Economic Incentives, Impacts, and Commercialization

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Heritage Sites: Economic Incentives, Impacts, and Commercialization

Peter G. Gould¹and Paul Burtenshaw²

1Penn Cultural Heritage Center, University of Pennsylvania Museum of Archaeology and Anthropology, Philadelphia, PA, USA

2Sustainable Preservation Initiative, Los Angeles, CA, USA

Introduction

Particularly as tourism has grown into the world’s largest service industry, heritage sites increasingly have been recognized as potential sources of rev- enue for government agencies, of economic development for communities, and of profit for private enterprises. The organization and exploi- tation of these opportunities, known ascommer- cialization, takes myriad forms. The motivations for commercialization range from providing funding for preservation of heritage to the creation of jobs and profit from investments in commercial heritage. However, there is considerable debate about the consequences of commercialization for heritage sites themselves and for the people who live and work around them. Whether commercial- ization has constructive or destructive conse- quences for any particular heritage site depends on the distribution of the economic and noneco- nomic benefits and costs of commercialization, its

impact, and on how stakeholders respond to the incentivescreated by these benefits and costs. The debate over commercialization thus raises ethical, practical, and technical questions that are of importance to archaeologists. Each of these three concepts – commercialization, impact, and incentives – is central to the economic analysis of heritage sites.

Definitions

Incentives

Incentives are the inducements that drive personal behavior. They may be pecuniary–working for wages or seeking to profit from an investment–or they may be nonfinancial. Economists argue that individuals whose behavior is incentivized by personal gain are likely to be more productive and efficient; however, if incentives are mis- aligned with social needs, they can generate unde- sirable behavior. Heritage sites produce a complex web of incentives. Some areeconomic incentives, such as the potential to generate government rev- enue to pay for preservation or the opportunity to profit privately from tourist investments. Others aresocial/political incentives, such as the oppor- tunity for governments to inculcate an “autho- rized” vision of history or the potential to reframe the story of people and places in a manner that appeals to tourists. Such incentives may pro- duce socially positive outcomes – monetary rewards from income or jobs benefitting

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community members or outside businesses– or the hope that the benefits of commercialization may motivate local people to protect heritage sites. But incentives also may induce undesirable behavior. Heritage sites typically are managed and staffed by archaeologists and heritage profes- sionals whose behavior may be driven by noneco- nomic incentives, such as acquiring bureaucratic authority or professional standing. Similarly, communities may be incentivized to pursue eco- nomic gain at the expense of the authenticity and cultural values of their heritage sites or to compete for tourist revenues in ways that disrupt the har- mony of local communities. The opportunity for economic gains may incentivize corruption among the stewards of heritage sites, with dam- aging consequences to sites, communities, and national patrimony. Such negative incentives work against the interests of other stakeholders.

A thoughtful analysis of the incentives that face individual stakeholders is essential to understand- ing why people behave as they do with regard to heritage sites, which in turn is essential to shaping ethical and effective public policies toward heritage.

Commercialization

Commercialization involves the introduction of market-based practices to the management of a place, a product, or a social practice in order to make it available for public consumption. The process may be instigated by government action or by private entrepreneurs, including community members, seeking to exploit market opportunities to create income and jobs. Tourism is a primary driver behind the commercialization of cultural heritage sites and related practices because both international and domestic visitors have great interest in cultural, historical, and archaeological displays. Heritage commercialization takes many forms. Heritage sites may be managed and curated for tourist visitation. Traditional crafts may be adapted to produce marketable products. Even traditional activities, such as rituals or art, may be reconstrued for sale or public demonstration.

Tourism enables a variety of commercial activities at heritage sites including guiding; collection of fees for admission or entertainment; retail sale of

books, souvenirs, or food; and economic activity associated with operating and maintaining the site. Archaeological sites may be exploited through the sale of images used in advertising promotions, books, or movie and television pro- ductions; and sites may be rented for private events. Museums may license the copies of objects in their collections. Outside of heritage sites and museums, one encounters local micro- economies of shops, transportation concerns, res- taurants, hotels, and other retail and service businesses created to satisfy the heritage tourist.

Such tourism“supply chains”(Gould2018) exist at every tourist venue, from Machu Picchu in Peru to the British Museum in London. Finally, exca- vation research and conservation activities at archaeological sites may provide significant occa- sional revenues for local communities and host countries, processes that may be directly commer- cialized by scholars, nonprofit, and for-profit organizations who market participation in research and conservation to students and other paying members of the public.

Economic Impact

Economists measure the economic impact gener- ated by commercialization on two levels, the direct impacts of commercialization associated with the site and the follow-on“multiplier”effects on the broader economy. These impacts are included in the gross domestic product (GDP) of the country. Direct impacts include the revenues received by heritage sites, the salaries paid to workers there, payments to vendors and others to supply and operate the site, and the investments in conservation, signage, and site preparation required for it to receive visitors. These direct impacts stimulate further economic activity, defined by economists as“multiplier effects.”To illustrate: An investment in a retail shop at a heritage site generates demand for products sold there. Some portion of the money spent at the store will be kept by the owners, and the rest will be used to buy replacement goods from pro- ducers, who in turn must pay to restock their raw materials and pay workers or themselves. Some portion of workers’pay will be saved, but most will be spent on housing, food, clothing, and other

necessities. The economic impact of spending at a heritage site is multiplied through this process of spending and re-spending. Governments also ben- efit directly from commercialization. Govern- ments are responsible for many important heritage sites and often earn revenues from ticket sales and on-site services or from taxes on the private tourism sector. Spending by foreign tour- ists is counted in national income accounts as an

“export”and is a key source of foreign exchange for many governments. Revenue from sites may be spent by governments to benefit the sites them- selves, be redirected to subsidize other sites or national heritage in general, or may simply be used to support the general activities of government.

The overall economic impact of tourism is substantial. Worldwide in 2018, tourism is esti- mated to have directly generated almost 154 mil- lion jobs and $3 trillion in global GDP. Taking multiplier effects into account, tourism is esti- mated to have contributed 10.4% of global GDP and 10% of global employment in 2018 (WTTC 2019). Visiting heritage sites is a primary driver of this vast industry, although there are few detailed studies of the actual magnitude and impact of heritage tourism. One agency that does attempt to do so is the National Lottery Heritage Fund (NLHF) of the UK. The NLHF’s study concluded that heritage tourism drove four out of ten over- seas visits to the UK in 2009 and, even when visits to natural heritage sites are excluded, generated 270,000 total jobs in the UK and accounted for

£11.9 billion of GDP. Foreign heritage tourists are highly valued economically, but the majority of tourists in the UK are domestic travelers (HLF 2010). However, estimating the economic impact of a cultural activity is complex and a subject of considerable technical debate (Snowball 2008;

Crompton 2006). The magnitude depends on whether the money triggering the effect originates outside or from within the economy under study, the source of investment capital, and the rate of spending or saving of the various members of the value chain. Heritage managers also need to understand how much of the multiplier re-spending occurs within their targeted economy (e.g., a local village) and how much is lost or

“leaked away”from the local area and the local stakeholders in the heritage site. For example, if souvenirs sold at a site are made in another region or country, much of the value goes to those foreign producers. Similarly, if workers live in other regions or hotel accommodation are owned by national or international chains, the income earned by nonresidents is leaked outside the immediate region of the heritage site.

Key Issues and Current Debates Site Protection

Those who enjoy an economic benefit from a heritage site may have an incentive to conserve and protect that site and even to invest in it to continue to receive that economic benefit. How- ever, increased tourist visitation also risks degra- dation of the physical site from foot traffic or pollution. Furthermore, the commoditization of heritage may detach traditional artifacts, practices, and places from their original context, presenting them in a distorted form for consumption by vis- itors who may not value their cultural significance (Kehoe 2007; Silberman 2007). Over the long term, reliance on tourism may reduce local eco- nomic diversity, with adverse consequences in later years on sites and communities because tour- ist interests are highly unstable (Timothy and Nyaupane 2009: 56–69). Economic incentives for communities to protect places have been widely pursued in environmental conservation (McNeely 2006) and, to a more limited degree, in archaeology (Coben 2014). The concept of ecotourism relies on using tourist revenues to make natural resources economically valuable for the groups that otherwise may cause them harm or who are in a position to protect them.

However, ecotourism programs have had mixed success, encountering problems that include chal- lenges in getting economic benefits to intended groups (e.g., the local population), achieving a linkage in people’s minds between the economic impacts and the natural resource, and producing the desired behavioral changes in response to the proffered economic incentives (de Vasconcellos Pêgas and Stronza 2008). Parallel issues have

been seen with commercialization projects that have heritage preservation as a central objective.

Archaeologist-led programs to create community businesses based on heritage are nascent and still developing strategies, models, and best practices.

Benefit Distribution

The distribution of the benefits from commercial- ization is a critical political and ethical issue, one that can lead to contention among local, national, and international stakeholders, each of whom may assert rights to the site and its benefits. The power held by stakeholder groups is far from equal, corruption is hardly unknown, and residents liv- ing adjacent to a heritage site may be disadvan- taged in commercial competition. The preparation of a site to appeal to the tourism market may displace long-standing residents from newly demarcated parks, looters may become aware of the value of artifacts to be unearthed at the site, or the aesthetic or sacred values of the site may be disrupted. Local community members often lack access to the banking system, to investment cap- ital, or to the political connections needed to obtain permits or approvals, and they may lack the market knowledge and experience essential to compete with more sophisticated outside parties, especially national or multinational corporations.

As a result, the economic impact of tourism can be compromised by high levels of leakages away from local stakeholders. The jobs created by her- itage commercialization can be low wage, infor- mal, and seasonal and are exposed tofluctuations in tourist demand. Similarly, the jobs created through archaeological research can also be low paid and seasonal, with higher-skilled, better-paid jobs inaccessible to unskilled local populations.

The distribution of benefits depends on the capa- bility of stakeholders to take advantage of eco- nomic opportunities, as well as the multiplier benefits and leakages discussed above. Whether any particular distribution pattern is acceptable will depend on the political, social, and economic context of each site and the aims of any commer- cialization project. Studies into the distribution of economic benefits have demonstrated the severe challenges facing efforts to direct the benefits of heritage commercialization to local stakeholder

groups (Adams 2010; Kausar and Nishikawa 2010; Hampton2005).

Privatization

Heritage sites are often referred to by economists as public goods, tangible or intangible resources that benefit people in common in ways that cannot be managed purely through private ownership.

Private goods, by contrast, are those that can be owned and controlled for the benefit of individ- uals for the purpose of making profits. Neoliberal economists, whose impact on public policy has been strong in countries such as the UK and the USA, argue that an entrepreneur incentivized by the opportunity to earn a profit on investment introduces to heritage management competitive pressures, financial capital, operational skills, knowledge of customer desires, and the willing- ness to takefinancial risks. In the case of heritage sites, neoliberal policies have promoted the emer- gence of privately owned businesses to deliver tourist services and, in limited cases, enabled entrepreneurs or nonprofits to manage the activi- ties of museums and archaeological sites. In a period when most national governments are under stress, privatization can appear to be a par- ticularly attractive policy. However, markets do not work optimally when faced with the extended time horizon of heritage sites and their important noneconomic values (Mason1999). Such“market failures” have occurred sufficiently often that skepticism is rising, including in the management of heritage, that privatized services can deliver efficient and effective solutions.

Measuring the Benefits

A key issue is how one determines which heritage sites should be given priority for commercializa- tion. Economists often take a “benefit/cost”

approach to such questions (Brent2017). In prin- ciple, this is a straightforward matter of compar- ing the benefits of a project, in monetary or other quantifiable terms, to the investment and operat- ing costs of the project. If the value of the benefits exceeds the costs, the project may be seen as having a positive overall return. If not, it is either a poor investment or requires a government sub- sidy to continue providing benefits to the

public. However, the measurement of the benefits flowing from cultural heritage is confounded because many of those benefits are intangible and difficult to reduce to monetary terms or oth- erwise quantify for the purposes of benefit/cost comparisons. The noneconomic values of heritage can include the local or national identity attached to a site, the value to Indigenous people of sus- taining aspects of their culture that are not shared with fellow citizens, the scientific or historical value of preserving artifacts from the past, the aesthetic value of a site, or the general social value derived from uplifting the public through education that results from visiting heritage sites.

Commercial heritage management is unlikely to prioritize those values. Furthermore, as pointed out above, there may be intangible costs to com- moditizing heritage sites, such as site degradation or the desecration of places sacred to Indigenous people. Economists have developed tools that attempt to measure the value of cultural heritage through a variety of techniques (see Snowball 2008). They are subject to numerous qualifica- tions and technical limitations that render the evaluation of the benefits of heritage sites a prob- lematic enterprise. Furthermore, stakeholders’

incentives may be widely divergent, leading to very different views on the value of any particular heritage site.

Sustainability

The economic principles governing the commer- cialization of heritage are applications of neoclas- sical theories developed to explain the behavior of firms and consumers in short-term market situa- tions. While the theory may be applied sensibly to some long-term problems, there remains the prob- lem that the time horizon associated with heritage sites–measured in decades if not centuries– is difficult for market-based institutions to address appropriately. Decisions whether to preserve, con- serve, or open a heritage site to the public have implications that extend well beyond one individ- ual’s lifetime, which introduces the matter of“sus- tainability” to heritage site commercialization.

Three decades ago, the Brundtland Commission defined sustainable development as a process that

“seeks to meet the needs and aspirations of the

present without compromising the ability to meet those of the future”(WCED1987, Ch.1 Par. 49).

Applied to heritage sites, that definition raises questions such as: What is to be sustained, for whose benefit, and for how long? And, who will make those decisions? Governments historically have performed this role. However, as noted above, some policymakers argue that market- based management solutions are a better choice.

Alternatively, archaeologists increasingly see eth- ical and practical reasons to lodge decision- making responsibility in community-based struc- tures. This divergence of views gives rise to a debate whether“top-down”or“bottom-up”con- trol over heritage commercialization is most likely to meet the standards of sustainability. That debate, which also pervades the broader economic development literature, has practical, theoretical, and political implications that yield no single res- olution (Binswanger-Mkhize et al.2010).

The Role of International Organizations International organizations have come to play an important role in the commercialization of heri- tage resources. UNESCO certifies as World Her- itage Sites those deemed to exemplify

“outstanding universal value”and requires man- agement plans and detailed schemes both to con- serve and preserve the site and to exploit it for economic purposes through tourism (Robinson and Picard 2006). World Heritage Site status is widely sought-after for its value as a tourism- inducing brand. International financial institu- tions, including the World Bank and regional development banks, provide capital for infrastruc- ture investments, such as roads, electrification, and water systems, that often are required for successful heritage tourism (Cernea2001). Inter- national nongovernmental organizations, such as the World Monuments Fund, the Sustainable Pres- ervation Initiative, and the Global Heritage Fund, have experimented with community-based pro- jects intended to create economic benefits for localities adjacent to important archaeological sites. Government entities such as USAID in the USA and the European Commission also are sig- nificant underwriters of projects that engage her- itage resources to promote economic

development. Usually, these international pro- grams are undertaken with the approval and involvement of national governments, although increasingly NGOs are looking at alternative community-based models in order to address the operational failures of past top-down-driven pro- grams or to redress the unequal distribution of benefits from past projects. Regardless, the intru- sion of international organizations into heritage commercialization has introduced an array of new stakeholders to the processes of heritage con- servation and commercialization. Often these institutions and individuals have priorities, values, and incentives that are very different from the national and local stakeholders in heri- tage sites. Furthermore, as critics of international organizations engaged in the heritage process point out, these international organizations lack the financial resources and enforcement powers needed to protect heritage and have been shown to respond to institutional and international political incentives in ways that are contrary to the long- term interests of cultural heritage sites (Meskell 2018).

Future Directions

Commercialization of heritage sites has pro- ceeded rapidly since the 1950s as countries have competed for the burgeoning income from tour- ists. However, the adverse consequences of the often-perverse incentives created by large-scale heritage bureaucracies, privatization, and the drive for tourist revenues also have become increasingly evident. The quest is for heritage management approaches that incentivize behav- iors that will promote conservation of heritage sites and honor their cultural value even while delivering the beneficial impact of commerciali- zation to communities and to national economies.

In some countries, such as the UK in recent years, this project has resulted in greater levels of privat- ization and market dependence. In others, such as Italy, decentralization experiments are underway to improve efficiency and responsiveness to tour- ist needs while diminishing the influence of con- servative cultural bureaucracies. In China, many

aspects of heritage management have been devolved to regional and local authorities. With government budgets facing competing demands from urgent social problems, the tourism market will continue to be an alluring source of local and national economic impact, and cultural heritage will remain at the center of both national dis- courses and commercial opportunities. Thus, while experimentation in the management of her- itage commercialization is in its infancy, the search for better ways to manage commercializa- tion, limit the consequences of undesirable incen- tives, and promote desirable impacts will continue unabated.

Cross-References

▶Community Economic Development and Archaeology

▶Cultural Heritage and Communities

▶Cultural Heritage in Times of Economic Crisis

▶Cultural Heritage Management and Poverty

▶Cultural Heritage Management: Business Aspects

▶Economic Valuation of Heritage

▶Heritage Tourism and the Marketplace

▶Heritage Values and Education

▶Privatization, Public-Private Partnerships, and Innovative Financing for Archaeology and Heritage

▶Sustainability and Cultural Heritage

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