The Impact Of Public Funding On Cultural Urban Revitalization

The intent of this study is not to defend a preconceived notion that either the market or the public sector is more defensible, but to inform the reader of the public support of the arts.  The issue at hand, is whether or not public support of art activities can generate economic development and revenue in an urban regional economy.  The scope of this paper will concentrate on the performing and visual artists.

Before proceeding into the investigative background, it is important to establish a protocol statement as to “What Art Is.”  In western societies, it has been argued that the core of art includes literature, the media, performing and visual art.  The fundamental difference in the performing artist and the visual artist is that the former is rewarded with abundance, where the latter by scarcity.  There are several reasons why art would be supported.  They are as follows:

1. Art is not necessarily a daily part of our conscious lives.  However, large amounts of primary satisfaction received from art can lead to abstractions and ideas that are distributed and used in all parts of the economy.  For example, the influence color tones may have on a particular advertising campaign of a particular product line.

2. Art is basic to all human endeavors, collectively and individually.  It is a link with the past, present and future.  Art thus acts as education does—to influence, move, stimulate, and sustain us.

3. If in fact art plays such an important part of our cultural heritage, we do not want our society to experience a deficit in art supply.

Baumol and Bowen, in Performing Arts: The Economics Dilemma, make the argument that the labor intensity of the performing arts and its production cannot maintain the proper tempo with the continuous increase in technology in an industrial economy.  Thus the performing arts face the stoic reality that operating costs will continue to be above earned revenue.  They maintain that investments in performing arts tend to be labor intensive, therefore having the effect of widening the gap between earned revenue and operating costs.

Barton Weisbrod, of the University of Illinois, claims that economics of the arts yield an “option value.”  He defines “option value” as the value assigned to an option to consume, which we may not plan to consume in the near future.  This creates a scenario that art works and products would have value to a person who may not personally participate.  The myopia nature of the market mechanism may very well fail to allocate and distribute works, which would share these characteristics.

Cultural capital, like real capital, is a stock variable and is subject to depletion.  Art is a part of cultural capital, but must be preserved and replenished.  Art as cultural capital can and does stimulate cultural tourism.  Thus, cultural capital can and should be used as a possible generator of economic activity.

A Heuristic database will be established showing the impact of cultural capital on the growth of art activities, jobs, spending and tourism in urban areas.  It is particularly interesting to note that cultural activities may flourish in urban areas while the urban area itself may not flourish economically.

Demand and supply economies such as those generated by cultural capital can generate economic development through broadening the economic base of an urban area.  A recent study showed the impact of forty-five art organizations in Washington, D.C.  These organizations accounted for $619 million dollars or for every one dollar invested, the art community returned an estimated five dollars and ninety cents into the economy.  Thus the art community, and support for it, act as an incubator of broad-based demand and supply economies.

Public support of cultural capital may very well be providing funds for high participation rates in art endeavors, as well as seed monies for low participation rates of art endeavors.  The dilemma for the funding of cultural capital in the arts industry is that there has been a significant cut at the federal, state and local levels.  This has forced the arts industry to face the need for expanding viewership and private funding.  It can be argued that the lure of a clean, productive and community enhancing industry, such as the arts industry, would certainly be aggressively sought by any urban economics development agency.