Art Market Report, 2005

For the past three years, our annual state-of-the-market report has begun with a few general comments on the political situation, a response to the long shadow cast by 9/11. Today, to most Americans, the 2001 terrorist attacks feel increasingly remote, and the Iraq war is perceived as yet another far-off military misadventure with little evident impact on the immediate well-being of those not directly affected. However, the vociferous clamoring of the so-called religious right and the aggressive materialism of many others belie this superficial sense of calm. Both the quest for fundamental certainties and the immersion in sybaritic pleasures are attempts to counter the existential ambiguity that lies at the heart of our new, twenty-first century world.


By most accounts, the art market is booming. Auction records are toppling, and fairs such as Art Basel/Basel, Art Basel/Miami Beach, Frieze and Maastricht have become mega-events that now outpace the major auctions in attendance as well as sales volume. For the first time since the late 1980s, there is widespread talk about art as an investment: Funds are being set up. Collectors gossip about works “flipped” for a profit as little as six to twelve months after the initial purchase. Buyers raid student exhibitions, and young artists whose work trades in the $500 to $5,000 range are “hot.” The fairs that cluster around Art Basel/Miami in early December are particularly well-calibrated to encompass everything from blue-chip masterpieces to work by toddling neophytes, and the action in 2004 was said to have been especially frenetic at the NADA (New Art Dealers Alliance) event. Investment potential, glamour and social prestige mingle at the most successful art fairs, where ancillary cocktail parties in collectors’ homes or private museums offer how-to models for eager aspirants.


Those touting art as an investment might do well to remember that the boom of the late 1980s ended with the art market crash of the early 1990s. Depending on how they are formulated, studies that purport to document the efficacy of art as an investment offer a mixed prognosis. Most agree that art has performed best as an investment when held over a very long period of time, and that even then, profitability is diminished by carrying costs (insurance, storage, conservation) and selling expenses that are considerably higher than the norm for conventional investments such as stocks and bonds. When art prices are rising rapidly, as they have been over the past two years, it is theoretically possible to make a quick profit by buying and then selling judiciously, but once commissions are factored in, most such transactions turn out to be less profitable than they appear. Surveys that track art resales over a longer time-span are all skewed by one huge intrinsic flaw: the fact that a work of art reappears at public auction means that it has retained at least some of its initial value, but in fact quite a lot of art never develops any resale value at all and is therefore omitted from the statistical sampling.


Of course, there is no question that some art has appreciated enormously in value over the last half century. A number of broad socioeconomic trends contributed to this phenomenon: gradual recovery from the Great Depression and World War II fueled the prosperity of the immediate postwar period; inflation in the 1970s led to massive increases in the value of tangible property; growing inequities in wealth distribution in the 1980s and ‘90s created a larger collector class; and throughout these years, public interest in art expanded dramatically. To cite an example from the Galerie St. Etienne’s direct experience, Egon Schiele’s prices increased an astounding 3,000% between the early 1940s and the late 1970s, and his prices have since risen a more modest, but still impressive 1,000%. And yet Schiele would hardly have seemed a sure bet to an investment-minded collector in 1940, when drawings were going begging at $20 apiece, and watercolors could be had for $60.


If the value of a company’s stock is ultimately determined by that company’s profitability, the long-term value of a given artist’s work is influenced by far more complex, subjective factors. Art is most effectively judged by its impact upon successive generations and by its influence on other artists, who carry the work’s message into the future. In the short run, a consensus about the importance of an artist’s achievement is usually the product of interaction among experienced art-world players, including dealers, curators, artists, critics and collectors. Some people have a better natural instinct than others for judging art, but instinct can be honed by protracted study and exposure. This is not, however, a dispassionate process. It involves far more than just memorizing auction results and statistics. The ability to judge art comes as much, or more, from the heart as from the brain.


Bubbles arise in the stock market when speculation pushes the price of stocks beyond the value justified by underlying economic circumstances. An equivalent phenomenon occurs in the art market when collectors bid up the prices of works by artists whose significance has not been ratified over time or even confirmed by a broad-based present-day consensus. Auction houses, which do absolutely nothing to support artists’ long-term reputations, provide handy vehicles for such speculative fever. Art fairs, unfortunately, are hardly better. Although some dealers make valiant efforts to mount one-person shows in their booths, the primary focus of art fair installations is merchandising, not education. To catch the buyer’s eye, dealers try to prepare varied and attractive displays; the works in the booths do not “converse” with one another, nor, given the hectic pace of such events, is there much opportunity for protracted conversation between dealers and collectors. Yet many collectors today prefer the energy of auctions and art fairs to the slower, more contemplative atmosphere of a gallery. Few seem to want to take the time to properly understand and appreciate art.


We may be witnessing the apogee of a peculiarly market-driven epoch in art history. This epoch began in the 1980s, when the big auction houses first began courting a retail clientele, and art historians, decrying the traditional Eurocentric biases of their profession, foreswore absolute value judgments. The resultant upending of orthodox hierarchies had a liberating effect on artistic discourse, allowing the embrace of heterogeneous creative endeavors (such as photography, video, pop and global cultures) that were previously disdained. However, by abandoning the linear didacticism that characterized classical histories of modernism, academics left it chiefly to the market to rank and order this cacophony of artistic production. The influence of art critics (along with the insightfulness of their writing) plummeted. Curators often found themselves trailing collectors and dealers in search of new trends and bending their agendas to suit the demands of trustees or corporate sponsors.


The art-world’s academic infrastructure lost power in part through voluntary abdication, and in part due to forces beyond its control. Those forces included not only the relentless pressure of a booming marketplace, but a broader popular distrust of centralized authority. This distrust has degenerated into a prevalent belief that all information is equally valid (or invalid, as the case may be), and into the widely accepted canard that purchasing, like voting, expresses rational democratic choices. Information, as a result, becomes fragmented and largely irrelevant, while money is given more credence than it rightly deserves. In abandoning the overarching linear narratives that once guided collectors and connoisseurs through the art world, art historians legitimatized not only a plethora of diverse art-forms, but also a host of smaller contextual sub-narratives. These sub-narratives, quieter and less compelling than the pervasive clatter of money, fare poorly in an environment that fears ambiguity and evades complex realities. However, art ultimately trades in complex realities, and collectors would do best to heed the quiet stories told by the art itself and ignore the noise of the market.