Art, wealth and power

The ‘empty plinth’ in London’s Trafalgar Square was originally intended for a statue of the undistinguished William IV on a horse, but the sponsors failed to raise enough money. Now it is used to display the work of contemporary artists, and is currently occupied by the Gift Horse, a skeletal sculpture by the German-American artist Hans Haacke. The huge horse is inspired by the work of the 18th-century artist George Stubbs, celebrated for his equine paintings and drawings – for instance, Lion Devouring a Horse. Attached to the front legs of the Gift Horse, like a ribbon tied in a bow, is a digital display giving the latest stock exchange prices.

Today, it says, works of art – whatever the artists’ original intentions – tend to become inextricably involved in the art market and the world of finance. The emaciated horse is the result of the ravages of austerity. As it happens, workers at the nearby National Gallery are currently involved in strike action against the threat of cost-cutting privatisation of services.

The link between art, wealth and power is not new. The National Gallery houses hundreds of old masters celebrating the power and prestige of their patrons. Yet today, there is an unprecedented surge in the art market. Paintings – by Monet, Cézanne, Gauguin, Picasso and others – that are sought after by the super-rich, sell for obscene prices, while auction-house sales break record after record.

Art is many things. One definition from an online dictionary is: "the expression or application of human creative skill and imagination, typically in a visual form such as painting or sculpture, producing works to be appreciated primarily for their beauty or emotional power". A good enough definition – but incomplete. In the auction houses the artworks selling for phenomenal prices are appreciated primarily for their financial value. They are ‘assets’, symbols of wealth and a source of prestige.

The very wealthy have always invested in art. In 1914, on the eve of the Russian revolution, Tsar Nicholas II bought Leonardo da Vinci’s Benois Madonna for $1.5 million. Allowing for inflation, that would be about $35.5 million now – small change in today’s art market. Earlier this year, Pablo Picasso’s Women of Algiers (version O) was auctioned off to an anonymous bidder for $179.4 million. There were five telephone bidders ready to spend more than $120 million to get the paining. In a private sale, Paul Gauguin’s painting of two Tahitian girls, When Will They Marry? was sold to the Museum of Qatar for $300 million.

There has been a huge expansion of the art market in recent years as global inequality has deepened and the ranks of the super-rich plutocrats have grown. In 2014 more than 1,000 works sold for more than $1 million each, compared with 460 such sales in 2004. The global art market is estimated at about $466 billion. "I like to believe", says Hans Haacke, "that when my generation put their feet on the ground, collectors bought works because they wanted to be associated with the art. Now it appears a great number of collectors treat it as an investment. That is disgusting". (Nicholas Wroe, Horseplay: What Hans Haacke’s Fourth Plinth Tells Us about Art and the City, Guardian, 27 February)

The economic commentator, Nouriel Roubini, argues that "art is a new and separate asset class". Unlike shares, bonds or property, art does not yield dividends, interest or rents. So why do the super-rich invest in this asset class? There are various motives. Subject to shifting fashions and fads in the art market, they may make huge capital gains as prices rise. The super-rich already have a surfeit of securities and property, and artworks may complete their portfolios.

Investing in art, however, may reflect uncertainty about the world economy. Bonds and shares can collapse in a slump and some may never recover. But even after the deflation of the present art bubble, works by Monet, Van Gogh, Picasso, and other masters – because of their quality and rarity – are very unlikely to lose all their value. Besides, artworks have other advantages. They are a store of value that can easily be hidden from tax collectors.

Another motive for wealthy collectors is prestige – the aura of wealth and power. "The true value lies in owning a painting that the Tate or Getty museums would love to display in public, and being able to dazzle yourself and others in private". (John Gapper, Picasso is not just a Valuable Asset, Financial Times, 13 May)

"It is a period of colossal wealth", comments Georgina Adam, FT writer, "where buying art is akin to purchasing luxury goods. If Roman Abramovich can spend £1 billion on a yacht, what’s it to him to pay £100 million for a painting?" "Oligarchs are buying rich baubles for their homes, floating and otherwise", says a private galley director. "There’s a lot of fashion involved", says a dealer, "and people are buying for show. I’m not sure that many of them are buying for the love of the object. For some… it’s all about playing the market. Back in the early 20th century collectors would buy a painting, live with it in their own home and leave it to a museum. Now it’s about acquisition, not collecting". (International New York Times, 15 June)

The flourishing of the art market augments the personal wealth of hedge-fund managers, oligarchs and other sections of the plutocracy. But what does it contribute to the growth of the real economy, or to the benefit of society at large? In fact, the growth of the art market is strongly correlated with the growth of inequality and the impoverishment of the masses. The top 0.1% already owns nearly 20% of the world’s wealth, and their share is growing.

But within the capitalist elite there is an even smaller, ultra-rich fraction – who dominate the art market. "Last year, the planet was estimated to have a population of 211,275 so-called ultra-high-net worth individuals with a combined wealth of $29.7 trillion, of which some $26 billion was spent on art, according to… the European Fine Art Foundation". (Scott Reyburn, Riding on the Back of High-Value Art, INYT, 6 April)

In 2013, when the global art market was worth about $66 billion, about $17 billion was spent on services. Between sellers and buyers there are many layers of middlemen and women: agents, advisors, auctioneers, dealers, who all take a cut. As the ‘industry’ grows, there are more and more scandals or rumours of criminality. "While art looks as if it is all about beauty", says Roubini, "as a business it is full of shady stuff". (John Gapper, Roubini Says Art Market Needs Regulation, FT, 22 January)

Roubini complains that, although art is effectively an ‘asset class’, it is totally unregulated and very secretive. There are claims that auctions have been rigged, that dealers have taken massive, concealed mark-up fees. Paintings are used for tax avoidance/evasion and money laundering, facilitated by a growing network of secure storage facilities. The art market is distinct from the world of museums, says Martin Roth, director of London’s Victoria and Albert museum: "It is a camouflage thing that is called the arts but it is money laundering. In the end it is just a business and a global currency, not really related to the art world". (FT, 22 January)

Museums and art galleries, moreover, which make art available to the public, are missing out to private hoarders. Astronomical prices in the art market make it more and more difficult for museums to add to their collections. Private collectors, who in the past loaned or bequeathed their artworks to galleries, are increasingly selling their paintings to private owners who keep them in bank vaults or art bunkers.

At the same time, government subsidies to museums and galleries are being cut. In response, museums throughout Europe are selling, or considering selling, items from their collections: "what once seemed unthinkable is suddenly palatable… The continent’s art treasures more and more are losing sacred status as an inheritance belonging to the people… [There are] fears that masterpieces will disappear from public view to adorn the living room walls of a Saudi prince or hedge-fund billionaire". (Doreen Carvajal, Museums Break a Taboo by Selling Art to Pay Bills, INYT, 6 April)

Art as "an inheritance belonging to the people" is being appropriated by the ultra-rich. Predatory purchasing of art goes together with the emaciation of public museums and galleries through austerity policies. In the future socialist society, art – and other cultural phenomena – will be accessible to everyone through public galleries and other facilities. Art will be "appreciated primarily for [its] beauty or emotional power", not its price tag. Meanwhile, there should be a substantial levy on art sales to provide additional resources for artists and galleries as a step in the right direction.

Lynn Walsh