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How the free market created the greatest arts festival in the world

Dominic Frisby explains how the Edinburgh Festival Fringe grew in a manner Adam Smith would be proud of into the biggest arts festival in the world.

A street performer at the Edinburgh Festival Fringe © Ken Jack - Corbis/Corbis via Getty Images

A street performer at the Edinburgh Festival Fringe © Ken Jack - Corbis/Corbis via Getty Images

If ever there was a story with a moral about the incredible power of free markets, it's the story of the Edinburgh Fringe.

And that's the story I'll be telling today, before I set off tomorrow for the Scottish capital and the greatest arts festival in the world.

And it really is the greatest arts festival in the world that isn't just hot air or pulp.

Edinburgh's population is about 480,000. But over the course of August some 4.5 million visitors will come to the city. 33,000 of them will be artists.

Of the world's 195 countries, roughly 160 85% will have nationals in the city at some point.

There will be almost 60,000 performances of 3,841 different shows. And that's just the registered stuff.

If you factor in the unregistered shows, as well as the street performers and buskers, you can probably increase those numbers by around 30%.

These performances will take place in over 320 different venues, ranging from vast concert halls to the top deck of a bus.

It's an 8% increase on 2018, which saw similar growth on the previous year. Every year, almost, it expands. It's testament to the extraordinary power of compounding. It wasn't always so big .

Entrepreneurial artists gatecrash the Establishment party

The Edinburgh Festival began in 1947, organised by a Austrian-Jewish impresario by the name of Rudolph Bing, who had fled the Nazis in the 1930s. Its purpose was "to heal the wounds of war through the languages of the arts".

He raised £30,000 in three lots of £10,000 from the Arts Council, Edinburgh City Council and from one Lord Roseberry who had just won £10,000 on a horse.

There was plenty of hype for this new Festival. It made the front cover of the Radio Times. The Lord Provost said he hoped it would bring "a sense of peace and inspiration". And the original programme declared only the"highest and purest ideals of art in its many and varied forms" would be shown there. There was the Sadlers Wells ballet, the Vienna Philharmonic Orchestra and Glyndebourne Opera.

Several small theatre groups also wanted to take part, including a puppeteer from England and a socialist theatre group from Glasgow, who used to tour the north of England and Scotland in a truck, putting on shows in village halls.

They were told they weren't good enough.

To heck with that, they thought, and came anyway.

There were eight such groups the Uninvited Eight, they became known as.

They weren't registered with the Festival. They didn't get any subsidy. They had to take their own financial risk.

One put on a show in the YMCA, another in the restaurant of a cinema. The prime spaces had all gone to the main Festival.

Another put on a show out in Dunfermline, which was described as "far out on the fringe".

So was the Fringe born. Unplanned, unregistered and spontaneous.

The uninvited guests take over

The shows got good reviews. They made some money, so the following year some of them came back, and a couple of new groups joined them. They were largely ignored by the gatekeepers of the main Festival.

In 1954 an entrepreneurial printer offered to put together a brochure for in the uninvited groups. "Additional Entertainments" were how they were known. The name Fringe took several years to manifest.

One "additional entertainment" that proved particularly popular was the late-night revue. In fact, the Festival got so peeved at the popularity of these revues, it raided the Fringe for talent secured the services of Peter Cook, Dudley Moore, Alan Bennett and Jonathan Miller and put on its own revue in 1960, snarkily titled, Beyond the Fringe.

The intended rebuttal only generated even more interest in the Fringe, and so it continued to grow.

In 1966 one play, by a young writer named Tom Stoppard, went from the Fringe to the National Theatre to Broadway within a year. The huge success of Rosencrantz and Guildenstern Are Dead made the fringe even more of a desirable destination for aspiring artists.

Every year since 1947, bar a couple, it has grown.

In 1959 there were still only 19 groups. By 1974 the Fringe's revenues exceeded the main Festival. Such is the power of compounded growth.

Today Edinburgh is largest arts festival in the world, selling more tickets than any other event except the World Cup and the Olympic Games. And they take place every four years. The Festival is annual, and the Fringe is the biggest draw.

It's an incredible story.

A festival Adam Smith would be proud of

This enormous growth was unplanned, unregulated and spontaneous. It happened quite organically. There was no quality control. Just thousands of artists, each with their own speciality, pursuing their own self-interest.

It's chaos, but there is a weird, naturally occurring order to the whole thing. Turn up on time and don't overrun. That's all that matters. Apart from that there are no rules. Everything else seems to take care of itself. Every year there are a gazillion problems. But they all seem to sort themselves out without top-down directives.

Injustice and inequality is everywhere. But audiences are not taken from successful shows and redistributed among the less successful in the name of equality. Good work is rewarded, bad work isn't.

The result is this amazing Fringe Festival wonderful show after wonderful show. Audiences love it. It makes fortunes for the capital. And dreams, for some, come true.

It's everything the great Scottish economist Adam Smith argued for.

Dominic Frisby performs Adam Smith: Father of the Fringe about the history of the Fringe and its relationship with the teachings of Adam Smith, in the very room in which Smith completed Wealth of Nations.

In addition, with MoneyWeek editor-in-chief Merryn Somerset Webb, he co-hosts The Butcher, The Brewer, The Baker and the Commentator debating the issues of the day with leading thinkers from the world of politics, economics and finance, and answering all the big questions you may have. Dominic hosts 3-16 August, Merryn 17-25 August.

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