Those who forget the past, they say, are condemned to repeat it. So in all the wailing and rending of garments over what the current financial crisis has done to cultural institutions, it is often forgotten that their literal fortunes have waxed and waned before, and typically, the strong, like the Metropolitan Museum of Art, have survived, and sometimes even learned lessons that helped them prosper anew. In “The Culture Crash” on forbes.com today, The New Criterion’s James Panero discusses how endowment managers helped exacerbate the situation — a subject that might have been usefully raised by the mainstream media before the recent staggering losses, but uncritical press coverage of museums is not my subject du jour. Instead, it’s just how bad things are, and how one cringes on reading Panero’s description of the effects of uncritical financial management on the now-somewhat-less-mighty Met:

James R. Houghton, chairman of the Metropolitan Museum’s board of trustees, announced in February that the museum’s endowment had lost a staggering $700 million since the previous June — a decrease of 25%, leaving the endowment worth about $2.1 billion,” Panero writes. “Since investment income makes up 30% of the heavily endowed Met’s annual operating revenue, the loss shook the museum at all levels. Adding to the Metropolitan’s woes, the city announced that its operating support for the museum would be reduced by $1.7 million, with another cutback of $2.4 million announced for the next fiscal year.

“Houghton identified a set of new cost-cutting measures, including a museum-wide hiring freeze, the elimination of temporary staff and travel curtailment. He also flagged the museum’s retail arm for immediate cutbacks. In March, as the Metropolitan’s loss estimates rose by $100 million, its director, Thomas Campbell, announced further layoffs. Campbell added that the museum anticipated the need to reduce the rest of its workforce by 10% by July, which could mean a reduction of as many as 250 additional full- and part-time jobs. These cuts will represent the first museum-wide layoffs since the fiscal crisis of the early 1970s. And in June, the museum raised the estimate of its losses again, to a third of the endowment’s former value.

“‘We’re looking at a period of austerity this fiscal year, and the situation will be even more difficult in the fiscal year that follows,’ says Metropolitan spokesman Harold Holzer. Even without an additional downturn in its portfolio, the Met’s bottom line will worsen because of the way the museum averages its endowment income over a multiyear period. ‘We base [endowment income] on a rolling average of 20 quarters, so it’s just beginning to be averaged in,’ says Holzer. ‘We’ve had three quarters. Eventually the bad periods become the majority of the average. That’s when the income will go precipitously down. We’re looking at a much more pressing problem in fiscal year 2011 than in 2010.’”

Still, the Met has yet to close galleries, or close its doors altogether during part of the week, as it was forced to do in the not-so-distant past. Back in the day, the museum wisely diversified its board, opening its doors wider in order to tap new sources of funding and of wisdom, to help it make up the difference and see its new reality clearly. Would that make a difference this time? Probably. As the saying goes, no pain, no gain.