How can the cultural sector survive the financial crisis?: How is the arts and culture sector responding to the crisis?

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How is the arts and culture sector responding to the crisis?

January 2009
by Helmut Anheier

The current economic downturn, triggered by the financial crisis, is closely related to the inability of governments and international institutions to address what experts call the ‘global governance problem’ – the growing mismatch between the forces of globalisation (largely financial), and the capacity of governments to steer and regulate. Illustrative of this problem is not only the crisis itself but also the often hapless responses in political capitals: no national government and no international institution, including the European Union, is able to deal with weaknesses in the global economy. Unless the systemic failures of governance are fixed through policies and institutions that adequately consider the challenges of a globalised economy and global financial markets, the governmental response will remain focused on managing their political image at worst and ‘doctoring with the syndrome’ at best.

Image: Financial Crisis Mural in SoHo by bbusby

At another level, much more can be done, not in the sense of the global or macro issues mentioned above, but in terms of proactive policy and management responses for, and on behalf of, philanthropic giving and cultural non-profit organisations. This level, and what it means for non-profits, is the primary focus of this article. However, before delving into the options, two preliminary points are worth raising:

Firstly, in the arts and cultural field – and in the non-profit sector overall – there is very little interest in the origins of the current crisis (i.e., financial markets that were beyond the control of policy-makers and business leaders). Rather, the field is focused almost entirely on dealing with the immediate fallout, with some energy placed on developing strategies for surviving in the medium to long term.

Secondly, it is equally important to separate what would have happened anyway and what has happened additionally, sooner than later, or more dramatically, because of the crisis.

Of course, while we cannot predict the future, we can reasonably extrapolate a number of trends from developments in the field of arts and culture over the last ten years. Among them are:

Greater demand for cultural goods and services combined with less public funding that is more competitive
Competition models developed elsewhere (in the health, social services and education sectors) being applied to arts and culture, with an emphasis on cost control rather than outcome quality
Search for new business models for non-profits in many fields, including arts and culture, to compensate for lower levels of government support
Professionalisation of finance, management and service delivery, often combined with a certain timidity in terms of advocacy
Policy emphasis on greater civic engagement and fiscal transparency for legitimacy reasons
Private philanthropic support that can be fickle, resulting in fluctuating levels of support
Overly optimistic expectations about what foundations can do for arts and culture (e.g., substitute for reduced government spending).

What these developments mean is more than a rhetorical question, for the simple reason that these trends are continuing, albeit in the context of a crisis. For a start, transferring models between non-profits and businesses would have become more frequent in regulated quasi markets (health, social services), as would conversions of public to private institutions (education, culture). In other words, many organisations would have changed, and many non-profits would have become more like businesses, while many public institutions would have become more private.

In turn, this would have brought about fierce and long drawn-out debates: about the right revenue structure for cultural non-profits and the optimal mix of earned income, public funds and private donations, including foundation grants; about asset management and acquisition policies; about barriers of exit and (re)entry for donors and recipients alike; about stakeholder involvement (artist, consumer, client, member, funder, staff, the general public etc.); and, about professional control over mission and operations, and the role of the board.

How can the cultural sector survive the financial crisis?

How should non-profits rise to new challenges?

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