Contemporary Art as an Investment, Part II:
speculation, artifice or magic

by H.A. Fraser.

Ms. Fraser is Managing Editor of Art Business Magazine.

Rules, what rules?

In Part I, we discussed the speculative nature of the market for contemporary art. Dollar value of art being produced today is determined by the artist's reputation with art world professionals -- dealers, curators, and critics. If this is true, it begs a question: who or what keeps these "professionals" honest? The term professional is much bantied about. For this writer, being a professional in part means: a) you strive to make your living at your profession; 2) there is an official and legal body which governs the profession through laws; 3) you must have formal standing in this body by passing some type of test; 4) if you break the laws, you are punished. I submit that all of this holds true for doctors, lawyers and teachers but not for critics, curators or art dealers.

Art dealers in Canada can become members of the "Professional Art Dealers Association of Canada". Criteria for membership in PADAC includes "having conducted business for a continuous period of not less than five years and evidence of financial stability and ethical business conduct..." PADAC also provides a Code of Ethics that involves helping to "minimize malpractice or unethical procedures in the art market". If a member dealer ignores PADAC "rules", however, he does not go to jail. PADAC's disciplinary committee may not even know. And if they did, what could they do? For example, if a dealer inflates an artist's reputation, pads his resume, promotes him as the next Picasso, and all the time knowing he is not, how would he ever be caught? Of what would he be accused, bad taste? A similar "strategy" is being used in England and in Canada, although with less frequency. A dealer picks a fresh art school grad who is competent at his art. The dealer then puts together a promotional campaign for the artist that includes magazine and newspaper articles, a prominent cover, a sale or two to relatively well known collectors. The fresh artist becomes an overnight sensation and a well publicized exhibition sells out. The artist is then dropped by the dealer, but not without a little money for his trouble.

Covering up.

This market and its machinations, this writer has called "speculative" (at best). Recently, another writer has called it "artificial" and yet another has called it "magical".

In an August 14/96 Globe and Mail article, Robert Fulford contends that the economic rule of supply and demand does not apply to the market for contemporary art of well-known artists. Fulford offers some examples. At an opening at Christopher Cutts Gallery in Toronto, a 1968 Kazuo Nakamura abstraction was offered for $42,000. and a 1979 Richard Gorman for $25,000.

"Nakamura," Fulford explains, "has never sold a painting for $13,000. and Gorman has never sold one for $25,000. In 1996, when neither of them sells briskly, their prices appear to be increasing. Why?"

Apparently, prices went up in the 1970s and 1980s and never came down. During this high spending period, the Canada Council's Art Bank (now all but defunct), the National Gallery of Canada and the Art Gallery of Ontario were all buying. Artists who saw them coming, increased their prices. Today, with little or no spending by these and other bodies, these prices have remained or even increased because of a core art world rule, says Fulford, "never reduce prices". To do so would damage reputations:

"Aside from the cost in personal humiliation, it would betray all those who bought at higher prices, including art consultants. If an art consultant persuaded a law firm to pay $15,000. a few years ago, how will he or she react if a simliar work goes on sale for $4,000.?"

Fulford concludes by stating that , "Pricing based on demand would create fury and chaos..."

To Fulford's exposure of this distorted market, independently wealthy Toronto collector and gallerist Yedessa Hendeles tries to pull the blanket back up. In an August 31/96 Globe article she writes: "Like sex, the art market is a source of fascination and bewilderment..."

We need this artifice, Hendeles declares, because art does not sell well here or elsewhere. Myth, manipulation and showmanshp are part of the reality of art markets everywhere:

"New York-style art dealing is especially effective in promoting work: The dealer receives paintings year-round from artists, offering them in a select "inner circle" of curators and collectors. When enough works are accumulate (and sold), the show goes on... So develops a waiting list and the beginning of a courtship between seller and purchaser."

Hendeles admits that it is a "treacherous" game at times, dealers "making moves that in any other field would land the players in jail". She defends the behaviour, however, by stating that the art market is fragile, it is based on faith and it needs protection. Art must be marketed "with myth, magic and mirrors to seduce people to part with money to purchase it and keep culture alive."

This reasoning is outrageous. However, most of her points are well taken: this is how the market for contemporary art functions.

Tom Clancey, move over!

It is unusual for so much to be said on the inner workings of the market for contemporary art. And it must be observed that few names have been mentioned: "professional" reputations are at stake. The curtain should not be lifted from a critical review, an exhibition or promotional strategy. To do so would lead to the end of reputations, businesses or careers of all parties (perhaps this is how artspeak got so out of hand?).

The market for contemporary art involves artifice, speculation, manipulation -- magic and fraud we'll leave to more fictional accounts of the art world. And to the art buyer looking to make money: beware.

Back to the Bank