In the last couple of months Business Week has started
to poke its nose into our business, particularly the fine art end of it.
This is bad news for all of us.
But first some facts. Investment bankers are poised
to move into the art market in a big way. Ariel Salama, the Global Head
of Private Banks at ABN-AMRO, predicted in April that $30 billion of private
equity would move into art funds in the next ten years. Three billion
a year? Is there really that much art sold each year? And if there is,
how much will be left over for public museums and collectors after the
three billion-worth has been sucked up into the investment machine? Business
Week tells me that there are plans to launch six new art investment funds
in the first half of 2005.
How do these funds work? The Fine Art Fund, the first
to get started, plans to spend $350 million on 500 paintings in the categories
of Old Masters, Impressionists, Modern and Contemporary art. The Fund
will hold the art for ten years and predicts an annual return of up to
15%. The minimum investment is $250,000. This means that people who couldn’t
give a hill of beans for art are going to cream off the top of the market
and use it to make a whole bunch of money. Most will never actually see
the paintings that they buy.
Why is this happening in art and not antiques? Why
does a painting by Van Gogh fetch more than a desk by Goddard? I’m
going to give you a biased answer to this, because I deal in antiques,
not fine art, and I would far prefer to own a Goddard than a Van Gogh.
But I’m obviously nuts, so take my explanation with a large pinch
The Economy of Snobbery
A Goddard desk has a functional value, an aesthetic value and a financial
value. A Van Gogh has only an aesthetic value and a financial value. In
western societies, the fact that a painting has no function, the fact that
it is useless, increases both its aesthetic value and its financial value.
This is both stupid and true.
In the eighteenth century, when most great art collections
were founded, possessing something that was very expensive and utterly
useless was an irrefutable statement of surplus wealth. A collection of
useless paintings was a socially desirable way of flaunting wealth in
public. Furniture, by contrast, however beautiful and expensive it may
have been to buy, always had a use, and was thus not pure luxury. In this
economy of aesthetic snobbery (which is what we are describing) the fact
that a piece of furniture was useful actually reduced its value.
The nineteenth century took this snob’s economy
even further – it spiritualized it! Imagine a painting of a bowl
of fruit. If it was so well painted that it made you salivate and want
to eat it, it was bad art. It was bad art because it appealed to the senses
of the body. If, however, it was painted in a way that made you think
only of its forms and colors, and not at all of its fruitiness, it appealed
to the spirit, not the body, and thus was great art.
Only the finest and most refined people had the spirituality
to appreciate great art (and not think of fruit). The rest of the seething
masses were merely sensuous, thought only of bodily pleasures, and thus
were only capable of enjoying debased art. Now for some unfathomable reason
all these refined, spiritual people happened to be members of the wealthy
classes, so we can see why they rushed to spend vast sums on useless art:
possessing it not only distinguished them from the great unwashed, but
also proved that they were more spiritual, and therefore finer examples
of the human race. Members of the refined upper classes vied with each
other to own more, and more expensive, art to demonstrate their refinement.
They therefore wanted prices to be high, and got precisely what they wanted.
The uselessness of art became the necessary basis
for its appeal to the human spirit: anything useful catered to the body
and its needs, and thus could not be great art. And to this day we confine
antiques to the lesser category of ‘decorative arts’, not
‘fine art.’ A Van Gogh has a higher financial value than a
Goddard only because of this economy of spiritualized snobbery.
Investment and Illusion
Investment bankers want to get into the art market, not because of its
spirituality, but because the economy of artistic snobbery still functions
as though it were a real economy. It isn’t, it’s an illusionary
market, but the participants create and believe their own illusion. So,
when these investment funds compete with each other for the limited number
of investment-grade paintings, the prices will sky rocket, but the value
will be created only by their own behavior. So when they’re looking
to sell, not buy, the competition may not be there, and they’ll
either lose scads of money, or be stuck with unrealizable assets. Hooray!
Treating art as an alternative asset class (which
was the title of a symposium held at Christie’s in April) will sever
completely any links between the top of the market and the rest. The top
will have different buyers, different sellers, different pictures, and
different prices. There will be no trickle down effect, and activity at
the top will no longer stimulate activity in the middle. The separation
of the top from the middle is already happening (in the antiques market
as well) and the rush of investment funds will complete the process.
The top auctioneers will benefit – Christie’s
International and Sotheby’s Holdings are deeply involved in these
art funds. Dealers will be shut out of the top of the market. Collectors
and public museums will also be shut out. Art can continue to make profits
for the investment class only if it is confined to that class, because
others buyers don’t have that sort of money available.
Antiques, Fortunately, Are Not Fine Art
I pray that the long history of being regarded as an inferior art, decorative
rather than fine, will protect antiques from Wall Street and keep them
on Main Street. But I’m not optimistic: this February, Sotheby’s
sold an Elizabethan stool for $73,348, they had sold it previously (in
August 2002), for $29,395. Its functional value as an uncomfortable seat
played no part in that. One of the ugliest pieces of furniture I have
ever seen sold at Christie’s last December for $36.6 million –
the highest price ever paid for a non-pictorial cultural object. Known
as the Badminton Cabinet it was commissioned in 1726 by the new Duke of
Beaufort who was a young man of incredible wealth. I can only assume that
this huge, decorated-to-death hunker was a young man’s attempt to
outdo his elders and betters – a perfect example of the economy
of snobbery. Which is why, today, somebody thought it was worth $36 million.
Numbers like these are bound to attract the attention of the Wall Street
sharks, particularly when the sharks find that there is not enough fine
art to feed all of them.
My best hope is that the Art Fund bubble will burst
early and drive the sharks elsewhere. The antiques market will survive best
when it serves only those who love antiques, who want to live with them
and enjoy them, and who want a decent return on their investment. Antiques
are an appropriate asset for people who appreciate them – as I’ve
punned before, antiques are the only asset that appreciates while being
appreciated. If antiques remain a valued part of our everyday life, and
not merely a valued asset in our portfolio, then the antiques market will
not become another trendy bubble. The economy of everyday life is much better
grounded than the economy of snobbery.