Is the art market a bubble?
Art: what is it? Is it a fantasy? An object that resists all rational definitions? Especially when we are talking about the art market, with its seemingly crazy eight- or even nine-digit prices. For thousands of years, art has been an asset class in which large sums were and are invested. People trade in art. It is admired and treasured almost everywhere in the world. The Seven Wonders of the World celebrated in ancient literature included descriptions of fabulously beautiful buildings, which consequently became socially binding travel destinations. Since the 1980s a global market for painting, sculpture, graphic art, and also photography has developed. There was measurable growth, and the yields were at times astonishing.
Stable or volatile?
As a financial product, art is seemingly stable compared to other asset classes, but very volatile at the same time. If one thinks of a successful auction, art is highly liquid, but when one has bad luck with one’s sales, it is almost completely illiquid. We, the respective societies that value the arts, decide on their worth on the basis of education and, not unrelated, with money.
In his Critique of Judgment, Immanuel Kant spoke of the “presumptuousness” of making judgments of taste about art. He demonstrated that an individual’s taste, however “disputable” it may be, is perceived as fitting by a society because there exists a “public spirit”. Conceivably, Kant says, the idea of taste entails the vision of Bildung or cultivation – in his words, “the idea of an artificial faculty that is yet to be acquired.”
Exceptionally good art is never free of charge
The art market as a construct involving goods that are extremely coveted, especially at the highest level of value, goes further back than the 20th century. It is not only buyers and sellers who meet at such moments. As with the other asset classes, there are also advisors, intermediaries, silent partners and, more recently, “art lenders.” A good
art consultant should know all sides and very many of the players. Some
of the newcomers are free-riders, as it has become fashionable to support sellers of high-priced works in the hope of a commission. Ever since the sale of Picasso’s Garçon à la pipe in 2004, the magic limit of US $ 100 million per work has been exceeded. In 2019, the financially lucrative sphere of this global market was penetrating the media with US $ 64 billion in annual sales. The Financial Times spoke of “eye-watering prices, the parade of billionaires vying to acquire trophy assets, the powerful dealers advising them,” and characterized the current art market as a “high-octane world.” That same world experienced a turnaround between March and July 2020, the first four months of the pandemic. But exceptionally good art was almost never free of charge, and the market is fully back now.
Are there excesses?
What most authors are reluctant to take into account are the well-known historical precedents in Florence, Rome, or Paris, where great art has been created and shaped by “excesses” over many centuries. The “investor,” preferably a king, the pope, or a particularly wealthy family head, was willing to give practically everything for a particular work, as it still happened in 2017 with Leonardo’s Salvator Mundi selling for more than $450 Million. In many cultures, the aim of art is to meet the pronounced needs of competing ruling houses for impressive representation. It is a desire for style. So, art is not a fantasy: After all, it is what almost exclusively distinguishes us from animals and occasionally even from the most beautiful plants. What remains of man on the physical plane? Actually, almost only art. It is a very emotional asset.
Cultural courage?
In our age of industrial and societal “disruptions,” it is no wonder that art and its buyers
have a penchant for shock and vie for maximum attention. Today, we are supposed to buy art by “women” and “people of color” and no longer art by “white men.” The widely prevalent catchword “diversification” is now seen and heard in the foreground of many
cultural institutions that have traditionally operated under predominantly white and male auspices. Linear cultural history is a bit passé. During the spring of 2021, reports have been unceasing that NFTs, non-fungible tokens, are now on the map. The sale of thousands of digital works in one by Jan Winkelmann, aka “beeple”, for more than $69 million, created a new star in the sky of art speculators. A new sharing culture shall grow in the art world; art works may be sold in fractions soon.
What is the best thing we can do with our highly emotional asset class? Before we love it, it’s worth our while to touch it with caution. Art is like a lovely child that grows steadily. Once we are assured of her proximity, we love it, we care for it and grow with it. Art is and remains what we may safely presume is the noblest asset class, for it bestows material, spiritual, and emotional wealth. Only when absolutized can it become dangerous. To be cognizant of this, too, is one of the noblest tasks for professionals in a good private bank.
