THE ARM'S LENGTH PRINCIPLE AND THE ARTS: AN INTERNATIONAL PERSPECTIVE - PAST, PRESENT AND FUTURE

Harry Hillman-Chartrand (c) and Claire McCaughey
in Who's to Pay? for the Arts: The International Search for Models of Support,
M.C. Cummings Jr & J. Mark Davidson Schuster (eds.)
American Council for the Arts, NYC, 1989

"God help the minister that meddles with art!"
Lord Melbourne ¹

Introduction

What is the status of the "arm's length" principle as applied to public support of the fine arts?  In the popular press, the debate has involved issues such as the level of support to national "flagship" institutions; the increasing role of "ministries of culture" in direct support to fine arts organizations; and the proposed disbandment of arm's length councils.  But these matters form only the surface of a debate involving the maturation of the arts as a significant political and economic force in contemporary Western societies.

The growing importance of the arts and their audience reflects basic demographic and economic trends: the rapid growth of the highly educated population; the increasing role of women in political and economic life; the aging of the general population; ² the evolution of the "narrowcast" marketplace; the "deindustrialization" of First World economies; ³ and the growing importance of design and qualitative factors in the export performance of national economies.⁴  These trends serve to reinforce the importance of the arts in political and economic life, and underlie ongoing international debate concerning appropriate mechanisms of public support.

THE ARM'S LENGTH  PRINCIPLE

In Constitutional Affairs

"Arm's length" is a public policy principle applied in law, politics and economics in most Western societies. The principle is implicit in the constitutional separation of powers between the judiciary, executive and legislative branches of government. The principle is also represented in the division of powers among agencies of government in federal states. In Canada, for example, the provinces rather than the federal government have constitutional responsibility for education. International representation of Canada's national education interests, however, has been achieved through an arm's length National Commission for the United Nations Educational, Scientific and Cultural Organization (UNESCO), which is administered by the Canada Council.⁵  A similar institutional solution has been reached by other federal states such as the Federal Republic of Germany, Switzerland and Yugoslavia.

The arm's length principle is also applied in the relationship between government and the press in most Western countries. For example, government is constitutionally restrained from subordinating the press to its own purposes - in the United States by the First Amendment, and in Canada by the recently enacted Charter of Rights and Freedoms. Such constitutional restrictions are intended to ensure freedom of thought and expression subject to specific limitations, such as the Official Secrets Act, and libel laws.⁶  In Great Britain, with its unwritten constitution, freedom of the press is made explicit through the arm's length status of the British Broadcasting Corporation (BBC). The recent furor concerning political interference with the independence of the BBC demonstrates the importance of the arm's length principle to the people of the United Kingdom.⁷

In Public Affairs

There are several areas of public affairs where the arm's length principle is applied. Conflict of interest guidelines in many countries govern the conduct of elected officials and represent an application of the arm's length principle. Cabinet ministers and other senior officials generally are required to place their financial assets in a "blind trust" to avoid conflict of interest. A trustee manages the assets and informs the official of the value of the account, but keeps other information confidential. ⁸  Treasurers, auditors and evaluators in major corporations and government departments are also at arm's length from the activities they scrutinize. They generally report to boards of directors and are free from control by senior management. In a similar fashion, ombudspersons appointed to ensure access to information, personal privacy or human rights must work at arm's length from the government that appointed them. The arm's length principle is also embodied in tax legislation and regulations. In this regard in Canada, a transaction is defined as being at arm's length if it is "conducted between parties that have no corporate or other direct connections with each other, and thus act each in its own self-interest:" ⁹

The arm's length principle is also applied to public funding of the arts in some countries. Before considering application of the principle to arts funding, it is appropriate to consider the nature of the contemporary arts as well as alternative modes of public support.

THE ARTS

In Western society the arts include the literary, media, performing and visual arts. Together they form a distinct and recognizable sphere of human behavior. In turn, the arts are part of a larger cultural sector including architecture, crafts, fashion, heritage, multiculturalism and official languages. As part of this larger sector, the arts pervade and permeate the lives of every citizen at work, at home, in the marketplace and at leisure.10

The Arts Industry

There are three distinct segments of contemporary art: the fine arts, the commercial arts, and the amateur arts. In each, the source of all art is the individual artist. The fine arts are a professional activity that serves "art for art's sake" just as "knowledge for knowledge's sake" is the rationale for "pure research" in the sciences.¹¹ In each fine arts discipline there are generally recognized standards of professional excellence. The dominant organizational form of production combines the professional artist and the nonprofit corporation.

The commercial arts, on the other hand, are a profit-making activity placing profit before excellence. The two motives need not, however, be mutually exclusive. In fact, the fine arts often use commercial arts channels to distribute fine arts products including recorded music, books, and films. When the fine arts are distributed through commercial channels they do not cease to be "fine art." The dominant organizational form of production in the commercial arts is the for-profit corporation.

The amateur arts are a "recreational" activity that serves to recreate the ability of a worker to do his or her job, or a "leisure" activity that serves to "self-actualize" a citizen's creative potential, thereby permitting a fuller appreciation of life. The dominant organizational form of production is the unpaid individual and the voluntary association.

The Linkages

The three segments of contemporary art are intimately interrelated in two ways. First, they are related through the source of all art work, the individual creative artist (Figure 1). The individual artist, as the source of all artistic products, is linked to an art work through creation. An art work is linked to an audience through communication. An audience is linked to an artist through commercialization.

Consider first the relationship between an artist and an art work excluding the audience. In this case the artist actualizes his or her creative potential, but no one sees or hears the result. This constitutes therapy, or amateur art. Second, consider the relationship between an art work and an audience, but exclude the artist. In this case a work of art "speaks" to an audience in a numinous or archetypical way. One then has fine art.

Finally, consider the relationship between an audience and an artist, but exclude the art work. In this case an audience "buys" the name of the artist even if the actual work does not "speak." One arrives at "the aesthetics of snobbery" ¹² or commercial art. The case of 35,500 blank sheets of paper all signed by Salvador Dali is a case in point:

With the artist's signature as authentication, whatever is on the sheet theoretically becomes an "original," even if it is printed or added to afterwards and the "author" never knows what it is . . . . It is possible that Mr. Dali does not give a fig for what is put on paper over his signature and would consider it all an excellent joke on a naive public willing to pay vast sums to keep him in the style to which he has become accustomed. ¹³

The three segments of art are also linked by economic function. The amateur arts, in actualizing the talents and abilities of the individual citizen, provide an educated audience and initial training for the fine and the commercial arts. The fine arts, in the pursuit of artistic excellence as an end in and of themselves, provide research and development for the commercial arts. That the fine arts provide research and development for the commercial arts industry is clear, even though of 16 major industries only the commercial entertainment industry has no reported research and development expenditure.¹⁴  The commercial arts, in the pursuit of profit, provide the means to market and distribute the best of the amateur and the fine arts to an audience large enough and in a form suited to earn a profit, for example, recordings. Figure 2 provides a schematic overview of the economic relationship between the three segments of contemporary arts.

Collectively these three segments constitute the "arts industry."  The industry, for statistical purposes, includes advertising, broadcasting, motion pictures, performing and visual arts, publishing, sound and video recording. Compared to the 20 Canadian manufacturing groups identified by Statistics Canada, the arts industry in 1982 was the ninth largest with respect to total revenue- $85 billion or 2.5 percent of Gross National Product; the fourth largest with respect to full-time employment -134,275; and the sixth largest with respect to total salaries and wages - $2.8 billion. Arts industry revenues grew 80 percent between 1977 and 1982, compared to 73 percent for all manufacturing groups. Moreover, arts industry revenues even increased during the recession of 1981 and 1982 while manufacturing revenues were falling.

ALTERNATIVE MODES OF PUBLIC SUPPORT

As a public policy principle, the arm's length principle is generally applied to support of the fine arts. The arm's length principle, however, is not the only possible mode of public support to the fine arts. There are four alternative roles for the State: Facilitator, Patron, Architect and Engineer.  Furthermore, the State can have two different objectives-to support the process of creativity16 or to support production of specific types of art such as socialist realism.¹⁷  Roles and objectives are not mutually exclusive, that is, a single government may play more than one role and may seek to achieve more than one objective (Figure 3).

For purposes of demonstration, we will examine the four roles as pure types with respect to the mechanism of funding, policy objectives, standards and dynamics as well as the economic status of artists and artistic enterprise. For each role a short national case study will be presented.

The Facilitator

The Facilitator State funds the fine arts through foregone taxes - so-called tax expenditures-provided according to the wishes of individual and corporate donors; that is, donations are tax deductible. The policy objective of the Facilitator is to promote diversity of activity in the nonprofit amateur and fine arts. The Facilitator supports the process of creativity, rather than specific types or styles of art. Furthermore, no specific standards of art are supported by the Facilitator, which relies on the preferences and tastes of the corporate, foundation and individual donors. The policy dynamics of the Facilitator State are random in that changes in support to the fine arts reflect the changing tastes of private donors. In the Facilitator State the economic status of the fine artist and the artistic enterprise depends on box office appeal and the tastes and financial condition of private patrons.
The strength of the Facilitator lies in the diversity of funding sources it creates. Individuals, corporations and foundations choose which art, artists and arts organizations to support. The Facilitator role also has weaknesses.

First, standards of excellence are not necessarily supported, and the State has no ability to target activities of national importance. Second, difficulties occur with respect to the valuation of private donations in kind, for example, paintings donated to a museum or art gallery. Third, public support of some arts activities may be of questionable benefit to the particular State and its people: the reconstruction of Versailles was funded in large part through tax-exempt contributions made by American taxpayers to the Versailles Foundation in New York City. ¹⁸ Fourth, as demonstrated in Canada by the elimination of the scientific research tax credit, it is very difficult to calculate the cost of tax credits and expenditures to government. ¹⁹

In the United States, government plays the role of Facilitator, promoting the fine arts through tax expenditures channeled by donors. The Facilitator role has its origins in three American traditions: the separation of church and state, the competitive market economy, and private philanthropy, which both before and after the imposition of the income tax has represented the most important source of support for the arts. In 1965 the National Endowment for the Arts (NEA) was established and shortly thereafter came state arts councils. The development of these national and state arts councils represented a shift toward the role of Patron for government in the United States. However tax expenditures still provide two-thirds of public support to the fine arts.²⁰ The first Reagan Administration attempted to disband the NEA and return the U.S. government to a strict Facilitator role, but the effort failed.²¹

The Patron

The Patron State funds the fine arts through arm's length arts councils. The government determines how much aggregate support to provide, but not which organizations or artists should receive support. The council is composed of a board of trustees appointed by the government. Having been appointed by the government of the day, trustees are expected to fulfill their grant-giving duties independent of the day-to-day interests of the party in power, much like the trustee of a blind trust. Granting decisions are generally made by the council on the advice of professional artists working through a system of peer evaluation. The arts council supports the process of creativity, but with the objective of promoting standards of professional artistic excellence. The policy dynamic of the Patron State tends to be evolutionary, responding to changing forms and styles of art as expressed by the artistic community. The economic status of the artist and the artistic enterprise depends on a combination of box office appeal, the taste and preferences of private donors, and grants received from arm's length arts councils.

The very strength of the arm's length arts council is often perceived as its principle weakness.  Fostering artistic excellence is often seen as promoting elitism, with respect to both type of art work produced and audience served. Support of artistic excellence may thus result in art that is not accessible to, or appreciated by, the general public, or by its democratically elected representatives. In most Patron States there are recurring controversies in which politicians, reflecting popular opinion, express anger and outrage at support for activities that are, for example, perceived as politically unacceptable, pornographic or appealing only to a wealthy minority.

With an arm's length council, however, politicians can claim neither credit for artistic success nor responsibility for failure.  Great Britain is the best known example of the Patron State. Government adopted the role of Patron during World War II by creating the Committee for Education, Music and Art for raising morale during the Blitz.²²  After the war it created the Arts Council of Great Britain and its sister agencies in Scotland, Wales and Northern Ireland. The role of Patron evolved out of traditional arts patronage by the English aristocracy. The government continues the Patron role, even though various task forces and committees of Parliament have recommended incentives to enhance charitable giving.²³

The Arts Council of Great Britain has experienced controversy concerning art not acceptable to the general public. Such was the case in 1983 when an irate citizen set fire to the "South Bank submarine" created from used tires by sculptor David Mach. The Arts Council had funded the work to the tune of £50,000. ²⁴

The Architect

The Architect State funds the fine arts through a Ministry or Department of Culture: Granting decisions concerning artists and arts organizations are generally made by bureaucrats. The Architect tends to support the arts as part of its. social welfare objectives. It also tends to support art that meets community rather than professional standards of artistic excellence. The policy dynamic of the Architect tends to be revolutionary. Inertia can result in the entrenchment of community standards developed at a particular point in time, leading to stagnation of contemporary creativity, as recently observed in France.²⁵  The economic status of artists in the Architect State tends to be determined by membership in official artists' unions. Once an artist gains membership in such a union, he or she becomes, in effect, a civil servant and enjoys some form of income security. The economic status of artistic enterprise is determined almost exclusively by direct government funding. The box office and private donations play a negligible role in determining their financial status. However, with respect to artistic choice, artistic enterprise generally remains autonomous of government.

The strength of the Architect role lies in the fact that artists and arts organizations are relieved from depending on popular success at the box office, resulting in what has been called an "affluence gap." ²⁶  Moreover the status of the artist is explicitly recognized in social assistance policies.²⁷  The weakness of the Architect is that long-term, guaranteed direct funding can result in creative stagnation.

Since before World War II the government of the Netherlands has played the role of Architect. The government funds numerous literary, media, performing and visual arts institutions as regular budget items. Furthermore, the government provides a guaranteed annual income to visual artists.²⁸  In effect, minimum salary and working conditions. are established by the government. The role of Architect originated with the "absolute" monarchies of the seventeenth to late nineteenth centuries. In the twentieth century social democratic and other political parties in most Western European countries assumed the role of Architect after the collapse of active monarchy following World War I.

The "Tomato Revolution" of the 1970s, in which the audience protested the content of Dutch theater, demonstrates the revolutionary policy dynamic that can result from the Architect role.

[D]issatisfaction expressed in poor attendance, position papers, meetings and ultimately tomatoes, smoke bombs and invectives, gave government a clear indication that there was a serious gulf between the public's perception of need and what tax money was purchasing . . . . Now in a revival of one of the world's fundamental rites, the death/ castration of the parent cleared the way for the child's assumption of power and prestige. Mythic relationships prevail even in government support system! .²⁹

The Engineer

The Engineer State owns all the means of artistic production. The Engineer supports only art that meets political standards of excellence; it does not support the process of creativity. Funding decisions are made by political commissars and are intended to further political education, not artistic excellence. The policy dynamic of the Engineer State tends to be revisionary; artistic decisions must be revised to reflect the changing official party line. The economic status of the artist is determined by membership in official Party-approved artists' unions. Anyone who does not belong to such a union is, by definition, not an artist. All artistic enterprises are state-owned and operated; that is, all artistic means of production belong to the State.

The Engineer role is attractive to a "totalist" regime because it focuses the creative energies of artists toward attainment of official political goals. Many Western governments, however, also find the Engineer role attractive in constructing a commercially viable arts industry in which the profit motive, or "capitalist realism," plays an ideological role analogous to "socialist realism." In the West, capitalist realism is generally expressed as "if it does not pay, kill it."

There are several weaknesses associated with the Engineer role.  First, all art is subservient to political or commercial objectives. Second, the creative energy of artists cannot be completely channeled.  Repressed artistic ambition results in an "underground" subversive of party aesthetics or capitalist values, for example, the phenomenon of the "counterculture."³⁰

There is a counterintuitive paradox associated with the Engineer role. With respect to the Soviet Union, it is the works of the Czarist period that receive critical acclaim in the West, not the works of socialist realism. With respect to Western art, it is the popular cultural products; for example, Hollywood movies and rock music-that are eagerly sought after within socialist and communist countries, not the works of socialist realism.

Between the Communist Revolution in 1918 and 1932 the Soviet government played the role of Architect.  The arts were viewed by the first "People's Commissar of Enlightenment" as an integral part of human development, but artistic change was seen as evolutionary, not revolutionary. While the workers were considered the owners of the "artistic means of production" they were not considered ready to operate them.  First they would have to be educated through access to the capitalist art of the past after which true proletarian art could emerge.  Censorship and control over content were relatively rare. ³¹

In 1932, with the second Five Year Plan implemented by Joseph Stalin, the costs of industrialization and the need to develop a new socialist society combined to change the role of the State from Architect to Engineer:

This second page in socialist cultural policy saw the rise of the doctrine known as Socialist Realism . . . . [that] downplays the notion that the "means of production" in the arts belongs to the masses, substituting the idea that it is the final product, the artwork itself, that is the property of the proletariat. Under this scheme, the social responsibility of the artist lies in "satisfying" the "owners," that is producing works that can be immediately accepted by the masses. ³²

Henceforth all art produced in the Soviet Union had to be socialist realist; that is, realist in form and socialist in content. Artistic activity was organized into "creative unions" to monitor new works and ensure conformity with the aesthetic principles of the Communist Party. Artists who produced work that did not conform were expelled and no longer recognized as artists.

The Linkages

Although these roles are mutually exclusive in theory, in practice most nations combine some or all of them. A few examples will demonstrate. In the United States, the National Endowment for the Arts complements tax expenditures (the Facilitator) with grants to artists and arts organizations, thereby playing a Patron role. In Great Britain, the Office of Arts and Libraries complements the Patron role of the Arts Council of Great Britain by providing direct grants to selected arts and cultural facilities. In France, the Architect role of the State is complemented by tax expenditures in support of charitable donations to the arts; thus, it also plays a Facilitator role.

Figure 4 provides a schematic summary of the four alternative modes of public support to the fine arts. The Facilitator does not formally use the arm's length principle. Rather, funding decisions are made by corporate, foundation and individual donors according to their tastes, not according to national arts policy objectives or artistic standards of excellence. In the case of the Architect and the Engineer, funding is provided directly by a government department. In the former case, support is provided according to community standards, and in the latter, according to political standards. The Patron is the only role in which the arm's length principle is applied. Funding is provided by government to an arm's length arts council that then makes grants according to professional standards of artistic excellence.