Effects Of Economic Crises On Art Companies Essay Example

Effects Of Economic Crises On Art Companies

Effects Of Economic Crises On Art Companies


The 21st century is characterized by unprecedented economic crises that rock the business sector as well as government and nonprofits organizations affecting their day to day operations in an extensive way. The art companies in this context represent both business enterprises and nonprofits organizations that fall under the category of art and culture. They constitute a significant aspect of the overall economy based on the percentage of economic activities that take place in the art industry. For instance, art companies contribute greatly in the creation of employment opportunities to the locals as well as generating revenues for the government in the form of taxes on art-related activities.

In the wake of the global recession and other economic crises that have been the centre of attraction in the recent past, art companies, both big and small have been on the receiving end bearing the brunt effects of the downturn. However, owing to the fact that big companies enjoy large economies of scale compared to their smaller counterpart, they (big companies) are in a less susceptible position to experience harsh effects of the economic downturn in the industry. The economic significance of art companies in the country call for immediate action in response to the adverse effects of economic recession. This paper focuses on the government policies that could help art companies in combating the effects of such crises.


The prevailing economic conditions are regarded as normal when the economic activities are carried out in a stable manner without straining any of the major players in the economy. However, it is important to note that normal economic conditions are not necessarily desirable. Instead, they permit for a sustainable and bearable economic atmosphere in which all the players are in a position to carry on with their conventional activities without external pressure. In the event that an external pressure or force emerges requiring alterations in the normal activities in the economy, hence straining the input and output in the economy, it is said to be an economic crisis.

Such an occurrence calls for changes in the structure and operation of the organization, which in some cases results in both immediate and eventual effects. When they occur, economic crises have far reaching effects that stretch from the financial aspects of an organization to the individuals that are directly linked to the organization such as employees, suppliers, customers and the community. Art companies are directly related to the tourism industry, which receives most of its revenue from both local and international visitors. In this regard, the interrelationship between art and tourism further extends the scope of the impact of economic crises on the art industry (Seungwon & Goldblatt, 2012, p.142-145).

Economic crises push companies to adjust their expenditure in the various aspects of their operations in an effort to remain within the limits of the budget. This is primarily because, expenditure is planned, and each expense is either directly or indirectly linked to another. Art companies are not exempted from this phenomenon as they are also forced to respond to the changes in the economic atmosphere brought about by the emergence of an economic crisis. One of the responses by the art companies to economic crises would be laying off some of the staff in order to minimize the wage bill, which is seen as a liability to any given company.

This response results in the loss of jobs for those who were previously employed in the art companies. In addition, the unemployed members of society will further advance the economic impact by adding up to the problems associated with economic crises such as rising dependency ratios (Lee, 2002, p.15-17). At the local level, loss of jobs resulting from art companies laying off employees will translate into rising poverty levels as people’s sources of income are extinguished by the economic crisis. As if rising levels of poverty and high dependency ratios are not enough, slashing down of the workforce in the art companies will ripple out to the effectiveness and quality f service provided to customers.

The contribution of the art companies to the total income of the government will be lowered in greatly, as a result of the reduced expenditure by the art companies. Economic crises force companies to strain their financial capabilities in a manner that limits investments for future growth. Previous economic crises left grey areas as far as their effects on the art companies are concerned. In this regard, it became difficult for the art companies to single out those areas in which extra emphasis should be laid in the formation of a contingency plan for combating economic crises (Siregar & Lim, 2010, p.83-85). For this reason, companies in the art industry have been forced to operate in the dark not knowing exactly how far financial downturns will affect their operations.

Since economic crises upset the normal condition in the economic atmosphere of the country, businesses strive to restore their recent conditions prior to the crisis. However, it is important to establish the causes of the economic crisis in order to devise mechanisms that potentially combat such adversities and if possible prevent future occurrences of the same. In this respect, the effectiveness of economic systems that precede financial crises ought to be examined in order to identify loopholes and possible shortcomings that could result to economic downturns if left unattended (Rzepczynski, 2013, p.78-81). This would ensure that financial constraints are not only abated, but also kept at bay.

Economic crises lower government revenue realized from economic activities in the art companies. Art companies offer employment opportunities to a large percentage of the country’s population considering the fact that art and tourism are interrelated. Artistic events attract the attention of both local and international visitors. This way, both the art company and government benefit. This is because visitors spend significant amounts of money in these events apart from the entry fee. The taxes paid to the government by a company, and the visitors make up for the high revenues collected. Since economic crises affect both consumer and organizational behaviour, the level of revenues for both the company and the government will drop significantly.

Art companies depend on endowments and sponsorships from other sectors of the economy. The support from these endowments and sponsorships drops significantly during economic crises as companies in various aspects of the economy slash down their expenses. In this case, the effect is felt by the art company, which, in return is forced to make changes in its operations in order to accommodate the alterations brought about by the absence of endowments. Consequently, artists and other participants in the company are forced out of the business by prevailing circumstances, which have little promises in terms of returns. This is a demotivating factor as it discourages the company’s administration in organizing artistic events. The effect of reduced enthusiasm from the sponsors and supporters of artistic companies go way far beyond the superficial consequences of slashed down expenditure.

Economic crises affect various aspects of the economy ranging from the finances of big companies to expenditure at the individual level. This is to say that no matter how large-scale crisis seems to be, it will find its way down to the individual level whereby the expenses of individuals are affected. It is important to note that an individual’s disposable income is what determines their likelihood of having demand for artistic products and services. This means that the segment of the population with limited disposable income has negligible demand for artistic products and services as they happen to fall under the secondary category of human needs/wants. Economic crisis, therefore, cause a decrease in the demand for artistic products, resulting in a drop in sales for the art company (Mendoza, 2010, p.1950-1951). The low sales experienced during economic recessions affect the overall returns for the art companies in that the company fails to meet its goals, thereby reducing its chances of continuity.

From the foregoing, it is crystal clear that the art companies alone cannot deal with the economic crisis singlehandedly. This is because of the scope and the magnitude of such a crisis. Consequently, there is a need for collective efforts by more than one entity to come together and devise mechanisms that would help combat the problems that face art companies during economic crises. Most importantly, the government is at a better position to formulate policies that have the potential not only to deal with the crises, but also to completely do away with it for the better of future operations for businesses. The formulation of government policies is a process that should happen concurrent with other forms of government involvement in business such as regulation and the provision of an enabling environment (Scott & Vitartas, 2008, p.50-52). In addition, government policies put in place to assist the art industry ought to be customized in such a way that they address specific issues facing art companies.

In other words, art policies are unique in their own ways. The correlation between tourism and art is an important aspect that needs not to be left out in the formulation of arts policies. It should be understood that apart from proving a source of government revenue, art convey a special message to the world about the culture of the country as well as its spirit of national identity. As such, the government ought to be at the forefront in preserving and protecting the art industry through policies that can shield it (art industry) from the adverse effects of economic crises. One of the ways through which the government can help the art companies to deal with economic difficulties is through legislation. This is an indispensable tool that is potentially capable of aligning economic activities in correspondence with conditions that are not only normal, but also those that favour positive growth. In the past, government support on art has produced positive results in countries such as Australia, France and Germany (Skolnik, 1992, p.18).

The way in which the government treats art companies in a country determine how such companies fair in the business during economic crises. In this regard, it important for the government to treat these companies the same way as it treats other companies in the country. The government should allow artistic products and services in the market to be influenced by the forces of demand and supply instead of considering them as simply representations of the country’s heritage and national identity. This way, artistic products will be in a position to withstand harsh economic times during economic crises. Thus is because their supply and demand will be influenced by market forces rather than by government pricing strategies. Government endowments and support programs would also come in handy in helping art companies deal with the crises. This is because of the fact that these endowments help such companies sustain their operations by avoiding the move to lay off employees (Aspden, 2011, p.10).

Government policies such as the recovery act in the United States have the potential to revive the ailing art and culture industry that has been infested by negativities, as a result of the economic crises. This policy seeks to get the government to the point where it treats the art and culture sector just like any other sector of the economy in which case it will be able to direct national endowments to the art sector of the economy. Previously, the art sector has not been regarded as an economic sector despite the fact that it contributes to the economy of the country in a great way through job creation and payment of taxes. These disparities have seen the sector experience unprecedented negative effects during economic crises as employees lose jobs and demand for artistic products and services in the market drop significantly. However, through the recovery act, the sector is expected to be self sufficient and operational throughout the downturn period. In addition, this government policy is capable of restoring art employment, which faces a sharp drop during economic crises (Choudhry, Marelli & Signorelli, 2012, p.78-80).

Since the main problem/issue facing art companies during global recessions is artists’ unemployment, it follows that government policies that curb this phenomenon are the best course of action to take. One of the policies through which the government can help the art companies retain their workforce during the economic periods is through distribution of national endowments to nonprofits organizations. In addition, the government could also mount campaigns that aim to educate the masses on the importance of art products and services as instruments for the preservation of national identity. Furthermore, these campaigns also help create awareness about the tangible and the intangible benefits that come with embracing artistic products and services. Organizations such as the Australia Business Arts Foundation are at the forefront in soliciting for support from the government and other philanthropic organizations in order to keep art companies afloat in the wake of financial crises. These efforts have borne fruits as certain art companies have managed to recover back to the recent economic conditions prior to the recession.

It is ironic that despite the contributions by the art and culture sector in the creation of employment opportunities as well as urban and rural renewal, the government still looks at the sector as a subsidiary in which case it could be done away with in the event of an economic crisis. The suggestion of government funding to the art’s sector to be slashed is astounding. What is more, several governments have gone ahead and abolished the ministry of culture, as a result of pressure from economic crises. These moves only show lack of a strong will and commitment towards the implementation of art’ policies. The enactment of government policy that institutionalizes art and culture would be the starting point in the efforts to address the issues in the art companies in the event of a financial crisis. It is important to note that considering the art and culture context, a normal economic condition refers to that condition when none of the components of the economy is faced by strain or pressure. This is regardless of the prospects for economic growth (Köksal & Özgül, 2007, p.335-338).


In summation, the art and culture sector is an active economic sector of the country just like any other. Consequently, in the event of an economic crisis, the sector is bound to face economic challenges similar to those faced by other sectors of the economy. In this regard, there is a need for government’s intervention in enacting policies that help art companies remain afloat in the wake of economic crises. The biggest challenge faced by the art companies during economic crises is the high rate of unemployment coupled with reduced demand for artistic products and services in the market. Government policies could help these companies deal with these challenges by implementing recovery programs that are geared towards restoring the company’s recent economic conditions prior to the economic crisis. The government could also help by implementing policies that treat art and culture companies like every other company in the economy. This can be achieved through the release of the art and culture sector to the free market system whereby the forces of demand and supply will be the determining factors.


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