Tuesday

4th Oct 2022

Opinion

How Europe undervalues the economics of its craft heritage

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This week, the European Commission suggested a system to protect the intellectual property of regional industries and craft products, inspired by the success of the similar protected geographical 'tag' used for wines, spirits, and agricultural products.

It will — or at least, could — cover products such as Murano glass, Donegal tweed, Porcelaine de Limoges, Solingen cutlery and Boleslawiec pottery. The proposal aims to enhance action against fake products and provide dedicated support for SMEs.

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But, for some others, it is already too late.

In 2017, Poterie Renault fired its kilns for the final time, having struggled to make ends meet as a business for the last several years. Its closure is a contemporary story, a single drop in a larger wave of small business closures. It is also illustrative of how Europe fails to realise the economic potential of its heritage.

At the helm of the business at the time of its liquidation were not the business's founders, nor their sons and daughters, but the fifth generation of Renaults to run a pottery business out of Argent-sur-Sauldre, a town of 2,000 in France's Loire valley.

Following the court-ordered liquidation of the business, Poterie Renault's stock — timeless soup bowls and water pitchers and more obscure cider bowls and escargot plates, all in different shades of the manufacturer's trademark brown salt glaze — was snapped up by American retailers geared towards affluent urban consumers.

I occasioned on this fire sale because I myself was one of these customers, an urbanite looking to repopulate a kitchen with meaningful products.

It begs the question whether Poterie Renault might not have run out of cash, or would have found a more willing sixth generation, had it tapped this lucrative market earlier.

In regional French markets, these pottery products might not have incurred much of a premium, but it is clear that they do among the clients of the retailers that bought up the stock.

More importantly, it illustrates how Europe is struggling to fully convert its heritage into economic value.

Many companies today are valued by investors for their ability to transform knowhow and intellectual property into revenue and operating profit.

Heritage, which allows manufacturers to command higher prices than the same products produced in a recently constructed factory in a faraway country, should be seen as a subset of this 'intangible capital'.

Like Parmesan cheese, and Rioja wine

Europe has sought to capitalise on this heritage through appellations of origin that protect parmesan cheese and Rioja wine, among other products.

In turn, these appellations empower producer organisations that help their members. However, these protections do not exist for all products that are part of Europe's heritage — for good reasons. It may not make sense to create a specific appellation to protect the earthenware manufacturers of the Loire valley, since they might not exist in sufficient mass to do so.

Something must still be done though. Saving heritage businesses, in the worst case scenario, or increasing their value, in the best case scenario, requires tailored support.

Solvent businesses should be supported through financing and technical assistance. Europe has no lack of small business support programs. However, these programs are not built to respect the unique opportunities (connecting to premium markets) and challenges (multi-generational family businesses) of heritage businesses.

Expanding the European Agricultural Fund for Rural Development, which only finances tourism projects at the moment, could be one pathway.

Insolvent businesses can be acquired through special-purpose funds with the aim of restructuring and selling them to other companies under covenants that respect their history.

These funds could be operated as public companies or by private fund managers commissioned to run them in the public interest.

Doing so would avoid a liquidation: the fate of Poterie Renault and the worst outcome since this is heritage capital that will be lost forever, depleting Europe's economic potential in the process.

Governments can use their budgetary and fiscal levers to encourage these programmes. This is not without historical parallel.

England's grand country estates, run as diversified businesses with agricultural, husbandry and forestry interests, struggled with inheritances and other taxes introduced as the post-war welfare state took shape.

The National Trust was created to take ownership of entire states and manage them in the interests of the public, generating a credit for inheritors that could be used to offset the tax bill.

While the model has rightfully attracted criticism for diverting resources away from the treasury, it has been remarkably successful in keeping these estates intact.

Repurposed for heritage businesses, a heritage programme would not be intended to own and operate these businesses indefinitely. Rather, it would be a temporary home for them in the public's interest.

Without the liquidity and other measures introduced in the wake of Covid-19, bankruptcy rates among European small and medium-sized businesses would have been 9 per cent higher.

With some of these support measures phasing out, and central banks already hitting the monetary brakes, many business owners will be questioning whether to continue their business. Giving them an additional reason to do so is in everybody's interest.

Author bio

Sander Glas is a New York-based analyst who has worked for the United Nations, the World Bank, and began his career at the EEAS. His concern is to reorientate the financial system to invest in more things that matter to people.

Disclaimer

The views expressed in this opinion piece are the author's, not those of EUobserver.

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