Is there a Creative Sector?

1. Is there a Creative Sector? Alan Freeman GLA Economics LSE 15 December 2003

2. 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’ …

3. Where are we in the research cycle? Hypothesis: a new phase of cultural commodification Analysis Use standard classifications to study commodity-producing activities (Art, Fashion, software) Data Action/ Observation They have something in common: but what?

4. 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

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

6. What we know 2: a qualitative reshaping of industrial structure Jobs growth London’s output growth 1995-2000 Output growth

7. What we know 3: a new regional pattern of growth jobs growth

8. Including in London itself London: CI job growth 1995-2000

9. 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

10. 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

11. 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 productionprocess and an output of products.

12. 8% 28% Ceci n’est pas une pipe:A health warning about Hierarchical Classification 36% tractors but… 52% is in Section D and… 21% largest share of D Is food machines therefore… Classified as 29.53, manufacturer of food machinery

13. Where did industrial classification come from? • Physiocrats – physical reproduction • Marx – social reproduction • Marshall – origin of products • Leontieff – industrial reproduction

14. 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.’

15. 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)

16. 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)

17. 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

18. 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)

19. However some change can’t be avoided… Woodward, 30 years on ? ?? ???

20. 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’

21. 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’

22. 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 structure Capital flows into optimising small unit production Flexible manufacturing becomes a universal technique Design becomes a universal factor of production

23. 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)

24. 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 paradigm Flexibly specialised hi-tech delivery of services, or products which are close substitutes for a service (eg films, videos) • New factor of production Creative capacity • Organised through specialist productive units • Using the new factor of production • in the new production paradigm • to produce commodities to the new market

25. Acknowledgements Thanks to: Daniele Archibugi Carlota Perez DCMS