This article presents core questions and problems related to the role of culture in society, to culture policy and it outlines some instruments, models and practices that can be applied to promote culture.
The intention of the article is to function as a platform for discussion of the role of culture in the society and of financing cultural activities.
As this is a big field to cover this article intends to only focus on core questions and on outlining drafts for solutions: In other words the purpose of the article is to function as an appetizer and as a driver for discussion of dealing with culture activities in the public and the private sector, looking at it from an EU perspective, national perspective and a regional/local perspective.
An additional purpose is to focus on the field seen in relation to economic business cycles with special attention to recession and economic and financial downturn developments

Lyck, Lise

OpenArchive@CBS

1 
 
Copenhagen, 3. July 2012 
 
How to strategically use the EU support programmes, including 
Structural Funds, to foster the potential of culture for local, regional 
and national development and the spillover effects on the wider 
economy 
 
Lise Lyck 
Centre Director 
Center for Tourism and Culture Management 
Copenhagen Business School 
Solbjerg Plads 3 
DK-2000 Frederiksberg 
E-mail: ll.tcm@cbs.dk 
 
Presented at the International Arts Professionals Summer School, Brussels (July 2-6, 2012). 
Arranged by University of Kent and ENCATC 
 
Introduction 
This article presents core questions and problems related to the role of culture in society, to culture 
policy and it outlines some instruments, models and practices that can be applied to promote 
culture. 
The intention of the article is to function as a platform for discussion of the role of culture in the 
society and of financing cultural activities. 
As this is a big field to cover this article intends to only focus on core questions and on outlining 
drafts for solutions: In other words the purpose of the article is to function as an appetizer and as a 
driver for discussion of dealing with culture activities in the public and the private sector, looking at 
it from an EU perspective, national perspective and a regional/local perspective. 
An additional purpose is to focus on the field seen in relation to economic business cycles with 
special attention to recession and economic and financial downturn developments. 
 
Core questions and problems 
Culture as absorption vs. culture as a production factor 
Discussions on culture and economics have for the past many years, and are still today, to a high 
degree concentrated on two opposite perceptions: 
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- Is culture mainly an expenditure (consumption)? This perception implies that culture is a 
part of private and public consumption and thereby contributing to absorption. 
- Is culture a production factor? This perception implies that culture is a necessary input to 
create output (production) in the society. 
The first perception is the most widespread. As a consequence of this perception, economic and 
financial downturns imply savings and cut downs of cultural expenditures. It is seen by the lowering 
of public expenditures and investments in culture and in difficulties of attracting consumers to 
spend money on many kinds of events and attractions based on experience economy. This is 
especially the case for events and experience economy based attractions, where no tradition or ritual 
has been developed that have created a fixed position in the consumer pattern for spending. 
The second perception is developed in relation to concepts as cultural capital (Throsby, D, 2001) 
and social capital (Putman, R.D. 1993, Potras, A, 1998 referring to Bourdieu, Lorry and Coleman). 
Culture considered as a production factor has also been a core element in the development of 
instrumental experience economy, stressing culture as an instrument to create economic growth 
(Pine & Gilmore, 1999). 
This perception of culture is also found in detached studies for instance, applying input-output 
analyses to demonstrate the economic value of spending money on culture to create economic 
growth. In Denmark for example, I have made a study on the economic impact of theatres (Lyck, 
Sfandla & Jensen, 2007) showing that the economic outcome of public subsidies to theaters have 
the same impact on economic growth as public subsidies spent by entrepreneurs in the 
manufacturing and service corporations. Other studies of culture based on the perception of culture 
being a production factor are found in other countries, but as far as I know, there does not exist a 
full overview or a reading on this kind of studies. 
 
The concept of culture 
Culture can be defined and perceived in a narrow sense (fine art) or in a broader perspective 
including almost everything in daily life. Fine art is expensive to produce and the demand is 
relatively small, which is why state subsidies are normally necessary to have this kind of culture to 
survive. The background for this is among other theories explained by “Baumol’s cost decease” 
(Baumol, W.J., 1967, Brooks, A.C. 2006). 
Since the 1960’s when the middle class grew in many countries and the traditional difference 
between labor force and capitalists evaded, more weight was devoted to the broader concept of 
culture. This was combined with the principle of willingness-to-pay. It resulted in a new policy of 
giving subsidies to a broader concept of culture and also gave room for sports to be included in the 
cultural field in many countries. 
The development since the 1960’s has also loosened the relation to religion and education and that 
lessons learned cultural discussion implies that enlightenment have lower priority than previously 
and that the secular dimension of culture has gained an increased weighting in the cultural area. 
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The dimension of religion versus secularity in culture is still a strong factor in the culture 
discussion, especially at the global level, but also to a certain degree in the EU countries. 
 
Culture in relation to business cycles  
Business cycles influence the way that money is spent on culture as well as the kinds of culture that 
the money is spent on. Concerning the amount spent, it is as already mentioned dependent on the 
perception of culture as absorption versus culture as an input factor. During a recession and 
economic downturn fine art is normally still receiving subsidies from the state, however, with a 
tendency to lower the amount or to keep it stable. Other forms of culture subsidies are normally 
reduced to a much lower level, resulting in large difficulties in continuing the current cultural 
activities. 
The kind of cultural activities supported are also influenced by the business cycles. During 
recession priority is given to culture activities that are flexible especially in the sense that they can 
be initiated or stopped without heavy economic consequences. This is why many new activities start 
as festivals as they can take place without too high fixed costs. It is also easier for the public sector 
to support new upstarts of festivals as they are considered as a reversible cost without a fixed 
position in the public budget over time. It can be argued that festivals are a sort of try-and-error 
activity, implying that only successful festivals will have a long life. 
The dependency of culture in relation to business cycles is of course a big issue where only the 
main problems is mentioned here. In practice it calls for different business models used in the 
cultural field allowing cultural business models to mirror the relation to the business cycle 
dependency. In the book: Celebrate to prosper (Lyck, L, Long, P & Grige, A.X., 2012) some of the 
aspects are analyzed. 
 
EU-, national- and regional level of the cultural field 
The level and form of the cultural activities depends on the government and governance structure as 
well as on strategies pursued at the different territorial levels. In other words the political dimension 
and perception of the role of culture is of immense importance and is reflected in the activities that 
are applied. 
At the EU level the main perception of culture has been that culture is absorption. The EU economy 
has for many years been based on the Mundell-Fleming1 economic models for economic 
development. 
                                                            
1  The Mundell–Fleming model, also known as the IS-LM-BoP model, is an economic model that 
was first set forth (independently) by Robert Mundell and Marcus Fleming. (Mundell, 1963, 
Fleming, 1962) The model is an extension of the IS-LM Model. Whereas the traditional IS-
LM Model deals with economy under autarky (or a closed economy), the Mundell–Fleming model 
describes an open economy. 
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Those models have been the main economic curriculum at most universities for many years and 
have been the background for the EU treaties.  The essence is that they are based on free movement 
of capital and on a common interest rate implying that monetary policy is considered a technicality. 
This is why the European Central Bank (ECB) was constructed as a technical body only having the 
responsibility for a stable price level in the countries. The ECB was not allowed to take national 
considerations when executing their work. This perception of monetary policy as a technicality was 
further developed in the establishment of the Euro i.e. a common exchange rate for the member 
countries. It allowed only two instruments for the politicians to deal with to solve economic 
problems, namely fiscal policy and labor market policy. The models were based on free capital 
movements, on standard homogeneous state behavior in relation to economic responsibility in the 
fiscal policy and in adjustments of the labor market. Furthermore, they were based on cultural 
diversity governed by a common state framework and a common behavior of the politicians treating 
economy and culture in a homogeneous responsible way. 
However, today it seems evident that those assumptions are not in line with the economic and 
cultural situation in the single EU countries and in EU seen as an entity. The rules of the EU 
Stability and Growth Pact are not met. State debt is a severe problem in many EU countries. The 
new financial pact and the idea of an EU bank union related to the ECB are new instruments, but it 
is questionable if those instruments can create trust and progress for the EU member countries. The 
unemployment is in many countries extremely high and the proposals on further public savings 
cannot solve the problems. The solidarity among the European member states and their populations 
is too low to allow for a transfer of income from richer to poorer member countries. We see a divide 
between the southern and northern member countries. In other words the economic conditions are 
not promising. 
The national perspectives are seen in the political attitudes towards the EU and towards domestic 
cultural agents and institutions. As mentioned a main difference is seen in the relation to the state 
being southern or northern. The southern states are less devoted to savings and to labor market 
changes, while the northern countries demand influence on the budgets and economic policies of 
the southern countries in order to be willing to finance further activities in the southern states. 
Domestically the states are restrictive in their financing of cultural activities especially if it is not 
the core cultural status activities. In total it means that government money for cultural purposes is 
hard to achieve. 
                                                                                                                                                                                                     
The Mundell–Fleming model portrays the short-run relationship between an economy's nominal 
exchange rate, interest rate, and output (in contrast to the closed-economy IS-LM model, which 
focuses only on the relationship between the interest rate and output). The Mundell–Fleming model 
has been used to argue that an economy cannot simultaneously maintain a fixed exchange rate, free 
capital movement, and an independent monetary policy. This principle is frequently called the 
"impossible trinity," "unholy trinity," "irreconcilable trinity," "inconsistent trinity" or the "Mundell–
Fleming trilemma." 
 
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At the regional level money is also scarce. However, if activities can be seen in a governance 
perspective and if cultural activities can be undertaken as public-private activities and furthermore, 
if the activities are reversible it is still possible to achieve money for cultural activities in most 
states. 
 
Solutions 
It is of course difficult to identify solutions in general, but some guidance for solutions can be 
given: 
1. It is important to identify evidence on culture as a production factor leading to economic 
growth. It could be in form of an EU project with participation of the EU member countries 
in order to identify and calculate consequences of money given culture considered as an 
investment in economic growth. 
2. Promotion of cultural programmes as for instance culture capital or cultural cities of Europe. 
Those programmes have big economic spillover effects and can contribute to creation of 
viable structures within culture. A very good example of this is when Copenhagen became 
cultural capital in 1996. The municipality decided to double the amount given to culture. It 
resulted in a heavy increase in tourism and in citizens’ satisfaction as well as in structures 
that have been viable until today. 
3. Make use of structural funds in EU. It should be done in big projects involving many EU 
countries. The purpose should be in line with the EU policy of Europe being the world 
tourism destination nr. 1 (Brussels, 30.6.2010, COM(2010) 352 final). 
4. Increase the financial support of the Europe for Citizens Programme 2014-2020. The 
replacement of the programme running to 2013 is decided but the Multiannual Financial 
Framework from 2014-2020 is currently under discussion, but unfortunately it seems 
without the needed increase in financial support. 
5. Improve statistics on culture, both the financial data and the manpower data. 
6. Specify the concept of culture. 
7. Relate cultural policy and instruments to positions in the business cycle. 
Explore instruments that are flexible and reversible as for instance festivals. (Other topics 
could be different kind of markets, where suppliers and demanders meet each other directly) 
8. Study different experience economy models and the learnings of using them2. 
9. Promotion of cultural exchange programmes to create solidarity. 
10. The most comprehensive change will be a shift of the EU model away from the Mundell-
Fleming model to a new model that must be based on the prevailing conditions for the 
economy of the European member states.  
a. It can be a more “Euroland” model based on the German ideas, i.e. a model less 
based on integration and more based on assimilation.  
                                                            
2 It can for instance be the models presented by Pine & Gilmore (1999) or the Experience Wheel 
made by Lise Lyck (2010) 
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b. It can also be a model based on a heterogeneous membership concept implying more 
national adjustment. In this respect it can be mentioned that the Danish model of 
following the Euro without being a member has made national current adjustment of 
the economic policy needed and in this way contributed to a responsible economic 
policy among the politicians. It could be claimed that such mechanisms could be 
developed to improve the economic discipline among politicians also in other EU 
states. 
c. A new economic model paying more attention to innovation based on core strengths 
in the different EU countries  
 
Conclusion 
The article stresses the need for more precise knowledge on culture and spillover effects from 
culture. It also stresses the need for a more realistic approach to the European economy and to 
models of which the policies are based upon. It involves a series of political questions that has to be 
dealt with and it will take time to renew processes and content and areas of political cooperation in 
the EU. However, the time has come for a change. Based on this perception some solutions are 
outlined in a drafted version and the main problem about the use of economic business models in 
Europe is presented. The development in the years after 2000 clearly demonstrates that culture has 
had a too low priority in the European cooperation in order to secure a more prosperous economic 
and social development for Europe. 
 
A post-scriptum on strategy 
Strategy includes directions/answers in relation to what, why, who, when and how a vision can be 
achieved.  
The vision behind this article is achievement of economic growth, employment and welfare in the 
EU member states. 
What: Change the area for economic policy in the EU giving culture a higher priority 
Why: The basic conditions for the Mundell-Fleming model used in the EU economic policy are not 
present and cannot be present for many years ahead. It is seen in the enormous differences in 
interest rates found among the EU member states, in the unemployment rates and in the imbalances 
in all the markets in the EU. 
Who: The main change can only be taken by the politicians and as the countries are democracies, 
the politicians need their voters accept for such a policy. The national freedom to act is low, but at a 
regional level there are some options based on governance and on public-private activities. 
When: Changes are needed both at the short and at the medium perspective, i.e. both within 5 and 
10 years. 
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How: The needed changes can only take place with new agreement on the political goals and those 
goals have to be supported by the voters. As a first step some of the existing arrangements in form 
of use of the EU support programmes including The Structural Funds must be applied especially 
within the cultural area. Furthermore, solidarity programmes must be improved if the Euro 
membership countries shall continue to have a common future. 
 
References 
Baumol, W.J. (1967): Performing arts: the permanent crisis, Business Horizons, Autumn, 47-50. 
Brooks, A.C. (2006): None-profit firms in the performing arts, Handbook of the economics of art 
and culture edited by Gintsburgh, V.A. & Throsby, D., Chapter 15, North-Holland 2006 
European Commission (2010): Communication from the commission to the European Parliament, 
The Council, The European Economic and Social Committee and the Committee of Regions, 
Europe, the world’s No 1 tourist destination – a new political framework for tourism in Europe, 
Brussels, 30.6.2010, COM(2010) 352 final 
European Council (2012): 9095/1/12 
European Council (2011): Europe for Citizens Programme and its prolongation from 2014-2020 
Fleming, J. Marcus (1962): Domestic financial policies under fixed and floating exchange 
rates. IMF Staff Papers 9: 369–379. Reprinted in Cooper, Richard N., ed. (1969). International 
Finance. New York: Penguin Books. 
Lyck, L, Sfandla, C, Jensen, A (2007): Analyse: De københavnske teatres effekt, Frederiksberg, 
Center for Tourism and Culture Manamgent 
Lyck, L, Long, P and Grige, A.X. eds. (2012): Celebrate to prosper, Frederiksberg Bogtrykkeri, 
Denmark 2012, ISBN: 978-87-92019-16-5 
Lyck, Lise (2010): “Experience Economy as an Instrument to Create Economic Profitability” 
Guest Lecture at Örebro University. 
Mundell, Robert A. (1963). "Capital mobility and stabilization policy under fixed and flexible 
exchange rates". Canadian Journal of Economic and Political Science 29 (4): 475–
485.DOI:10.2307/139336. Reprinted in Mundell, Robert A. (1968). International Economics. New 
York: Macmillan. 
Pine, Joseph & Gilmore, James H. (1999): “The experience Economy”, Harvard School press 
Putman, R.D. (1993): “The prosperous community: social capital and public life”, Public Island 
Press, Vol. 13, Issue 4, p.35-42 
Portas, A. (1998): “Social capital: Its origins and applications in modern sociology”, Annual 
review of sociology, Vol.24. p.1-24 
Throsby, David (2001): “Economics and culture”, Cambridge University Press, Cambridge, UK 


How to strategically use the EU support programmes, including Structural Funds, to foster the potential of culture for local, regional and national development and the spillover effects on the wider economy

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How to strategically use the EU support programmes, including Structural Funds, to foster the potential of culture for local, regional and national development and the spillover effects on the wider economy

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