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NY Times Op-Ed, May 17, 2019
Even the Rich Aren’t Rich Enough for Jeff Koons
As billionaires compete for art in an overheated market, the merely
affluent are giving up.
By Allison Schrager
The art market has a 0.01 percent problem. That much was apparent on
Wednesday at the contemporary auction at Christie’s in New York, where a
stainless steel rabbit by Jeff Koons sold for $91 million, setting a
record price for work by a living artist. If it seems as if these sorts
of records seem to be set much more often these days, it’s because they
are — just last fall a David Hockney painting sold for $90.3 million,
the previous record for a living artist.
Art collecting has always been an exclusive activity, but the world of
contemporary art, in particular, has become dominated in recent years
not by the 1 percent — the millionaires — but by the super-wealthy
billionaires of the 0.01 percent.
This growing inequality threatens to upend how the market works. The
small and midsize galleries that have long supported and nurtured
unknown artists are finding it difficult to survive in the
winner-take-all economy of contemporary art, meaning the next Andy
Warhol or Donald Judd, who rose through the ranks of the gallery system,
might never be discovered.
The art market reflects and magnifies trends in the larger economy.
Recovering even faster than G.D.P., annual sales in the American market
have more than doubled since the global financial crisis. According to a
2019 report published by Art Basel and UBS, in 2018 art sales reached
nearly $30 billion, compared with just over $12 billion in 2009.
But these numbers mask a serious problem: A small number of large
galleries and artists took in most of those sales. Art that cost more
than $1 million accounted for 40 percent of the market but just 3
percent of transactions. The disparity is most severe in the
contemporary market, where living artists’ work is sold out of art
galleries. In 2018, sales from the top 20 living artists accounted for
64 percent of the market. Bigger galleries, the top 5 percent in terms
of turnover, accounted for more than 50 percent of sales. Sales at
smaller galleries declined over the past few years.
Clare McAndrew, the author of the Basel/UBS report, explained that the
affluent but not super-wealthy collectors — the bankers at Goldman Sachs
but not the partners — who used to patronize the mid- and lower-tier
galleries stopped buying art after the 2008 crash and did not come back
after the economy bounced back. They can’t afford top artists, so they
would typically invest in emerging artists who are about to break
through or well-established second-tier artists.
These collectors, Dr. McAndrew said, are put off by the sky-high prices
at top galleries and auction houses. When they see a Hockney painting
sell for $90 million, they assume the $50,000 work they can afford is
not worth buying, especially if they can’t flip it for a quick profit at
auction.
The loss of this middle tier of collectors, along with rising rents and
tougher standards for loans, means that many smaller galleries are going
out of business. According to international data from Artfacts.net, in
2007 four galleries opened for every one that closed. That ratio began
declining after the recession, and in 2017 more galleries closed than
opened.
In the art world, small and midsize galleries serve an important
function. Artists normally start at smaller galleries, where their work
develops and they become known to collectors. Though galleries’ motives
are not always pure, they play an important role in creating the
pipeline of new artists. They mentor their artists, supporting them
financially, introducing them to collectors and sometimes steering their
work.
Small and midsize galleries are able to nurture up-and-coming artists
because their more established artists bring in sales. Relying on these
few artists for most of their sales has always posed an enormous risk
for smaller galleries, because the artists who find success often will
no longer remain exclusive to a small gallery and seek out a bigger one.
In this high-stakes market, it happens faster and more frequently: An
emerging artist has an even greater incentive to move on and quickly to
reap the benefits of the superstar economy. Art news is full of
sought-after artists leaving their smaller galleries for the likes of
David Zwirner or Gagosian.
It creates a vicious cycle where small and medium-size galleries get
squeezed out. Without them, it is unclear where the new artists from
future generations will come from. In a winner-take-all art market, the
artists who thrive are those with the political savvy to court top
galleries early in their career or brand themselves to become Instagram
stars.
A market where extremely rich people pay too much for mediocre art and
shut out the not-quite-as rich may not be the biggest issue in a wildly
polarized economy. But art is the record of culture we leave for future
generations, and it too is being warped by our unequal economy.
Allison Schrager, an economist and a journalist at Quartz, is the author
of “An Economist Walks Into a Brothel.”
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