Bilbao is the kind of place described in guidebooks as a “working city”. Go back three decades, and few tourists came to this salty port – except, perhaps, those taking a coffee before proceeding on their way to its quainter resort neighbour in the Basque country, San Sebastian.

But this year the fireworks are coming out for a special anniversary. It's 20 years since the Guggenheim Museum Bilbao was built and the Frank Gehry building, with its astonishing tumble of intersecting titanium panels, introduced the now-commonplace idea that a set-piece cultural icon could play a central part in the regeneration of a city – still something of a novelty at the time. In doing so, it ushered in whole new tier of art-urbanist professionals and gave rise to the dread word “icon”.

“It was a harsh time in 1991,” recalls Juan Ignacio Vidarte, the long-term director of the Guggenheim Bilbao. “There was 21 per cent unemployment. Worst, the city itself had an identity crisis.” The Basque separatist group ETA was active, adding a threatening hint to a city that was already in a bit of a post-industrial hole. A feasibility study was undertaken in 1991; an auspicious area of the Nervion riverside identified, the architect Frank Gehry contracted, and the Guggenheim Museum Bilbao opened in October 1997.

With the Turner Contemporary Gallery, Margate’s appeals now extends beyond fish, chips and crazy golf

This set in train a series of events that has been dubbed the “Bilbao Effect”, a coinage claimed by writer and broadcaster Jonathan Meades. As well as adding the icon, the Guggenheim also charted the change in museums from dutiful storehouses to zones of visitor experience (as Vidarte says, “They have become hybrid spaces and social hubs), which had almost magical palliative effects. “The Guggenheim has been a tool of social transformation, and a good example of the transformational aspects of culture,” adds Vidarte. “And the effect has been greater than expected, as we underestimated the effect of globalisation – how the Museum would become a world-famous image.”

In the UK, softened up by the Liverpool Garden Festival of 1984 and Glasgow being elected the first European City of Culture in 1990 (not to mention the vast release of capital following the establishment of the Lottery in 1994) the “Bilbao Effect” was enthusiastically taken up. Up popped the icons, with the same Bilbao-esque remit to drive regeneration, social inclusion and civic wellbeing as well as tourism: David Chipperfield's Turner Contemporary Gallery in Margate, the Hepworth Wakefield, Zaha Hadid's Glasgow Riverside Museum, Rafael Viñoly's Firstsite contemporary arts centre in Colchester. The whopper, of course, was Tate Modern, which opened in 2000 on London's Bankside and few would disagree that this was a great national moment. There were notable failures – the £15m National Centre for Popular Music (NCPM) in Sheffield 1999 lasted a year, and even more notoriously, the Public in West Bromwich, which opened in 2008, cost £72m and closed in 2013. Some deserved to die but sadly others have struggled including, recently, Walsall's fine New Art Gallery.

But the idea still proves durable. Earlier this year a new £22m “iconic museum and art gallery” was announced in Swindon, with designs coming in from architects including Make, the idea being to declaim the Wiltshire railway town's rearrival, as well as house its collection of 20th-century British art, which includes works by Lucian Freud, Henry Moore and LS Lowry (by the way, the “match-stalk” man is the theme of an icon in Salford, which opened in 2000). Swindon's icon, meanwhile, will be the lodestone of a new “cultural quarter” and be a “source of pride”. It's the old Bilbao formula.

The idea that a gallery (or even a well-placed artwork or arts festival) can turn around the economic fortunes of deprived places still resounds across the developed world. The European Union's Capital of Culture programme, which started in 1985, may have has lost steam but it still a high-profile regeneration agenda-setter. The UK's City of Culture designation started in 2013 and this year works its magic in Hull. Large gateway public sculptures such as Antony Gormley's Angel of the North (1998) in Gateshead – itself 20 years old next year – have also been a concurrent trend.

Thus, in town halls and meeting rooms, a generation of burghers have learned to trade chatter about “metrics” and “cultural capital”, a phrase popularised by 20th-century French sociologist Pierre Bourdieu; as well as take cues from US geographer Richard Florida, who popularised the argument that “creative cities” become rich cities, adding a soupcon of sociological science to the mix.

Artist’s impression of the planned new Swindon Museum & Art Gallery (Swindon Museum and Art Gallery)

And yet, an anti-icon mood is now emergent. In his new book The Age of Spectacle: Adventures in Architecture and the 21st Century City (Random House, £20) critic Tom Dyckhoff takes a sceptical view of some aspects of the Bilbao Effect. “The culture of spectacle and what Gehry has called “iconicity” has been such an enormous feature of the last 20 years,” he says. “But particularly in the UK it has sometimes lacked inclusiveness, and made us into passive voyeurs.” At worst, he argues, the gallery icon becomes a “stick-on” that might as well just exist for Instagram snaps. It's always been a poor fit with our reactive planning system. And also, the money just isn't there any longer. The scrutiny is greater. Swindon is selling into a far savvier market.

There's also a sense that policy is shifting from “icon” building to a more integrated, grass-roots approach, which develops the arts in a bottom-up community-based way. The Great Place Scheme, funded by the Heritage Lottery Fund (HLF) and Arts Council England, is giving £20m to drive cultural regeneration in 16 areas across England (followed by Scotland, Wales and Northern Ireland), to a targeted group of more-or-less deprived places including Great Yarmouth, Rotherham and Coventry, now bidding for UK City of Culture 2021. Rather than pushing for icons, it'll be encouraging these places to use culture and heritage to drive growth, improve residents’ health and wellbeing, and boost tourism, with the arts to be integrated into education and health services. It's far from regeneration-by-starchitect and close to the concerns of a younger generation of architects who, according to Dyckhoff, are manifesting “a great interest in street-level urbanism”. Then there are examples like Folkestone, whose Triennial was started in 2008, instigated by Roger de Haan Charitable Trust. There's a “Creative Quarter” in its old town, but the event, which happens again this year, hopes to catalyse culture and art-making in Folkestone, rather than merely make it an arts destination.

Even with the big icons, the model has been criticised. As low-cost airlines mobilised the tourism model of the “city break” the Guggenheim Museum Bilbao alone hosts about 1.2 million visitors a year. “The Guggenheim was always meant to be an international institution based in Bilbao, so the city could speak to the world,” says Vidarte. That may have worked, but elsewhere there's been conflict about the depredations of “hipster tourism” and disquiet about post-icon gentrification, which has led to critical noise about what academic Martin Zebracki has characterised, with a touch of irony, as the “public artopia”. Why have an icon if local artists can't afford studio space?

‘The Electrified Line, Cross-track Observation-deck’, an installation by Gabriel Lester, part of the Folkestone Triennial Public Art Project in 2014 (Getty)

Last month, a report commissioned by GLA called Creative Tensions: optimising the benefits of culture through regeneration, emphasised the creation of smaller, sustainable projects. The committee chair, architect and politician Navin Shah, identified a tension between London's global cultural renown and its excessive land values. “It's about finding the right attitude and balance,” says Shah. “Culture, heritage and art is a big reason to come to London and we're at an exciting junction where London is the cultural capital of the world. At the same time, we want it to be more grass roots and to champion suburban areas – not just the creation of icons.” (Lest one interpret this as metro-centricism Shah adds that the benefits of this activity will spill over the UK).

Moreover, are the assumptions made by the shiny suits even correct? A recent report by the Arts and Humanities Research Council called Understanding the Value of Arts and Culture is as critical as it is erudite: “The regeneration of places is usually accompanied by gentrification … and the exclusion of communities who live there [as they] are forced out by rising property prices.” Nor are the outcomes always so ensured. Glasgow has a higher global profile as an artistic city, but is still known for a relatively high crime rate and notoriously low life expectancy rate.