This Friday evening a couple of dollars are up for sale at Sotheby’s
contemporary art auction in London. One of them, entitled Triple Dollar
Sign, is a familiar image by Andy Warhol. The other piece coming under the
hammer comprises 204 ice white turbo reflector caps, lamps, plastic bulb
covers, daisy washers, light bulbs and a lacquered brass electronic
sequencer. These bulbs are arranged in an S-shape crossed with two vertical
bars.
As a pop art commentary on our commercial society, Tim Noble and Sue Webster’s
$ is not strikingly original. What raises an eyebrow is Sotheby’s estimate
of up to £300,000. This price rather than the work itself deserves the
catalogue description as a “satirical incarnation of arrogant display and
unashamed pretension”.
Noble and Webster’s work is described as having “fantastic zeitgeist
currency”. The same can be said of contemporary art in general. Tate Modern
attracted nearly 5m visitors last year and the Frieze art fair, which opens
in London on Thursday, is set to draw dealers and collectors from around the
world. Rich people want something new, bold and large to go with their white
walls and high ceilings. Contemporary art is a lifestyle choice. “The art
market,” says a prominent London dealer, “is a luxury brand.” It has buzz.
This year has seen record auction prices set for works by Rothko (£36m),
Warhol (£35m), Francis Bacon (£26m) and Damien Hirst (£9.6m). Sales of
contemporary art at Sotheby’s rocketed from little over £98m in 2002 to
nearly £318m last year and surpassed £343m in the first half of this year.
There is more to come. Sotheby’s and Christie’s estimate that their London
October sales of contemporary art will rake in some £147m.
The source of the demand is no secret. Last year the combined bonus pool of
Wall Street and the City of London exceeded £20 billion. This figure doesn’t
capture all of the extraordinary fortunes lately amassed by hedge fund
managers and private equity bosses. Last year the top five hedge fund
managers took home more than £3 billion, according to Alpha magazine.
Two of the names on this list – Steven Cohen of SAC Capital and Kenneth
Griffin of Citadel Investment Group – are among the 10 most active art
buyers. Cohen is the owner of Hirst’s £3.9m pickled shark while last year
Griffin paid £39m for False Start by Jasper Johns.
The vast fortunes earned on Wall Street and in the City far exceed the
relatively small turnover of the art world. This has created an imbalance
between the demand for art and its supply. Old masters are mostly locked up
in museums and the best impressionists and postimpressionists are in short
supply. That means today’s collectors who wish to build a “significant”
collection rapidly are forced to turn to contemporary art.
There is another advantage of the modern. It doesn’t take long for a hedgie
who has spent most of his adult life in front of the Bloomberg to learn the
ins and outs of the modern art world.
The result has been a frenzy in the art world. An index of 100 contemporary
artists compiled by Art Market Research (AMR), comprising artists from
Jean-Michel Basquiat to Cy Twombly, has nearly quadrupled in value since
1997 and is up more than 50% over the past 12 months. Hirst’s recent show at
London’s White Cube gallery, aptly entitled Beyond Belief, was a £125m
sell-out.
The problem for pennywise collectors is that art has no theoretical value.
Unlike stocks, paintings produce no dividends or earnings. As the art critic
Robert Hughes once observed: “Art prices are determined by the meeting of
real or induced scarcity with pure irrational desire and nothing is more
manipulable than desire.” The only yardstick is provided by past and current
prices. When supply can’t adjust to meet demand then prices soar upwards
There have been numerous occasions in the past when competitive bidding
frenzies pushed prices for individual artists to levels that were not
attained again for decades. In the mid-19th century, for instance, The
Immaculate Conception, one of several copies by Murillo, the Spanish baroque
painter, was acquired by the Louvre for £24,600. A century later the
underbidder for this picture, the National Gallery in London, paid just
£8,000 for another Murillo.
At the beginning of the 20th century, Van Dyck became the most valuable artist
at auction when his Marchesa Grimaldi-Cattaneo was sold for more than
£100,000 to PAB Widener, the Philadelphia businessman. Some 50 years on, Van
Dyck portraits were selling at auction for little more than £5,000.
American tycoons in the Roaring Twenties had a passion for British
18th-century aristocratic portraits, a market skilfully manipulated by Lord
Duveen, the English art dealer. During the great depression the art market
suffered even more than stocks. For instance, in 1938 Thomas Law-rence’s
portrait of Lord Castlereagh was auctioned for just a tenth of what it had
fetched a decade earlier.
“When the slump came,” wrote Gerald Reitlinger in The Economics of Taste, his
history of the art market, “the rap was taken by lesser works of which the
prices had been inflated by Duveen’s operations.”
The same process was at work in the late 1980s when Japanese collectors, their
wallets swollen with the profits from property speculation, snapped up
impressionist paintings. These buyers were notoriously undiscriminating:
when asked why he had spent more than $300m on late-19th century French
paintings, Yasumichi Morishita (a moneylender known as “the pit viper”)
replied that “impressionist paintings go better with modern decor”.
AMR’s index of French impressionists rose sixfold in the second half of the
1980s but gave up all these gains after Japanese property prices collapsed
at the end of the decade. In 1994 Morishita’s collection of paintings, once
valued at 30 billion yen, was taken by creditors.
Given a sufficient passage of time most great painters regain their peak
prices. But this may not be the case with much contemporary art.
Contemporary art has a “replaceable source of material”, says Oliver Barker of
Sotheby’s. But this should be a cause for concern, not celebration. The
supply of works by living artists will inevitably adjust to meet demand.
It is a sign of the profound irrationality of today’s art market that those
artists in most abundant supply command the highest prices. Consider Warhol,
whose Green Car Crash sold for £35m earlier this year. In Sotheby’s
forthcoming sale, for instance, there are no fewer than 10 Warhols for sale.
Inflated prices act as a magnet to draw works to market.
Later this year Christie’s will be auctioning Hugh Grant’s Liz by Warhol,
valued at up to £17m – or about 10 times what the actor paid for the
painting a few years ago. Sellers are being lured by Sotheby’s and
Christie’s, which increasingly guarantee the minimum price that consignors
receive at auction.
It’s a common feature of speculative bubbles that the rising tide lifts all
ships. The Dutch during the 17th century tulip mania were initially
attracted to the rare bulbs with beautiful variegated multicoloured petals.
As the mania progressed, the price of the plain breeder bulbs also soared.
The same process is at work today.
Sotheby’s upcoming show includes a couple of works by Banksy, the London
graffiti artist: a life-size replica of Michelangelo’s David (one of three),
estimated at £150,000, and a half-portrait in 18th-century style, entitled
Rude Lord, estimated at up to £200,000. The figure in this picture is shown
“giving the finger”.
No one in the modern art world knows better than Hirst how to turn art into
hard currency while simultaneously mocking the art market. Hirst says that
his £50m diamond-encrusted skull For the Love of God is meant to represent
the triumph of wealth over death. Yet in the humanist tradition, images of
skulls together with those of tulips and even bubbles were symbols of the
vanity of wealth and of human desires.
Valued at more than four times its cost of production, Hirst’s skull may well
be one of the most overvalued art works in history. A secretive consor-tium
– of which Hirst is a member – has reportedly acquired the work to sell on.
Any eventual buyer is ensured an immortality of sorts, if only in the annals
of art market folly.
Edward Chancellor is the author of Devil Take the Hindmost: A History of
Financial Speculation
