures, the fact remains that they set the direction for arts activities across the USA.  Similarly, creation of a Canadian Department of Communications with responsibility for arts funding represented a shift away from the Patron role of the Canada Council towards an Architect role for the Government of Canada.  Western European countries, such as Sweden and the Netherlands, have developed quasi-independent advisory councils which represent a shift from an Architect towards a Patron role (Keller 1980).  At the same time, Western European and British Commonwealth countries are exploring ways to increase tax expenditures to the arts through corporate and private sector donors marking a shift towards the Facilitator role.

 

Conclusions

Using variations on the theme that the changing role and status of the arts reflects general social evolution, it has been argued that:

(1) within the arts there has been a progressive "individualization" of the artist from anonymity to celebrity as communications media have become better able to fix artistic works in material form of greater and greater durability and transportability;

(2) within Market Economics a split exists between cultural economics and the economics of culture, both of which are required for a complete appreciation of economic reality.  This split, which reflects a wider schism between Marxist and Market Economics, is partially based on differing opinions concerning the impact of culture on economic behaviour;

(3) the effect of copyright on the economic status of the artist and the commercialization of the arts varies between countries depending upon the traditional balance between its role as a reward for creativity and as the legal foundation for industrial organization of the arts;

(4) as the high arts withdrew from mainstream industrial society in the 19th and 20th centuries, new communications media emerged which permitted the commercialization of art through the exploitation of copyright; and,

(5) political tradition plays a more significant role in funding the non- profit arts than does economic rationality.

It is the very richness of diverse, cultural and political traditions, the impact of these traditions on arts funding, and the ability to learn from the experience of other cultures that makes this collection of papers such an important contribution to the research literature.

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