Ruth Wagner: Culture as a hard factor for economic locations

The cultural environment not only defines the quality of life in cities, towns and states, it has also long been an economic factor for locations. The cultural and creative sector combines traditional economic sectors, new technologies and modern forms of communication with each other. Given its capability, it is comparable with key sectors of the econ­omy such as the automotive and chemical industries.

Art and culture are of central importance for human self-fulfilment and self-discovery. At all stages of human history, artists have provided examples of the ability to live out­­­side norms, dogma and fixed pat­­terns through their self-chosen activities.

While art serves as self-assurance for artists, it is also part of the self-reflection of a society. So artistic works not only pre­­serve individual identity, they also pre­­­­serve social identity. Art and culture are essential for human understanding; like religion and philosophy, art transmits social values which are constitutive for a community. Artistic works demand both understanding and exchange between various cultures.
It is my view that culture is the soul of a country, which can be neglected and wounded but which must also be fostered and looked after. For this reason, culture is an essential location factor for a polity and is also an important, special and “hard” economic factor.

In discussions, assessments and decisions, finance ministers, city treasurers and businesspeople often distinguish between so-called “hard” and “soft” location factors in a region. In contrast to man­­u­­facturing and service providers, cultural organizations are often referred to as “soft” location factors. Thus, they are considered to be an “add-on” to basic human needs which are re­­­quired to satisfy economic needs, and they are considered to be an “extra” that society can afford in economic good times while art and culture can also be done without in economically and financially hard times.

Thus, they are considered to be an “add-on” to basic human needs which are re­­­quired to satisfy economic needs, and they are considered to be an “extra” that society can afford in economic good times while art and culture can also be done without in economically and financially hard times.

The situation in Germany. The facts tell a different story. In the European Union some five million people are employed in the cultural and creative sector.

Creative and artistic people are the basis of the cultural and creative sector. Authors, film makers, musicians, architects, designers, artists or even the developers of computer games create artistic and creative goods and services. They thus represent a dynamic and diverse sector of the economy.

In this category Germany tops the list in Europe. In 2009 the million or so employees in 237,000 companies and self-em­ployed sectors in the creative and cultural sector earned turnover of 131.4 billion euros and gross macroeconomic added value of some 63 billion euros. This makes the cultural and creative sector almost as economically strong as the automotive industry and an even stronger performer than the chemicals industry. Seen from this perspective, the assessment of culture as a “soft location factor” is clearly a gross misinterpretation.


Hessen’s cultural sector. Last decade the state of Hessen conducted several investigations into the link between cul­­tural sponsoring, the cultural sector and general economic development. Ac­­cord­­­­ingly, Hessen’s first report on the cultural sector appeared early in 2000 as a joint effort of the Ministry of Science and the Arts and the Ministry of Commerce. The second report looked at “Cultural Spon­­­­­­soring and Patronage”. The third report was entitled “Supporting the Cultural Sector – Developing Towns and Cities” and looked at the effects of the cultural sector on regions and muni­c­ipal situations. In 2010, the Hessen Agentur (a state agency that combines all non-monetary activities of business promotion in Hessen) published an up­­date of the data entitled “The Cultural Sector in Hessen – an Update of Principal Economic Data” on behalf of the Ministry of Commerce.

The studies distinguished between six partial markets:
• literature, book and press companies
• the plastic arts (design and handicrafts)
• film production, TV and video­ companies
• Hessen’s cultural heritage (preservation of historic sites and buildings)
• the music sector
• the performing arts and entertainment.

120,000 employees in 22,000 companies with turnover of 19 billion euros – concentrated in the Rhine-­­Main region – show the high percentage contribution by the cultural sector to the entire economy of Hessen. Looked at by turnover, literature, the book and press market, the plastic arts and cinema, TV and the video sector are the most important partial markets of the cultural sector in Hessen. The “cultural heritage” section shows a particularly high ranking with 21,000 employees, even if turnover in this partial market is not as high. The economic effects of this sector of the economy and public funding, especially in the preservation of historic sites and buildings, are remarkable. In pres­­­er­­vation work on historic sites and buildings, one euro of public funding generates about four to five euros of economic power with a direct effect on employment in the skilled trades, construction and construction-related companies. Studies by the Ifo Institute for Economic Research em­­­pha­size the significance of culture as a hard location factor. This applies particularly to the Rhine-Main region and the city of Frankfurt.

Public promotion of the cultural sector.Cultural policies are the result of Germany’s federal history, in which the states and the cities in particular supported the arts and culture and, as such, perform this task in Germany. The public financing of culture compared to total budgets shows that Germany spends about 12 per cent, the states 43 per cent and the municipalities 45 per cent. In Germany the arts and culture receive state support worth about eight billion euros annually.

Public promotion of culture in Hessen, the municipalities, the big cities and the counties is extraordinarily varied.

Compared to the overall budget, Hessen’s expenditure on the cultural sector is less than two per cent while the city of Frankfurt still finances cultural institutions and projects with ten per cent of its budget. The city of Darmstadt still spends seven per cent of its budget on the cultural sector, while Kassel and Wiesbaden only spend 3.5 per cent of their budgets on cultural promotion.


One significant, possibly doubtful, development in the cultural area is also the fact that the number of freelancers and sole-proprietor companies in all segments of the cultural sector is growing, while the number of permanent positions where the employees are required to contribute to the German social insurance system is decreasing. This applies especially to the socio-cultural centres which, in a conscious turning-away from traditional cultural facilities, offer opportunities of encounter in intergenerational, intercultural and social projects. The new 2010 report of the Hessen Agentur says: “There are still hardly any full-time positions and the pay is usually insufficient for the work done.”

Private funding of culture. In Hessen – as in Germany as a whole – the funding of cultural pursuits is not only a public duty but is carried out in accordance with the tradition of civil life in the cities by foundations, through patronage and sponsoring together with the business community and the public purse. Patron­­­­age and spon­sor­ing differ through the mutuality of the transaction. While in cultural sponsoring, companies support cultural activities in order to boost their public image, patrons support artistic, scientific and cultural pursuits without requiring any direct return. For example, companies or family firms act as found­­ers of private and company foundations. Citi­­zens and companies become involved in an honorary capacity in civic foundations or are members of sponsoring societies. Fi­­nan­cial institutions maintain foundations, operate sponsoring activities or give donations. In Germany there are 17,380 foundations with assets of about 100 billion euros. In Hessen 1,600 foundations support culture, art, science, sport, social activities, and the environment.

In the long term, the ethical, political and economic obligation to promote culture in Germany and in Hessen can only be guaranteed as a result of cooperation between the public, the cultural sector, municipal promotion from foundations and sponsoring. It has only been in the last few years that culture has been defined as an economic factor, whether as a “soft” or “hard” location factor. However, the legit­­i­­macy of public funding for culture is another factor again.

Art is the soul of a country and a city, which must be carefully fostered and not neglected.

Bild-Wagner-lachsfarbenRuth Wagner was born in 1940 and studied German philology, history and political science. She is the chair of the cultural commission of the city of Darmstadt. In 1978, the author became a member of the Hessian Landtag. From 2003 to 2008, she was presiding officer of the Hessian Land­tag. From 1999 to 2003, Ruth Wagner held the offices of state minister for science and art as well as deputy prime minister.