The Effects of Inflation on the Arts

Abstract

Although difficult to quantify, the effects of inflation on the arts are observable and increasingly negative. Arts institutions are people-intensive and energy-intensive, and certain of their essential expenses are increasing at a faster rate than inflation. Other items, most notably funding from city, state, and federal governments, are not keeping up with inflation. Furthermore, reductions in federal spending are imminent, and it is unlikely that corporate contributions will replace that funding. The arts are taking a number of steps— some of which have questionable future implications—to increase their income. Contributions from the three sources in the private section—individuals, foundations, and corporations—have been generous in the past 25 years; they are predicted to remain so during the 1980-84 period. The "mix" of contributions will shift, however, with the foundations being the least able to contribute, the corporations fluctuating in their contributions, and individual contributors assuming increasing importance. There is little doubt that inflation harms the arts, but it is reflective of a weak economy in which other factors, for example, harsh tax laws and weak stock and bond markets, cause distress to nonprofit institutions. Until there is a strengthening of the economy, the arts will have serious financial problems.