It has been repeatedly noted that in the new-stage economy
(the stage that the annual St. Petersburg Economic Congress called “a second-generation new industrial society”), the nature of labor is generally leaning towards more creativity as society develops (which Karl Marx already predicted at the time). The emergence of modern creative economy is an important sign of this trend’s natural evolution. Participants in the recent World Economic Forum in Davos also noted the development of such tendencies as they spoke about the “great reboot of capitalism”. Free Economy spoke to Tatyana Abankina, professor with a Ph. D in Economics and Director of the Center of Creative Economy at the Higher School of Economics (HSE).
– After 2020, the year marked by the effects of the COVID-19 pandemic on the global economy, many raised the issue of changing its tenets. Are you one of these people? Has the ‘old’ economy run its course?
– First, I believe that many changes emerged even before 2020. And they are truly significant.
The first change is the transition to digital economy 4.0 as it was called. Creative skills and creativity are becoming increasingly sought-after as a special quality that employers look for in candidates. Ten years ago, McKinsey & Company conducted a research that found that even then, 40% of jobs needed creative people. It is even more important to know that 70% of new jobs require creativity.
Digital economy comes down to the gradual departure not only from mass production but from mass consumption as well. Personalization and regionalization (relying on local resources) are coming into sharp focus in the 21st century. With very strong anti-globalist trends on the rise, people are more frequently speaking about a craft revolution.
– Can you please explain what it is?
– A craft revolution is when supply is created to fit a specific consumer. It is an indicator of a human-centric and customer-oriented economy.
We are creating entire ecosystems geared towards demands of a specific person, their tastes and preferences. This applies to both production and consumption where mass products are rejected in favor of customized and personalized offers.
Goods and services developed using creative potential are starting to play a rather significant role.
– What does it mean for the changing economic paradigm?
– We keep hearing that transition to an innovative economy is essential and innovation are becoming more and more meaningful. This is why creative industries, the role of creative activity and distant forms of interaction between producers, consumers and distributors, the spatial accessibility of the results of this kind of work are leading to more cases where developing new products, goods and services is focused on implementing AI and ICT. The share of unique results of creative labor and intellectual property in value chains is growing.
Most importantly, creative industries themselves, regardless of their share in the modern economies, are becoming a transition mechanism that factors in the annual (2-5% of influence) structural deformation of the economies in the world.
– In other words, commodity is not the way to make money anymore?
– Industries involving intellectual property and innovative development, realizing the creative potential of human capital account for the major share of the global income today – and, therefore, are related to its qualitative characteristics. Furthermore, creative industries are becoming more attractive and desirable.
– Can you give an example?
– Countries have different ideas of what can be considered as a creative industry. But the main concept is that products and services are a result of creative work and they are based on intellectual property. Also, as John Howkins (expert on creative economy and member of the United Nations Advisory Board on the Creative Economy – ed.) said, these industries imply a transaction of creative products.
This is not only related to culture and heritage; this includes the new media and everything that has to do with modern computer and information technology. This also includes architecture and design.
If we refer to the classification proposed by UNIDO, we will be able to identify four major sectors. One is creative industries relying on the heritage and culture of different countries; then there are art industries such as music, theater and film. The third sector is the new media, including animation and blogging. Finally, there are applied creative industries that include industrial and graphic design, architecture, advertising and certain computer services.
– Does it mean that creative economy is basically the opposite of the existing paradigm?
– I think that creative economy and creative industries are important today because they respond to the challenges of digital economy. Digital economy will significantly change the employment structure and jobs. Many careers popular today will go obsolete; therefore, helping people find relevant jobs is becoming an extremely important task.
From this perspective, creative industries have certain advantages. First, the share of private entrepreneurs, small and medium-sized businesses in these industries is high. They fit into the global value chains. Then, the threshold for the creative industry market is rather low and also allows using the flexible employment technology, which is particularly relevant for young people, mothers, seniors and people with disabilities.
Thanks to the development of digital technology, people can promote their goods and services on the global market while remaining in their familiar or newly comfortable environment.
– Consumers are also becoming more demanding about products. One thing is to sell something locally, but making a product popular around the world is a completely different challenge.
– Yes, expectations are indeed higher. At the same time, thanks to modern communications, vendors can maintain a professional dialogue with their customers and offer advice. Customization also helps businesses find their perfect clients.
From this standpoint, creative industries are improving mutual understanding and harmony in society and the world in general. They have a tremendous humanitarian potential.
Finally, I should note that today, almost every country supports this movement. There are creative industry support programs in Europe, the United States and Southeast Asia.
– What about Russia?
– For now, obviously, Russian creative industries do not cover the domestic demand. Creative imports are bigger than exports. However, we have a potential that allows us not only to increase exports of our creative economy products but also to create global brands. Masha and the Bear animated series is one example of such brands.
Overall, the creativity of Russian people, who are highly educated, can successfully develop – provided that there is certain government support – and contribute more to GDP than it currently does.
The government is starting to realize the importance of supporting creative industries. Both federal and regional governments, the Strategic Initiatives Agency and the Committee on Intellectual Property and Creative Industries of the Russian Union of Industrialists and Entrepreneurs supports the development of creative industries and creative economy.
There is a concept of state support for creative industries that is being reviewed by competent government agencies.
I should note that this is a shared task for several agencies but the Ministry of Culture plays the essential coordinating role – because it is creative work that is the basis of creative economy.
– Is there an estimate for the share of creative economy in Russia?
– We estimate that creative economy accounted for about 5% in 2013 and about 6% in 2018. The Strategic Initiatives Agency estimates its share at just over 4%. But it depends on what is considered a creative industry.
Therefore, it is extremely important to make adjustments to statistical observations which would allow us to review the monitoring practices in this sector, to assess its development prospects and to expose certain issues.
– It is a common belief today that human capital must become a pillar of the new global economy. But how can we properly build it? What changes in the global politics are necessary?
– Human capital is a new approach to evaluating labor resources and their input to the economic growth. Investing in people, education, culture and future healthcare yields returns. It is an investment. The more developed an economy, the bigger input comes from human capital.
Most interestingly, people already know how to calculate these returns.
– There is a Mincer earnings function that shows how GDP depends on the level of education reflected in wages. The more educated a person, the higher skilled work he or she does. This means higher financial returns for this person and thus higher input to GDP.
– But today, on the contrary, there are many people who claim that we do not need so many people with university degrees. Instead, we need to focus on vocational training.
– Initially, two types of human capital were measured. The first is basic or primary human capital that is measured in years of education. The second type is vocational that is accumulated as a person actually gains work experience.
As concerns Russia, many claim that human capital drives development. If our employment structure is outdated, human capital exceeds the capabilities of the economic system. Many experts, including Yaroslav Kuzminov and Tatyana Klyachko, have been talking about so-called “higher education overhang” when we have much fewer jobs requiring a degree than there are degree-holding candidates on the market. The number of jobs that require vocational training is often higher than the number of people who have it.
The labor market used to be more balanced. About 20-25% of the population had a university degree versus 80% today. Even though recently, people started saying that vocational training needs more support and more people should choose it, parents still think: “Yeah, sure, but my kid will study in a university”.
– It is understandable because vocational colleges and schools have a bad reputation.
– Yes, colleges lost greatly due to unpopularity. Also, many vocational schools are no longer tied to employers. In the past, students could plan and predict their career but the links have been lost since then. The Federal Service for Supervision of Education and Science estimates that about 30% of vocational training programs are not up to quality standards – mainly in terms of training conditions.
– The situation has overturned recently, hasn’t it?
– Yes. First, families have become much more pragmatic about education and employment prospects. Many young people go to vocational schools after the ninth or eleventh grade.
– Many experts are talking about the high level of uncertainty in creative economy. How appropriate do you think it would be to prioritize the creative and intellectual component of the economy? Isn’t it risky?
– Yes, I agree that the risk is indeed high. The share of small and medium-sized businesses in the creative sector is substantial. In circumstances such as the coronavirus pandemic, many representatives of the creative economy found themselves at risk.
Of course, we should not prioritize this sector and it should not dominate the economy. Still, it must be a full-fledged sector that performs many economic as well as humanitarian and social functions.
It provides for flexible employment. There are certainly large companies in the creative sector. Another aspect is that all workers in this sector represent the creative class that is actually changing the future and is motivated by self-actualization before money. The countries that create conditions for the creative class and for the growth of creative economy are taking off.