The high-end art market is not for you and me but rather the 1 percent of the 1 percent. It is dominated by the strangest ethos in economics that you can ever even imagine. The bubble in high-end art, pieces running $1 million and up to hundreds of millions, and traded at auctions by Sotheby’s and Christie’s, has lasted for most of the 21st century.
What it has revealed is that price has no connection to labor or even value as traditionally understood. Something else is going on.
Yes, that this industry is used for money laundering is well documented: buy with sketchy funds, sell to clean it up. No one knows for sure how much of the market is driven by what amounts to banking services. That said, there are cultural factors at work here too, subsidized by easy credit, bubble dynamics, and elite pretensions.
The highest price ever paid for a work of art was for Leonardo da Vinci’s “Salvator Mundi,” which sold for $450.3 million in 2017 despite continuing questions about its authenticity. I will say this: it is a beautiful painting. That cannot be said about most of the art that dominates this market.
However you come down on the issue, is a steel rabbit really “worth” $91 million? As the old saying goes, if someone is willing to pay that, the answer is yes.
Regardless, the entire pricing and industrial structure of the industry seems to be unraveling now, a sure sign that a globalized recession/depression is upon us. It’s the canary in the coal mine. If the auction houses fall into insolvency, the problems are bigger than we know.
What could be behind such a move? The answer is huge debt plus high interest. In other words, our old friend leverage is behind this. The industry was simply not prepared for a softening of prices buyers are willing to pay, and are now shifting around accounts to keep the ball rolling.
Further: “Sotheby’s told its bondholders the auction portion of the business had a loss of $115 million in the first half of the year, compared to a $3 million profit in the first half of 2023 .... Rival Christie’s, owned by luxury magnate François Pinault, has also taken a hit, with its auction sales dropping nearly a quarter during the first half of the year.”
They are moving around the settlement schedules to make money on the float. Example: “In the past, both Sotheby’s and Christie’s asked winning bidders to pay for their pieces within 30 business days of a sale, and then paid sellers five days later. Sotheby’s changed its contracts to allow it to pay sellers 15 days later, according to sellers familiar with the house’s contracts. The move allowed the house to hold the funds in its coffers longer.”
None of this looks good. In fact, the situation looks dire. As with most booms that turn to bust, it all seems inevitable in retrospect.
As it finished, I almost could not believe what I had witnessed, among which marginally talented artists who seemed to be riding a wave of an elite frenzy, producing pieces that are highly valued only because of the perception that others in the peer group regard them as highly valuable. The favored artists cannot crank them out fast enough.
A few years ago, before the lockdowns drained consumer interest in modern art galleries, I did a sweep through the Whitney Museum in New York City. To be sure, my tastes run old-fashioned: old masters, old music, Gothic and Baroque, early modern, and so on. But like anyone who doesn’t want to be branded a “philistine” I try to keep an open mind.
Plus, as a paying customer, I wanted to get my money’s worth.
All that said, it took me less than an hour to scurry the many floors of high-end art strewn here and there. Some of it struck me as political, which is annoying. Some of it was flat-out offensive. But most of it had a nihilistic bent, a grand message of “There is no meaning.” It is anti-art, the absence of art, the inversion of art. I suspect for partisans of this genre, this is not seen as criticism at all but a good description.
Many people miss the point of elite art. It is not supposed to be appealing to the average person or to some old-world standard of talent, symmetry, or creativity. It is supposed to be opaque, off-putting, incomprehensible, even offensive to bourgeois sensibilities. That is precisely why a hip and mega-rich upper class with refined sensibilities like it and are drawn to it. Their very appreciation of it is the ticket to separating themselves from everyone else.
You find the same phenomenon in music, fashion, architecture, and interior design. You and I might find it all quite ugly and that’s rather the point. For a very long time, probably since the Great War, elite culture has dramatically diverged from mainstream culture, almost as if to be elite, one must reject everything that the bourgeois regard as true and beautiful.
This whole sensibility represents a shattering of the social fabric but never more so than in the 21st century, when loose credit and financial profiteering put the whole art market on hyperdrive toward radical implausibility.
With Sotheby’s in the odd position of questioning whether its employees can be paid, we are faced with a deeply troubling trend. You can feel schadenfreude if you want, and I do, but this unraveling of a quarter-century-old bubble portends major problems for everyone.
