Julianne Schultz. Comparative advantage. Culture, citizenship and soft power

Fairness, Opportunity and Security.
Policy series edited by Michael Keating and John Menadue.

IT’S TIME TO think much more seriously about culture. For years we bought the Clinton truism, ‘It’s the economy, stupid’, but this simple binary no longer provides sufficient guidance for the future.

Self-evidently, a successful society must have a robust and innovative economy – one that is able to adapt to changing domestic and global circumstances. This process of adaptation and change seems to be one that Australia is ill-equipped to tackle; there is little evidence of big thinking, and a lot of protection of existing interest groups and sectional activities.

The need to redefine the nature of the Australian economy, to search for new areas of comparative advantage, and embrace the emerging ways of measuring the impact of intangible benefits, is more acute than it has been for decades.

In the area of culture, politicians and policy makers seem to be as wilfully blind to the opportunities as they are in other areas of comparative advantage canvassed elsewhere in this series. But there is excellent research being done here by scholars and practitioners, and enormous capacity, as a recent report by Professor Justin O’Connor and Mark Gibson for the Securing Australia’s Future program showed.

A United Nations Conference of Trade and Development report in 2010 showed that even when global trade was declining by 12 percent a year, the cultural sector had had a global growth rate of 14 percent a year between 2002- 2008 and at that time accounted for $592 billion. Not only is it one of the most rapidly growing sectors, but it is as UN, EU, UNESCO and other reports have shown, a sector that now accounts for about a fifth of GDP in most developed countries and is rapidly growing in others.

It is also a sector in which Australia has distinctive advantages, but one in which we are in danger of falling short. The cultural sector is one of the great new engines of influence and economic growth. It is one which plays to many of Australia’s strengths as an educated, globally engaged, outward-looking, multi-lingual democratic state in the same time zone as the world’s most populous and increasingly middle class regions.

The cultural sector has the potential to create high value jobs and reward innovation and to enhance the qualities of citizenship. It accounted in 2008-09 for the employment of between 6 and 9 percent of the workforce, generated between $35 and $67 billion of Gross Value Add, according to a report by the 2013 Creative Industries Innovation Centre, ‘Valuing Australia’s Creative Industries’. The range acknowledges some of the definitional issues, which I will return to later.

But we do know that it includes one of our largest home grown international companies, News Corp, and other publicly listed companies, and then ranges to medium, small and micro enterprises. It also includes activities and institutions that are supported by the state because of their contribution to citizenship, national identity and quality of life. In addition there is a sector made up by micro, small and medium enterprises that attract a small amount of public subsidy.

This is a diverse sector, which is part of its strength and part of the reason it has not been able to mobilise publicly as effectively as sectors which are more narrowly defined.

FOR TOO LONG in Australia the public policy response to culture has been to equate it with the arts. There were once good reasons for this, but the two domains are no longer synomous. And this is an old fashioned false equivalence. It does not work to the advantage of either national institutions, individual artists and the subsidised sector, or the commercial and instrumental parts of the sector. In the jargon of the sector this is called an ecosystem – the links are strong and material, as we see when a project that has received some public or philanthropic support becomes a commercial success.

Limiting cultural policy to an arts policy, when the arts are regarded as baubles, areas of patronage which can be dispensed at whim and not integrated into a bigger strategic approach to national cultural economic development, means that the sector is framed in the wrong way – one which means it is not treated as seriously as other areas that account for comparable amounts of economic activity.

This is deeply entrenched in Australian public policy. In part it is because there is an abiding sense that areas of intangible value are hard or impossible to measure. This is no longer as true as it once was – innovations in impact measurement and innovative refinements in accounting standards are making it possible to evaluate these activities more effectively.

There is a need for a strong and robust arts policy, one which supports the non profit sector and helps it become more sustainable, one which provides our most able and innovative artists with the support that they need to produce great works of art, one that provides pathways for new and emerging artists, one that is sufficiently resourced to make strategic investments in a range of major, middle sized and small organisations, and one that operates with the support of, but not at the behest of, politicians.

Unfortunately, despite the great success of public funding for arts and other key areas, including public broadcasting, film and the cultural institutions, there is a default that seems to reassert itself when funding decisions are being made; that these soft areas are therefore best dispensed as favours, favours which provide attractive ‘announceables’ for politicians. A more robust and effective model would be derived from building on the evidence of past success and finding new ways to make the sector more sustainable, connected and resourceful, while still enabling talented individuals and organisations to produce great works of art. The less well measured payoff is the social benefits that accrue and help to foster innovation and active citizenship.

Although measuring cultural value will to some degree always require a different approach, to simply say it is too hard and therefore an area depending on patronage, sells short the capacity of the people, companies and institutions operating in this domain. While it is true that measuring impact is an inexact science, it is an area that has increased in sophistication in recent years, and is now engaging skilled scholars and researchers, and entrepreneurs interested in the potential of impact investment.

The cultural sector does not have a settled definition, but thanks to several decades of intense policy and intellectual work it is possible to begin to define it in a way that is appropriate for this country. In 2009 UNESCO devised and adopted a statistical framework that was designed to capture the scale of activities and by providing an agreed international definition, make comparisons, and assessments of success more robust. The framework takes the major areas of cultural activity and divides them into six broad cognate groups and two related domains: heritage (which includes archeological, physical, environmental, structural and intangible dimensions), performance (theatre, music, festivals), visual arts (from fine art to photography), audio-visual (film, tv, video), publishing (books, newspapers, magazines, libraries), design (fashion, architecture, graphic design, advertising), tourism, sport.

Each of these domains has activities that have different relationships with the state and the market. They derive value and meaning from relationships with audiences, but they also provide benefits in terms of identity, citizenship and meaning in a way that is not available in many other industries.

All of Australia’s major trading partners are lavishing more and more attention on it in pursuit of trading and branding advantages, and domestic returns. As Thomas Piketty notes, this is an important sector for every nation state because its returns are not solely material.

SO HOW MIGHT this be done in an Australian context? What key decisions might be made which would enable this sector to achieve its potential, to deliver on economic, quality of life and national and social cohesion criteria?

As has been noted, much of this economic activity already occurs with only very limited interaction with the state, beyond a regulatory burden that is shared somewhat unequally depending on activity, scale and location.

Australia became a signatory to the UNESCO Convention on Cultural Diversity a decade ago, but the import of this has not been exercised or realised. This provides a legal rationale for a reorganisation.

The starting point is to aggregate the areas that account for the estimated $6 billion of commonwealth expenditure on cultural agencies and output, to put them into a single portfolio, or one linked by clear lines of accountability.

At the moment this expenditure (which is supplemented by an additional $2billion spent by states and local government) is scattered across many portfolios. Indeed so widespread is this range of activity it is unlikely that the estimated public expenditure accurately captures it.

So a quick survey of the spread of cultural activities makes the point.  The arts, some of the national cultural institutions, and screen funding agencies are in the ministry for the arts; the public broadcasters and broadcasting regulators are in the communications portfolio; heritage and parks are in environment; archives and copyright in attorney-generals; the crucial cultural dimension of Indigenous affairs in its own department; sport is in health; war memorials in veterans affairs; AIATSIS in education; tourism and creative industries export is in trade; cultural diplomacy (now known as economic diplomacy) is in foreign affairs; citizenship is in border protection and immigration; science and the remnant creative industries in industry and cities, which are home to most Australians and most cultural activity, are represented only as infrastructure.

This failure to aggregate an important area of policy is truly bipartisan.

Neither Coalition nor Labor Governments have grasped the potential that would come from a reallocation of responsibilities into a coherent portfolio. During the Rudd-Gillard-Rudd era arts and heritage were detached and arts was tacked onto five different ministries in almost as many years – with staff numbers falling with each transfer.

By comparison in most comparable countries culture has been aggregated into one portfolio. The titles vary but almost all include culture alone, or with various combinations – and media, and arts, and sport, and creative industries, and religion, and tourism, and science, and education.

This does not mean that governments control and direct culture, this is a long way from the old days of the Cultural Revolution and its ilk. Rather it recognises that if this sector is to achieve its potential for citizens, companies and the national interest, it needs to be taken seriously and that government needs to work on ways to enable a sustainable, innovative and profitable sector.

AT A TIME when global trade has stalled or reduced, trade in cultural and creative products is growing in double digits every year. Australia is active in this domain. Indeed as Nick Bryant has documented there is evidence of Australian businesses and individuals making a disproportionate impact.

But still we have a trade deficit in this sector, thanks to the volume of imported audio-visual material. Being an English speaking country makes Australia an easy destination for the cultural product produced by global leaders. But being an English speaking country in this part of the world, also offers enormous potential advantages to export cultural products and services as has been done so spectacularly with education.

Over the past decade most countries with which Australia likes to compare itself and almost all of our major trading partners, have implemented policies to boost, enhance and enable their cultural sectors.

Britain led the way with its redefinition of the creative industries in the 1990s. Taking those activities and services that had a cultural input and were at a meta level the product of creativity, and reclassifying them as an industry. At a practical political level this was designed to address the collapse in manufacturing and mining, which followed the restructure of the British economy. The point that reputedly convinced New Labour was a report that showed that the British music industry was larger than the steel industry.  The era of creative industries was born.

Similar lessons have been drawn albeit for different reasons by many other states. The South Koreans used investment in cultural and creative industries to super charge the economy. Its electronic manufacturing sector has been supplemented with film, digital, fashion, music and other activities that are creating a buzz, and generating income. Japan has been exporting ‘Cool Japan’ for years. China is now investing heavily in culture, with both a commercial and non commercial remit, building creative precincts in new developments and countless new museums, and investing heavily in soft diplomacy, particularly targeting diasporic communities in every continent. Singapore has invested heavily in design, cultural tourism, digital activities and more. Taiwan is a global leader in interactive digital products and other creative industries. Indonesia places a great emphasis on its cultural uniqueness and is seeking to strengthen this both in education and commerce. New Zealand has been a world leader in ascribing value to environmental assets (100% Pure) and has actively and successful translated this into film, fashion and environmental innovation. Every where you look countries in this region are investing to build capacity in these areas.

‘CREATIVE INDUSTRIES’ WAS a powerful construct but like any new construct one that had problems and internal contradictions. While some Australian state governments are now attracted to this way of framing the sector, it is a caravan that has moved on. A more effective definition revolves around cultural activities.

Over the past two decades the analysis of the success of the creative industries approach has led to new thinking about ways of aggregating this area of activity as the cultural industry or cultural sector – as economists argue it does not really demonstrate the characteristics of an industry.

The creative economy approach was viewed somewhat gingerly by those in the arts whose work could best be judged on its intrinsic value, and who were accustomed to an either/or mode of policy discourse as well as excessively competitive access to public funding.

While those involved in the commercial end of the sector rightly welcomed this approach, more effort was needed to delineate the pathways to success between art created for its intrinsic and instrumental value, and that which could measure success on a commercial balance sheet.

Certainly there is strong evidence of cultural activity in education, health, social welfare and other areas transforming lives and communities, but this has not been as readily embraced as solutions based on law, regulation and economics. The study of the impact of access to early childhood education, exposure to and engagement in creative and artistic pursuits is now overwhelming. It more effectively turns lives around than almost any other form of intervention. Indeed the recent decision by the British Government to extend free early childhood education because of both its personal and social benefits makes the Australian debate about childcare look arcane.

For those most engaged with this project simply collapsing art into a measure of its economic value was never going to be sufficient. We have long been accustomed to the notion that things of intangible value can’t be measured and therefore they are not taken as seriously as they might be. During the development of the Creative Australia policy considerable effort went into ways of defining the activity that could derive from investment in artists. The best analogy was to equate this to the investment in pure scientific research. It may have a commercial and instrumental value, but the research itself is of singular importance.

It is important to understand this history and the unintended consequences of copying a policy framework that has evolved quite rapidly. Simply adding creative industries to a departmental title short-changes the very real potential for policy development with a broader cultural framework, with direct and increasingly measurable tangible and intangible benefits.

The EU responded to this debate between creative industries advocates and artists, in its 2010 Green Paper by adopting a definition which described cultural industries as those ‘producing and distributing goods or services which…have a specific use or purpose which embodies or conveys cultural expression, irrespective of … commercial value’ and creative industries as those ‘which use culture as an input and have a cultural dimension, although their outputs are mainly functional’. This is necessarily a fluid and shifting domain, something UNESCO recognised by including the creative industries as one of the domains of activity. This is a useful starting point for policy development here.

NONETHELESS THE ECONOMIC value of the cultural sector is significant. It is marred by definitional problems, but these essentially pivot on what to include, and what to leave out. The Australia Council’s recent Arts Nation report uses a methodology that values the sector at 4 percent of GDP and the contribution to national well being at $66 billion a year. Work done by Price Waterhouse Coopers for the Copyright Council includes the copyright industries (with a commercial IP component) and the percentage of GDP jumps to almost 9 percent. The UN suggested that in most advanced economies this sector was worth up to 20 percent of GDP.

Definitions are important, and so is data, which made the decision by the Australian Bureau of Statistics to jettison its short-lived Art and Culture series that captured this data, particularly lamentable.

It is worth noting that two of the world’s leading cultural economists, Professor David Throsby at Macquarie and Professor Justin O’Connor at Monash are in great international demand  But at home they are generally only consulted to bolster sectoral argument, rather than to make the bigger case underpinned by robust economics, international evidence and persuasive case studies. Similarly research concentrations in the creative industries headed by Professor Stuart Cunningham at Queensland University of Technology and the Creative Industries Innovation Centre at the University of Technology, Sydney have built considerable analytical capacity.

In Australia this debate has been stymied by equating culture with arts defined quite narrowly as the non-commercial sector. A more sophisticated way of framing this builds the links between the creation of art of intrinsic value, and the commercialisation of related products and services – rather than considering it as a binary option.

The focus on non-commercial artistic and cultural production has grown hand in glove with various stages of cultural nationalism. The desire to tell uniquely Australian stories has been evident since white settlement, and indisputedly for millennia before. Mechanisms to enable this, despite the relatively small scale of the domestic market to foster a sustainable sector, have evolved ever since. In this market-driven global age, the challenge of imagining, creating, producing and consuming Australian stories is as great as it ever was. Participating in a global English language market presents challenges – but also enormous opportunities.

IN A REPORT for the Australia’s Comparative Advantage study in the Securing Australia’s Future program lead by the Australian Council of Learned Academies and the Prime Minister’s Science, Engineering and Innovation Council, Professor O’Connor and Mark Gibson made a series of recommendations which would go a long way to achieving this repositioning including:

  • Recognising that the cultural economy has significant economic importance in direct and indirect employment.
  • Developing policy in this area that acknowledges cultural values independent of economic value.
  • Framing the cultural sector as a complex service sector involving producer, social and personal services as well as links to manufacture and retail.
  • Recognising that the state has a crucial role in the cultural economy despite rising levels of personal consumption and expenditure.
  • Considering reorganisation of portfolios to encourage greater integration as has been done in other comparable countries.
  • Supplementing the role of the Australia Council with other agencies that can advocate for the full range of genres and industry sub components.
  • Reviewing Australia’s under performance in trade in cultural goods and services
  • Exploring the opportunities for cultural leadership in the Asia region based on interconnection between the public sphere and cultural production possibly by creating an agency comparable to the British Council.

To this list I would add two more:

  • Commissioning a Productivity Commission review of the obstacles to sustainability in the sector, which is inhibited by a regulatory framework that has evolved over time and in response to very different circumstances and a lack of access to investment and capital. As was noted earlier, this is a very diverse sector, and there are many regulatory obstacles only apparent up close. Copyright issues, which are common to many of these genres, are variable in their impact, but a common concern in the digital age. Then there is enormous variation between sectors. Publishing faces different issues to live music which has to contend with local government and insurance regulations.  Even film and television face different regulatory obstacles.
  • Requiring a cultural impact statement to accompany new policy proposals using the impact assessment methodologies that have been evolved in recent years. Just as the economic and public importance of the environment has been incorporated into the assessment of policy, there is a need to evaluate the cultural impact, both in terms of the tangible and intangible consequences of such innovations. The example I use in this regard draws on the response of the architects to the Building the Education Revolution projects. A large amount of research has been done that demonstrates the way the educational experience can be enhanced by design. In the rush to build new facilities, this opportunity was not even considered, but could have produced more buildings with a bigger impact than jobs for builders and a roof over the heads of school children.

Aggregating this sector in such a way would ensure that policy advice was of the highest calibre. Lessons could be learnt from the successful operation of areas such as public broadcasting, and the impacts could be regularly assessed.

Unlike many other areas of policy this sector has the potential to impact directly on community wellbeing and cohesion. Government cannot do this, but with the right policy settings it can enable the commercial sector to flourish, and the non-commercial sector to produce even greater benefit for Australian citizens. This is a potentially enormous market;  a source of high quality jobs and national value.

Professor Julianne Schultz AM FAHA is the founding editor of Griffith Review and chaired the reference group for the Creative Australia. These views are her own.

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One Response to Julianne Schultz. Comparative advantage. Culture, citizenship and soft power

  1. Max Bourke says:

    This is an excellent piece with some excellent ideas, but sadly likely to fall on barren ground. If we want a comparative analysis we only have to look at the late but smart Lee Kuan Yew, Watching Singapore closely over the last 40 years it has been extraordinary that in such a closely “managed state” (certainly some real loss of democratic freedoms we enjoy, but the tradeoffs as he worked through his agenda: full employment (tick), housing (tick), education (tick), good health system (tick), improve the environment and manage climate change (tick) and over the last decade or so spend big on arts infrastructure and cultural facilities (tick). Max Bourke AM former CEO Australia Council and the Australian Heritage Commission.

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