Where are they taking the art market?
Behind the artist in the act of creation stands the collector. His piggish eyes are gleaming, and his right hand firmly clutches the bulging money bag at his belt.
Greed, as the 16th century drawing “The Painter and the Connoisseur” by Brueghel makes clear, has always been a part of the world in which art is made. But the dizzying expansion of the world art market over the past five years has created hothouse conditions for the growth of speculative collecting, and many of the old illusions are being crowded out by the new jungle-style trade.
The rarefied world of painting and sculpture has become a financial free-for-all comparable in its high risks and high payoffs to the madly gyrating commodities market. International businessmen, looking for a secure means of investment and an easy way of transporting their riches around the world, are investing in art as never before. With a few timely purchases, they can make an unknown artist a millionaire; with a few untimely sales, they can consign another to oblivion. Artists are churning out works to satisfy the voracious demands of their buyers, and the established order of the art world has been upset.
“Every collector will tell you that he buys art because he likes it,” says Leslie Singer, economist and art historian at Indiana University. “That’s baloney. Art is not bought as a consumer’s item. The art dealer is nothing more than a good stockbroker who advises his clients. His understanding is related to potential capital gains.”
From 1980 to 1985, works by contemporary artists made spectacular gains. Each year higher and higher prices were established for a growing number of new stars — Julian Schnabel, Anselm Kiefer, Francesco Clemente, Jorg Immendorf, Sigmar Polke, Jean Michel Basquiat, Susan Rothenberg, Jennifer Bartlett, Robert Longo and many others.
The lure of rapid appreciation has attracted collectors for decades, but in the past contemporary art had to undergo the test of time before it became pricey. Artists had to acquire a track record, show in museums, get prizes and commissions.
“Ten years ago,” says New York gallery owner John Weber, “you could read an artist’s biography and guess within a few thousand what his prices were. That whole concept has gone out the window.”
In the new speculative market, it is often the quality of patronage, not the quality of the art, that determines its initial success. If a young painter, fresh from art school, gets picked up by the right collector, his or her prices can zoom from $400 to $40,000 almost overnight.
According to economist Singer, “It is not that the art market has radically changed. It is just that what happens in a week used to happen over a period of 10 years. And in the Middle Ages it took place over half a century.”
According to tables compiled by Nicholas Faith, former investment editor of The Economist and author of “Sold: The Rise and Fall of the House of Sotheby’s,” from 1971 to 1984 investments in art were more than twice as profitable as investments in corporate shares in both the United States and Britain. They also kept ahead of inflation by almost a 2-to-l margin. In large measure, Faith attributed the stellar performance of the 1970s art market to the fear of hyperinflation. “The rise in the 1970s,” he wrote, “was a mirror of the unparalleled fear that gripped all the inhabitants of industrialized countries who had any wealth to protect.”
When that fear abated, Faith expected the art market of the 1980s to return to normal. That didn’t happen.
The ’80s were ushered in by the $1 million sale of American painter Jasper Johns’s “Three Flags” to the Whitney Museum, the highest price ever paid at that time for the work of a living artist. The sale was conducted with maximum publicity, with the New York gallery owner Leo Castelli producing the original 1958 invoice of $900 for the work. For quick turnaround, however, the benchmark was the 1983 Sotheby’s sale of Julian Schnabel’s “Notre Dame” to Washington, D.C., collector Anita Reiner for $93,000. Anina Nosci had bought the flamboyant, plate-encrusted painting a few years earlier for $4,000, which made her profit on the sale more than 2,300 percent.
“I think the fate of that Schnabel definitely encouraged speculation,” says Lucy Mitchell-Inness, Sotheby’s expert in contemporary art, who arranged the sale. “Here was a woman who three years earlier had paid three or four thousand dollars for that painting, and then she sold it for a huge amount of money. It was an example of successful speculation.”
New records for contemporary American and European artists are made at virtually every sale of contemporary art, even unsuccessful ones like Sotheby’s and Christie’s November 1985 auctions. One can expect to pay at least $40,000 for a painting by any artist with an international reputation, according to one curator. And for techniques or styles that an artist has abandoned, such as Schnabel’s plate paintings and Susan Rothenberg’s abstract horses, the price can rise to well over the $100,000 level. Works by living, older artists can go for $1 million or more.
But as the spiral reaches into the stratosphere, art world observers are asking if the prices of contemporary art do not have a ceiling. Certainly the dynamics that propel them upward and the forces that bring them down are imperfectly understood.
Most people inside the art market ascribe the increase in market activity to an explosive expansion in the audience for art. According to Castelli, “There is a very wide public, and that public is constantly widening. There are more collectors around, more interest in contemporary art, more shows to promote this interest, more articles written … It’s fantastic publicity in that art receives in every possible way.”
Dealer Andre Emmerich agrees that, “there has been a spectacular growth of the art market as a percent of the population interested in art.” He explains, “Admittedly not every one of the subscribers to art magazines or museum-goers are interested in buying art. But even if there are only 10 buyers of art out of every 100 subscribers or visitors, this is an enlarged body of buyers.”
However, Emmerich sees a leveling if not an end to the expansion. “God forbids the trees from growing into the sky,” he quips. “There has to be a limit. It’s possible that the audience for art has reached its saturation point.”
Recent statistics support his view. A 1984 survey on “Americans and the Arts” conducted by the National Research Center for the Arts suggested that the audience for art exhibitions has reached a plateau. “The one exception to (the) pattern of growth emerges in the cases of art museums,” the report states. Attendance at exhibits of paintings, drawings and sculpture was slightly lower in 1984 than in 1980, although above 1975 levels, the report said.
However, in defiance of declining museum audiences, the market keeps on climbing.
In New York City alone it rose to well over $1 billion in 1985, according to Gil Edelson, secretary of the Art Dealers Association. That is a tenfold increase over the past 20 years even allowing for inflation, he estimates.
One explanation for the boom is that art collecting has become chic, with yuppies getting brownie points for the art they have on their walls.
“Instead of getting involved with big cars and boats,” says dealer Mary Boone, “they’ve started to collect art.”
One story circulating around New York concerns a couple who lived on Sutton Place. During the week they would go to top galleries and choose works to go to their apartment on approval. Then, with the art up on their wails, they would give dinner parties over the weekend. Come Tuesday (art galleries are traditionally closed on Mondays), the art would go back to the dealer.
“It’s a glamour business,” says Emmerich. “We get calls from ad agencies constantly asking, ‘Can we shoot this or that in your gallery?” A more substantial reason for this continued expansion of the art market is the large-scale entrance of international funds. Singer suggests that the art market follows the same patterns as the economy at large. “As global income rises, more art is purchased,” he explains. “More European and Oriental money has been flowing into the art market.”
One of the major factors loosening the relatively tight fabric of the New York art community has been the rise of affluence in Europe and the concomitant rise in the numbers of European artists, dealers and collectors.
“The internationalization of the art market was an enormous change,” says Castelli. “It was unforeseen, unpredicted, unpredictable.”
As the major dealer in the most American of movements, pop art, CastelIi was caught more unaware than many by the influx of Europeans. A decade ago few American dealers, collectors, critics or artists would have predicted that the hottest artists on the international circuit would be West German, like Anselm Kiefer, or Italian, like Francesco Clemente.
“American artists were exported during the 1960s and 1970s,” says gallery owner Weber. “The new spirit of internationalism came in between 1980 and ’85. For non- American artists to be accepted in the American market was a first.”
Actually there were more than a few signals during the 1970s that the hegemony of the American art world was breaking up. Ever since World War II, European museums have been highly responsive to new American art. Then, in 1976, the Art Institute of Chicago mounted “Europe in the Seventies” the first show of new art from Europe in decades. It received cautious but complimentary reviews. In 1979 came the sensational retrospective of the German artist Joseph Beuys at New York’s Guggenheim Museum. With a celebrity opening, it was the event of the exhibition season.
At the same time the international art fairs began to rival the Whitney Museum of American Art’s biennial show as official pulse-takers of new art. During the 1970s international European art expositions such as Documenta in West Germany and the Venice Biennale were written up in American art magazines as important bellwethers of trends. Then came the fairs at Zurich. Cologne, Basel, Dusseldorf and most recently Chicago.
These became giant, international occasions for contemporary-art trading, bringing American collectors together with new, hip, European dealers like Konrad Fischer, Paul Maas, Michael Werner and Bruno Bischofberger.
There is a widening audience for contemporary art, and the media help publicize events such as art openings.
So eager were the European dealers to attract American buyers that their advertising saved such American magazines as Art in America and Artforum during the difficult period in the late 1970s when inflation and declining subscriptions threatened these publications’ survival. And American collectors responded to the Europeans’ blandishments.
“Collectors are freer now,” says Chicago collector Lew Manilow, “because they can deal with all sorts of dealers around the world. In classical economics, what has happened is a far wider distribution, far more options for everybody.”
The big international art fairs also helped adventurous American dealers such as Anina Nosei and John Gibson to become acquainted with new European art — with the Italian Mid German artists who had begun to reassert their cultural roots after decades of playing second fiddle to Americans. Their expressive figurative paintings on national themes had an unexpected power and appealed to audiences fatigued by conceptual and other nontraditional modes.
And in classical economic terms, their work was undervalued. Nosei says frankly in Laura de Coppet and Alan Jones’s book “The Art Dealers” that she went into the field of the new Italian and German painters because she couldn’t afford the American works she liked. Almost overnight during the 1980s, a handful of German and Italian painters became international art stars, propelled skyward by the numbers of collectors rushing to buy their relatively inexpensive works.
The Japanese too have entered the market for contemporary art, although most Japanese collectors prefer impressionists and such classic modern artists as Matisse and Picasso. Still, they buy new art when the Japanese yen is high, according to Sotheby’s Lucy Mitchell-Inness.
With the increased demand for their work, both European and American artists with international reputations have begun to reject the long-standing artist-gallery relationship, in which the artists contract to sell their work through one dealer.
Traditionally, the dealer helps the artists during the lean years when they are developing their reputations. In later years, the dealer reaps the profits, if there are any profits.
But according to Mitchell-Inness, “very few artists in New York have signed exclusive contracts with their dealers. Artists today can hold their dealer to ransom. They can demand the kind of slots they want in the calendar. And many of them are fairly fickle. They’ll go wherever they can get the most favorable situation.”
“It’s a lot less rigid,” says collector Lew Manilow. “Fifteen years ago, new works from artists were committed to dealers with whom they had long-term relationships. These have been eliminated or frayed. The new crop of artists like Georg Baselitz and Francesco Clemente have a dealer in Germany, a dealer in Italy, a dealer in America and God knows where else.”
To accommodate the new market, successful artists have to work at a pace undreamed of in the past. Even two decades ago a one-person show every two years was the standard. Today a sought-after American artist like Sol LeWitt routinely mounts six or seven one-man shows a year.
And like high-paid movie stars or athletes, artists as popular as LeWitt have agents. One sure sign of the way the art business is changing is the rise in the number of artist reps, agents who handle negotiations, arrange exhibitions. For example, Susanna Singer, who used to be director of the John Weber gallery, resigned to take charge of the work of New York artists Robert Mangold and LeWitt. ‘They basically feel that they don’t want to be tied into one particular gallery,” she explains, “and they want to have a greater control over their career and be free to show where they want to show.” Singer acts as intermediary with a worldwide network of galleries for her artists and also sets the prices for their work (in dollars), making sure that they are the same in Chicago, London and Zurich. She says that LeWitt’s and Mangold’s incomes have increased significantly since she began representing them.
“The other thing I have to make sure of,” emphasizes Singer, “is that the artists get paid by the galleries. Artists who are well- established and whose work is much in demand have a lot of paperwork to deal with. It’s better for the artist not to have to deal with that.”
Singer is not the only former gallery director who has become an artist rep. Several New York dealers, squeezed by rising rents, have closed their public spaces to take up private practice, among them Pat Hamilton and Michael Klein. SoHo’s Pam Adler is one of the latest recruits. She is closing her gallery this spring to represent those few artists she sees as visionary.
Despite the efforts of Singer and her colleagues to standardize the prices of the artists they represent worldwide, the international art market became so active in the last decade that it needed a more institutionalized method of establishing the prices of contemporary works of art. With works by a single artist available in many different galleries, collectors needed regularly updated benchmarks they could consult. This function is filled by the major auction houses-— Sotheby’s and Christie’s.
“For galleries of my type,” says Castelli, “auction houses have always been extremely useful in establishing price structures. Without them people would consider that our price-fixing is arbitrary. It’s confirmed by sales in auction houses that the prices we make are real”
Auction houses have functioned in this capacity for the contemporary art market for only a relatively short time, however. Traditionally, the auction houses have been extremely cautious about very recent art. For the most part before the 1980s auction houses held to the “rule of 20” first enunciated by H.C. Marillier in his 1926 history of Christie’s:
“The work of the younger man active at the time does not come onto the market, but remains with the original purchaser on an average for 20 or 25 years,” he wrote. “Such pictures as do come up in a sporadic way are as a rule minor ones, which pass unnoticed and have no effect.”
Since the 1983 Schnabel transaction, however, the sale of very recent work at auction has been an integral part of the contemporary art boom. “There is no doubt,” writes Michael Kohn in the September 1985 Art & Auction, “the auctions have become, for better or worse, a highly important and very public forum for buying contemporary art. Never before has the audience for such art been so dense, nor the amounts of money spent so great.”
Kohn points out that although most of the works sold are still by established artists, the influx of works by young artists is rising. “The recent popularity of young — sometimes very young — artists at auction can be understood in purely financial terms.” Kohn says. ‘These are prolific artists whose prices have increased tremendously over foe last two to four years.”
While the conventional wisdom is that art galleries profit when the auction prices of their artists rise steeply, there are more than a few signs that the speculative spiral unleashed by the continuing string of auction records has dealers deeply worried. For one thing, the auction activity is eating deeply into the art dealer’s mainstay: the secondary or resale market.
Since the collapse of the academy in the 19th century, modern artists have needed middlemen to introduce them to the buying public. Dealers like Paul Durand-Ruel and Henry Kahnweiler made it possible for the impressionists and the cubists to develop their revolutionary styles. Such dealers not only found buyers for the art, they frequently advanced small sums of money to artists who were developing new, initially unsalable forms.
For example, Durand-Ruel, the impressionists’ primary dealer, not only showed their works, he also purchased canvases from Monet, Renoir, Sisley and Pissarro on a regular’ basis. Emile Zola’s accusation that he sold their works to patrons who did not understand them may be true. But in some respects Durand-Ruel was as visionary as the artists he patronized.
Obviously everything depends on the ability of art dealers to choose artists whose work is of lasting value. Says Gil Edelson, “The ability to make a judgment that this is an artist who has significant quality over and above the merely competent, that’s what distinguishes a Leo Castelli. It’s the eye. That’s the key to how well a dealer does ultimately.”
Implicit in the gallery business is a turnover, not just from new exhibitions, but also from secondary sales or resales. Sometimes collectors will trade up, exchanging an older work for a newer. Often a collector in need of money will ask the dealer who originally sold the painting to find another buyer. Dealers’ fees on secondary sales typically run about 20 percent, and in many galleries these fees account for 50 percent to 75 percent of total income.
Over the past five years, however, the auction houses have been getting a larger and larger share of those sales, effectively diverting a large share of gallery income. Once consummated quietly in a gallery’s back room, resales are now jet set entertainment put on by Sotheby’s and Christie’s for the Tiffany-and-tails crowd. But high prices at auction are a two-edged sword. On the one hand, they do confirm an artist’s worth. But when collectors flock to the auction houses with recently purchased contemporary works for sale, dealers fear both the loss of business and the loss of control over prices. Last spring’s successful contemporary art auction netted more than $1 million for Sotheby’s, and that was money that normally would have gone into the art dealers’ pockets.
‘‘The auction houses have no long-term commitment to the artist,” says dealer Mary Boone, her tone that of a betrayed spouse. “They are geared to the one-night stand.” In the bitter dispute between dealers and auction houses over the resale market, epithets like “greedy” and “irresponsible” are being hurled by both sides.
From the dealer’s point of view, a slow and steady appreciation is far more desirable than a sudden ascent to the heights, which might not be sustained by subsequent sales. “Dealer’s benefit if there is a certain amount of predictability in the pricing structure in these secondary sales,” explains Edeison. “One sale doesn’t make a market. The atypical sale tends to distort the view of people who don’t really understand the situation.”
“I think over the last two or three years collectors have gotten very unrealistic ideas about what things should cost,” says Boone. Her experience with Julian Schnabel’s work is an example. Although it was offered to her first because she was the dealer who originally sold it, the record- breaking painting “Notre Dame” went to auction at Sotheby’s because Boone thought its owner, Anina Nosei, wanted too much money.
“At that point Schnabel’s prices in the gallery were $35,000,” explains Boone, “and I couldn’t in good conscience sell it for twice as much as I was selling the current paintings for. This is an artist who had a very short life in the public eye. I kept my prices the same even after the [$93,000] sale. But what I found was that now, every collector who wanted to sell their Schnabel paintings thought they were worth $100,000.”
Boone says she believes that if prices go up too quickly, it cuts out potential sales to museums, whose patronage in the long nm will be more valuable to the artist’s career than the one-shot hype afforded by a record at auction.
The competition for the secondary market explains, in large measure, why dealers, who might be expected to worry over the weak response to the November auction sales, are taking a certain pleasure in Sotheby’s and Christie’s failure to judge the market.
“The reserves (the prices below which owners will not sell) were too high for mediocre things,” says Andre Emmerich. “The auction houses are largely responsible for the failure. Sotheby’s badly misjudged the market, and the clients were greedy.”
There is a certain bravado in the way that art dealers talk about those dismal November sales. “Nobody jumped out a window,” jokes John Weber. But there is the undertone of fear that the bubble will suddenly burst and the prices will come tumbling down. Almost everyone, including economist Singer, predicts some kind of “adjustment” in the prices of recent art. But no one knows when it is coming or how much of a crash it will be.
Writes Robert Hughes, art critic with Time magazine, in his 1984 New Art Examiner essay “Art and Money”:
“We are repeating one of the peculiarities of the Victorian art market, though on an industrial scale. By and large historical art is better value than contemporary art; and contemporary art is overpriced … Nobody of intelligence in the art world believes this boom can go on forever. There is a jittery feeling that we are heading for something like the slump that hit the once-dominant French art market in the ’50s. Except that instead of one Bernard Buffet, we have 20. And except, too, that when the shakeout comes, it will be much more traumatic.”
Predicting when the shakeout will come has proved elusive. Writers have been predicting the end of the art boom every year for the last five. Wrote Michael Brenson in The New York Times in July 1982, “The 20-year boom of the New York art world, when there seemed to be a buyer for the work of every artist and when dealers and auction houses broke their sales records virtually every month, is apparently over.”
True, 1982 was a bad year. High interest rates attracted most loose cash, and the future of the economy seemed uncertain. But it was followed by 1983 when sales and records, buoyed by a booming stock market, resumed their upward pace. Hughes’s dire warning in 1984 was followed by the boom spring of 1985, when Sotheby’s racked up an unprecedented $12.5 million in a single sale.
Then came the November auctions. More than 40 percent of the works went unsold, including large paintings by such famous abstract expressionist artists as Arshile Gorky, Barnett Newman and Clyfford Still. Even the magic name of Andy Warhol failed to elicit sparks.
Dealers ascribe the poor results to different causes. Some say the paintings simply weren’t as good as the ones that drove up the spring auctions. Others say that the paintings were too big and too pricey for the individual buyer. Almost everyone agrees that the reserves were set too high.
But the one big factor in the November minicrash that no one is mentioning was the absence from the bidding of a group of men, almost all European, who wield an increasing influence on the fluctuations of the art market worldwide. The supercollectors are the art world raiders, and, like T. Boone Pickens, they choose their targets carefully.
The supercollector’s money usually comes from a multimillion-dollar family- owned business. Germany’s Peter Ludwig has a chocolate empire — the Monheim group, founded by his wife’s family. The Swiss Baron Hans Heinrich Thyssen-Bornemisza has a shipping empire. Count Guiseppe Panza di Biumo’s fortune is founded on his family’s real estate and commercial alcohol business in Milan, Charles and Doris Saatchi’s wealth comes from Saatchi and Saatchi Compton Worldwide, an international public relations firm which dominates the business in Europe and, with accounts like E.I. du Pont de Nemours & Co., International Business Machines Corp. and Xerox Corp., is well on its way to doing the same in the United States.
The international nature of these businesses is a considerable asset to the supercollector. With accounts in a number of currencies, he buys where the art is cheap and sells where it is expensive, usually the United States. Thyssen-Bomemisza has said that World War II taught him to never have his capital assets fixed in one place.
Typically the supercollectors buy in bulk. They want not just one example of an artist’s works but a range of works representing different phases of an artist’s career. Ludwig has boasted that he owns more paintings by Jasper Johns than the American artist does himself. Charles Saatchi has been known to buy out entire shows, leading to charges that he is trying to comer the market in particular artists.
Supercollectors work hard at their avocation, keeping complete files on artists who interest them. Often they end up knowing more about contemporary art than the majority of dealers and curators. They can also afford to hire curators who work full-time on their collections. They use dealers as scouts but for the most part make up their own minds.
Finally, the supercollector usually ends up creating an institution through which he can exert influence on the world of art. Like Joseph Hirshhom, a prototypical supercollector who donated his collection to the Smithsonian Institution to found Washington D.C.’s Hirshhom Museum and Sculpture Garden, they want their own museums. Ludwig persuaded the Cologne Wallraf-Richartz Museum to merge its holdings of 20th century art into a new entity—Museum Ludwig — with a brand- new building to house it. Charles Saatchi built his own museum in London, which opened in 1985 to raves from the press. Thyssen-Bomemisza is building a museum of modern art in Lugano, Switzerland.
The most important quality of the supercollector, though, is that he can make prices jump just by looking at a work of art. Sotheby’s Mitchell-lnness explains that in fields which interest a supercollcctor, there will usually be two possible prices for a single object — a high one if the collector is known to be interested, a lower one if he is not. Ludwig used to complain that prices doubled when he walked in the door.
Thus the supercollectors have an enormous influence on the market. If they dump an artist’s work as the Saatchis did in 1983 with Italian painter Sandro Chia, it can have an immediately depressive effect on the artist’s prices. On the other hand when they buy more work, as the Saatchis did with Warhol’s work in the late 1970s, it has roughly the same effect as massive investment in a blue-chip stock.
“Warhol was a bit in the dumps before Saatchi intervened,” says Castelli. “He wanted certain pieces, rare pieces that were very expensive. When he next found a painting he wanted, well, we were perfectly aware of the prices that he had paid for certain paintings, and the prices would go up.”
Most dealers will tell you that it is impossible for any one collector to dominate the market. However, Charles Saatchi, at least, has come close to doing just that. The question is, for how long?
Lucy Mitchell-lnness of Sotheby’s suggests that the neo-expressionist boom Saatchi helped to nurture may be coming to an end, brought down by the artists’ and dealers’ eagerness to exploit their success.
“Dealers don’t know how many of their artists I turn down for every sale,” she says. “Eighty percent of the telephone calls I receive are for young artists: Schnabel, Basquiat, (David) Salle and (Jedd) Garet, etc.” She blames galleries for pushing artists to keep on producing pictures regardless of quality. It is often these inferior works, she says, that collectors are trying to unload. “Very few of the dealers,” she says, “and this is where I believe they are at fault, hold their artists back.”
The idea that an artist can have multiple one-person exhibitions each year and maintain quality is absurd, Mitchell-lnness says.
“Much of the work should never have left the studio,” she explains. “It was unedited. The dealers were greedy and undisciplined about it, and the artists were just as greedy as the dealers for their sales.”
And as for future greed? The odds are that the November auctions’ poor results were only a blip on the rising graph. This year at least, falling oil prices, falling interest rates and a soaring stock market are almost guaranteed to drive art prices up.
But whether prices go up or down, the real question the New York art world should address is how to halt the decline of faith in the way the market works. The rampant cynicism that preceded the demise of Paris as the market center for contemporary art after World War II has now become a New York disease.
New York gallery owner Pam Adler says she believes that ultimately art history will weed out the art clutter. ‘Time allows us to see quality,” she says. “Cream rises.” In the meantime she is closing her doors, she says, because she cannot stand the speculative fever and hype that characterize the art market today.
Jane Addams Allen
Jane Addams Allen was the art critic for the Washington Times and the founding editor of the New Art Examiner
Volume 31 number 1, September / October 2016 pp 21-28