A Gilded Recovery? the Global Art Market after the Financial Crisis

By Kim, Grace | Yale Economic Review, Winter 2010 | Go to article overview

A Gilded Recovery? the Global Art Market after the Financial Crisis


Kim, Grace, Yale Economic Review


WE ARE ALL FAMLIAR WITH the image of starving artists; even Michelangelo is known to have "slept in his clothes and boots." Van Gogh did not sel a single painting in his lifetime. Although Hollywood continues to perpetuate the image of starving artists, in reality, with celebrity7 artists such as Andy Warhol and Damien Hirst, they seem to be a dying species. Economic success is no longer something that the artistic geniuses are denied, but rather the very mark of their artistic genius. WeI - at least before the financial crisis. With faith in capitalism shaken at its core,, we might expect starving artists to make a come back. But will they?

In their book, The Winner-Take- AH Society, Robert Frank and Philip Cook describe the art market of the past half-century as a 'winner- take-all-market' A winner-take-all-market is one where the competition for the; disproportionally large first prize attracts an excessive number of applicants. Frank and Cook argue that this over-crowding leads to allocative inefficiency, where individuals who could add greater value elsewhere in society waste time and talent in one overly competitive market. It is certainly true that the art world has come to resemble Hollywood, with a few glamorous superstars demanding millions for work - some of which may be done by their assistants. In 2007, during the peak of the art market boom, 'For the Love of God,' Damien Flirst's diamond-encrusted skull,, was sold for £50 million. If the winner-take-all analysis presented by Frank and Cook applies to the art market, then the recent financial crisis may very well force young aspiring artists into more stable careers.

However, the shift towards winner-take-all has been long in coming, caused in large part by technological advances such as the internet that have made geographical distance less relevant. Since collectors can buy artwork from, say, Chinese artists just as easily as from American artists, the overall competition has widened immensely; it is no longer good enough to be the best artist in the United States - now, one must be prepared to compete on a global scale. The globalization of the art market has also seen the top prize for the winner grow, as the richest buyers worldwide engage in bidding wars at auctions. While the financial crisis might address the over-saturation of the art market temporarily, it is unlikely to reverse the process of globalization.

Simply crediting globalization for the art world's record-setting auction prices in 2004-7, on the other hand, would be like praising Da Vinci's mother for Mona Lisa - it's not the whole picture. The 2004-7 art market bubble was driven mainly by inflated demand due to speculation. By bursting the bubble, the financial crisis already has helped to make the art market more efficient, not by controlling the supply side - the overoptimistic artists - but by checking the demand side-the over-eager buyers. According to ArtTactic, the Londonbased art market research institute, the average auction price of contemporary art has fallen 76.2 percent since May 2008. Even in China, where the average price of artwork has risen 15-fold in four years, art dealers struggle to find interested buyers, and many galleries are closing down under financial pressure.

However, a crisis for the market need not necessarily be a crisis for art. The financial instability may have encouraged artists around the world to experiment more. In the "No Love Lost: Blue Paintings by Damien Hirst" exhibition, which opened in London on October 1 3, 2009, the artist - for better or for worse - has shown a radical turn in his work. We still have skulls, but instead of a platinum skull, crusted with diamonds by his assistants, we have paintings of skulls, all done by the artist himself. This is a major shift for an artist whose best known works consist of preserved dead animals. Similari}7, the top Chinese artists, who had previously been criticized for mass-producing their signature artwork to meet demand, have become more innovative.

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