On the face of it, the cultural exception won a major victory on 14 June when the Council of the European Union unanimously agreed to keep this issue off the TTIP negotiating table. On a closer look though, the cultural exception is going through a life-threatening crisis generated by both endogenous and exogenous drivers.

The deceptive journey from exception to diversity and back
From the outset it felt farfetched to argue that exception and culture make a smoother mix than chalk and cheese. Indeed the former smacks of exclusion whereas the latter is all about including and sharing. In a rare concession to the fact that oxymora don’t sell well, spin doctors prescribed that the same policy should operate as “cultural diversity”, a name more amicable and more attuned to crossbreeding, this proven way to enhance creativity. Has Europe retreated back to the grounds of exception because this old wine poured into the new bottles of diversity still tasted stale and anachronistic? Could it be that digital natives are better than their elders at getting the scent of snake oil?

Braggarts are rarely made of steel
This much is certain: digital natives feel empowered enough to take top-down diversity for what it is, i.e. a weird contraption meant to crowd out creation that fails to meet the strict criteria defined and enforced by high officials who know where to grant license and money to carry the flag of national culture. When it became clear that the fig-leaf painted over the exclusion shredder to have it look like a talent incubator had fizzled out, governments decided to do away with it and bravely to display the real face of a policy that boils down to immunity from – or suspension of – rules-based international trade… whether you like it or not, the US government was told last month. It defies logic to pretend to clench victory by suspending the rules of a global game while playing. Some would call it self-defeating arrogance. Europe has a more positive name for it: negotiating from strength.

But how strong is the EU’s hand in this respect? As more signals pop up by the day that the tidal wave of digital technology has made the cultural exception completely obsolete, three telltales are worth particular consideration.

Cutting the Gordian knot
The cultural exception was born in 1994 of the twin undocumented allegation of ostracism on the part of US theater owners against European films and of Hollywood’s unfair trade advantage originating in a huge, homogeneous domestic market. The system run by France’s Centre National de la Cinématographie (CNC) to support French movie making used to stand out as the jewel in this crown of dubious glory until last week when it lost most of its lustre in one devastating swoop: the “Council on delegated levying” (CPO) – a branch of the highly regarded Court of Auditors – singled out its practices as exemplar of a parallel tax system gone awry.

This blistering and particularly untimely blow brings a most unseemly charge against all the government agencies concerned: “They sap the very foundations of parliamentary democracy… They run contrary to the rigorous management of public funds which has never mattered so much as [now when] France is undergoing a severe budget crisis”. A dispensation from the cardinal principle of budget universalism whereby all tax revenues should feed the State’s overall budget is the abuse the CPO wants to unseat. As if to add cultural insult to financial injury, the CNC is deemed to be “emblematic of the drift generated by this ill-conceived delegation of sovereignty.” Six kinds of levies – on theater admission, video rental, distribution of TV services, etc – drove its revenues up by 46% between 2007 and 2011 while France’s budget was shrinking by 2%. Although the government has already siphoned €150m off provisions made by the CNC, the CPO recommends that a ceiling should be put on the revenues from this delegated tax scheme as a more permanent sanity measure.

When it rains it pours
The “General Inspectorate of the Treasury” served the CNC another deluge of flak last month in the form of a report entitled: “Towards simple and effective support to competitiveness”. Having reckoned that the CNC revenues increased 80% from €415m in 2001 to €700m in 2010, having credited most of this spectacular hike to the “dead-weight effect” originating in levies on TV services (TST-D), the report comes to question the very magnitude of a “budget comfort zone” inflated by cash flow soaring from €21.5m in 2007 to €134.6m in 2011.

The signatories – a top official from the Inspectorate and the president of a key regional government – dare recommend that the CNC revenues be brought back and frozen to the level they reached in 2008, i.e. €550m. Amounts generated by TST-D above its 2008 level (€94m) should be transferred to the State budget.

These two separate reports cast the cultural exception as the mother of all tactics based on “easy relief by suspending the rules”, whether in the trade or tax area. Fiction buffs knew already that culture would thrive on a temporary suspension of disbelief: but the thorough scrutiny led by these independent bodies shows that culture can also trump honesty and do with a permanent suspension of belief in the rules that have secured good governance since the dawn of parliamentary democracy.

While this sleight of hand had gone mostly unnoticed when the economy was doing well, the riding has turned so rough lately that the authorities in charge of overseeing the management of public moneys have no more qualms about raising the alarm with unusual persistence and matching cavalier attitude, at least by the standards of a French administration not prone to self-flagellation.

A regulation turned perverse
The report released on 30 May 2013 by the French Senate is as seminal and scathing. Focusing on the impact of the cultural exception, it has been kept under a shroud of secrecy thus far. Rapporteur Jean-Pierre Plancade zeroes in on the most blatant unintended effect of the so-called Tasca decrees. Fragmented across a fabric of micro-companies – only 10% of them employ more than 10 permanent staff, themselves outnumbered across the board by temps by a factor of ten – TV production has performed poorly: it hardly reaches one half or one third of UK or German competition respectively; French international sales have dipped 25% between 2001 and 2011; 7 out of 10 best ratings go to US series. The CNC volunteered an explanation to this rout: pro-birth policies mix badly with the Malthusian environment that national champions need to compete effectively on the world scene. If oxymora are a tough sell, the public policies they inspire are downright doomed.

Having addressed “the perverse effects of regulation”, section II (c) concludes: “This does not match his [Rapporteur Plancade’s] view of a cultural exception aimed to allow national culture to express its uniqueness even in domestic markets where profit is elusive… This ill-fated spiral of inertia elicits widespread admission that rules have to be changed”.

True to the forward-looking thrust of this report, section III addresses the future in general and the “usage revolution” in particular. One of the experts heard by Senator Plancade bluntly stated that “connected TV is ushering in a deregulated world vying for the same audiences as those hooked to traditional TV” and predicted that “the switch from broadcast to broadband will blow up our universe”. The report points to the UK or the US as benchmarks worth examination. Its overall advocacy for maximum exposure of audiovisual works – including online – jars with the original spirit of the cultural exception meant to erect barriers against dreaded Hollywood, not to try and match its edge. In the same earth-shattering vein, the report calls for regulation likely to foster boldness!

Europe’s audiovisual entertainment business can win the battle for global eyeballs
But the most innovative piece lies with a definite recommendation that fully-fledged industrial policy should drive France’s cultural policy. The true face of audiovisual culture – i.e. entertainment business with significant impact on a nation’s jobs and GDP – is thus conceded. Those claiming a special status for culture – no ordinary goods to be traded in no ordinary way – may feel betrayed at first sight. On second thought, they will probably admit that turning culture from an elite-crafted exception to a mass-driven mainstream business is the best way to unleash and harness the creativity of all Europeans and to bring our continent on a par with other regions of the world.

In more than one respect, the call from the reactionary bunch behind the cultural exception echoes that of the scaremongers who, back in 1998, predicted the death of France Telecom should the government share ownership or the French market open to competition. Fifteen years on, Orange is still a heavy-weight in France and in other markets… Likewise, negotiating from real strength stands better chances to prove a winning tactic than shunning or bending the rules of fair competition.

When a cat starts being called a cat in the birthplace of the cultural exception, when it dawns upon French authorities that the magnitude of the economic and social crisis may warrant both a return to budget sanity and a drastic revision of this whole construct, when an entire nation’s enduring leniency towards a self-inflicted drag on its own creativity begins to melt down, then there is hope that Europe will soon trade the straitjacket that has been stifling its culture for the dressed down gear – regulation-wise – that will make sure we ride the wave of unfettered innovation successfully.

After all, it only takes the French to consider good governance as seriously as they do culture or… education. In a sure sign of change, Xavier Niel and fellow web entrepreneurs are investing personal money in “School 42”, a new concept of training grounds willfully disruptive of France’s highly centralized, State-dominated education system. This is the first-ever attempt of this scale to address the ICT jobs mismatch by experimenting student-centric learning and to jump-start social mobility in the process.

So despite the prevailing gloom around us, the writing on the wall does not spell doom. Watch out, rest of the world: Europe is back. Down with bureaucrats’ dreams of a cultural exception! Long live the grassroots-led cultural revolution!

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