$7 billion of neoliberalism

The Stationers' Company mark

The Stationers’ Company: an early example of government cultural policy. Image: Wikipedia.

Australian economist Jason Potts has restarted an important debate about cultural policy in this country with an article entitled “You’ve got $7 billion – so how will you fund the arts?“. I just wish he hadn’t analysed Australian cultural policy from the sort of instrumentalist, neoliberal position we find so familiar in many other spheres of policy debate.

I’ll say right up the top that I’m a fan of Potts’ work, and think him a pretty clever fellow. His work on evolutionary economics is in its own way quite heterodox, and a far cry from the sort of automatic and reflexive market worship we often associate with both the RMIT Economics school, and the Institute for Public Affairs, which he is apparently doing some work with.

On the other hand, his op-ed in The Conversation on cultural policy  is not one of his more perspicacious efforts. Justin O’Connor has already written a useful response, but I thought I’d add a few points of my own, set forth below.

Let’s start by setting forward Potts’ argument. Then we’ll move on to a critique.

Last year the Australian Bureau of Statistics did the maths – government spends about A$7 billion annually in Australia on arts and culture. The exact dollar figure varies depending on what we count, but it includes heritage, broadcasting and botanical gardens, along with all the usual suspects: performing arts, literature, film, visual arts, and so on.

This is apples, oranges and all sorts of random fruit.  “Heritage” funding, for instance, includes such things as war memorials, botanical gardens, zoos and some national parks expenditure. That’s a pretty different sort of thing to grants to game design companies or tax incentives to Hollywood movie studios. Does it actually make sense to treat all of these things as the same sort of expenditure?

Anyway, moving on:

To make this exercise fun, let’s suppose that no political horse-trading was involved in reaching this figure. Let’s assume this figure is the result of disinterested economic calculation of the size of the positive externality in the production of a public good, all wrapped in willingness-to-pay studies, and tied with a big bright cost-benefit ribbon.

So what’s next?

Do we put away our box of shiny economic tools and turn to grubby political compromise to allocate the exact market-failure correcting amount of public funding?

In Australia, as in Europe, this is more or less what we do. Economics to justify an economically efficient level of spending – and politics to implement it.

Really? Last time I looked, in most nation-states, including most democracies, politics is almost always the over-riding factor in the way  budget priorities are set. Sure, politicians and lobbyists and ordinary citizens use economic arguments to make the case for this spending increase or that tax cut. But the process is always and by definition political. On the really big picture stuff, economics arguably can’t really help us. For instance, how much should Australia invest in national defence, or climate change mitigation? The answer depends on inherently political judgments, such as whether you think global warming is real, or the likelihood of a major war.

Indeed, ‘economic efficiency’ is itself an inherently political argument, because it applies a very particular set of assumptions to public policy — namely that Pareto efficiency can actually hold in the first place. In markets in which there is imperfect information — and cultural markets are amongst the most opaque of all — Pareto efficiency may well be impossible. Potts knows this, which is why his quip about the “exact market-failure correcting amount of public funding” strikes me as disingenuous.

So let’s get to the guts of Potts’ argument:

… modern economics suggests that it would be better if we turned the process upside down. Let politicians determine the level of funding in a given area – and let economists determine the allocation.

Why? The political model of funding allocation is very bad at creating – or even recognising – new knowledge. In fact, political allocation mechanisms cause incentives that reward lobbying and punish experimental or innovative thinking.

Only by weakening those incentives can arts and cultural funding seek to be more than a rearguard preservation exercise or sinecure for vested interests.

I suppose it’s something of ad hominem attack to point this out, but it’s just a tad ironic that the person making this argument is a Federation Fellow of a publicly funded Australian university. A person writing for a website, by the way, also funded by universities and the government, using a medium — the internet — that was created almost exclusively by public investment in research.

“Political allocation mechanisms”, by which I think Potts means governments making budget decisions, certainly create incentives that reward lobbying. Then again, so do market mechanisms. Markets require the state to provide a level playing field via such basic institutions as property rights, police forces and courts of law. All of these create incentives for vested interests to plead their cause.

This is no trivial point, by the way: the cultural industries are completely dependent on intellectual property rights such as copyright and patents. The very fact that many cultural goods are non-rivalrous and non-excludable creates huge incentives for content industries to lobby governments to create and strengthen IP regulations — as has been well documented by researchers such as Lessig. When property rights become unenforceable, digital goods become a whole lot less valuable. Anyway, Potts’ claim was that public spending creates lobbying, which is bad. On this analysis, many of the cherished market mechanisms of the cultural industries must also be bad, because they were created via lobbying.

This points to a further naievete: the implicit belief that cultural goods and services are just like any other industrial product.

Even a moment’s reflection shows us this isn’t true. The products of cultural industries are not like any old widget or commodity: they are not even really the same thing as an iPhone or an operating system. Cultural industries produce symbols, and symbols are powerful (or at least highly influential). An aluminium ingot or a wind turbine cannot affect the democratic judgment or voting intentions of millions of citizens. A newspaper empire or television network can.

It doesn’t really matter whether you think that the power of media companies to swing elections is illusory. The history of modern media policy tells us that governments certainly do think symbols are powerful. Media has generally often been heavily regulated, sometimes on the grounds of public interest, but more commonly for naked reasons of political expediency. Even in the US, with its famous First Amendment, successive Washington administrations have had no qualms about controlling spectrum, imposing stringent copyright regulations, and spying extensively on their citizens’ communications. Hosni Mubarak turned off the internet in Egypt for a reason. Whether it’s internet filters or the Stationers Company, the political nature of cultural industries means they can’t be divorced from questions of power.

This curious ignorance of the symbolic reality of culture is often found amongst unsophisticated approaches to cultural economics — much as economics as taught in the modern university tends to ignore key aspects of sociology. As a result, when economists issue prescriptions for cultural policy, they tend to propose cures that are far worse than the supposed disease.

Perhaps this is why Potts misconstrues key facts about real-life cultural policy. For instance, he seems to think arts funding is about “inputs, not outputs”, when in fact nearly all Australian government arts grants are legal contracts specifying outcomes, allowing the government to recoup the funding if not properly acquitted. He also equates prizes as some sort of gold standard of outcome, which is strange because prize committees show exactly the sort of “bullshit” he decries in grant panels.

Similarly, when he argues for “tax credits to anyone – private citizen, corporation, foundation or NGO alike – for spending on arts and culture”, he seems to imply these don’t currently exist. In fact, they do. An individual donating to a DGR-status cultural organisation already receives a tax credit, while a non-profit NGO or foundation already pays no tax beyond the GST.

The Australia Council’s recent Arts and Creative Industries report

The following article appeared in Crikey on February 4th. There’s been quite a bit of debate over at Crikey in the comments pages of this article, so head on over to see the discussion.

The plan to provoke a profound shake-up to the arts

In a week where so much has happened in the world, it’s not surprising a report from the Australia Council has not made the news. But in the rarefied atmosphere of arts policy, the release of a report entitled Arts and creative industries will make waves — the document, if followed to its logical conclusions, implies a profound shake-up to the current status quo. 

Authored by a team of QUT academics led by Professor Justin O’Connor, Arts and creative industries is a long, detailed and rigorous examination of the context, shape and setting of arts and cultural policy in Australia. It’s not quite the Henry Tax Review, but it’s certainly the most academically informed piece of research to be released by the Australia Council in a long time.

Beginning with a historical overview of 19th century culture and the genesis of “cultural policy” in postwar Britain, the report then examines each of the issues that has bedeviled the arts debate: the role of public subsidy, the growth of the industries that produce popular culture, the divide between high art and low art, and the emergence of the so-called “creative industries” in the 1990s. It’s as good a summary of the current state of play as you’re likely to find anywhere, including in the international academic literature.

O’Connor and his co-writers conclude that “the creative industries need not be —  indeed should not be — counter posed to cultural policy; they are a development of it” and that economic objectives (in other words, industry policy) should be a legitimate aim of cultural policy.

Taken as a whole, the argument has big implications for the way Australia currently pursues the regulation and funding of culture. For instance, it argues that “the ‘free market’ simply does not describe the tendencies of monopoly, agglomeration, cartels, restrictive practices, exploitation and unfair competition which mark the cultural industries” and that this in turn justifies greater regulation of cultural industries like the media. That’s a conclusion that few in the Productivity Commission or Treasury — let alone Kerry Stokes or James Packer — are likely to agree with.

The report also argues the divide between the high arts and popular culture has now largely disappeared, and that therefore “it is increasingly difficult for arts agencies to concern themselves only with direct subsidy and only with the non-commercial”. This is an argument which directly challenges the entire basis of the Australia Council’s funding model, in which opera and orchestral music receives 98% of the council’s music funding pie. No wonder the Australia Council’s CEO, Kathy Keele, writes in the foreword: “This study proposes to challenge many of our current conceptions, definitions, and even policies.”

Intriguingly, the report stops short of any concrete policy recommendations. Perhaps this is because some existed, but were excised from the report. Or perhaps it’s because any recommendations that genuinely flowed from this report would imply the break-up or radical overhaul of the Australia Council itself.

As Marcus Westbury this week observed in The Age: ”While the Australia Council isn’t backward in promoting research, reports and good news stories that validate the status quo, there is not much precedent for it challenging it.”

That’s because the real guardian of the current funding model is not the Australia Council, but the small coterie of large performing arts companies and high-status impresarios that are its greatest beneficiaries. It won’t be long before a coalition of high arts types, from Richard Tognetti to Richard Mills, start clamouring to defend their privilege.

Special post 3: Festivals and urban cultural policy: Some meditations on the literature

Okay, so apologies for another long break from posting – I’ve been in Sydney, interviewing the Sydney Festival’s Lindy Hume for Meanjin Quarterly and aso catching up with my colleagues at the University of Western Sydney and NewMatilda.com.

I’m going to make it up to you all today with a long post on the literature of urban cultural policy as it relates to festivals.  This will be the final post in my “special series” on academic festivals literature, which has been a lot of fun to read up on. It’s another fascinating area of the knowledge base, and while I could spend days delving into it, I am going to discuss the literature in general before examining a couple of specific papers. Continue reading