Creative Communities: Art Works in Economic Development

The Arts, Consumption, and Innovation in Regional Development

Economic development strategy at the state, regional, and local levels has been dominated by economic (or export) base theory, which posits that exports drive overall growth, whether measured by employment, output, or value added. The dominance of export base theory directs policy attention and incentives chiefly to businesses whose output is exported from the city or region. In the United States,where economic development is practiced principally at the state and local level, public sector development agencies are preoccupied with outside export-type enterprises,which they try to attract to the local area,rather than with local startups, especially those aimed at area consumers.1 Although arts advocates often stress the local multiplier effects of additions to arts capacity and programming enabled by public funding, they largely fail to demonstrate that such additions can produce net increases in growth and jobs unless the additions draw tourists or produce commodified goods for export. This chapter revisits export base theory, probing its origins and showing its limitations, and reviews cross-sectional and longitudinal evidence from national studies questioning the causal relationship between exports and growth. Despite caveats since its inception, economic base theory—which distinguishes between locally consumed and externally consumed goods and services and assumes that the former evolve in lockstep with the latter (despite evidence to the contrary)—is a guiding principle of economic developers at state and local levels.We argue that export base practices are based on a trun3 The Arts, Consumption, and Innovation in Regional Development ann markusen, anne gadwa nicodemus, and elisa barbour 36 Our thanks to Todd Gabe and Greg Schrock for feedback on earlier versions of the arguments; to Bill Beyers for his partnership on the empirical findings; and to Michael Rushton, Kevin Rafter, Doug Noonan, and Jenny Schuetz for feedback on the content. 03-2473-5 03 Markusen_ISBN 978-0-08157-2473-5 3/13/13 9:37 AM Page 36 cated view of regional growth potential, one that is especially antagonistic to arts and culture. We offer an alternative, consumption base theory, which posits that investments in certain types of consumption base activity can create net new jobs and income by —offering residents opportunities to spend more of their discretionary income on new locally produced goods and services —seeding innovations that later expand into export markets —nurturing organizations and occupations that re-spend more of their earnings locally than others do —attracting and retaining entrepreneurs, firms, and workers. We explore this theory in the context of arts and culture. First, an increase in local arts activity can capture a larger share of residents’ discretionary income, creating sustainable jobs. This is a phenomenon broader than import substitution, in which people simply buy locally the same items and services that they previously imported. The argument here is that given local access to new types of arts and cultural programming, people will change the composition of their spending toward the arts and away from other consumer goods and services. Or, put another way, proximity to arts and cultural offerings will alter people’s tastes and preferences (or tap into latent preferences) in ways that change the basket of goods and services that they spend their money on. Second, new arts and cultural offerings first serve a local market (as do offerings in other fields), which functions as a testing ground. Musicians (other than the classically trained, orchestra-bound types) may begin in a garage, move out into pubs and cafes, and build a local group of fans before exporting their work. New plays, choreography, and visual art are created and honed in local venues. Most successful arts and cultural innovations are first rooted and nurtured in local consumption markets and marketed farther afield only when they are proven and mature.2 Third,because most arts activities are highly labor intensive,higher shares of income generated locally may be re-spent locally.A visiting orchestra or Broadway troupe, whose performers drive in for a night and take their incomes with them, would not have much local effect, nor would a museum exhibit in which the artwork is shipped in from elsewhere.But if residents patronize local artists who live and work in the community, their expenditures are apt to recycle locally at higher rates, supporting other workers, businesses, and landlords. Furthermore, it is widely believed that artists spend higher shares of their income on fellow artists’ work—unlike workers in most other occupations— and often do so locally, so that the multiplier effect is again larger...