Leisure, Sport and Tourism: Politics, Policy and Planning A.J. Veal Chapter 5: The Market versus the State

The Triumph of Capitalism Collapse of Eastern communist bloc, Reforms in China: ‘market system’ under communist control Decline in socialist parties in the West = the triumph of capitalism NB. Global Financial Crisis of 2008 indicates instability What is the role of the state in a market economy?

Mainstream economics Describes/analyses the market system = Firms and consumers But also has theory about the state – Branch of economics: welfare economics

The Role of the State in a Market Economy Adam Smith ( ): Role of the state: 1.National defence 2.Provision of a system of law and order – Public works Interpretation of Smiths ‘public works’: 3. Market failure 4. Social/political arguments

1. National Defence and Leisure, Sport, Tourism Traditionally: sport promoted for fitness for war James I Book of Sports, 1618: sport for ‘the common and meaner people’: ‘such exercises as may make their bodies more able for war, when His Majesty or his successors shall have occasion to use them’. 1930s: promotion of fitness in Britain and Australia due to concerns about the fitness of young men for war service

2. Law and Order and Leisure, Sport, Tourism Legal restrictions on potentially disruptive activities, eg. gambling, the sale of alcohol and use of recreational drugs. Government control of access to: air-space, radio and television broadcast channels, coastal waterways and fisheries. Copyright laws. Fire and safety regulations in entertainment/transport. Gun laws. Leisure provision to prevent juvenile delinquency.

3. Market failure Market process alone fails to produce optimum outcomes Situations: a.public goods and services b.externalities/neighbourhood effects c.mixed goods d.merit goods e.option demand f.infant industries g.size of project h.natural monopoly

a. Public goods and services Characteristics: – Non-excludable: difficult/impossible to exclude users – Non-rival: one person’s enjoyment does not preclude another’s Consequence: difficult for private sector to operate, so the market ‘under-provides’ Examples: Free-to-air broadcasting Public pride in success of local/national athletes Open public events: eg. firework displays, street parades Street signs/lighting (facilitating access to leisure venues) Major scenic amenities, eg. conserved historic/natural environment

b. Externalities (or ‘third party’ or ‘neighbourhood’ effects) Market under-provides or over-provides, due to specific benefits enjoyed or costs imposed, but not paid for, by specific third parties Negative: costs imposed on third parties – eg. air pollution, noise pollution, congestion Positive: benefits to third parties, which they do not pay for – eg. Environmental/amenity benefits of a golf course to surrounding properties; public tourism attractions

c. Mixed goods Part private and part public goods/services eg. Theatre visit – Private: enjoyment – Public: good social/cultural spin-off eg. Sport participation – Private: enjoyment, well-being – Public good: improved health = cost savings to health service/insurance and to employers eg. Urban park – Private: visitor enjoyment, well-being – Externalities: environmental benefits to local residents – Externality/public good: Passers-by enjoyment, well-being – Public good: dispersal of pollution

d. Merit goods Enjoyment/appreciation is not immediate: high learning threshold, so government should subsidise education/exposure Eg. – Environmental education – Some art, music

e. Option demand Goods and services which people want to maintain in case they or their successors want to use them in future Eg. – significant environmental, cultural and heritage items

f. Infant industries Industries where it is difficult for new entrants to get started because of power of existing companies, so state supports start-up Eg. – local film industry – local publishing industry – Airlines Problem of ‘picking winners’

g. Size of Project Projects too large for private sector to invest Few examples today in developed economies – possibly major resort development, Olympic Games

h. Natural monopoly Services where only one supplier is technically required Eg. Unique heritage attractions or environ- mental resources As with any monopoly, state may take over or highly regulate, to avoid excessive profits

4. Socio-political arguments Equity or humanitarian measures Economic management & development

Equity or humanitarian measures Leisure may be part of a package of goods and services required for a minimum acceptable quality of life To be assured for all, notably disadvantaged groups – people with disabilities, elderly, unemployed In cash (income support) or direct services?

Economic management & development Leisure industries may: – be supported as a significant part of the local economy – eg entertainment district, theatres, restaurants – used to boost the economy – eg tourism Problem of governments ‘picking winners’

Other situations Incidental enterprise: a leisure enterprise may be part of another public service – eg. Museums shops/restaurants Tradition: it may be politically difficult to close down a long-standing service, even when it is no longer effective

Issues Profit-making or loss-making? – If a facility/service can be run profitably, why should government bother? – NB ‘profitable’ includes a return on capital, including (land and buildings) as well as meeting operational costs Government failure/size – Often argued (eg. by neo-liberals) that government is innately inefficient – Therefore a large government sector is a drag on the economy

Issues contd Provider or facilitator? – One response to the government failure/size argument is for government to facilitate others to provide services (commercial or non-profit) Globalization: – Problems of national/local cultural identity Film, TV, music, sport – Economic disruption/unemployment Leisure are job creator services in high unemployment areas

Out of the Mainstream Alternative economic theories – Marxist – see Chapter 2 – Institutional economics (eg. Veblen) – Humanistic economics (related to Maslow, see Chapter 3) Further discussion and sources (p. 119) – Butterfield – Sinclair and Stabler – Gratton and Taylor – Tribe