Economic Growth

Why is the creative economy growing so strongly?

Stefan Hajkowicz
Principal Scientist, CSIRO
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Creative services continued to grow even during the recent global financial and economic crisis, and could grow significantly more as technology advances and incomes increase in emerging economies. Creative services are important as they generate financial returns with minimal production and distribution costs, help people escape poverty, and bolster cross-cultural exchange and understanding. How can we best ensure they serve these functions?

Creative services are an underappreciated bright spot of the global economy. There is no commonly accepted definition of creative services or the creative economy, terms often used interchangeably; however, according to the definition adopted by the United Nations – which understands it to include arts and crafts, books, graphic and interior design works, fashion, films, music, new media, printed media, visual and audiovisuals – world trade in creative services more than doubled in a decade to reach a record total of $624 billion in 2011.i

Their growth is fastest in developing countries. In the decade to 2011, exports of creative services grew by an average of 12.1% in emerging economies, compared with a global average of 8.8%.ii Creative services appear to be decoupled from the rest of the economy, in that they grew strongly during the global financial and economic crisis of 2008 when many other sectors contracted: in that period, international trade contracted by 12%, while creative services trade continued to grow at an average rate of 14% per annum worldwide.iii This strong performance resulted from: (a) rapid income growth in developing countries; (b) the transition of emerging economies into a services-sector phase; and (c) the rise of ICT.

Current and future demand for creative services can be explained by the growth in internet usage and the increase in disposable income. There is room for further growth as hundreds of millions more people start using the internet. According to the World Bank,iv in low-income and middle-income countries – where the bulk of humanity resides – only 30% of people use the internet, compared with 81% in high-income countries. From 2012 to 2013 alone, an additional 176 million people in low-income and middle-income countries started using the internet for the first time – a 12% increase on the previous year.

As more people come online, they also have more to spend online. In 1960, the average global income was $455 per person per year in current dollars. In 2012, it was $10,206 per person. Forecasts suggest it could reach $44,000 by 2060, with the same purchasing power as today’s dollar.v

The growth of the internet as a distribution channel and a tool for collaboration also explains the increasing supply of creative services. Digital technology allows a creative product to be reproduced and delivered to a customer at zero marginal cost. As technology improves, so too does our ability to design, produce and distribute creative services tailored to meet individual preferences en masse. Future developments in communications technology – from telepresence systems to virtual reality, voice recognition and artificial intelligence – are likely to further expand the creative economy by enabling the evolution of entirely new kinds of creative services.

The development of the creative services market could assist in the alleviation of some major global challenges, such as youth unemployment and poverty reduction. Virtual goods can be produced and distributed at a low cost compared with other industries – often all that is required to successfully become part of the global economy is an internet connection and a good idea. 3D printers will increasingly lower production and distribution costs of physical as well as virtual goods by allowing an object of just about any shape to be constructed quickly and cheaply on demand. It will no longer be necessary to own a factory, a wholesale warehouse or distribution mechanisms to capture value in manufacturing – anyone with creative design abilities will be able to do so, further lowering the barriers to entry into the global economy.

Creative services could also play a bridging role across societies and humankind in a world which looks increasingly fragmented. Creative services could be an engine of understanding, cooperation and trust between cultures. Exchanges enabled by tourism and trade have historically improved cross-cultural relations. Can we find ways to increase the likelihood that virtual as well as physical cross-cultural exchanges and trade in creative goods and services will have the same effect?

The creative economy could have a transformative and positive effect on social cohesion and economic growth – if we can find ways to catalyse it. So how can we foster the full potential of its growth? From regulatory environments to awareness creation and investment in education and infrastructure, what are the most effective ways in which governments, companies and communities can create a platform for the creative economy to grow?

i Creative Economy Report − Widening Local Development Pathways. 2013. New York: United Nations Development Programme.

ii Ibid.

iii Creative Economy Report – Creative Economy: A Feasible Development Option. 2010. New York: United Nations Development Programme.

iv World Development Indicators Database. 2014. Washington DC: The World Bank.

v Economic Outlook No 93 − June 2013 − Long-term baseline projections. 2013. Paris: Organisation for Economic Co-operation and Development.

This piece is one of a number of individual perspectives from the Global Strategic Foresight Community of the World Economic Forum for the Annual Meeting 2015. To read more access the full collection.

Author: Dr Stefan Hajkowicz is a principal scientist working in the field of strategic foresight at Australia’s national science agency – CSIRO.

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