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The Dow Jones vs. the Art Market: How our Suffering Economy is Affecting Art Sales

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The you-know-what has hit the fan, and there is a big mess to clean up.  

Since the beginning of September, the Dow Jones has dropped more than 800 points in just four days, Lehman Brothers became the world’s largest bankruptcy ever, and the US government bailed out AIG. 

 In London, in June 2007, An unnamed investment group agreed to pay the White Cube Gallery $100 million cash for Damien Hirst’s platinum-cast and diamond-covered human skull, “For the Love of God.” Last May, a Lucian Freud painting sold for 33.7 million dollars, breaking the record for the most expensive single work by a living artist sold at auction. And just over a week ago, Hirst again set a new record after a two-day sale of his work fetched about $198 million at Sotheby’s.  This is ten times the previous single-artist record, set in 1993 by Picasso.  Hirst said the results of the sale showed “the market is bigger than anyone knows… I love art, and this proves I’m not alone and the future looks great for everyone.”

            The art market doesn’t seem to be hurting. Why?

There are two reasons:  first, according to Philip Hoffmann, chief executive of The Fine Art Fund, the market at large hasn’t been affected (yet) because art trading only looks to the economy of the super-rich. “A very exclusive group of wealthy buyers is keeping the art market alive,” he said.  The second reason has to do with who (and where) the super-rich are.  

Maybe, though, the somewhat rich are being affected.  When considering the art market as a whole, you can’t only pay attention to the galleries and auction houses you read about in the newspaper.  Take Chicago for an example. Chicago is not New York.  You normally can’t buy a Hirst at a Chicago gallery.  Work sold in Chicago galleries doesn’t usually sell for tens of millions of dollars.  That means that the buyers, rich as they may be, are made to look blue collar compared to the “unnamed investment group” that bought “For the Love of God.”  And some Chicago galleries have noticed a downturn in sales.  When I called Western Exhibitions in the West Loop to ask them about the economy’s impact on the galleries in Chicago, they just said it’s too early to tell, but other galleries like Thomas McCormick and Andrew Rafacz have endured a slow summer, and suspect that our suffering economy may be to blame, while still accounting for the fact that summers are just slow for galleries.  “Sure,” said Mary, who answered the phone when I called Thomas McCormick, “I think the economy is making an impact here.  Why don’t you come by and buy something?”

It’s also important to keep in mind who is taking control of the art market. Hirst and Freud are English artists, and, according to hearsay, the aforementioned works were not purchased by American collectors. Last June, at Art Basel, the American audience had shrunk from one third to 10 percent. The art world appears to be turning into a world of Indian steel tycoons and Russian oligarchs, and this is just a reflection of the economy in general. According to an article by Robyn Meredith in Forbes last December, Sotheby’s isn’t filled with Americans anymore; it’s filled with foreign investors.  “Because of increased demand at home, Indian contemporary art in galleries in India has gotten so expensive that it can be cheaper to buy the works of those artists in New York,” said Meredith. About the Russian newcomers on the scene, Edward Dolman, chief executive of Christie’s International, remarked: “No one could’ve predicted the emergence of the Russian superrich, but they are here now and they live in London, and part of living in London is going to the art auctions.” One reason for the shift is the weak dollar. Another is new wealth overseas from oil and new technologies.

In 2006, an article in The Independent took note of the trend and explained that “Art used to be seen as something quite elitist, but now it’s perceived as something you can buy quite easily.  Contemporary art is more widely known about; taxi drivers know about Tracey Emin.  We live in an age of the “brand” and some of the most prolific artists have become something of a brand.  You have got the Rolex and the Maserati and you have got the Picasso and the Damien Hirst.  Picasso is a fantastic luxury brand and great Picassos are very rare.”  It is widely believed that the buyer of the $95 mil. Picasso Dora Maar Au Chat in New York last month was Russian and that he was a new buyer in the market. 

According to Damien Hirst, one of the richest men in the world, we are all just going about it the wrong way.  “I always ignore money”, he says, and for him, ignorance is bliss.


Written by Kelly Reaves

September 25, 2008 at 6:38 am

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