Cultural Heritage Conservation An Economic Perspective

1. DIPARTIMENTO di ECONOMIA e METODI QUANTITATIVI Cultural Heritage Conservation An Economic Perspective UNIVERSITA’ degli STUDI di CATANIA Romilda Rizzo  Department of Economics and Quantitative Methods (DEMQ) University of Catania Bruxelles, 5 March 2009

2. A case for government action Cultural heritage (CH) produces use and non-use values, generates market failure and provides a clear case for government action In democratic societies Cultural Heritage (CH) policies are a matter of negotiation among several actors: • policymakers, • public officials, • economic agents involved in heritage conservation (developers, restorers, private owners, etc) • non-profit organizations • general public CH protection is a priority in all 27 EU countries The capability of CH policies to meet citizens’ demand for conservation and to score the expected results in terms of ‘public interest’ depends on the features of the collective decision-making process underlying CH choices. Bruxelles, 5 March 2009

3. Policy tools Government action can follow different patterns involving direct or indirect intervention. • Public spending, tax-expenditure and regulation are the tools usually adopted to promote heritage conservation, together with other wider instruments such as education, which can be used to spread information and improve citizens’ awareness. • There are relevant differences in the features of the public intervention in different countries: direct vs/ indirect financial measures vary also depending on the different public/private ownership mix prevailing in each country. • Data are needed to generate information for devising government policies. Bruxelles, 5 March 2009

4. Economic importance of CH The ‘economic importance’ of CH, in terms of income and employment is increasingly emphasized • CH is considered a tool to foster local development and to improve urban economic conditions • The economic features of CH conservation (e.g. labour intensive, locally based, decentralized action, investment of various scale) are suitable to stimulate demand; • Cultural tourism (though ‘elusive’) is advocated as a strategic factor. Tourism effects can be volatile (e.g. the impact of the international global crisis). • “social effects”: enhancement of the sense of identity, education. Bruxelles, 5 March 2009

5. Impact studies • Impact studies are widely used to measure the economic and social significance of CH, in terms of the income that it generates directly and indirectly as well as of the social benefits (education, sense of identity) • Very high multipliers are “estimated”, especially in relation to cultural tourism. • Impact studies disregard the opportunity costs of public resources which are diverted from other investments. • The claims on resources need to be adequately supported by some form of measurement Bruxelles, 5 March 2009

6. Measurement problems • The supply of CH data is characterized by many players, who are in some cases interested parties, collecting/supplying data for their own purposes. • With so many sources of data, the issue of the quality is very relevant as well as the coordination of the different sources. • disparity between the information that a policymaker may seek to aid decision-making and that available; • uncertainty in the measurement of the relation between changes in the magnitude of policy measures and the expected changes that policy embodies Bruxelles, 5 March 2009

7. Measurement problems Available comparable data, though of questionable quality, refer to “art and culture” or to “cultural industries” • According to figures based on Eurostat’s definition of culture, the EU 27 countries’ average public national spending on culture as a percentage of GDP (2000-2005) varies from 0.3% to 1.2% (Klamer et alii, 2006) • Public spending for CH conservation is only a small share of it. Bruxelles, 5 March 2009

8. Measurement problems “Although the sector is essential to Europe’s memory, history and identities, figures on its economic value are almost non-existent. This should not prevent the attempt to approach the sector from an economic standpoint” (Kea, The Economy of culture in Europe, 2006). The only available evidence relies on “estimates” of various sources; therefore caution is needed Bruxelles, 5 March 2009

9. CH conservation benefits The flows of benefits of CH conservation are affected by: • the type of heritage (church, monument, building, archaeological site, historical centres, etc) • the location of heritage (whether cultural heritage is part of the urban environment or it is located outside cities) • the quality of heritage (from outstanding heritage which is known worldwide to minor heritage which has only regional or local relevance) how conservation is carried out and who is involved is an open and crucial question to assess the overall benefits of CH conservation. Bruxelles, 5 March 2009

10. Sustainability • According to the World Bank definition • “Conservationencompasses all aspects of protecting a site or remains so as to retain its cultural significance. It includes maintenance and may, depending on the importance of the cultural artifact and related circumstances, involve preservation, restoration, reconstruction or adaptation, or anycombination of these”. • When the dimension of CH is huge relative to a country’s economy, a sustainability issue arises since a relevant amount of financial resources is required to ensure the maintenance of the cultural stock. • Moreover, In many industrialized countries it can be currently observed a growth of the heritage conservation scope. • The extent of the sustainability problems depends also on the size of benefits that cultural heritage is able to produce and, therefore, on the overall economic effects deriving from its conservation. Bruxelles, 5 March 2009

11. Sustainability and CH policies • Heritage benefits and the features of Government action cannot be considered as independent. • The level of government involved makes a difference • Government policy affects: • the scope of benefits; • the combination of public/private action • as a consequence, the sustainability of conservation policies, too. • These issues are relevant for the minor CH located in the urban context; • ‘conservationist’ stance is likely to discourage private investment which might be directed toward this type of heritage Bruxelles, 5 March 2009

12. CH and the financial crisis • Financial crisis makes fiscal budget constraints tighter • Financial crisis is likely to have also a significant impact on private funding (donations, sponsorships, non-profit organisations) As a consequence CH sustainability problemsare enhanced Bruxelles, 5 March 2009

13. Policy issues • How to contrast the present economic crisis is widely debated : public spending vs/ incentives is a simple way to summarize contrasting views • expenditure for public conservation, grants, loans; • total or partial exemptions from real estate taxes or income tax credits for part of the expenses in buildings that undergo conservation or restoration) There is not the ‘best recipe’ • The economic, social and institutional framework in each country has to be taken into account • The mix of spending/incentives and the role of regulation vary with the different public/private ownership mix. Bruxelles, 5 March 2009

14. Policy issues • CH conservation might make less severe the negative impact of crisis on the building sector • Ceteris paribus, the impact of regulation, in terms of slowing down the conservation process and/or discourage private investment deserve attention, especially when the rehabilitation of ‘minor’ or ‘local’ heritage is involved. The need for quick action might be frustrated. Bruxelles, 5 March 2009

15. Policy issues • CH conservation is a ‘service’ of small size which may benefit anyway from general measures to promote employment • A special case could be made for the protection of vulnerable artists and artisans with special skills if they were forced to take less skilled positions • There is a case for government action to prevent the irreparable effects of decay • Fragile monuments are lost for ever Bruxelles, 5 March 2009

16. Need for appraisal • Regardless the specific policy tool adopted the maximization of society’s well being requires that the opportunity cost of any intervention is taken into account. • The economic appraisal of public investment is needed to determine which of several competing projects is the most efficient proposal, • at macro level, when funds have to be allocated to the various fields (health, education, heritage, etc.) • within each field, to assess which historical building or archaeological site should be chosen for allocating resources. Bruxelles, 5 March 2009

17. Long-term perspective • Individuals will value heritage only if they are educated about its significance. • Education about the value of heritage is crucial in order to guarantee long term sustainability of the conservation effort, and should therefore be incorporated in all heritage conservation policies. • The necessary complement to the education policy is to enhance the participation of the general public – individuals, associations, non profit organizations - to the decisions regarding heritage conservation and to promote the circulation of information. Bruxelles, 5 March 2009