Domino effect: Finance crisis sending waves through cultural sector
Out of the American real estate crisis grew a finance crisis, which in turn has spawned a global economic crisis. By now the domino effect has reached the cultural sector as well.
The consequences were felt first in the crisis epicentre, the United States. Privately financed institutions are facing the gravest threat to their existence now that many of the companies sponsoring them as “good corporate citizens” are experiencing financial difficulties.
Sponsors from the banking sector have been the first to slash their cultural budgets. As prime example, Lehman Brothers is supposed to have spent 39 million dollars annually on cultural programmes up to its bankruptcy, according to the Bloomberg financial news. The bank had a stake in the Museum of Modern Art in New York, for instance, where one of the Vice Chairpersons is Kathleen Fuld, wife of Lehman Brothers CEO Richard Fuld. But the investment bank also supported the National Gallery and the Tate Gallery in London, the Louvre in Paris and the Städel in Frankfurt …
Together with Merrill Lynch, Lehman Brothers had promised three million dollars for the renovation of Lincoln Center – which hosts several film festivals, among other events, and publishes the magazine Film Comment. These funds are now unlikely to materialize. Shortly before the financial meltdown, Merrill Lynch was purchased by Bank of America, which is itself now experiencing major trouble. The organizations dependent upon Bank of America include Carnegie Hall …
Ripple effects of the finance crisis have recently reached other areas of the economy. In January 2009 automaker General Motors announced that it would be suspending its entire cultural funding budget. This news set off a conflagration particularly amongst cultural institutions in its home territory of Detroit. (see freep.com/article/20090108/ENT05/901080372).
In a third wave, interest rate cuts are now diminishing capital returns on the assets of cultural foundations, which normally use such returns to fund cultural programmes. Also effected, especially in the USA, are the endowments of cultural institutions and universities. For assets invested in hedge funds or risky ventures, losses have been nothing less than dramatic. The magazine “The Art Newspaper” reported that American museums have bled at least 20 percent of their endowments through capital losses alone.
Film festivals as well are reeling from the crisis. In an October 2008 survey of American festivals, Variety discovered that the smaller ones in particular are fighting to survive. But even the big Sundance Film Festival lost a sponsor on short notice. In Europe, the Swiss company UBS announced that it would be rethinking its engagement in the Locarno Film Festival.
Otherwise, figures and reliable information on this issue are hard to come by. The contents of sponsoring agreements are among the best-kept secrets of both donors and recipients.
Some festivals, like the Berlinale, are trying to counteract the financing gap by raising accreditation fees, which may very well backfire as the industry slashes travel and entertainment budgets. And once the crisis has finally trickled down to the consumer, viewer numbers and hence box-office take will also drop.
In countries where culture is mainly state-financed, the effects will likely not be felt until the coming year or thereafter. At the latest when governments have to compensate for the spiralling national debts incurred trying to shore up the economy, the finance market collapse will affect us all.
While in some countries cultural funding has been increased this year (in Germany and France, among others), the public cultural sector in nations that have been harder hit is already suffering. Lithuania for instance cut funding for the European Capital of Culture Vilnius by 50%, and in the UK cultural secretary Andy Burnham has called on the nation’s subsidised organizations to come up with contingency plans. Funding cuts can be expected starting in 2010/11 – after all, the British have to start saving for the Olympics in 2012!
The economic stimulus packages initiated by worldwide governments to date have yet to tap art and culture as an economic factor and consumption driver. At worst, they’re even throwing good money after bad by supporting companies and industries that are themselves essentially responsible for the crisis in the first place. At best, money is going to educational institutions such as schools and universities – not to promote educational initiatives, however, but as investments in brick and stone to help out the construction industry. Governments are ready and willing to give a hand to the “˜distressed’ automotive industry, ignoring the fact that the cultural industry in Germany and elsewhere employs many more people and makes a great deal more money. The John F. Kennedy Center for the Performing Arts has estimated that 5.7 million people work in the “arts” in the USA. Most cultural institutions and organizations work on a local basis and are too small to make national headlines when they are facing closure – as many are these days. And the cultural sector is unfortunately not yet sufficiently organized to lobby like other parts of the economy for what it deserves: Bailout the Arts!
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