Creativity is a Vitally Important Economic Factor

Lord Chris Smith August 2011 In the twenty-first century, we are increasingly realising how important creativity and culture are for the life of a society and the wellbeing of a modern economy. Creativity is the quality that enables people to think afresh, to have ideas, to tell new stories, to invent new ways of doing things, to find ways of making life richer.

As such, it is – and always has been – an essential ingredient of the cultural and aesthetic life of a nation. It enables great music and drama to be written and performed, great art to be conceived, things of poetic beauty to be created; it helps to fire our imaginations. Our lives would be infinitely the poorer without it. And because it helps us to tell our stories, it is also the most important component in our own sense of identity, as an individual, a local community, a city or a nation. It is what helps to bind us together and give us a sense of purpose.

But creativity isn’t only important because of what it can do for our aesthetic and artistic life. Increasingly, it is crucial for economic prosperity too. It enables us to find new ways of making products and delivering services; it assists us in the search for new goods to sell; it brings both quality and profit to an enterprise. It helps us to take risks, and companies, people and countries don’t make progress unless they take risks. And nowhere is the importance of this greater than in what I would call “the creative industries”: those entire sectors in an economy that depend for their value on the talent,inspiration and creativity of individual people. These creative industries are becoming increasingly vital for the wealth and welfare of many countries. It is certainly true of the UK. I believe it is also profoundly true of Estonia, Latvia and Lithuania.

The rough working definition of the “creative industries” I formed whilst I was Secretary of State for Culture in the UK (from 1997 to 2001), trying to wake up the whole of the rest of Government to the economic importance of this sector, was: “those industries that have their origin in individual creativity, skill and talent and have a potential for wealth and job creation through the generation and exploitation of intellectual property”. There are three principal ingredients here. First, the raw material of these industries is people – their minds, their skills, their inspiration. Second, the germ of the economic value comes from an individual person with an imaginative idea. And third, the output, the “thing” at the end of the process, that can unlock the economic value, is the intellectual property that is produced. It can be a drawing, a piece of music, a design, a moving image. It may have (though not necessarily so) a physical form, but more important than the physical entity will be the intelligent idea embedded in it.

The range of activities and industries that fall into this definition is wide. The list we produced at the time included design, publishing, digital software, computer games, television and radio, music, film, video and DVD, the art and antiques market, advertising, architecture, designer fashion, the performing arts, and crafts. There may of course be some contests of definition at the edges, but broadly speaking this list is now widely accepted as the definitive list of the creative sector of the economy.

One of the things that astonished me when we came into Government in the UK in 1997 was that no-one before had ever sat down and measured the value and scale and trends of these economic sectors. No-one had established what the contribution to the national economy of the creative industries was or could be, what the growth rates were, and what the obstacles. We sensed that the industries were strong, and growing in salience and importance, but we had no hard information or evidence to back up our hunch. The figures simply didn’t exist. In many cases no attempt was even made to collect them. So we decided quite rapidly to try and undertake the measurement exercise; and out of this came the two “mapping documents”, which we published at the end of 1998 and the start of 2001. These represented the first attempt anywhere in the world to establish what the real value of creativity was to an economy; the mapping exercise has since been copied and adopted in many other countries. Because of the lack of availability of figures back in 1998, it was inevitably something of a rough-and-ready exercise, but it was a vitally important one nonetheless.

The first of the mapping exercises was a particularly imprecise one, inevitably, but the second document was a much more accurate attempt, based on more scientific evidence, and even with its abiding imperfections, it revealed an astonishing picture of the economic giant we were looking at. We now know, ten years on, that the creative industries contribute something like 7-8% of the UK’s GDP. They employ nearly two million people. They have for some twenty years been growing at twice the rate of growth of the economy as a whole. In some parts of the country –London particularly – their impact is even greater.

The rates of growth, especially compared with therest of the economy, tell us something rather significant about the shape of economic activity in a mature economy in the 21^stcentury. In the UK we cannot compete on our access to raw physical materials, and we cannot and should not compete on cheapness of labour, but the unique thing we can offer is the quality of thought, imagination and creativity that goes into what we are offering to the world. This is where creativity and the creative sector become so crucial. For most of Europe, this is where our wealth and growth are increasingly going to come from in the future. And as the world grows more and more to appreciate the output of creativity – the music, the websites, the movies, the designs, the fashion, the quality – the demand for the products ofthis economic sector will grow too. As the thinker Charlie Leadbeater has said,“the real assets of the modern economy come out of our heads not out of the ground: imagination, knowledge, skills, talent and creativity”.

This is as true of the Baltic countries as it is of the larger more established economies such as Britain, France and Italy. For a start, creativity knows no national boundaries. It can arise and be developed anywhere. And with a strong sense of national determination, a firm foothold in the European Union, along-standing cultural tradition, and the ability to focus on particular areas of strength, the Baltic countries are well placed to seize – in their own way –the opportunities the creative economy brings.

When we started all of this work on the creative industries in Government in the UK, we wanted to go further than simply establishing what the extent and nature of the sector was. We also wanted to try to understand its needs and challenges better. What were the particular issues facing the sector that Government might be able to help to resolve? How could the best partnership be established, between the industries themselvesand the things Government could properly do? We identified five major areas of concern: education; access to finance; export promotion; availability of accommodation for small businesses; and the protection of intellectual property. In my view, these remain the principal issues, ten years on, and they are as important in nascent creative sectors such as in the Baltic region as in longer-established locations.

Education for creativity is crucial. And this means not just having further and higher education colleges of design, communications, fashion, and applied art of the highest quality. It means thinking about the creative elements of education throughout the primary and secondary sectors of education too. It means encouraging pupils who have a particular gift to develop their creative skills in a wide range of disciplines. It means offering courses, practical experience, and providing pupils and students with the chance to “do” as well as to appreciate.  It means bringing creative entrepreneurs into schools to inspire and encourage and pass on knowledge. And at the further education stage it means teaching creative students some business skills alongside the development of their creativity.

Education is perhaps an area where – for aclose-knit cluster of nations such as the Baltic countries – some cross-border coordination could be especially useful. How much easier will it be to establish high-quality tuition, and to disseminate practical wisdom and experience from entrepreneurs, if you’re doing it over three nations rather than just one? Developing particular specialisms in particular locations, open to anyone with the potential skill from any of the three countries, might well be a winning formula.

Access to finance for the creative sector, especially for young start-up enterprises, is always going to be an issue. Too often people from the world of banking and investment talk a very different language from those whose whole focus is on the act of being creative and developing a creative product. And very often the need for investment is extremely modest – too modest, sometimes, for banks or funds to take a serious look at. This is where Governments can usefully intervene, to facilitate the flow of investment funds for small-scale creative entrepreneurs, perhaps helping investment funds to set up tailor-made funding packages that would be appropriate for the sector.

Helping creative businesses with their export potential is another area where Government can play a role. For the Baltic countries, making the most of their EU status as well as their closeness to Russia and the former Soviet bloc countries, this is going to be especially significant. A small-scale business trying to export for the first time will have very little confidence or knowledge about the way markets work, about international trade events, about how to exploit the transportability that digital technologies have brought. A bit of advice and assistance – again, perhaps, done on a three-countries basis – could go a long way.

One of the characteristics of creative businesses around the world is that they tend overwhelmingly to be small-scale. They alsolike to work in clusters (differing in this respect from many more traditional industries). Finding a small workshop in which to get their work going, at an affordable price, and in a sympathetic location near other such enterprises, is often really difficult. There are now examples from many different countries of public authorities – most frequently at city level – coming to the rescue. Indeed, the UK has tended to lag behind others in doing this. What can work brilliantly is if a city council or Mayor takes over a derelict warehouse or market structure, converts it into small-scale workshops, provides some collective office-support services, and rents to a range of start-up creative enterprises at affordable costs. The public authority retains the freehold property, the creative businesses are helped, a genuine cluster is formed, and the entire surrounding neighbourhood improves and benefits.

In some ways the most important thing any Government can do for the wellbeing of the creative economic sector in their country is to provide robust legal and practical support for the protection of intellectual property and copyright. This is something that has to be established at international level, of course, but each country has its part to play. The value generated by a creative business rests in its intellectual property. And that is something that can be transmitted across the globe at amoment’s notice. This is both a big opportunity and a big challenge. What can be passed to someone a thousand miles away and properly remunerated can also be pirated and transmitted and not remunerated at all. Making sure that the value embedded in a creative “thing” – an image, a sound, a drawing, a design – can be properly remitted back to the person who created it in the first place is the purpose of copyright protection, and smaller countries have every bit as important a role to play in ensuring it as do larger countries. 

These, then, were the major challenges for the creative sector that we identified a decade ago in our analysis of what was happening in the UK.They remain the major challenges in the UK today. And I’m certain that they are the issues that need to be concentrated on in the Baltic region too. Other than in the field of the traditional performing arts, creative enterprise needs no direct subsidy from Government. It does however need encouragement, support, and a good platform from which it can spring and thrive.

The precise opportunities will of course vary from country to country. There will be particular natural or historic strengths tobuild on. There will be particular specialist sectors that can be developed as niche centres of excellence. There will be some things that succeed and others that fail. But there’s enormous potential here for Estonia, Latvia and Lithuania– precisely because of some of those historic strengths, and the determination that goes with them, and the access to the EU marketplace, and the close cooperation that can be developed between the three Baltic countries.

Fourteen years ago, when I started out on the journey in Government in the UK trying to convince my fellow Ministers, other Departments, and an occasionally sceptical public, about the importance of the creative industries, some of my colleagues thought I was mad. What on earth did this stuff about aesthetics and artistry and design have to do with the real economic stuff of making things and selling things and creating wealth? My answer was simple: everything. And so, increasingly, has it proved. Now the proposition that creativity is a vitally important economic factor is almost universally accepted. The contribution made by these industries to any country’s economic wellbeing is overwhelmingly acknowledged. Turning that acceptance and acknowledgment into active support and enabling assistance is what comes next.