Take a product like a T-shirt, made of cotton. To begin with, we made a living growing and selling raw materials to one another. Places with cotton would trade it with those that had fish, and so on. This is the Commodity Economy.
The places with the cotton usually learnt to make the best clothes, and as they competed with each other their skills and their processes improved, leading eventually to mass production. This is the long story of the Industrial Economy, that still continues.
As part of this growth, we have also learnt how improve and make a living out of all the transactions that support making things, getting the customer to pay for convenience, consistency, a guarantee of quality, choice and customization: this is the basis of the Service Economy.
Now, we have the T-shirt, it’s a perfectly good shirt, it’s in the shop across the world, in every conceivable size and colour, what next? How can we add more value?
A basic T-shirt costs around €8-10 in the shops in Europe. It will keep you warm. But today in advanced economies we do not choose clothes just to keep us warm. We care very much more what our clothes say about us: their meaning, their style, their cool.
What T-shirt producers have discovered is that they can add meaning, or feeling, or emotion, to the product, and then charge extra for this. A shirt with the Manchester United colours and Ronaldo’s name, or endorsed by Paris Hilton, or designed by Agnes B, can sell for over 100 Euros.
Of course it’s not just any label, or any design, that makes something cool. Creating meanings that people want is an expensive, difficult, highly skilled, highly risky kind of business.
The creative economy is where these meanings get made.
When most of a product’s value derives from its creative input, and most people are employed in this part of the production process, then this is what the product now is. The creative is the most profitable and hence it is the most powerful part in the production process.
What we are witnessing is the industrialisation of meaning, the industrialisation of culture.
Digital technology is creating vast new structures for the exchange of sounds, stories and images that were not dreamt of a decade ago. Twitter, FaceBook, YouTube and Google are ushering in a time when the making and exchange of meaning and value will be at the centre of wealth creation.
In their turn, these businesses are likely to be overtaken as new technologies take off. The internet of things, the real-time web, virtual worlds, the use of geo-data, crowd-sourcing, augmented reality headsets, brain–computer interfaces – are a few of the paradigm-breaking technologies that are in their very earliest days.
However we experience them, rich media – moving images, sound, animations – will be all around us. Perhaps, in advanced economies, more people will be employed making these than are employed making anything else.
The need for artistic creativity is not confined to T-shirts.
As globalisation advances, the developed world cannot compete on price with developing economies, where wages are lower, raw materials cheaper and lighter regulation means lower production costs. And as standards improve, it becomes harder too to compete on quality.
One of the few strategies left in advanced economies is to distinguish their product offer by building in lifestyle or cultural value. If the customer is paying for a specific connection with places, or peoples, or languages then it is much harder to off-shore or out-source production.
This makes the creative industries a contributor to all sectors of the modern economy.
Think of Nike, or Coca Cola. What do these companies actually do? They don’t make shoes or drinks, they get other companies to do that. Most of their manufacturing process is outsourced. But they can still compete because the shoe and the drink are incidental to the real sales offer – which is a lifestyle.
‘When people buy a Coke, they’re buying into a vision of world citizenship’, said Marc Mathieu, Coca Cola’s Vice President of Global Brands, in 2006. Bob Lutz, Head of Product Development at General Motors, told the 2005 shareholders meeting: ‘we are in the arts and entertainment business’.
The most successful companies in advanced economies rarely manage factories, they manage narratives. And the tools and techniques that they use are those of the storyteller, the entertainer, the artist. Creating meaning and emotion are no longer outsider activities, but mainstream business skills.
Culture is still widely seen in government policy terms as a cost to society, a drain on its resources. But in the creative economy culture appears to be a source of competitive advantage: not the product of wealth but the origin of it.
In the commodity economy, a country’s most precious natural resources were its crops, or its weather, or they were minerals buried under the ground. In the industrial economy, it was factories and machines.
In the service economy it is people, but people educated mostly to serve and to conform – call centres and fast food chains do not need creative people. But the creative economy does.
In the creative economy, the source of wealth is in people’s minds and in their social relationships, and it is revealed by open communication and by education – the kind of education that in the past we have only given to artists. Today’s economy needs a high level of ‘ordinary creativity’ in everyday management and staff, for it is the collective creativity of the workforce that drives the economy. Companies like Google and Pixar understand this, who allow their people to spend 20% of their time on their own projects.
In the creative economy, the artist should no longer be seen as an outsider with a magical gift that the state or the rich must protect. Artistic creativity is an ordinary human activity. Playing a musical instrument, designing brands, making a film – these are specialisms, they are hard work and some people will be better than others. But creative skill is not magic. It can be taught and learnt.
This makes the arts and culture into a source of wealth and power in a new way.
More Key Concepts: Creative Industries | Creative Clusters