WITH THE RAINWASHED STREETS of Edinburgh thronged with visitors darting in and out of the 40 participating galleries in the Edinburgh Art Festival (EAF), it might seem an odd time to query the capital's commitment to the commercial gallery sector.

At least since the EAF was instigated five years ago, with minimal help from the council, the city's art-for-sale spaces have been able to rely on a guaranteed footfall of discriminating and often well-heeled potential customers. Unlike their counterparts in other similarly-sized UK cities, they can enjoy the combined marketing opportunities provided by the EAF's skeletal infrastructure, not to mention the rich international marketing cachet of the "Edinburgh" brand.

But do these small businesses, many of which struggle to survive, receive enough support from the public sector to reward for them for the vast benefits that their critical mass brings to the city as a place to live and to visit?

A growing number of voices claim that Edinburgh and Scotland are not making the most of the cultural asset that the commercial gallery sector represents.

In contrast with the supportive, business-boosting attitudes prevailing in other world cultural capitals, they say, Edinburgh's art sector is rendered stuffy and stunted by public sector indifference and lack of commercial initiative. Even assets such as the Fruitmarket Gallery and the Edinburgh Print Studio, which are housed in council-let properties, are treated primarily as sources of revenue.

Ron Hewitt, chief executive of Edinburgh Chamber of Commerce, is a fierce critic of the idea that, because Edinburgh already has a privileged reputation as a centre of the arts, it should be content with the size and variety of its commercial art offering.

"The creative industries as a whole make a huge contribution to the city's economy, and depending on how you calculate it, they may represent the biggest sector of all. There is no doubt that the commercial galleries are an important part of that, but it is ridiculous to say that we don't need to do more do encourage this, as we are seeing a gradual erosion of our ability to encourage new artists and craftspeople to live and work here."

The perceived under-exploitation of the capital's non-public galleries becomes more of an issue as new thinking about cities as "destination economies" that stress "why it matters to be different" blur the traditional demarcation between business and culture.

The conclusion of such theorising is, in essence, that 21st-century cities must play to their competitive strengths or risk becoming backwaters. It is in this context that many are asking whether local and national government shouldn't do more to enhance and promote the contribution of painting, sculpture and the applied arts to Scotland's urgent programme of economic self-improvement.

Richard Ingleby, the art dealer and gallery owner whose stunning and game-changing new Ingleby Gallery has just opened in two floors once occupied by the fondly-remembered Venue nightclub in Edinburgh's Calton Road, is one of those who believes that the city authorities are missing a trick when it comes to the commercial art sector, for all their historically close relations with the artistic community through the Festival A regular visitor to galleries and contemporary art fairs the world over, he knows of no other city with a public art sector of Edinburgh's calibre that does so little to attract and sustain quality art businesses. Ingleby speaks with the authority of someone who, with his wife Florence, built up a £1.2 million turnover business of international renown - the original Ingleby Gallery - in two rooms of his own house. He says his only interaction with the council has been in the negative bureaucratic territory of planning objections, rates demands and stipulations about disabled access.

Now, with the help of his bankers Lloyds TSB Scotland, his refurbishment represents a £1.5m gamble that the city can support an outlet for contemporary art on the scale of those that exist in other capital cities, such as London's Gagosian, White Cube or Timothy Taylor. These are not just showrooms, but dynamic businesses - the Ingleby Gallery is innovating with affordable prints by big name contemporary artists - that represent artists throughout their careers as well as selling cutting-edge work.

"Edinburgh council is not a good landlord for the visual arts community," he says. "It just sees us as a commercial space. The attitude of the public sector, including the arts council, is that it won't help if it thinks you are going to go ahead and do it anyway."

Ingleby, who represents some of the biggest names in contemporary art such as Alison Watt, Sean Scully and Callum Innes, and whose market awareness matches his critical judgement, is frustrated by the lack of thought that has been applied to quantifying the economic benefits of Scotland's galleries industry, and to growing those benefits.

"Usually, where you see a healthy public art offering you expect to see a booming private sector, but Edinburgh is a global anomaly in this respect," he says. "There are a lot of galleries but they are specialising in a very traditional kind of Scottish art. Of course there is nothing wrong with that, but they are not distinctive, and in many cases it's hard to tell them apart. There is no strong offering of contemporary art.

"Apart from ourselves and Doggerfisher in Edinburgh and the Modern Institute in Glasgow, there is a massive gap between what you see in the modern public galleries and in the private galleries. Usually, communities of contemporary artists grow up where there are good public galleries."

This sense that the lively contemporary art offering has much more to offer to local economies is shared by David Weir, director of Dovecot Studios, the venerable Scottish tapestry weavers now housed in the cavernous conversion of Edinburgh's former Infirmary Street baths. The baths conversion, which provides working space for Dovecot weavers as well as exhibition space currently filled by examples of Dovecot's collaborations with the likes of Eduardo Paolozzi, David Hockney and Alan Davie, was funded to the tune of £6m ("and more") by Alastair Salvesen, head of the Christian Salvesen transport and logistics dynasty and a serially generous patron.

The new Dovecot is another privately-funded mega-project that will help transform the city's artistic landscape. Weir believes that Scotland has much to learn from the example of other countries where there is a more proactive public sector attitude to promoting grassroots arts businesses.

"If Edinburgh is setting itself up as a high-quality destination, we have to do more to attract exciting commercial art spaces here by creating the kind of atmosphere and conditions that encourage them to come. But there is a lot more that could be done on the demand side to encourage a thriving commercial arts scene. For example, in Australia and France, there are schemes that encourage the commissioning of art from contemporary artists, and Iceland makes it tax efficient to commission and acquire art works.

"Really, this has to be a combination of public and private initiative. Big projects like the Ingleby Gallery and the Dovecot gallery, neither of which has received a penny of public money, represent a new departure, but it is over to the public sector, as making Edinburgh the arts capital that it should be requires close collaboration between the likes of the city council, the arts council, the private sector and Scottish Enterprise."

Apart from taking a more helpful attitude to the rates, what could the public sector usefully do to help nurture and sustain the kind of thriving arts capital that it should be?

Barclay Price, director of Arts & Business Scotland, the organisation that promotes the mutual advantage of collaboration between the two sectors, thinks that local government should facilitate ways of collective marketing that would produce efficiencies without blunting the distinctive branding of individual galleries. He also sees benefits of smaller gallery operators collaborating to create larger venues that would attract more visitors, and deriving an income stream from hosting corporate events that would be a literal expression of the need for business and the arts to get closer.

"What is terrific about the Ingleby and Dovecot examples is that they will mix funding by individuals with income from corporate sources. It would be good to see more of this form of collaboration."

According to Richard Ingleby, the basis for a new collaborative effort should be some up-to-date calculation of the financial contribution that the galleries - which are usually limited companies - currently make to the economy.

The data would not be too difficult to compile. Sales of works by living artists are estimated at about £50m, though the economic benefits that the sector brings to the economy in terms of visitors attracted are a multiple of that. He would also like to see smarter application of the principles behind the SNP government's small business rates relief scheme that does not discriminate against smaller turnover businesses in larger spaces.

Steve Cardownie, the deputy leader of Edinburgh council and head of its culture and leisure committee, says that commercial gallery operators who wish to see more done to raise the profile of the sector's contribution within the city will be pushing at an open door.

"Measuring and finding ways to improve the economic impact of the commercial art sector is something that should be done, and I would be delighted to open up a dialogue with these galleries," he told the Sunday Herald.

"I appreciate that it's a very difficult business they are in, and that it is subject to major fluctuations, and we are happy to ask what we can do to facilitate them rather than put obstacles in their way."

Is it possible - or desirable - that instead of being full of tourist tat, the Royal Mile one day will be populated by cutting-edge contemporary art spaces? Certainly not with the current rates regime, even if people wanted to live in a city that snootily disdained multiple outlets for kilt-towels and See You Jimmy hats. Perhaps only when creative policy achieves a better balance will Edinburgh become the year-round cultural destination it aspires to be.

In the past, the richness of Scotland's heritage in the visual arts and crafts was only made possible by Scotland's vast wealth as a hub of global commerce and industry. The avant-garde movements of their day - the Glasgow Boys, say, or the Scottish Colourists - were avidly collected and supported by the world-bestriding business magnates, many of whom left their collections to the nation.

The difference between the 19th and 20th centuries and the 21st is that - in the absence of the conditions that enriched imperial Scotland - the contemporary visual art sector is needed to promote civic and national wealth, where once it was a result of it.