Why the present huge expansion of museums cannot last and derives from an intrinsic weakness in the sector

The worldwide growth in the number of new museums and museum wings over the past decade is without precedent. The impetus behind it has been analysed at length, the broad consensus being that:

  • Building museums has always been an avenue for the  expression of personal, foundation, corporate and civic wealth and self-confidence. These were extraordinarily high through the decade leading up to April 2000, so – QED.
  • Along with sports stadia and conference centres, architecturally distinctive cultural buildings have become one of the tools with which cities and countries project a distinctive and attractive profile when competing for tourists, inward investment and “brand identity.” They have become instruments of public policy valued as much for their contributions to wider agendas for social inclusion and economic regeneration as for their intrinsic worth.
  • Partly because of changing social values and partly in the process of accessing these new sources of funding, museum boards and directors have widened their mission progressively from collection and preservation through displays aimed at maximising visitors  to broader public education and entertainment – all space hungry functions requiring annexes and wings.
  • Changing leisure patterns and values have made visiting museums an important aspect of individual psychic decompression and social interaction. Their contemplative and aspirational aspects making a particular appeal to the harried middle classes.
  • Expansion has, after a while, built up a momentum of its own, as less well-placed museums seek to catch up the front-runners, in order that they too can secure the profile, and thus the good will and funding, enjoyed by the first movers – compete or die!

The aggregate impact of this cluster of factors has been the migration of museums from the back pages of the newspaper to the front, and their architecture from the functional servant to the dysfunctional master.

To this fairly conventional wisdom should be added a less well-noticed dynamic. Many museums are undercapitalised – their balance sheets are generally both weak and misshapen. They generally have insufficient working capital; their reserves are insufficient to fund routine repairs or depreciation; they under-invest in the remuneration and development of human resources – making it difficult to attract and retain staff with transferable skills or develop those without them; credit lines get used up; and structural deficits are rolled forward cumulatively. They are for these reasons often less fun to work in than they should be and less effective at doing the things that they are supposed to than they might be. It often surprises the outsider that this general picture can co-exist with the prominence and glamour that the sector appears to enjoy.

But co-exist it does. This pattern of rubbing along without enough money is familiar to every museum director in the world bar those favoured few whose institutions have accumulated significant endowments or which have some tangential source of revenue (such as property in excess of requirements that can be rented) or windfall source of capital (such as sale of air rights) that bails them out.

The reason for under-capitalisation is very simple and lies in elementary museum economics: museums are a red-ink business and require subsidy in the form of contributed income or grants to survive. The percentage of their operating budget raised from government or philanthropic sources depends on their capacity to generate income. This depends in turn on their charging philosophy, their attendance numbers, relevant entrepreneurial skills, and available physical space for ancillary retail, catering and so forth. But whatever the percentage, it is invariably significantly less than 100%.

Raising contributed income in parallel with the need for it and sufficient to fund the full difference between income and expenditure is extremely tough, even in the form of nominally “core funding”. The easier costs to cover are direct programme costs – more visible, more attractive, more obviously mission-related. Fixed costs tend to get drafted around, talked down and deferred, not least because museums wishing to present themselves to potential funders as efficient want to maximise, at least on paper, the ratio of direct to indirect costs.  Neither public funders nor philanthropists are quite as thrilled by appeals to meet the costs of new drains as they are new outreach programmes, but new outreach programmes need new drains. 

Periodically, therefore, museums need to recapitalise and, given the current attitude towards expedient de-accessioning, they are presented with only three alternatives.

The first is to run screaming into the street – the emergency appeal. This is generally humiliating, requires heads to roll and is rightly regarded as a last resort.

The second is the periodic blockbuster—the exhibition that is aimed at income maximisation through the choice of material, the way it is marketed and the ancillary retail than is bolted onto it (the Cezannewichs, etc. etc.). The need for the periodic injections of the cash they generate is a more significant driver than any institutional infatuation with the numbers game for its own sake (pace March’s editorial and see also the director of the Metropolitan Museum’s comments in this regard, The Art Newspaper, No.115, June 2001, pp.10-11). They are usually approached with squeamish ambivalence by all involved.

The third is the expansion plan – the use of a galvanising building initiative as the context to raise funds, refinance, and move forward.

The problem with this third strategy, of course, is that it is a form of pyramid selling or Ponzi scheme. Eventually, after the noise has died down, and the new building completed, the logic of the weakening balance sheet kicks in again. Unless the scheme was so successful that it has generated a whole new set of contributed funding opportunities, then the systemic under-financing reappears, and in a heightened form, given the larger facility and the more ambitious programming on which the facility is premised. The museum stands faced, again, with the three options of crisis appeal, more populist programming or obfuscatory expansion. (Why does the Guggenheim keep coming to mind here?) The building boom is therefore in part cause and in part effect of a series of systemic changes in the role of the museum sector.

It is also unsustainable.

Much of the fuel for growth in the United Kingdom has been the availability of funding from the national lottery. The spigot was turned on in 1995 and thirsty museum boards and directors stampeded towards it, the stronger trampling the weaker underfoot. However, a new Labour government in 1997, new lottery legislation, and a slow dawning realisation that museum building is an inescapably loss-making business turned the spigot down to a trickle four years later.

This has left some institutions physically bloated but in operationally undernourished, and others as parched as ever, lacking even the liquidity necessary to wash down the bitter pill of envy at their more canny or pushy peers. Some wonderful buildings have clearly emerged from some five years of lottery funding, but it will be another five before the longer-term structural impact of its rather arbitrary distributive procedures becomes clear. When the smoke from the fireworks of celebratory openings clears, the aggregate demands on contributed income and grant in aid will cause deep problems.

In the US the building boom has been longer and stronger, fed by the decade long upward sweep of the Dow Jones and, toward the end, by the climb of the NASDAQ. Its fall over the past year is having two effects:

  • It is reining in dramatically the forward plans for capital expansion that were drawn up on the long upswing but that are not yet executed. Throughout America one can hear the sound of fractious meetings between peeved and thwarted staff and chary chastened boards whose animal spirits are palpably dampened.
  • The sector as a whole is approaching a systemic problem of under capitalisation as its aggregate operational cost has grown faster than the contributed income and earned income needed to keep it adequately capitalised. Further expansion plans are likely to give way to more blockbusters, and blockbusters give way to more emergency appeals.

We are in for a bumpy ride.