Welcome a new contributor to Wonkblog. Katherine Boyle covers museums and art for the Post Style section, and has agreed to write occasional pieces on what the art world can tell us about economics, wealth, inequality, and financial markets. Here, she looks at what the most-anticipated art event of the season tells us.
The art world is descending on Basel, Switzerland, the private jets lined up at the city’s airport, hedge fund managers readying to conduct business under giant uvulas. The event bringing them together, Art Basel, is the largest and most important international contemporary art fair of the year, with $2 billion worth of art expected to be on sale. That makes it an excellent window into how the art market has become among the most visible, and lucrative exemplars of some broader economic trends. At a time joblessness remains high and most financial markets have only barely climbed back to their pre-crisis levels, the art market is booming. These are four trends to watch that shed light on what is happening to wealth and consumption among those at the pinnacle of global wealth.
The Global Wealth Disparity
While currency meltdowns or dips in the S&P 500 rarely affect art sales in the short term, changes in the wealth gap have been found to track art sales. As ultra-high net worth individuals become wealthier, art prices soar higher, as more money chases a finite supply of works by big-name artists. (Adam Davidson provides a good overview of this theory.) According to Boston Consulting Group, in 2012, households with more than $100 million saw their wealth grow by 3.6 percent compared to 1.7 percent in all households. The growing global divide between ultra-high net worth individuals and everyone else is the best indicator that prices of contemporary art will continue to climb in 2013.
A pivot to Asia
Art Basel is the most important brand in the art fair world, and it got an early start this year with Art Basel Hong Kong. It was the first time the fair has exhibited in Asia, and the fair’s third location after Basel and Miami. Some worried another fair might cause “fair fatigue,” the term used to describe the anxiety and constant party-going that can accompany contemporary fairs. But Art Basel Hong Kong might have done the opposite, priming collectors for the bigger fair in Basel. Of the 245 galleries that exhibited, over half of them came from Asia. That means Art Basel broadened its footprint and welcomed new galleries to the fair that cater to Asian collectors, who tend to prefer domestic artists.
Record Contemporary Sales
There is a tendency toward herd behavior among the ultra-wealthy who are spending six, seven, or eight figures on artwork. And right now the herd is lurching toward contemporary art. Christie’s sale of post-war and contemporary art last month shattered records, selling 66 pieces for $495 million—the biggest sale ever in one night. Jackson Pollock’s “No. 19, 1948” drip painting broke the artist’s record, going for $58.3 million; the last time it was at auction in 1993, the painting fetched only $2.4 million. Eleven other artists sold pieces for record highs and even dealers were shocked by the sales. Brett Gorvy, Christie’s international chairman of post-war and contemporary art, called it “a new era in the market.” After $1.1 billion of sales in New York, there’s no question that contemporary art is becoming the alternative asset class of choice. This era of big sales is likely to continue with Art Basel.
The $34 million rug and bottomless demand for alternative assets
Contemporary sales aren’t the only ones breaking records, and no one was more stunned than Mary Jo Otsea, the auctioneer at Sotheby’s, when selling the Corcoran Gallery of Art’s Clark Sickle-Leaf Carpet went last week. She thought the famed carpet could sell for between $10 million and $15 million, breaking the previous $9.7 million record for a rug sold at auction. Instead, it sold for a whopping $33.7 million. Every rug at the auction sold for at least double its high estimate. At a time of volatility in stock markets and very low returns on bonds, this was the latest piece of evidence of the depth of demand among the ultra-wealthy alternative assets. And that can only mean good news for sellers at Art Basel.