Adrian Ellis raises some interesting questions for the museum field but they certainly carry over to all of the arts!

The recession and US museums

How to compensate for the loss of philanthropic, endowment and visitor incomes

By Adrian Ellis | From Editorial & Commentary | Posted: 11.3.09

“That was then; this is now.” A blunt expression often used in negotiations when one party wants to make clear to the other that previously reasonable expectations are unlikely to be met because of some adverse and unalterable change in circumstances. It is an expression that the cultural sector’s leadership is likely to hear frequently over the next few years as it seeks to navigate a radically changed economic and political map. The global recession that we have entered will not just knock the froth off things; it will permanently reconfigure the cultural landscape. This may happen more slowly and the events may be less flamboyantly newsworthy than the bankruptcy of Iceland, the collapse of the international banking system or the failure of the American mortgage industry, but the underlying forces at work are just as strong—indeed, they are the same forces.

This observation is hardly revelatory. The past five years of the decade-long upswing of the art market—predominantly the contemporary art market—has been largely speculative in nature, and the market correction that we are experiencing has been predicted by most parties who do not have a vested interest in the prolongation of the bubble: a period of declining volumes and prices and a shrinking of the market’s entire infrastructure—galleries, auction houses, art fairs and ancillary publications, and public relations. (In February, Standard & Poor’s gave Sotheby’s a credit rating of BBB, for example.) The scale and duration of the contraction will be directly related to the scale and duration of the wider recession. The art market trails the economy—as a whole reluctantly, but obediently. To give some indication of what’s ahead, the last time the art market experienced a major slump followed the 1987 stock-market crash. The art market fell later but further than the stock market, finally hitting bottom in 1993, with prices falling 56% on average. The market was thinner then, and therefore more volatile, but the current recession is broader and deeper, and likely to last longer; and the fall is from a higher speculative peak.

The impact of world recession on museums will be more subtle, but no less profound. The conspicuous consumption that has fuelled the art market is umbilically linked to the conspicuous philanthropy that has fuelled much of the growth in contemporary art museums throughout the US, the Middle East, South East Asia and Europe. These institutions have been significant beneficiaries of the growing and, to many, morally indefensible disparities of wealth throughout the world. It has left them heavily reliant on, and overly attuned and attentive to, a narrow constituency whose long-term appetite or capacity for support is highly questionable. The sector has come to rely disproportionately on the very wealthy, and on the role that museums can play as mechanisms for the translation of wealth into status, and status into power.

Most fundraisers in the arts freely acknowledge how much the pyramid of giving has narrowed in the past decade, with a greater reliance on an increasingly diminishing number of very wealthy donors. In Russia, India and the Middle East, the pyramid is practically a sheer-faced column—the museum sector is to a large extent the domain of the newly super-wealthy. The almost inevitably speculative nature of rapidly acquired wealth can lead to dramatic reversals of fortune, and thus of largesse. Interestingly, the success of President Obama’s electoral campaign in using web-based social networking to secure smaller donations is the talk of the charitable sector internationally. But art museums are not just short of the technological know-how to widen access to a donor base. They are also short of the arguments to galvanise them, as can be seen in the reaction of the US Congress to the provisions for the cultural sector in the Federal Bailout Bill. Museums have given a great deal of time and attention to stratification and hierarchy for the upper tiers of donors. With conspicuous consumption less in favour, speculative fortunes trimmed and priorities adjusted, the social class that art museums have smooched with most intimately is also the group most likely to sit out the next few dances.

The contraction of anything short of all-weather philanthropic support is, of course, compounded by dramatic drops of 30-50% in endowment income (whether museums’ own or of the trusts and foundations on which they rely). The precipitous drop in Brandeis Uni­versity’s endowment led to its president’s ill thought-out plan to close the Rose Museum and sell its collection. A more wily plan may well have attracted less attention. It is also compounded by cuts in public expenditure as local and national governments enter a prolonged period of austerity, reflecting their reduced tax base and the increased demands for fiscal intervention. UK Culture Secretary Andy Burnham said in January: “All parts of government have to hear that message and live in the real world. Some people may not like it, but the arts has [sic] to live in the real world too. Nobody is immune from what is happening.” In the US, the State of California is sending out IOUs instead of the tax rebates it owes, and most state and city arts departments—far more significant in the US than federal arts funding—have either implemented cuts or warned that they are on their way. Layoffs, furloughs (unpaid leave), pay cuts and shortened public openings are common in smaller museums and galleries in the US.

Museums of art have tended to rely more heavily on spectacle than programme to attract visitors—loud headlines rather than a fine print of involvement in the community. This is despite exhortations by trade associations such as the American Association of Museums in the US and the Museums Association in the UK that their members adopt agendas that increase and parade their social relevance, and myriad programmes of outreach and social engagement.

In the painful process of the prioritisation of public expenditure, the prospect of political underwriting—that is, a sense of obligation to sustain cultural institutions by civic leadership—is greatly diminished both by the realities of public expenditure constraint and by the growing sentiment of politicians that the art world, at least at its current scale of activity, is simply not central to a civic agenda congested with crises in health, housing, employment, education and the environment.

The brunt of the squeeze will be borne disproportionately by operating budgets (exhibition programmes, education programmes, conservation, research and curatorial functions). This is because, short of closure, the fixed costs associated with expanded infrastructure (new buildings, wings etc.) are just that—fixed. It is the need to balance the books from a higher baseline of fixed cost that is causing the pain. The drift is clear: we are entering a period when all but the most privileged and well-connected of art museums are going to come under very real financial constraints and many will be doing so with a weakened safety-net of well-disposed stakeholders. Outside of the restitution of art to Holocaust victims and the occasional censure of miscreants, museums have for the most part shown limited capacity for effective collective action. Industry-wide responses to problems (analogous to those for banks or the automotive industry) would require an appetite for solidarity that does not come naturally, even if the industry found a more willing ear in government.

Much of the reaction to these trying circumstances will therefore be confined to what individual museums, or small coalitions of museums, can do. Museums’ boards and directors are—quite reasonably, given their central mission of stewardship—highly conservative and, perhaps less reasonably, highly motivated by peer approval. Therefore, radical alternatives to genteel but irrevocable decline—such as merger, relocation, restructuring, resource sharing—are only likely to be contemplated as a last resort when an institution is faced with imminent closure. By that time, solutions are significantly more difficult to implement, as the time, money and organisational will required have been exhausted. As Hegel said, “the owl of Minerva flies at dusk”. It is interesting, if not entirely comfortable, to speculate on some of the fault lines that are likely to grow as the pressure caused by the triangulation of the dark forces of speculative expansion, recession and a diminished civic mandate increases.

Here are three possible ideas. First, dramatic and competitive physical expansion and large-scale temporary exhibitions have, in a sense, substituted for an effective agenda of community engagement. These strategies have served as a way of generating buzz and money while interest in the traditional mission of the art museum was waning to the point where it was insufficient to generate the funds required. These strategies are now stalling because of their expense; the contraction of the philanthropic and public sector funds and the cultural tourist market on which they are premised; and the diminishing returns the strategies secure in a crowded, winner-takes-all marketplace. Art museum agendas will have to shift to seek viable alternatives to these warhorses and with them, the skill sets required of museum leadership will also shift.

Second, in the search for resources, the desire to explore ways of capitalising collections will continue to grow. The straightforward fiat that is the current international norm—no deaccessioning unless you spend proceeds on more art—will either be finessed or ignored under the pressure of financial realities.

Third, what museums accept they cannot do alone, they will explore doing together more thoroughly and earnestly than in the past: collection sharing, joint acquisitions, pooling conservation resources, and pooling curatorial appointments. The museum economy is increasingly globalised and these trends will be global in their impact. The alternative to the open-minded exploration of radical alternatives is a sombre one, in which the energies and ingenuities of the sector are devoted increasingly to the support of a dysfunctional pseudo-mission: that of maintaining appearances at any cost, even if the museum becomes a sort of “living dead” organisation, in which any capacity for aesthetic or intellectual endeavour is sacrificed to the goal of keeping the institutional ego protected.

The writer is a regular columnist for The Art Newspaper and a director of AEA Consulting