Creative Industries: Tangible and Intangible Boundaries of a Multi-Face Industry.

Implications for Public Policies and Philanthropy

Evinc DOGAN

ABSTRACT

Creativity has attracted much attention in the last decade as art and culture industries
started to play a major role in addressing a number of public policies and as creative
industries have become increasingly important components of modern post-industrial
knowledge-based economies. In this essay the creativity is defined through human
creativity embodying the intellectual property by taking a closer approach to the cultural
capital as the stock of tangible and intangible cultural expressions. The essay aims to
deal with the implications for public policies and philanthropy while staying within the
limits of cultural and economic definitions and focusing on the creativity and its crucial
role in the rising cultural industry. First of all, the essay gives a brief definition of
creative industry and then focuses on government and private support by offering an
outlay of the current facts, types of support and rationales related to each sector.

KEYWORDS: creative industries, public policies, philanthropy

INTRODUCTION

Globalization and new technologies not only brought change to the means of production
speeding up the process but also to the mode of production making it more imaginative,
creative and innovative. What make the good more valuable and competitive in the
market are not only the factors such as price and quality but also the originality. The
intangible value of the good therefore adds to the tangible value.

Florida (2002), claims that the economic growth is based on the “creative class” which
is the creative and innovative people remarkable for its high productivity. Similarly, in
the boundaries of the creative industry, creative enterprises are seen as a source of the
innovation for the knowledge economy and new ideas which is a further driver of
innovation (Bagwell, 2008: 31).

There are a number of definitions of concept of “creative industry”. The definition by

UNESCO combines the properties of cultural industries into live and/or individual
cultural or artistic production. UNIDO (United Nations Industrial Development
Organization) suggests a more comprehensive definition by extending the production
into “tangible or intangible artistic and creative output which have a potential for
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income generation through the exploitation of cultural assets and production of
knowledge based goods and services”, therefore adding the income dimension into
definition. The UK (Department of Culture, Media and Sport in the UK) definition by
Smith (1997), also includes the job creation and exploitation of intellectual property, but
approaches to the definition from a more individualistic side. According to the latter
definition of creativity, skill and talent originates from the individual.

GOVERNMENT

The relationship between creativity and cultural policy lies in the regulation of
“marketplace of the ideas and creative practice” (Keane & Zhang, 2008: 4). Mill (1909)
takes an approach from the economic situation of the artist and says that; “Artists are
starving, therefore they should be supported by public administration” as the “starving
artist” sacrifices material well-being, living on minimum expenses either for a lack of
business or because all their disposable income goes toward the artwork. In this context,
Ricardo (1817) stated that artists could be either “stars” or “starving” referring to a
minor artist with no money goes as hungry as a genius.

The government’s role in managing the cultural industries is therefore related to the
regulation of production and consumption, in other words the supply and demand.
Nevertheless, governments take role beyond the strategic policies as being the
interventionist. According to Keane & Zhang (2008: 4), relations between government
and cultural sphere can take the shape of four different categories having different levels
of intervention. The first group the “facilitator state” has a more indirect role through
extension of tax incentives and inducements to corporate institutions and philanthropic
donors. The second category, the “patron state”, takes the excellence as the criteria for
the support of artistic and cultural activity, which is usually meant to be an aristocratic
support. This type of relationship is closer to what Craik (2007) calls “elite nurturing”
which is the tendency to give generous subsidies to a small number of elite
organizations. We can see a more direct role of the government for the national cultural
policy objectives in the third category which is the “architect state”. However when the
government takes a more active role it also somehow limits the creativity in the
production of culture as the product becomes somewhat that the state favors. The fourth
category, the “engineer state” extends the role of government as the direct
interventionist that controls the cultural sphere. In this case the state owns the means of
production and controls the cultural industries by using media and education. This type
of relationship can be seen in the former communist regimes (Keane & Zhang, 2008: 4).

Although all of these models are mutually exclusive, there is no single formula for
implementation and usually a combination of them is put into practice. Hence each
model has its own strengths and weaknesses. To start with, the “facilitator state” drives
its strength from the diversity of funding whereas it has deficiencies in the standards of
the excellence, valuation of private donations, benefit of public support and calculation

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of the cost of tax credits and expenditure to the government. In the “patron state”, the
strength can be regarded as the weakness at the same time. Fostering artistic excellence
is often perceived as promoting elitism as the granting decisions are generally made by
the council through “peer evaluation”. Therefore the economic status of the artist and
the organization depends on the box office appeal, the taste and preferences of private
donors. On the contrary, the strength of the “architect state” lies in being relieved from
dependence on popular success at the box office, so called “affluence gap”. The
weakness on the other hand lies in the long-term that assured direct governmental
funding may lead to creative stagnation. The last model, the “engineer state” supports
only the artistic practices and enterprises that meet political standards of excellence;
therefore it is hard to speak about process of creativity. In other words, the art is under
the control of political objectives. Another possible weakness can be underground
artistic activities subversive of political aesthetics and values resulting in “counter-
culture” (Chartrand & McCaughey, 1989).

Frey (1999: 72-75) adds “decentralized-democratic” state vs. “centralized-authoritarian”

state to the given four models that stand for the government intervention in culture
sphere. According to his theory, the question of “what kind of state” influences the level
of government subsidy on creativity and quality of artistic output in which he favors the
decentralized-democratic state rather than the centralized-authoritarian one, as the
centralized state has a more monopolistic structure in which the artists should conform
the formal requirements of the political regime. This is very much like engineer state as
it hinders the artistic freedom. On the other hand the decentralized state refers to the
federal structures and therefore offers alternative government supports to the artist.
Although the authoritarian regimes are generally thought of somewhat producing “bad
art” as they are fully the outcome of the dictator - and if he has some kind of bad taste -
it will be imposed on the art produced nation-wide. However it is not always the case.
The autocratic popes of the Renaissance, employed artists such as Bramante, Bernini,
Raphael or Michelangelo to build St. Peter’s Cathedral and Sistine Chapel in Vatican
(Frey, 1999: 73), which is more visible in the architectural works than the works of art
produced. Nonetheless, if we focus on the process more than the outcome, we see that
democratic regimes suggest a more participatory role for the citizens to support the arts
financially and giving more options to the artist. Zan (2007: 53) explains the rationales
of centralization with “professional control” and “cross subsidy”. The state has this top-
down approach towards the protection of cultural values. There are two legitimizing
issues for the state intervention in this case: lack of profitability and rarity of self-
financing. In this context, it can be said that the state has dual role which are “clearing
house” and “mitigating market failure”. In the clearing house case, we can think the
state in the role of “Robin Hood”, redistributing resources from richer to the poorer
institutions as a subsidy for the development and non-economic value while the market
failure is associated with the positive externalities.

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If we try to connect some of these relationships into a welfare economic model we
arrive to the justification of policy intervention. For instance, for a national theatre the
real direct income is the ticket sales where the costs exceed income. This is an example
of a situation where policy intervention rests on market failure, which is in particular the
positive externalities culture provides for society. Thus, the elite organizations are
willing to provide cultural capital for the “high cultural value” but “low market value”.
In this context, Ploeg (2006: 1185) asserts that, only subsidized symphony orchestras
and classical music ensembles are able to perform good music, whereas the commercial
ones might perform musicals, operas or classical music for the millions, they would not
play difficult pieces, due to the risk of frightening away the audience as it will result in
loss of money. Therefore, it can be inferred that; high culture or stimulating demand
rather than supply and risk aversion are the examples of motives for the government
subsidy. We may also add social stock of cultural capital to these motives as the
governments are willing to subsidy for cultural goods, especially if they are on the
public display (Ploeg, 2006: 1200).

The contribution does not necessarily have to be in monetary terms. Most of the time, it
may take the form of training in the arts, education or so, which can also stimulate the
national identity and goes along well with the public policies. This leads us to an
aggregate economic growth, if we consider the driving force of creative industries to
introduce and facilitate new ideas as well as spreading it to the other sectors which
provides in the end benefit for all. Keane & Zhang (2008: 11), explains this phenomena
by extending the role of creative industries from a public education notion to a growth
facilitating one. Therefore it can be inferred that culture and creativity is one of the
engine of economic development as the cultural and artistic production generates
directly and indirectly economic effects such as the enhancement of quality of life
(Bucci & Segre, 2009: 1). Not only the effect of creative industries on the overall
economy as an engine for social change, but also the emergence of new industries
should not be underestimated, as they play a key role in the creation of new and
sustainable jobs thus contributing to the welfare of the nation.

PHILANTHROPY

The origins of philanthropy can be found in the charity; even both terms could be used
interchangeably in the UK with a small distinction that charity often refers to short-term
relief, while philanthropy is normally applied to attempts at investigating and reforming
underlying causes through a private action for a public good in the form of large
personal fortunes given away as gifts totaling millions and then billions in support of
the arts, education, public policy, social services, environmental causes, and other
special interests. Most charitable organizations depend on private contributions, in the
form of monetary gifts, volunteer efforts, or some kind of tangible contributions. Apart
from the charity efforts to raise donations, the government supports the increase in
charitable giving by offering tax breaks. There are mainly three motives behind this
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altruistic behavior (Ariely et al., 2007). The first one, “intrinsic motivation”, can be
understood as pure altruism which is represented by private preferences for others’ well-
being. The second one, the extrinsic motivation, includes any material reward or benefit,
either monetary or non-monetary, associated with giving. The last one, image
motivation, captures the industries with severe PR problems as a way to present
themselves in a positive manner to the public and for the sake of image creation (Katz,
2006: 1307). The image of an organization to be “corporate social responsible” is an
example of this kind. Yet, the image can be taken in a twofold way for the corporate
goals of the large companies and smaller firms, targeting formidable ways of
communication and more than that the “corporate image”. For instance the subsidiary
role of the public administration is played by bank foundations in the case of Italy.
These foundations are not only interested in the corporate identity production and
acquiring “brand visibility”, but also play for the corporate social responsibility on the
local level (Besana, 2008: 3-4). Himmelstein (1997) draws the relation between
corporate philanthropy, corporate profit and corporate politics, as complementary to
each other , in the form of "doing good" for society while transforming the resulting
image of the good corporate citizen and "looking good" to increase corporate profit.
This issue can also be reformulated in the form of “Doing well by doing good” in
which the organization faces a situation where there is a possibility to maximize
shareholder value together with maximizing stakeholder or social value at the same
time. Karnani (2007: 3) says that “there is more to corporate success than the financial
bottom line” and goes on to argue that companies can accomplish some positive social
goals without suffering financially.

Another factor influencing the increase in corporate philanthropy is the up-scale nature
of the arts audience with high level of education and income which makes the art
market more attractive for corporations. This can also be regarded as a good marketing
tool for the supporters. However this kind of philanthropy is “cyclical” in nature, which
means that when the economy is in a good situation, there is an increase in the support
and when the economy is going down it is the opposite. In addition, the supporters tend
to control artistic process in order to be sure that highest possible public relation value
and “good image” will be achieved. (Chartrand & McCaughey, 1989).

According to Frank & Geppert (2002: 3); “Donations intended to support education,
health and human services and civic/community causes do not correlate with an
industry's advertising/sales ratio, whereas arts sponsoring does. This suggests that arts
sponsoring is considered as a promotional tool, at least to a certain extent”. The
changing nature of art markets and the rising interest in marketing and profit generation,
in other words the “marketization of the arts” is further complemented by philanthropic
giving. This can be further explained by the dominance of private non-profit sector in
financing creative industries and the need for clarity on the overall agenda for the
cultural policy process beyond the market failure justification (Zimmer & Toepler,
1999: 44).
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CONCLUDING REMARKS

To wrap up, the major motive for state to support the creative industries in the arts and
culture sector is the market failure which partially stems from the not for profit nature.
Nevertheless, positive externalities allure also the private sponsors to come and step in
most of the time for the sake of visibility and image motivation in other words for
marketing purposes. Even sometimes the non-monetary benefits are more crucial to
monetary ones, such as for the private sector the concern for “corporate social
responsibility” and for the public sector creating benefits for consumers and educating
their tastes, in the end leading to a spill-over effect in generating other industries’
revenues and contributing to the sustainable economic growth and welfare of the nation.

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