Is Edinburgh really necessary?

It was a lovely idea; heal the wounds of war with some nice music and a bit of Shakespeare. All it needed was somewhere away from London that had not been bombed to bits. Rudolph Bing, the Viennese music impresario and refugee from the Nazis, was seduced by the stars in a clear northern sky over Edinburgh's crenellated skyline. And so it was that what has become the world's biggest annual cultural event was born in the Scottish capital, 60 years ago.

And 60 years ago, to an exhausted and brutalised Europe, it must have felt like the first zephyr of civilization returning. Was that really the fabled Vienna Philhar- monic, precious instruments retrieved from war-time hiding places, reunited with Bruno Walter for the first time since 1938? Could that be Alec Guinness as Richard II and Trevor Howard as Petruchio? Had Artur Schnabel really been persuaded to lead a special Festival piano quartet? Nowadays, in a new century, if you want to see the Vienna Philharmonic, you are as well travelling to its home in the Musikverein as waiting for it to come to you; the air fare will probably be less than the cost of the ticket. And cheap air travel works both ways. A colossal industry buys and sells performers and companies all round the world, all the year round.

What once were rarities are now commonplace. The Kirov's visit to London this summer will be its third in four years.

Obviously it is nice for central Scotland to have a glimpse of the international art world once a year. But does anyone else, apart from the attention-seeking adolescents who underpin the Edinburgh Fringe, really need to go there any more? It is not as if the Scottish capital has ever unequivocally drawn this gaudy interloper to its bosom. It was nearly half a century before the city provided a proper opera house.

Even now, the International Festival is £1m in the red, (though it expects to clear that off this year); the Film Festival struggles to compete for either stars or première screenings with the London Film Festival, never mind Berlin or Sundance; the jazz festival could be anywhere, as could the television festival; the Fringe's much-vaunted "openness" costs over £300 just for a listing in the programme, and several thousand more by the time you have booked a venue and somewhere to stay.

Added to which, isn't this high-minded, Arnoldian cultural model, "the best that has been said and thought in the world" and all that, rather old hat in these anti-elitist times? Is that Claudio Abbado again this year, conducting The Magic Flute? But he was the hot ticket in 1977, conducting a famous Carmen with Theresa Berganza and Placido Domingo. If you must go to Scotland, surely Perthshire's T in the Park (much more fun than Glastonbury) or Glasgow's midwinter Celtic Connections (far bigger than Womad and the Cambridge and Sidmouth Folk Festivals put together) or even the street theatre weekend of Big in Falkirk are closer to today's cultural norms.

And yet, there stands Edinburgh still, an immovable obelisk in the summer calendar: still far and away the biggest in the world; still launching careers; still attracting the world's top artists, even if you can sometimes see them elsewhere (though you will have to go a long way before you find more spectacular casts than the ones in the three concert opera performances this summer, and two of the five theatre pieces will be world premieres); still attracting substantial interest from the world's media; still drawing audiences in the millions; and still generating not far south of £200m for the Scottish economy.

Some strange alchemy binds together the disparate festivals, each technically independent, generating, against that distinctive skyline a kind of joyful energy which new visitors find exhilarating and to which old hands keep returning for their regular fix.

Other cities around the world, from Melbourne to Montreal, have actively tried to reproduce it, or at least parts of it. None has so far succeeded. Every year, a dribble of would-be festival organisers make their way to the office of Paul Gudgin, the Fringe director, to ask how it is done. When he tells them, they shake their heads in disbelief. The Montreal Just for Laughs comedy festival is bigger, better resourced, funded, and organised than the comedy part of the Edinburgh Fringe - which isn't really funded at all except by the people who take part in it and their managements. But the bookers for Montreal will be in Edinburgh next week.

Diamond jubilees, however, while they may celebrate the past, also have the effect of concentrating minds on the future. And this time it is not just because Brian McMaster, the longest serving director of the international festival, credited with restoring its reputation for excellence, certainly musically, is finally stepping down after 15 years. There is a growing realisation that the astonishing stroke of luck which dumped the festival in Edinburgh's lap may not, after all, be entirely self-sustaining. "There has been a certain amount of complacency at all levels," argues Catherine Lockerbie, the director of the Book Festival.

It was Lockerbie who came up with the title of a report commissioned by the Scottish Arts Council and published in June into how to maintain Edinburgh's edge. That title is Thundering Hooves, referring to the sound of the competition galloping up behind. The report found that while Edinburgh's festivals (they included things such as the popular science festival in April and the big Hogmanay party at New Year) were indeed world-beating, other cities, in Britain and elsewhere, were beginning to challenge. Domestically, the effort that Liverpool is putting into its Year of Culture in 2008, dwarfs Edinburgh. The Merseysiders are spending £3m a year on marketing alone in the run-up to 2008 - which is not that different from what the city of Edinburgh spends on all its festivals put together.

Edinburgh saw off Glasgow's year as City of Culture in 1990 without really breaking sweat. But other cities such as Manchester, which is launching its own full strength international festival next year, have more sustained development campaigns with cultural programmes at their heart. And in a global cultural market, ambitious new players such as Singapore, Abu Dhabi and Shanghai are deliberately using cultural activity as a way of attracting attention and prestige.

Why they should want the baubles of a Western civilization that many of them see as decadent, rather than their own, is a moot point. But for the moment, they do; and their pockets are deep enough to distort the delicate eco-system of European grants and subsidies. It would indeed be an irony if one of the things that kept Edinburgh healthy was an injection of Pacific rim culture from its incoming Australian director, Jonathan Mills, when he takes over in October. There is some doubt that he will be able to replicate McMaster's meticulous and inspired programming and casting within the parameters of Western high art culture.

Thundering Hooves makes 14 very specific recommendations; not least is the one which says the City of Edinburgh should increase its cultural spending by over £8m to bring it in line, in percentage terms, with its competition. At present, Edinburgh manages to have the world's biggest arts festival and still spend less per head on the arts than any other local authority in Scotland (and there are some local councillors who see that as virtue).

However, the report also acknowledged that, because Edinburgh is much smaller than its competitors, a population of only about 500,000, there was a role for the national Scottish exchequer to play. For most of the last 50 years, those two sides have played themselves off against each other, leaving the festivals permanently short of money. There is an added piquancy now in that Lesley Evans, the most senior civil servant in the Culture, Sport and Tourism department of the Scottish Executive, was once a community arts worker for Edinburgh City Council.

Edinburgh's first response was immediately to release another £1m, spread across all the festivals, to fund a range of pet projects, though, as Adrian Trickey, the administrative director of the International Festival points out, this was a theatrical, if welcome, gesture with money which had already been set aside. But Trickey does think that the festivals do at last have the attention of the - dread word - stake-holders. "I think they have got the message," he said. "It needed someone outside to take a wider view." There is to be a major pow-wow between all concerned - which includes the tourism and economic development agencies in Scotland as well as the festivals and the city - in September, at which an action plan is to be agreed.

Selling the Edinburgh festivals to the rest of the world is one big issue. Currently Visit Scotland, the national tourism agency, focuses much of its attention on key markets such as golf, whisky and genealogy.

"We'd like to get culture up there alongside golf," says Lockerbie, through ever so discreetly gritted teeth. But it is not just about money. For Gudgin, whose share of the festivals attracts the lion's share of visitors, basic infrastructure such as transport looms large. The Fringe has more than 100 shows going on after 10pm and there are strictly limited ways for people to get home after them.

Gudgin is more determined than his bluff bonhomie sometimes suggests. And although his is the festival whose quality he cannot control, he has been arguing as strongly as anyone that unmissability is still critical. How successfully that is concocted - a combination of innovation, quality, surprise, showcasing, novelty and a number of other even vaguer terms - remains to be seen. There may be some dross on this year's programmes, but there is still an awful lot of exciting prospects, whether it is Ismail Kadare at the Book Festival, Suzanne Farrell's restaging of Balanchine's Don Quixote at the International Festival, new plays by Greg Burke and Daniel Kitson at the Traverse, the British première of the hot Korean movie Guimul at the Film Festival and on and on.

Edinburgh has come a long way without really trying. If it gets its act together, politically and commercially as well as culturally, the hooves of its rivals are going to have to do a lot of thundering to draw level.