Is there a Creative Sector?

Alan Freeman

GLA Economics

LSE 15 December 2003

Culture, creation and intervention Commodification has redefined ‘culture’

– ‘Creative Sector’ is treated as ‘Culture that makes Money’– Provoked search for evidence to inform policy– But: one policy, many policies – or no policy?– Is there in fact a single ‘thing to intervene in’?

DCMS uses ‘standard’ economic classification systems– Standard Occupational Classification: what the workers do– Standard Industrial Classification: where they do it

What does ‘Sector’ mean?– No-one distinguishes it from ‘industry’– So we will study the two terms interchangeably– Unfortunately, ‘industry’ is no better defined than ‘sector’ …

Where are we in the research cycle?

Analysis

Data

Action/Observation

Hypothesis: a new phase of cultural commodification

Use standard classifications to study commodity-producing activities (Art, Fashion, software)

They have something in common: but what?

Thesis There is no such thing as a ‘science sector’ There is no such thing as a ‘knowledge sector’ But there may be a ‘creative sector’, with

– common market– common processes of production– (a?) common supply factor(s?)

And moreover– agglomeration externalities (clustering)– and extensive market interconnection

What we know, 1: a stable, qualitative, domestic and global, across the board rise in demand

5%

7%

9%

11%

13%

15%

17%

19%

1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

Leisure goods and services as share of household expenditure

Advertising share of service exports

Audio-visual share of service exports

London’s output growth 1995-

2000

What we know 2: a qualitative reshaping of industrial structure Jobs

growth

Output growth

What we know 3: a new regional pattern of growth

jobs

growth

London: CI job growth 1995-2000

Including in London itself

Borough

Havering 2,744 4,147 6,610 281 3,866 4%Barking and Dagenham 1,948 3,587 5,074 461 3,126 9%Waltham Forest 6,566 6,900 11,726 1,740 5,160 15%Harrow 10,517 8,443 16,466 2,494 5,949 15%Greenwich 7,688 4,939 10,851 1,776 3,163 16%Bromley 16,098 9,654 21,558 4,194 5,460 19%Newham 7,072 4,295 9,417 1,950 2,345 21%Bexley 5,003 3,337 6,848 1,492 1,845 22%Hillingdon 9,961 9,420 15,874 3,507 5,913 22%Ealing 17,849 14,523 26,446 5,926 8,597 22%Croydon 12,256 12,713 20,149 4,820 7,893 24%Enfield 8,638 6,544 11,844 3,338 3,206 28%Kingston upon Thames 11,237 9,657 16,153 4,741 4,916 29%Hounslow 9,536 5,094 11,300 3,330 1,764 29%Redbridge 7,432 8,338 11,953 3,817 4,521 32%Merton 9,995 8,905 14,089 4,811 4,094 34%Lewisham 10,726 10,557 15,780 5,503 5,054 35%Sutton 9,549 7,337 12,435 4,451 2,886 36%Brent 12,721 10,794 17,068 6,447 4,347 38%Richmond upon Thames 18,232 13,535 22,736 9,031 4,504 40%Wandsworth 27,495 22,574 35,658 14,411 8,163 40%Barnet 20,093 15,791 25,479 10,405 5,386 41%Tower Hamlets 9,434 9,121 12,912 5,643 3,478 44%Westminster 21,213 15,893 25,479 11,627 4,266 46%Lambeth 20,237 17,561 25,767 12,031 5,530 47%Hammersmith and Fulham 19,341 14,931 23,344 10,928 4,003 47%Hackney 11,467 10,285 14,756 6,996 3,289 47%Kensington and Chelsea 18,410 14,641 22,243 10,808 3,833 49%Southwark 15,146 14,390 19,565 9,971 4,419 51%Camden 24,555 19,257 28,665 15,147 4,110 53%Islington 15,426 12,234 17,854 9,806 2,428 55%Haringey 18,169 13,750 20,495 11,424 2,326 56%

Is there a pattern of specialisation?

I = working in Creative industry

O= in Creative Occupation

O I = Total Creative Workforce = industry + occupation (DCMS definition)

O I = ‘specialist’ workforce (any creative occupation also working in creative industry)

O I /O I = ‘Creative Factor Utilisation’ indicator

The Standard Classification: a conceptual geology

In theory, analytical categories evolve. But do they? The standard taxonomy has accumulated over time

and each age deposits a stratum– Agriculture - Physiocrats– Manufacturing – Industrial and classical Economists – Services - Financial Economists

A fossil record: strata are buried, not reconstituted Eg: where does GM food ‘fit’?

– SIC makes it a branch of agriculture– Pragmatically, it is a branch of pharmaceuticals

Principles used in constructing NACE and followed in SIC 2003 (from the

manual)1. The main criteria employed in delineating divisions and groups (the two and three digit categories, respectively) of NACE concern the characteristics of the activities of the producing units. The major aspects of the activities are:

(i) the character of the goods and services produced,(ii) the uses to which the goods and services are put, and(iii) the inputs, the process, and the technology of production.

11. An activity is said to take place when resources such as equipment, labour, manufacturing techniques, information networks or products are combined, leading to the creation of specific goods or services. An activity is characterised by an input of products (goods or services), a production process and an output of products.

Ceci n’est pas une pipe:A health warning about Hierarchical Classification

8%

28%

36% tractors

52% is in Section D

but…

and…

largest share of DIs food machines

21%

therefore…

Classified as 29.53, manufacturer of food machinery

Where did industrial classification come from?

Physiocrats – physical reproduction Marx – social reproduction Marshall – origin of products Leontieff – industrial reproduction

Leontieff on industry

‘any national economy can be described as a system of mutually interrelated industries or – if one prefers a more abstract term - interdependent economic activities…

‘the whole system has been subdivided into 50 sectors comprising

– agriculture, – various extractive and manufacturing industries, – electric public utilities, – three kinds of transportation, – trade – and other types of service industries.’

Some problems Why?

– Is agriculture is one industry? (manufacturing is many industries, so are utilities – so why not landed production?)

– Are there ‘three kinds’ of transportation? (Do cars have more in common with trains and horses than aeroplanes and ships?)

And what about?– Wood (construction, materials, or agriculture?)– Moonboots and slippers – one product?– Chemicals - one process?– Services – is banking really the same as communication?

Yet– Leontieff was pragmatic and close to what he described– His classification ‘worked’ in practice– USA fastest-ever mobilisation and demobilisation (cf Kennedy)

Other agendas, other taxonomies

Complexity and production runs (Woodward)

Innovation and the use of science (Pavitt, National Systems of Innovation)

‘Knowledge’ industries (OECD, etc)

Socio-economic paradigms (Perez)

Agglomeration externalities (Porter)

‘Creative class’ (Florida)

Caution: why isn’t there a science industry?

Science is a component of everything– So is land– So are buildings– So is power– So what?

Science is not commercialised as a product– ‘Tacit’ knowledge– Public goods– Not abstractly transferrable

There are few if any ‘science factories’– Research lab is typically either public or subsidiary

Guidelines for cautious classifiers History matters

– The past worked, or we wouldn’t be here– Trends matter– History repeats, but each time it’s different

It may not be perfect but it’s there– Don’t knock pragmatism– Observe what is really going on– Don’t expect one scheme to fit all

Follow the money– The bottom line: an industry is an organised system for buying

something and selling something else– New industries present themselves (Steel existed for 2,000

years but Bessemer made it an industry)

However some change can’t be avoided…

Woodward, 30 years on

???

?

??

An attempted escape: ‘innovation’ as a modern universal (Pavitt)

‘Science-intensive’ firms are now found in all ‘sectors’– GM (agriculture)– Bioscience, nanotechnology (manufacturing) – Tropical fish and fresh flowers (retailing)– Electronic money (finance)

‘Industry-based’ classification cannot capture this– Need ‘cross-cutting’ taxonomy– Suggested ‘reconstruction’ of existing taxonomy– But in practice this seems to be a supplementary classification

Two possible deductions– Industrial classification may be outmoded, or– ‘Innovation’ may not be a ‘sector’

Actually-existing industryK-waves as creative destructors

New ‘core’ industries as they actually arrive are…– centres of innovation– drivers of productivity– attractors of capital– and inputs to all other industries

…and they therefore– transform the organisation of work– transform the organisation of society

and so create new universal concepts– The Age of Manufacturing = ‘the factory’– The Age of Steam and Railways ‘technology’– The Age of Steel and Electricity ‘power’– The Age of Computing – ‘information’

A new technological paradigm?

●Small runs, big bucks: mass producing difference

The end of the market in sameness

What matters: on spec, and on time

●Birth of a new industrial structureCapital flows into optimising small unit production

Flexible manufacturing becomes a universal technique

Design becomes a universal factor of production

Redefining production

Redefining the city– Economies of scale no longer a property of the unit– Agglomeration as such is the source of economy– The city is the new location for agglomeration economies

Redefining human capital– ‘Knowledge’ and ‘information’ imply once-for-all transfer– If so they cannot be a ‘factor’ of production– Creativity is ever present in production because each

project is new– Capacity to ‘transform to a vision’

(produce to an incomplete spec)

Summary: what the Creative Sector might be New market, both domestic and global

High value-added, short-run, differentiated consumer services and products

New production paradigmFlexibly specialised hi-tech delivery of services, or products which are close substitutes for a service (eg films, videos)

New factor of productionCreative capacity

Organised through specialist productive units–Using the new factor of production– in the new production paradigm– to produce commodities to the new market

Acknowledgements

Thanks to:Daniele Archibugi

Carlota Perez

DCMS