Veteran art market reporter Souren Melikian's New York Times account of the recent New York auctions of modern art alluded to a "disconnect in the art market" without explaining how that might have come about. Certainly the "hubristic buying" currently driving prices to such astronomical levels does make it seem as if today's art collectors are, as Melikian suggests, "living on a different planet."
One fact of which we are all aware is that the recession has had the effect of widening the gap between ultra high net worth individuals (i.e. those with investable assets worth more than $30m) and everyone else. As Dr Clare McAndrew pointed out in her art market report for the European Fine Art Fair, "In the US and other mature markets, the very rich lost relatively less in the crisis than the remainder of the population."
These are the people now pushing blue-chip modern and contemporary art to levels that no classical economic theory could even begin to rationalise.
But it's not just ultra high net worth investors looking to diversify their portfolios who are pumping this market. The exotic back-office instruments being constructed by auctioneers working hand-in-glove with third party investors is another contributing factor in accelerating the 'financialisation' of the art market.
Some recent reports of Christie's latest evening sale of Modern Art in New York were gushing about the "exceptional élan" of auctioneer Christopher Burge's rostrum style, lauding his patrician command of a roomful of millionaires hanging on his every word.
At one point, Burge refused to accept a bid of $100,000 for a Gerhard Richter canvas, insisting on minimum increments of $200,000 or more. "We've messed around long enough," he sneered, as he tried to squeeze another eye-watering amount of money from the room.
When an auctioneer refuses to accept a bid of that size it is not an indicator of his professional élan; it's an illustration of a gaping "disconnect" between the art market and conventional reality, not to mention a sign of breathtaking arrogance.
Where auction houses used to act as agent for the vendor, today they are often a principal in the transaction. This issue has been lurking in the background of fine art auctions since at least the late nineteenth century. Writing about the New York picture trade in 1888, Sheridan Ford wrote:
"An auction properly understood, is for the purpose of exposing goods at public sale for legitimate competition, the public being supposed to force prices in fair and open rivalry. If the auctioneer takes a position between the public and the seller calculated to prevent this, he betrays his trust."High-ticket fine art auctions may sustain the illusion of legitimate competition and fair and open rivalry, but in reality they are engineered to disguise a complex machinery of back-room financial deals. It's extraordinary that the kind of practices that in any other market would be condemned as insider trading excite little if any comment in the art market.
During the sale of Munch's Scream in New York a few days ago, Sotheby's auctioneer Tobias Meyer told his ponderous, bid-taking colleagues on the telephones, "Don't worry; I have all the time in the world." Of course he had. In many cases, Christie's and Sotheby's know well beforehand who will be bidding and how much they will bid.
An auctioneer's refusal to accept a bid of $100,000 for a work of art may look cool to those in thrall to the art market, but it also shows staggering conceit. One senses that the big two auction houses never really learned their lesson from the price-fixing scandal. The art market is often described as the last unregulated market. It is also one of the last markets where vulgar egotism still wins admirers.
Earlier this week it was reported that the same sum Christie's declined — $100,000 — had been donated to Orange County Children's Hospital, funding a new 425,000 sq ft wing complete with 31 treatment rooms, three triage suites, cutting-edge operating rooms, a laboratory, and pathology and imaging services.
I'd suggest that whoever had their bid declined simply divert that trifling sum to another equally deserving cause.