Some notes on the interaction of economics and culture in the global era

INCD Conference on Cultural Diversity,

Opatija

October 15, 2003

Zeljka Kozul-Wright

Zeljka.kozul-wright@unctad.org

Lecture Notes

Good afternoon, my name is Zeljka Kozul-Wright, I am an economist working with Unctad in Geneva. It is an honour for me to address this distinguished audience, on behalf of the Secretary General of Unctad, Mr. Rubens Recupero, who sends you his greetings and his best wishes for a productive and successful conference. I would like to thank the organisers for inviting me to Opatija to attend this historic meeting. It is also a great pleasure for me to be here in Croatia, a society currently experiencing multiple transitions, but also one with a deep-rooted identity, which carries very special meaning for me personally, and also speaks to the basic themes of this conference.

Unctad stands for the united nations conference on trade and development, culture is not our traditional area of concern, and normally our work is associated with policy issues arising in response to structural biases and asymmetries in the global economy, in areas such as trade, commodities, debt, technology transfer and foreign investment, which can impede the growth prospects of developing countries.

Why then is Unctad looking at culture? At a basic level it is precisely because culture is being traded on an ever greater scale in today's globalising world. Indeed, it is a particularly dynamic component of the trading system, linked to rise of the new information or knowledge economy. That culture, or rather creativity, is becoming a generalized input into the production process is reflected in the growing recognition among economists of the important contribution to growth and development played by human capital and intellectual property.

However, while creativity is an increasingly important general input in to the production process of all goods and services, there is a specialized group of actitivities that use creativity intensively. These “creative industries” represent newly emerging and fast growing clusters of economic activity. It is expected that the global value of creative industries will increase from $831bn in 2000 to $1.3 trillion by 2005, an annual compound growth of 7.2%. And these activities are also among the fastest growing segments of the trade in-services panorama, with more and more developing countries participating, especially in audio visual services.

While the economic and employment generating potential of these industries is, we believe, vast and many developing (and transition) countries have potential in this area, most are still marginal players, despite their rich cultural heritage and pool of talent. That position reflects a combination of domestic policy weaknesses and global systemic biases.

Talent alone is not sufficient to build a competitive creative industry, such as music or film, and in most developing countries, creative industries have suffered from weak institutional and political support, low levels of entrepreneurial capability, low added value, over-dependence on foreign firms and massive copyright infringement. Hence, earnings are far below the potential levels were the industry more effectively organized and strategically oriented.

Given this scenario, effective policies and sect oral strategies clearly matter. It is also clear that many of the policy issues and concerns raised by the rapid global rise of the sector can only be tackled effectively at the multilateral level. Thinking about all this is very much UNCTAD's economic brief.

Of course, more than labor and capital, or even technological skills, creativity is deeply embedded in any country's cultural context. Culture includes both the production and the consumption of a shared set of beliefs, values, customs, behavioral practices, and artifacts that the members of society use to cope with their world and with one another, and is transmitted from generation to generation through learning. Culture, as such, is not an economic construct, although it has an economic dimension.

The relation between these two realms is a contentious intellectual debate, the nuances of which are certainly beyond the immediate concerns of this presentation. I would certainly wish to avoid the economists tendency to priorities our own discursive realm. When talking about the equally contentious relation between economics and politics the great development economist Albert Hirsch man (who with a nod to Freud castigated his profession for its “physics envy”) detected an “on again off again relation”, which changed with specific historical circumstances and I suspect that the same is true of culture. However, my working assumption is that in the current era the two are closely intertwined and interrelated. Such a point of view has also been made by UNESCO when it notes:

"… culture is at the heart of contemporary debates about identity, social cohesion, and the development of a knowledge-based economy,…UNESCO, universal declaration on cultural diversity)."

From this perspective I have extracted four key areas of tension surrounding the interaction of economics and culture, and which, I think, go to the heart of the NIICD debate. My concern here is not to offer definitive solutions to deal with these tensions but rather to suggest that recognizing and addressing them will be central to any global arrangement dealing with cultural diversity.

1. The economics of culture involves more than consumption

Just as culture is an intimate part of the economic realm (sadly most economists who readily celebrate the seminal contribution of Adam smith have failed to understand that this was one of his key messages) so there is an irreducible economic side to culture. This however has too often focused on the question of its consumption or the market for culture. At the international level this has its analogue in a focus on the traded dimension of culture.

Certainly in the modern world, the market and private firms that operate through the market mechanism, represent a dominant channel through which cultures interact. But culture has to be produced before it is consumed. And producing culture is a complex and expensive organizational process which absorbs resources, both human and financial, with other potential uses. Conventional economics has never really been comfortable discussing the organization and financing of production and not surprisingly, when it comes to looking at culture, it tends to ignore the imbalances in economic power and capacities (productive and institutional) which characterize this realm.

Moreover, while much conventional discussion of the market mechanism suggests – wrongly in my opinion -- a smooth equilibrating process which corrects any inconsistencies between the wishes of suppliers and demanders, asymmetries and imbalances in the production sphere are likely to be a good deal more resilient, linked to geographical and historical legacies (such as country size, language, colonial status, etc). As well as to their institutional reproduction through first mover advantages, scale economies, technological depth and related learning capacities, access to finance etc. Certainly one does not have to look very far to see such features have a profound influence on the shape of the production space of cultural goods.

An important conclusion from this perspective is that trade, as in the discussion of economic development more generally, is only one element in the economics of cultural diversity, and probably an overemphasized one. Any serious discussion of the interaction of economics and culture should not take the conventional discussion of the economic realm as gospel.

2. The private and public realms of culture

Historically, organ sing the resources for cultural production has taken place through the state or the church. In these institutional spaces the production and dissemination of culture was tightly controlled and bound together. The rise of the market opened up an alternative set of economic opportunities which eroded earlier arrangements but also created a new public space alongside the private space of markets and firms.

From an economic point of view, the idea that culture has some of the qualities of a public good introduces new challenges. In particular, the fact that culture can be jointly consumed and carries significant fixed costs means that there is a tendency for it to be undersupplied if the market is given too much influence. This threat has often received a good deal of emphasis in the discussion of cultural diversity:

"….culture takes diverse forms across time and space. This diversity is embodied in the uniqueness and plurality of the identities of the groups and societies making up humankind. As a source of exchange, innovation and creativity, cultural diversity is as necessary for humankind as biodiversity is for nature. In this sense, it is the common heritage of humanity and should be recognized and affirmed for the benefit of present and future generations.

"….market forces alone cannot guarantee the preservation and promotion of cultural diversity, which is the key to sustainable human development. From this perspective, the pre-eminence of public policy, in partnership with the private sector and civil society, must be reaffirmed…" (UNESCO, Universal Declaración on Cultural Diversity…)

Consequently, there remains an irreducible public dimension to cultural activities and the balance between private and public is a key feature of any healthy cultural environment.

Essentially this implies that we need the market but not necessarily a free one. In this context, it is however important to avoid a simple state versus market dichotomy. Indeed, the very concept of a free market is not very meaningful given the specific institutional aspects surrounding the production of culture in the private sector. This is a complex issue that needs to be carefully deconstructed. There are plenty of shadows and shading here. Certainly the view that identifies culture with the business ethic and its trade component reflects a mistaken view of economic relations which equates market dominance and cultural superiority.

3. Global convergence and local diversity

While there is I think a general agreement that freer circulation of cultural goods and services should be an integral part of any dynamic cultural environment. On one level globalization which is driven by the spread of markets and by border-straddling technologies must heighten that circulation.

But globalization is not just about markets or new technologies. It is a political project. According the dominant conventional economic viewpoint, liberalization and deregulation bring big economic benefits, particularly to those at the bottom of the pile. The promise is the elimination of economic (income) gaps among countries or what is called convergence. This is consistent with a certain conception of diversity which assumes economies interact with each other on the basis of their differences in resource endowments (their comparative advantages). The idea that opening up to the relentless forces of global markets and capital is the best possible world, is often extended to cultural benefits with the idea that globalization by offering new opportunities for interaction nurtures creativity and new forms of cultural expression that contribute to the evolution of cultural diversity.

There are many problems with this perspective not least its one-sided view of the economic realm that stresses

Opportunities, but ignores the means to capture, seize or acquire these opportunities. I.e. those that are non-existent (equal playing filed, symmetries in knowledge, common productive capabilities, etc).

As Unctad has insisted on many occasions, economic globalization is in reality a highly skewed and lopsided process in which powerful interests are able to use markets and technology to reinforce their positions of economic strength. The economic record does not support the view that most developing countries have benefited from liberalization. Indeed, there is a good deal of evidence now which shows that the adoption of the universal model of rapid liberalization has been damaging to economic prospects in many developing countries. This essentially reflects the very different domestic production conditions that countries have inherited from the pre-globalization era. Accommodating this diversity in the design of development strategies has been a message Unctad has been pushing for some time

UNESCO has recognized that this tension within the economic realm has an analogue in the interaction between the economic and cultural realms.

"…. That the process of globalisation, facilitated by the rapid development of new information and communication technologies, though representing a challenge for cultural diversity, creates the conditions for renewed dialogue among cultures and civilizations,…" (UNESCO; universal declaration on cultural diversity)

4. National policy space and multilateral arrangements

Culture in the modern world inevitably has a very strong national dimension. Interestingly both globalizes and anti-globalizes tend to look on this with some distaste. However, multilateralism does not mean denying responsibilities. On the contrary, effective multilateralism is based on strong national spaces which can give up some degree of autonomy in return for desirable outcomes, such as stability or diversity, which can be supported at an international level.

Certainly the way in which markets and the media firms interact by eroding national responsibilities and instruments in the search for greater profit making opportunities has undermined rather than buttressed multilateralism. While there may not yet be truly global tastes, the tying of culture to business ethics is in turn reinforcing the control of major corporations, dominated by the quad countries, and narrowing the capacity of states to support cultural diversity.

There is accordingly little doubting the need for sufficient policy space at this level some of which will only be guaranteed at the international level:

"….while ensuring the free circulation of ideas and works, cultural policies must create conditions conducive to the production and dissemination of diversified cultural goods and services through cultural industries that have the means to assert themselves at the local and global level. It is for each state, with due regard to its international obligations, to define its cultural policy and to implement it through the means it considers fit, whether by operational support or appropriate regulations…." (UNESCO).

Designing effective arrangements is one of the big challenges facing the international community, a point recently made at the political level by UN Secretary General Kofi Anan. The economic-related aspects of cultural diversity, including trade, can be discussed at Unctad, in collaboration with UNESCO. Unctad has the capacity to deal with such issues from a development perspective.

At a recent the expert group meeting on audio visuals, last November at Unctad in Geneva it was agreed that there is a need to establish a new pillar at the international level that would contribute to the common understanding and treatment of issues inherent in culture. These participants felt that the WTO in general and the gats negotiations in particular were an inappropriate forum for the consideration of issues related to audiovisual services. The notion of the international instrument of cultural diversity and the associated role of UNESCO was underlined in this respect. Under this approach, such pillar would be a necessary step in bridging the link with trade

Conclusions

There is a growing recognition that the attempt to impose one economic model on developing countries has not worked. Economic diversity needs to be accepted as a starting point for discussing more effective development strategies and accommodated in global economic rule making. This perspective extends readily to the question of culture and cultural goods.

In a more open global society, there is a need for global rules and arrangements that establish an appropriate terrain on which growing cross-border interactions takes place. This is certainly true of culture. However, the object of an agreement should not be to ensure conformity to some universal set of standards but to correct the more egregious imbalances and ensure that diversity can flourish along with openness.

The balance is difficult but essential. In this respect, NIICD could provide a counterweight to the existing institutional arrangements, that would marry global arrangements and safeguards with local policy flexibility to better manage the production of national cultures and hence to ensure cultural diversity. From this perspective, defining the economic cultural nexus in terms of “exceptions” to some otherwise acceptable body of rules is not helpful. Diversity is an integral part of a dynamic and healthy (i.e., creative) global cultural environment.

In more open societies trade and culture are difficult to separate and this is certainly true of contemporary global sing world. But if trade and market-based agenda are prioritized over the non-commercial dimensions of cultural development, then the asymmetries that derive from the production-side of culture could easily lead to the undermining of cultural diversity.

The trade liberalization agenda cannot manage the tension – the playing field on the production side is obviously not level. But cultural diversity cannot be handled through the cultural exemption clause. Nor does reducing culture exclusively to a trade-related issue, with an attendant awareness of the need for flexibilities, really help.

The proposed convention needs to stress the need for establishing a new instrument, as an issue separate from the strict concerns about trade. This is now recognized in many developed countries. But it also needs to have a strong developmental dimension simply because the asymmetries on the production side are so clearly dominant.

A need was highlighted to strengthen the developmental dimensions of the NIICD, if the new convention or instrument is to become universal and relevant for all the parties concerned and a truly universal convention.

Unctad stands ready to serve in any way it can by making its modest means available to the international community in support of a better balance between economics and culture and the support of cultural diversity.

Thank you for your attention.