Art Works Blog

#SupplyDemand Redux: Rocco's Comment & the Elephant in the Room

Washington, DC

by Diane Ragsdale (originally posted February 7, 2011 on Jumper)

I’ve been following the responses to Rocco’s ‘decreasing supply‘ comment and his subsequent post on the NEA blog. Some believe that supply/demand is the wrong framework through which to look at the sector; some that there is no such thing as too much art and that we should increase patronage rather than ‘kill’ organizations; some agree with him but believe it was inappropriate for him to make the statement; and a few seem to agree with his points and believe that it was beneficial for him to make them. I’m in the last group.

Rocco has done the arts sector a service with his ‘decreasing supply’ comment as I think it has created an opening for a candid discussion about an elephant in the room: the U.S. lacks a mechanism for identifying and dealing with mission-failing arts organizations and (because competition for resources exists) the nonprofit arts sector might be healthier overall if some mission-failing organizations were to close. Following on my overstocked arts pond post of a few weeks ago, here are some further thoughts on the supply/demand issue.

Competition among arts organizations for earned and contributed income exists. Some markets and organizations experience more competition than others, but it is not uncommon for arts groups located in the same city to be competing to secure patronage and trustees from among the same (narrow) demographic of upper middle class well educated arts-goers and funds from one or two government agencies and a small number of private foundations and corporations.

Many arts people take the stance that we should "let 1,000 flowers bloom." While one might theoretically argue that there is no such thing as ‘too much art in the world,’ the same cannot be said of arts organizations: to the degree that resources are not growing at the same rate as organizations (and they are not according to the most recent National Arts Index report), every new firm that enters the sector reduces the chances of every other to secure sufficient resources to operate.

If a commercial firm experiences losses year after year---unless it can successfully develop a new market for its product, or change its product to better serve existing markets, or restructure its business to reduce expenses, or find economies of scale through expansion or merger, or achieve revenues over expenses via other strategies---it will most likely shut down. Or it might be taken over by others who believe they can do a better job of running it. If an entire industry is in decline and there is insufficient demand for the current suppliers to cover their costs then one would expect to see firms exit the industry until equilibrium is achieved. There are exceptions---but generally speaking, this is what one would expect because commercial firms exist to make profits.

It’s more complicated for nonprofits because while they must have sufficient cash to operate, they exist (as Andrew Taylor has succinctly put it) to ‘maximize mission’ not profits.  Nonprofit organizations do not (in theory) exist to benefit themselves (i.e., to keep arts administrators gainfully employed); they have an educational and charitable mission and exist to benefit society (e.g., to support the development of artists and people’s relationship to the arts). One cannot assume that an organization that is balancing its budget is achieving its mission and providing cultural and social value to society; nor can one assume the opposite.

If there are nonprofit arts organizations that are not providing ‘sufficient’ value to society relative to the current investments in them by the government, private foundations, and other donors, and if they do not appear to be able or willing to adapt to fix this situation, then it is logical to assert that other more deserving nonprofit organizations (arts or otherwise) that are currently competing with them for resources would be better off if those ‘mission-failing’ organizations would close (or be re-organized).

However, even if we were able to identify ‘mission-failing’ organizations (sometimes it’s obvious, often it’s not), we do not have a clear method for dealing with the ‘dead weight’ in the sector. We don’t have a ministry of culture and large government subsidies. If we did, failing organizations could be de-funded and might adapt or close their doors as a result. The plurality of the U.S. nonprofit model is both a strength and a weakness. Government agencies, private foundations, corporations, and major donors give more than just their money: they give endorsements that serve as signals to board members, leaders of organizations, and other donors. Renewed support from the state arts council or one well known family foundation to a failing organization can be all that’s needed to encourage other donors to re-up and for the board and staff to persist on the wrong course for another year (despite good sense telling all of them to do otherwise).

Many organizations were started with the belief that they should exist as permanent institutions and have fought for their survival at all costs. Some of our dead weight is in historically leading ‘tall trees’ that have been preserved for far too long. Those that are the largest or that have already existed the longest are often assumed to be the most valuable. This is why many arts organizations get nervous when the cutting supply conversation happens; they assume (and with good reason) that funders and government agencies will sooner turn off the sprinklers that are misting the grass, the small bushes, and the saplings than shift the hose from one tall tree. (I’d like to see some funders prove them wrong on this.)

We lack a sound mechanism for communities to identify and deal with mission-failing organizations---those that refuse to adapt or close despite a preponderance of evidence that it would be better for society if they were to do so. There is no easy solution to this but there are opportunity costs to ignoring the problem: again, resources going to failing organizations are resources that cannot be utilized by those providing greater cultural and social value.

The reality is that organizations will close. Some already have, some are closing as I write this, and some will die in the coming months or years. And they will either be the right organizations to close or the wrong organizations to close. Why is it better to shut our eyes, wring our hands, and hope for the best?

Of course, dealing with  failing organizations is only part of the strategy. We still have the issue of declining participation rates. Many took offense at Rocco’s comment that ‘demand is not going to increase’; but according to a report put out by his own agency, arts participation rates have been trending downward, more or less, for more than two decades. I don’t perceive Rocco to be a pessimist as much as a realist.

Optimistically, I believe that there is ‘pent up demand’ (read: need) for the arts that is not being realized because of financial, geographic, cultural, educational, social, logistical, programmatic, and other barriers to participation. Pessimistically, I do not see many nonprofit arts organizations radically adapting their institutions to address these barriers. I hope I am proven wrong on this.

To be clear, I’m not suggesting that every organization needs to serve its entire community (it would be unwise for all but the largest flagship institutions to even try to do so); but if a given community has 100 arts organizations, neither should 80 of them be serving the same small segment of society. Perhaps arts organizations should spend less time stewing about the ‘decreasing supply’ comment made by Rocco Landesman and more time pondering why participation rates have been declining and why the arts and culture sector is securing a declining portion of philanthropic dollars. This may be the other elephant in the room that merits some earnest discussion. And (please) this is not a call for greater investments in marketing and fundraising; it is a call for more relevant institutions.

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