- Arts and Culture have Lost Share in the US
- Arts and Cultural Industries, and Music Content
- Further Study Needed
The United States National Endowment for the Arts (NEA) in association with the Bureau of Economic Analysis (BEA) has published annual statistics going back to 1998, showing the contribution of arts and cultural industries to the total American Gross Domestic Product. The statistics are known as the US Arts and Cultural Production Satellite Account (ACPSA). Annual statistics have been collected for more than a decade, but they are still dubbed “preliminary estimates”.1
Whatever the level of the estimate, it is a major contribution to our insights into the role of culture and how it integrates with the rest of the economy — in this case in America, but other economies have similar structures and close cultural bonds. The publication of the American project in December 2013 nearly coincided in time with the Australian Bureau of Statistics release in February 2014 of an “experimental” set of contributions to GDP by cultural and creative industries in Australia — for which see Cultural and Creative Activity in Australia.
The ABS effort is significant in its own right, suggesting that the contribution of cultural industries defined in approximate agreement with other countries including the US was about 2.8% of the total Australian GDP in the base year of 2008-09. Music, according to our “guesstimate”, accounts for about 20% — one-fifth — of the total value-added of cultural industries in Australia.
This is a base figure. Neither the American nor the Australian statistics covers the wide array of industries that make the narrowly defined cultural industries possible2, starting with school and post-secondary music education but including much else as shown by the structure of the Knowledge Base. It is an important plank in the major project we have undertaken to demonstrate the fundamental role of musical activity in Australia, beyond what is defined as “cultural” activities. Similar comments apply to the American research.
Arts and Culture have Lost Share in the US
The annual statistics from 1998 to 2011 of total GDP and “arts and culture GDP” are shown in Table 1. The first two columns show GDP at the current prices of each year, without adjustment for the price increases that took place. The price deflator used is the one applied to total GDP, converting the statistics to 2009 prices.3
Annual rates of change are shown in the two columns following the constant-price GDP estimates. The impact of the Global Financial Crisis is plain in the total GDP column. Actually, growth started to slow down as far back as 2005 before reaching negative figures when the crisis hit in 2008 and 2009. The subsequent increase was modest in 2010 and 2011.4
Arts and culture fared worse than the total economy. The component may be more volatile than total GDP but arts and culture generally gained share in the initial years. Between 1998 and 2004, total GDP increased by 19.4% from $11.1 trillion to $13.3 trillion, but arts and culture GDP grew by 27% from $402 billion to $511 billion. This situation was reversed, in fact to an extraordinary extent as arts and culture GDP declined by 4.8% in 2007, the year before the crisis, and continued to fall in 2008 and 2009 by 1.3% and 5%, respectively. In 2010 and 2011, arts and culture GDP recovered to growth slightly above the total economy, but despite these small gains in market share appears to be closely related to it. We don’t yet know the arts and culture statistics for 2012 and 2013 but the continued lack of strong recovery in total GDP to the end of 2013 doesn’t hold out much promise.5
Chart 1 shows the annual rates of change in total GDP compared with arts and culture, and Chart 2 shows the disturbing trend in the share of arts and culture, generally declining from about 3.8% to not much above 3.3% of total GDP.
Arts and Cultural Industries, and Music Content
The US statistics distinguish between a main category of “core arts and cultural production” (performing arts, museums, arts education, and design) and “supporting arts and cultural production” (performing arts support, art support services, information divided into print and electronic, manufacturing, wholesale and retail trade, and construction).
This brings us a step closer to identifying where to find music. Performing arts include opera, symphony orchestras and chamber music, as well as rock, country, jazz and other music which are fully part of the music sector. Dance companies have a significant music content as well, but theatres, circuses and other performing arts such as magic acts, circuses and ice-skating shows do not. All these are defined as performing arts and part of cultural GDP in America.
Of the other core arts and production industries:
- Museums would have a music content of practically zero
- Arts education (defined as privately provided fine and performing arts, and performing arts departments of non-state colleges and universities), would have significant music content. This category does not include schools and post-secondary music education
- Design services, while having a generally low music content, were defined to include architectural design of cultural structures, computer systems designed to assist motion pictures and sound recording, and the creative activities of the advertising industry.
Among the “supporting” arts and cultural activities:
- Performing arts support would have significant music content, as would art support services
- Information through print would have a music content of practically zero
- Information through electronic means, on the other hand, would have significant music content (production of motion pictures and TV, sound recording, radio and TV broadcasting, video games and arts-related software)
- Manufacturing includes musical instruments but would be generally low on music content6
- Wholesale and retail trade: generally low music content — arts supplies and musical instrument stores get a mention
- Construction of new cultural structures would have some music content.
Table 3 shows selected industries adding to two-thirds of arts and cultural industries’ contribution to the total Gross Domestic Product in the United States in 2011. The largest excluded component is arts support which according to the NEA refers to arts-related grant-making services and unions ($92.6 billion), which may have a relatively high music content; and manufacturing, wholesale and retail trade, construction and all other industries totalling $77.9 billion for which the music content would be generally low.
The value added is shown for the industries included in Table 3, in some cases such as performing arts both as individual industries and grouped. Each has been assigned an estimated music content from “high” to “nil”. Opera companies, orchestras and chamber groups, and other music genres have been given “high” content — also “promoters of performing arts without facilities” which consists largely of performing arts festivals.
Most of the value added, however, comes from industries with “medium” music content (60% compared with only 7% “high”). We can go one step further in the interest of illustration by guessing at average music content. Assigning 80% for “high”, 25% for “medium”, and 5% music content for “low”, we arrive at a “guesstimated” music content of about one-fifth of the GDP contribution of these industries (see box).
While it is much the same as we guessed for Australia, this is illustrative only.
Further Study Needed
The American and Australian value-added and GDP studies are complex and we are still trying to uncover their full significance. For example, the table in the American statistics we used to build the time series for Table 1 and the associated graphs shows two value-added sets, the satellite account (ACPSA) data that we used, and total value added for an industry. For performing arts, the total value added in 2011 was $48.5 billion while the satellite account as such showed $42.5 billion. For arts education, to take another example, the difference was much larger: satellite account $7.6 billion, total value added $116.4 billion. We haven’t yet delved into the intricate input-output relationships from which the statistics were constructed but will report back in due course.
In the meantime, advice from input-output experts among our readers would of course be more than welcome.
Hans Hoegh-Guldberg, 19 April 2014.
- Revised time series including 2012 are due in the third quarter (the US “fall”) of 2014. For further explanations of the US satellite accounts (and how they compare with other countries including Australia), see NEA Guide to the U.S. Arts and Cultural Production Satellite Account, NEA’s Office of Research & Analysis (director Sunil Iyengar and colleagues), December 2013.↩︎
- In fact, the NEA guide referred to in a previous note quotes a specific example from another artform: “To illustrate [the difference between output and value added], the output of dance companies includes the cost of pointe shoes (the shoes worn by ballet dancers when dancing en pointe). The value added of dance companies excludes the cost of pointe shoes, which were produced by other industries. To illustrate, the output of dance companies includes the cost of pointe shoes (the shoes worn by ballet dancers when dancing en pointe). The value added of dance companies excludes the cost of pointe shoes, which were produced by other industries such as shoe manufacturers.” (p 21).↩︎
- It is a reasonable assumption that the arts and culture industries were subject to similar price increases as the total economy. There may be variations in individual small segments but arts and culture in total is a heterogeneous structure and it would be difficult to make any other assumptions.↩︎
- Total GDP growth at constant prices remained sluggish in 2012 and 2013 as well: 2.8% in 2012 slowing to 1.9% in 2013.↩︎
- Table 1 and the data shown in Charts 1 and 2 were taken directly from the annual table showing value added by arts and culture industries, and total value added (GDP). For 2011, it shows the share of arts and culture at 3.35% whereas the publications quote 3.2% based on relationship to “current-value GDP”. Technically, value added is the difference between an industry’s output and the cost of intermediate inputs such as energy costs and the cost of raw materials, semi-finished goods, and services. We haven’t reconciled these fairly modest differences but will reconsider the problem when revised and updated estimates are published in late 2014.↩︎
- Other music-related activities such as production of home entertainment systems don’t seem to be included as cultural-type manufacturing – should they be?↩︎
Hans founded his own consulting firm, Economic Strategies Pty Ltd, in 1984, following 25 years with larger organisations. He specialised from the outset in applied cultural economics — one of his first major projects was The Australian Music Industry for the Music Board of the Australia Council (published in 1987), which also marks his first connection with Richard Letts who was the Director of the Music Board in the mid-1980s. Hans first assisted the Music Council of Australia in 2000 and between 2006 and 2008 proposed and developed the Knowledge Base, returning in an active capacity as its editor in 2011. In November 2013 the Knowledge Base was transferred to The Music Trust, with MCA's full cooperation.
Between 2000 and 2010 Hans also authored or co-authored several major domestic and international climate change projects, using scenario planning techniques to develop alternative long-term futures. He has for several years been exploring the similarities between the economics of cultural and ecological change, and their continued lack of political clout which is to a large extent due to conventional GDP data being unable to measure the true value of our cultural and environmental capital. This was announced as a major scenario-planning project for The Music Trust in March 2014 (articles of particular relevance to the project are marked *, below).