As the art market goes back to school this month, the question remains whether it can keep ticking over when times are clearly tough.
Before the summer break, the leading gallerist Tim Blum pointed to a moment of crisis when he announced the closure of his Los Angeles and Tokyo spaces and declared the current model “unsustainable”. Just a few weeks later, the Art Dealers Association of America (ADAA) cancelled the next edition of its venerable New York fair, citing “an evolving cultural and market landscape”.
Such decisions, in the face of macro events including wars in Europe and the Middle East, a Chinese property crash, trade wars and sticky inflation, suggest that the art market is facing a collapse not witnessed since 1991—after which, according to data from Arts Economics, it took 14 years for art sales to recover.
Back in the early 1990s, many Western economies, including those of the US and UK, went into recession, a situation that the art market could not ignore. Now though, other trends point to what The Economist recently described as a new form of capitalism, dubbed “the Teflon economy”: like the non-stick coating, businesses are proving surprisingly resistant to negative news.
Today, according to The Economist and citing data from the International Monetary Fund (IMF), just 5% of countries are headed towards a recession (these are not named by the IMF, but is the lowest percentage since 2007). It finds that unemployment rates in rich countries are close to a record low, while “consumers across the world, despite claiming to be down in the dumps, spend freely”.
The non-stick dynamic is attributed to two factors: businesses have become better at managing shocks, while governments are acting swiftly to protect national economies. This means that when the falls happen—as they have in the stock markets as well as art markets—people are still able to “buy the dip”, finding opportunities that help keep the wheels turning.
Art businesses that are not closing or cancelling are beginning to find alternative ways to manage through the current gloom. Phillips auction house has revealed a new fee structure that could benefit reluctant sellers and buyers by incentivising those who commit to buy ahead of time with lower commissions (while also raising the usual rate, for the health of their own business).
A fashion-inspired future?
Galleries are increasingly adopting a “together we are stronger” approach that defies the prevailing competitive, unsustainable model. Goodman Gallery’s revamped website, which launched in August, not only offers a “buy now” option (with relatively quick know-your-client checks for art over $10,000) but also a rotating selection of work from other galleries—“an arty Farfetch”, explains a gallery spokesperson, citing the online fashion retail platform.
History has taught us at least that if the economy is OK, then the art market is OK. But I would add a couple of health warnings. First, the economy might not be OK—the cost of servicing the debt that enables protection could prove too much in a high interest rate environment, while the geopolitical shocks might reach beyond those that economies have learned to swallow. Secondly, the art market looks to have its own distinct issues, rooted in a change of taste that questions its very essence of ownership. Unfortunately, only time will tell if this next season leads to a merry Christmas.