The Economic Power of American Arts and Culture

It is often said that art feeds the soul. But culture and the arts also fuel the economy directly: The arts contribute more than $800 billion a year to U.S. economic output, amounting to more than 4 percent of GDP.

That figure is based on detailed data from the U.S. Bureau of Economic Analysis (part of the Department of Commerce) and the National Endowment for the Arts, summarized in a report released earlier this month.The report tracks the aggregate performance of 35 key arts-and-culture fields, including broadcasting, movies, streaming, publishing, the performing arts, arts-related retail, and more.

The contribution of the arts to America’s economy is equivalent to nearly half of Canada’s total GDP, and bigger than the economic output of Sweden or Switzerland. Indeed, the arts account for more of U.S. GDP than industries such as construction, transportation, and agriculture. And they have been growing much faster than the economy as a whole. Over the three-year period spanning 2014 through 2016, the average annual growth rate for the arts was 4.2 percent, compared to a 2.2 percent growth rate for the entire American economy.

The powerful arts-and-culture industry is export-based. In 2016, the United States ran a $25 billion trade surplus for artistic and cultural goods and services, driven by its exports of movies, television programs, video games, and more. That is more than 10 times the amount from a decade earlier; the trade surplus in the arts was just $2 billion in 2006.

More than 5 million Americans work in the arts-and-culture economy. After sliding during the Great Recession, employment in the sector rebounded alongside the larger recovery, and it produced more than 200,000 new jobs between 2009 and 2016. In 2016, arts-and-culture employment generated nearly $400 billion in wages.

Also, consumer spending on the arts is up, both in real terms and as a percent of all consumer spending, over the past couple of decades.

The arts are not just an amenity—a form of intellectual enjoyment or spiritual enrichment—but, as the report demonstrates, a key source of investment in today’s economy. Historically, economic investment was defined in terms of “physical capital”; that is, tangible things like factories and equipment. But in recent years, the Bureau of Economic Analysis has expanded its definition to include so-called intangible assets (e.g., software). In 2013, the Bureau also added investment in arts and cultural goods in the form of “entertainment originals,” including movies, TV programs, music, photography, and more. Investment in entertainment originals grew by more than 10 percent per year between 2014 and 2016.

The arts-and-culture economy is geographically concentrated in states including New York and California, as well as the New York and Los Angeles metros, along with Nashville and several others. But the report suggests that it has grown rapidly in a baker’s dozen (or so) of states. Topping that list are Washington, Georgia, Utah, and Nevada, all of which posted faster growth rates in the sector than California for the period 2014 to 2016.

One troubling finding: there has been a substantial decline in the level of government funding for arts-based education programs for the past couple of decades. The chart below shows the fall-off in value of arts-based education since 2012, which seems to have leveled off in 2016. Arts-education programs have fueled the development of leading arts-and-culture industries in other countries: For example, Sweden’s investment in music education for its kids is widely credited with propelling its songwriters and producers to the top of popular music.

In fact, according to the report, arts and culture together make up about half of the creative economy, which it defines as encompassing “copyright-intensive” industries. My own research finds that arts and culture are one of three key sectors, with science and technology and business management, that drive regional economic development. Today’s economy is not just knowledge- or tech-based, but a broadly creative economy in which the arts and culture play a critical role.

CityLab editorial fellow Nicole Javorsky contributed research and editorial assistance to this article.