centred interests of members of a passionate minority. Regardless of whether he is right, we must reckon
with market and government failures in the making of cultural policy.
Europe has different systems of cultural policy, each with their own merits and distortions. We
distinguish the state-driven, bureaucratic systems in, say, France or Italy and the arms-length approach of
the UK, Netherlands and Scandinavia. We differentiate between the UK with an independent Arts
Council and no ministerial responsibility and countries such as the Netherlands with an independent Arts
Council and ministerial responsibility. In the latter case the Arts Council recommends, but the Minister of
Culture decides and is held responsible by the parliament. Finally, Germany has almost no federal
cultural policy and delegates most of the making of cultural policy to the Lander. In assessing the various
systems we adopt a political-economy perspective and make use of the theories of delegation and of local
public goods, clubs and federalism. Before that can be done, we must understand the nature of cultural
goods and point out valid and invalid arguments for subsidising cultural activities. We also examine the
costs and benefits of different kinds of government intervention varying from government handouts to
tax incentives and special regulations for cultural exceptions.
Sector 2 presents indicators of the different sizes of cultural sectors in Europe. Section 3 discusses
the nature and value of cultural goods. Section 4 considers how technical innovation and Baumol's cost
disease affect the case for cultural subsidies. Section 5 shows how the way of allocating cultural
subsidies affects quality, diversity and popularity of culture in Europe. Instruments vary from privileged
positions and tax incentives to direct grants for cultural activities. Section 6 discusses subsidy allocation
by grant-giving arts councils, advisory arts councils and bureaucrats. Lobbying and rent seeking are
considered. The crucial questions are which powers should be delegated to bureaucrats or the Arts
Council, and what mission, guidelines and criteria the Minister should give bureaucrats or the Arts
Council. Section 7 discusses the principle of subsidiarity and applies the theory of local public goods,
clubs and federalism to cultural policy making in Europe. This explains cultural competition between
regional governments and sheds light on federalist systems as Germany. Section 8 discusses approaches
to international cultural policy in Europe. Section 9 concludes.
2. Indicators of cultural sectors in Europe: size and participation
2.1 Cultural employment in Europe
Table 1 presents estimates employment in cultural enterprises including non-cultural occupations and
groups them according to the NACE-classification. Cultural activities amounted in 2002 to about 3.9
million working persons in Europe (excluding Poland and Malta); 3.5 million in the EU-15. This reflects
2.1 per cent of the working population. Employment in cultural enterprises is relatively high in Denmark
(2.6 per cent), Sweden (2.7 per cent), Finland (2.9 per cent), the Netherlands (2.5 per cent), Ireland (2.4