The Beauty Curse!

Countries with great wealth or natural abundance often fall victim to their own blessings. Economists have long known that resource-rich countries can get stuck in cycles of slow economic growth, intense environmental degradation, and weak democratic institutions. But places endowed with a unique artistic and architectural heritage also can suffer from this "resource curse." Breathtaking monuments from a storied past can generate economic rents and sectoral distortions not unlike those created by large reserves of fossil fuels and precious minerals.

Venice is a case in point. Plagued with fast-paced, cheap tourism, it increasingly suffers from a "beauty curse." The city's recent decision to charge an entry fee ($5.45) for day trippers merely confirms the larger problem: Venice is on its way to becoming an open-air museum- a cultural mausoleum.

Natural resources and architectural beauty are not as dissimilar as they may seem. Both are scarce and geographically concentrated. In the case of Venice, the city is an extraordinary architectural masterpiece; even its smallest buildings may contain works by some of the world's greatest artists - from Giorgione and Titian to Tintoretto and Veronese. That is why UNESCO's World Heritage designation for Venice comprises the city in its entirety, rather than select buildings or neighborhoods.

But such immense architectural and cultural wealth can create an economic trap. When just a few lucrative extractive industries attract most of the human and financial capital in an economy, they can crowd out investment in other sectors, ultimately preventing sectoral diversification and impairing overall competitiveness. This dynamic is known as "Dutch Disease," because it is precisely what happened in the Netherlands following its discovery of a large natural-gas field in the late 1950s.

In Venice, the high demand for tourist- related services that guarantee large markups has crowded out the supply of services for residents. As a result, the historic city is becoming increasingly uninhabitable. Its population has fallen from 150,000 in the 1960s to around 50,000 today, and neighborhoods with fewer tourist attractions already look like ghost towns. Buildings are abandoned, streets are empty, and grocery shops are almost nonexistent. The only sparks of real life are the few traditional bars ("bacari") that remain operational. University students animate an otherwise sleepy nightlife, and the few cultural events target tourists, whose number keeps rising.

Two decades ago, Venice had a little more than two million overnight visitors per year; by 2022, that figure had reached 3.2 million, and the number of day trippers was around 30 million. Unsurprisingly, the few Venetians left are directly or indirectly employed in the tourism sector, resulting in economic desertification of the rest of the city. With traditional industries like chemicals and steel disappearing, Italy's development ministry has declared the situation in Venice and its environs an industrial crisis.

To be sure, the beauty curse is not exclusive to Venice. There are many small villages and towns around the world whose economies have been completely captured by tourism. In large and well-developed cities such as Barcelona or Rome, mass tourism is increasingly a threat to the quality of life of their inhabitants. Nonetheless, the scale of the problem in Venice is astonishing. This is not some small medieval village whose only future lies in capitalizing on its past. Venice is a large European city that could aspire to be something different. Once the seat of a prosperous empire, it was a bridge between the West and the East for centuries. Even if daily life in a city on the water is not easy, Venice has always managed it.

The entry fee, which was introduced as a pilot programme between April and mid-July, is expected to be reintroduced in 2025 on a permanent basis and possibly doubled. But it is unlikely to dissuade fast-paced tourism. Though it will help to absorb some of the costs that tourism generates (such as for waste collection and disposal), it will not reverse the city's decline. After all, most of its other civic initiatives are focused on the threat of sea-level rise. As necessary as these efforts are, they will only preserve the existing architectural beauty, rather than doing anything to revitalise the city. The palaces will still become museums, because nobody wants to live in them.

The situation demands a comprehensive, long-term strategy to repopulate the Laguna Veneta. By attracting talent from around the world, Venice could transform itself into a flourishing, dynamic global cultural and commercial center once again. It could rediscover the ingenuity, inventiveness, and industriousness that made it so great in the past. The goal should be not merely to preserve and exploit its artistic and cultural heritage, but to expand it. That means going beyond the extractive approach that is slowly bleeding the city dry.

Artistic beauty, like natural resources, should be a blessing. But without proper management and an ambitious strategy, looks can kill.

(Source: Edoardo Campanella is a Senior Fellow at the Mossavar-Rahmani Center for Business and Government at the Harvard Kennedy School. @ProjectSyndicate)