The Art Newspaper's April 2008 issue contains a first page article on the upcoming Sotheby's Hong Kong sale of Chinese art. If the events leading up to this auction aren’t a clear sign of the manipulation of the Chinese contemporary art market, I don't know what is. Like Enron, Sotheby's created its auction marketplace, oversees it, and trades in it, as a principal, thereby influencing supply and pushing prices up.
Basically, the article tells how a collection of Chinese contemporary art, assembled by private collectors, was exhibited at the Louisiana Museum (Denmark) then traveled to the Israel Museum, Jerusalem. Both museums did what museums do for important exhibitions; they published catalogues, promoted the exhibition and most important, gave the “museum imprimatur of legitimacy and importance” to the displayed works and artists. The exhibition was packaged as works from a single, important private collection.
While the art was still being exhibited, a private art dealer "bought" the collection, allegedly telling the original collectors that the purchaser intended to keep the collection intact. As it turned out, Sotheby's acquired a significant ownership in the collection. And two days after the close of the Israel Museum exhibit, Sotheby's announced that the entire collection would be sold off at its Hong Kong and New York auctions, in April and the fall of this year.
When I sat on the Board of The Brooklyn Museum, in the 80’s and 90’s, museums were scrupulous to distance themselves from the commercial side of the art world. No dealers sat on boards or even advisory committees. Curators were appropriately circumspect when seeking and getting advice from dealers.
This is not because dealers are bad; it simply recognizes the conflict of interest that a dealer might have when advising a public museum on art or artists in which he trades commercially. To preserve their impartial authority, the museum world wisely kept its distance. Museums generally respected the public trust, which they hold, and did not want to risk being seen as participants in the commercial promotion of art.
Gradually, over the past twenty years or, the Museum world has lost much of its independence from the commercial side of the art market. Dealers are now active participants, providing funding and “scholarship” on block-buster exhibitions. They contribute significantly to the museums and guide important clients to museum boards. High profile, well-funded dealers now exert considerable influence on the policies of world-class museums.
Add to this mix the emerging market in Chinese contemporary art and you have the perfect storm: a vast art market both in terms of its number of artists and the works being produced, a market and culture largely unfamiliar to western audiences, a market sufficiently secluded and opaque to enable a speculator to buy and sell very privately. The Chinese art market of the 90's provided an opportune environment for a financial speculator to accumulate large inventories of art out of the public eye.
And so they did. As recently as ten years ago, savvy art speculators trolled China and purchased large quantities, container loads in some cases , of art. So called investment partnerships were formed to purchase artworks in quantity and hold them for 3-5 years until they would be sold at projected multiples of 3 to 5 times their cost. At times these investor speculators even succeeded in locking up the supply of certain artists, by entering into exclusive supply agreements for years to come.
The only challenge remaining was where and how to sell such large quantities of art at such prodigious projected gains. Large inventories of art typically require the investment of time and money, marketing and strategic placement of the art into important museums and private collections, and the assumption of risk before an owner might realize a significant financial return on his investment. But this is not what these investors bargained for.
Enter the auction houses, eager to expand their global reach and smelling the potential for huge, quick profits embedded in backwater, undeveloped art markets.
Significantly, during this same ten-year period, the auction houses evolved their often-criticized businesses of financing the purchases of art to guarantying auction results to actually owning and selling art. These auction houses, entrusted with maintaining fair, honest and transparent marketplaces, see nothing wrong with investing in art and selling it through the very same channels they are supposed to keep fair and honest. Perhaps more important and more tragic, the art community hasn't found this development to be troubling either. After all, auction house interest in owning and selling art just means more money would chase less product and prices would go up.
Like Enron, the auction houses will likely continue these practices and relentlessly push the profit envelope further until this situation implodes.
With no pushback from the Museum community, no significant collector voice challenging the claim that the auctioneer can be an honest broker of art belonging to others simultaneous with promoting the sale and appreciation of his own inventory, no outcry from the academic and art critic community that money has now usurped their roles as guides in public endeavor to understand and appreciate what is being created… in short, with the breakdown of the checks and balances that we have evolved to ensure a viable and working art market, the contemporary art market is poised to become another in a troubling list of financial bubbles.
