Insights Nigel Fairbrass

Why the global art market is not such a pretty picture

After a somewhat depressed year in 2016, the sale of the Mundi capped a stellar year for the global art market in 2017, which looked on track to surpass the $68 billion of revenues generated in 2014.  But for all the hype and intrigue into the identity of mystery buyers, it’s hard to escape the sense of an industry determinably out of touch.

“Being good in business is the most fascinating kind of art,” Andy Warhol said. So one imagines he might have cheered from beyond the grave last November, as the hammer came down on Leonardo da Vinci’s “Salvator Mundi’ for $400 million.  Where once commodities inspired art, now art has become the commodity.

But so what if a handful of rich people pay staggering sums for trophy art works? From our earliest beginnings, the wealthy have sought the trappings of privilege, and artists or their intermediaries have been there to pander to their vanities.  But there are a few reasons why the Mundi sale and art’s growing importance to the global financial system offers a warning sign.

The scale of inequality fostered by the injection of cheap money into the global economy since the financial crisis, is fomenting social tension across the world.  The difference between the haves and the have-yachts has not only grown, it has widened in a decade when middle-class prospects have stagnated.  Capitalism has worked conspicuously well for those with capital, but the global plutocracy which has emerged from the financial crisis is not perceived to have furthered the interests of society so much as exploited them.  As the Panama and more recent Paradise Papers revealed, the wealthy use tax havens to conceal not only ownership but also the buying and selling of assets, in particular works of art.

The extent to which art is becoming integral to the global financial system was also underlined in December last year with the announcement that The Fine Art Group, which specialises in using art as collateral for lending, would be opening its first Asia offices in 2018.  With plans to deploy at least $1 billion of capital, the move reflects several record-breaking auctions hosted in Asia over the past five years, including the sale of a single Modigliani to Chinese tycoon Liu Yiquian for £170 million.  A sum he reputedly settled with an American Express card.

So if art is becoming a financial product, it’s surprising the industry persists in preserving a culture of secrecy and mystery at a time when the banking industry is adjusting painfully to a new era of radical transparency.  Deference to the private sensibilities of the rich and famous might have served the auction houses well through the 20th century, but the elaborate lengths to which they go in helping to preserve the anonymity of buyers and sellers now looks out of step with the times.

In its 2017 Art Market report, the insurance company Hiscox remarked on how Christie’s and Sotheby’s, which dominate the over-the-counter art market, are now asserting their control of online sales, potentially triggering a wave of consolidation and retrenchment amongst competitors.  Such oligopolies elsewhere are proving increasingly controversial, particularly in the technology sector where they are spurring calls for regulatory and tax regimes that treat companies as utilities rather than entrepreneurial businesses.

In 2017 the sprawling German Documenta exhibition of contemporary art that takes place in the city of Kassel, took as its theme an attack on neoliberalism and the globalisation of finance.  Called “Learning from Athens” the exhibition suffered the delicious irony of being bailed out itself to avoid collapse.  But the subject offered a warning to the art industry, and others that are seemingly blind to the contradictions piling up in the capitalist system.  That in more networked economies, where authority is distributed and no longer bestowed by the great and the good, trust is negotiated and earned at a far more personal and granular level in society.

Perhaps the real ‘art’ could be for a somewhat elitist industry to reconnect with society at large to avoid the stigmatisation, political pressure and regulatory burden that may be around the corner. As Warhol also said: ‘They always say that time changes things, but you actually have to change them yourself.’