Making a case for demand-side financing of arts and culture

More than one year into the COVID-19 pandemic in Canada, we remain focused on the immediate concerns of managing community spread and infection rates. Vaccine rollout, while in many ways reinforcing deep inequities in our social structures, has allowed governments to relax public health restrictions, providing some much-needed mental health relief and optimism for the future.

It also presents us with an opportunity to get a clearer sense of the pandemic’s impact, and in many instances, devastation. We have heard consistently that the arts and culture sector is the worst hit in economic terms, with hospitality, tourism and other industries that rely on communal gathering and travel not too far behind. The title of a Manitoba Arts Council report says it all: First to Close, Last to Open. Indeed, when this is all said and done, arts and culture will have suffered the longest closure of any sector, with the performing arts the most severely affected.

To date, the prevailing strategy for government and philanthropic support has been to provide supply-side financing by funnelling money directly to organizations to ensure that they can keep their employees on payroll, pay their bills, upgrade their facilities, and when possible, create or deliver content in a digital format. On top of emergency funding provided to the sector throughout 2020, the Department of Canadian Heritage and the Canada Council for the Arts have been jointly tasked with moving $181.5 million into the sector for “the planning and presentation of COVID-19 safe events in the arts and music sectors.”

This strategy is certainly important. Without this support, most organizations would simply not survive. However, from an economics standpoint, supply-side financing is a useful, yet generally imperfect, support mechanism that does not always reach those who need it the most. In the long run, it may even impede the sector’s ability to restart.

Some of this supply-side funding also comes with strings attached that may exclude grassroots organizations. For example, the Ontario government has given the Ontario Arts Council a one-time investment of $25 million to distribute — $1 million of which will go directly to artists and creators — but has restricted eligibility for this money to organizations with budgets of more than $1 million.

Perhaps more importantly, it remains unclear how comfortable Canadians will be with fully re-entering public space and life, even after their second vaccine dose. In fact, many reports predict lasting, residual fears, if not near-complete withdrawal from mass gatherings for some. Such behavioural dimensions cannot be overlooked. Many Canadians have become accustomed to isolation, perhaps even more so in urban contexts where population density prohibits social distancing.

Certainly, many people are craving their restaurant outings and other social gatherings. Yet there remains a stark difference between the free-flow timing of going out to eat in a socially distanced way and having to navigate a crowd to enter and exit an indoor venue for an event with a concrete start and end time (not to mention the never-ending lineup for washrooms during intermission). And many of the so-called “benchmark arts” (ballet, opera, museums, etc.) that enjoy high rates of ongoing support through granting agencies, philanthropy and sponsorship mostly operate indoors. Even pre-pandemic,  cultural consumers were less likely to participate in benchmark arts compared to community and music festivals, public art and other experiences that mostly happen outdoors.

Already, we can see how government responses to support cultural entities that mostly operate indoors do not always correlate to those the public engages with the most, nor where public life will first resume. Addressing people’s comfort levels with resuming civic life is key, and for many it seems that indoor gatherings are not where they want to start.

This is not to say that the so-called benchmark arts are not important or in need of support. Most of them have a massive amount of fixed costs because of the venues and other properties they own and operate. And they contribute much to various economies and sectors. They provide employment to a large percentage of the arts and culture workforce. Their marketing and publicity provide revenue to the beleaguered news publishing industry and other sectors. They act as tourist attractions and destinations in and of themselves. Many of them are world-renowned and help place Canada on the international arts and culture map.

But by funnelling money into organizations and institutions that will remain shuttered because of the varying iterations of lockdown and the need for social distancing, policy-makers cast aside other cultural activities that give the public more opportunities to emerge from lockdown. How, then, can audiences be encouraged to resume their engagement with arts, culture and civic life?

One possible strategy that has received virtually no public discussion is demand-side financing. This can take many forms, including subsidies or direct disbursement to citizens, as well as flat-rate tax deductions. In our current predicament, however, we would suggest exploring a voucher system in which patrons or consumers would be given “cash-like” vouchers specifically to use for purchasing goods or services in the arts and culture sector that the artist, business or organization would submit back to the government for cash. In essence, consumers would be given “free money” to spend on arts and culture however they please. This would provide organizations with financial support while also incentivizing the public to re-enter public space.

Similar initiatives, often intended for audience cultivation, have successfully been implemented elsewhere, including in Italy and France, where young people receive a 500-euro “cultural bonus” on the day they turn 18.

In theory, demand-side financing is said to provide consumers with more options, and typically results in a more equal distribution of resources. Interestingly, it could also streamline the existing support measures for arts and culture organizations that have proven to be daunting, if not plain impossible, to navigate. Supporting demand may also spark competition and innovation, encourage the sector to adjust to evolving needs and preferences, and even lead to more operational efficiency.

Yet demand-side financing comes with limitations. For instance, a voucher system only works if people actually use it, meaning that funding intended to support the arts and culture may never fully trickle down into the sector. Ensuring that the money reaches Canadian artists and creators, as opposed to foreign entities, and preventing undue massification of culture would also require oversight and additional measures. Meanwhile, a flat-rate tax deduction leaves the government at risk of having to cover a higher-than-desired amount. Perhaps more importantly, there could be potential resistance from some arts and culture organizations that have been well served by the current system of grants and philanthropy, or have invested time and energy over the years to learn to navigate its intricacies.

While no one support system is without flaws, nor can ever fully compensate for what was lost to COVID-19 in the arts and culture sector, exploring a broader set of measures to exit the crisis and gently nudge people in the right direction seems necessary. Kickstarting post-COVID consumption through demand-side financing is an interesting way to not only bring consumers back in the short run, but also potentially to attract new people who simply needed a little push in the first place.