In these straitened times, US$400 million for a Leonardo paints a picture of pure greed
Absurd prices are being paid for some of the world’s top paintings in a market that is opaque and open to all sorts of chicanery, while many around the world struggle to make ends meet
The rarefied and champagne-soaked world of fine art has entered 2018 in a panic. A very dignified sort of panic, but panic nevertheless. As the Financial Times art correspondent Jan Dalley put it just a month ago: “Has the art market gone completely insane?”
The formal trigger for this explosion of angst is of course the November 15 sale at Christie’s of Leonardo da Vinci’s Salvator Mundi for US$400 million. For me, the ridiculous price is less bemusing than the backstory: is there not delicious irony in a Muslim Saudi Arabian prince buying a picture of Christ with a title meaning “saviour of the world” for a new museum in Abu Dhabi?
But why stop here? Please just look at Jean-Michel Basquiat’s 1982 work Untitled and answer me two questions:
Could you honestly bear having that face stare at you across the dining room as you and friends share dinner?
Could you, without embarrassment, admit to those friends that you spent US$110.5 million to buy it?
I assume that the Japanese billionaire Yusaku Maezawa, who bought Untitled at auction in New York in May last year, would answer yes to both. Which means he has a much stronger stomach than I.
Unless of course, like so many of the ultra-high-net-worth (UHNW) buyers of the world’s most expensive art, he prefers to keep it in storage. Apparently around 80 per cent of the world’s top artworks sit in “free ports” – about 1.2 million artworks in all – which “not only offer specialist long-term care, but also tax havens and lavish facilities for viewing and trading works on-site, unobserved”, according to Dalley.
Panics about overheating in the global art market are not new. A quick Google search finds dozens of hand-wringing articles from speculators and art academics alike going back more than two decades. Bubbles emerged and were burst in the early 1990s, and again in 2008 in the global financial crash. Most recent talk of an unsustainable bubble began early in 2015, and continues apace despite a 27 per cent fall in auction sales in 2016. But the Salvator Mundi sale has aroused renewed angst.
If the market were a little less opaque, it would be easier to gauge whether prices are ridiculous or not. But only 30 per cent of global sales are in auction houses where prices can be reliably tracked. Prices in the “shadowy realm” of private sales – and even whether sales are completed – are rarely clear.
In principle, there should be no reason for ordinary mortals like me to care a jot about how the super-rich waste their money, or get scammed. If Maezawa’s modern gargoyle plunges in value by US$50 million – or if an owner of an Andy Warhol (down 68 per cent last year) or a Picasso (down 50 per cent) protests – few will be upset or feel sympathy. And it will do little to dilute the envy.
But in times of still-painful recession, there is something politically uncomfortable about the super-rich reminding us how little the recession has hurt them. Since 1980, over 80 per cent of all growth in the world economy has arisen from investment rather than incomes, which in turn means that the world’s richest 1 per cent now own 50 per cent of global household wealth, and the top 10 per cent own 88 per cent, according to Credit Suisse’s Global Wealth Report.
According to Forbes magazine, there are now over 2,000 billionaires worldwide who between them own wealth amounting to US$7.67 trillion. While about half of this wealth still sits in the US, almost a third of these ultra-rich are today in Asia, where China is apparently adding a newly minted billionaire every three weeks. Angst about the global fine art market sits mainly with this select and incestuous UHNW universe.
Of course there are other things the super-rich can splash their money on. Fine wines can be prodigiously expensive, as can private jets. But these give few bragging rights among those who really care. Superyachts can be a little more exclusive – just 370 were sold last year with prices up to US$20 million – and a total of 109 billionaires have bought a total of 140 sports clubs, like Russia’s Roman Abramovich, who owns Britain’s Chelsea soccer club. But it is in the fine art market where most billionaire testosterone flows.
Apart from the gross inequity this glamorous business represents, its opacity and attractiveness to scoundrels and money launderers must surely be a source of concern. As Dalley notes: “There is no transparency, almost no regulation and a culture of obsessional secrecy. We won’t usually know the names of either buyer or seller in auction transactions, and in private sales not even the price – or indeed whether a sale has taken place at all. There is no register of transactions, or of ownership of works.”
Georgina Adam, in her book Dark Side of the Boom, which explores the chicanery widespread among auction houses and arts sales rooms, including dubious authentification processes, forgeries, speculation, tax avoidance, money laundering and price rigging, notes: “Opacity, low regulation and portable assets make art a perfect vehicle for all sorts of chicanery … If people are buying (expensive) real estate, they bring in lawyers and stitch up contracts. Yet if they buy a picture for US$3 million they hardly do anything.”
One place where there might be quiet celebration at a fall in prices may be China. Beijing has reduced tax on imported works of art to 3 per cent to encourage China’s new billionaire class to repatriate Chinese works of art that have left the country as spoils of war over the past century. But can this explain the purchase by former Shanghai taxi driver turned billionaire, Liu Yiqian, of Amedeo Modigliani’s Nu Couche for US$170 million?
At the end of the day, the saddest and most shocking aspect of this hyperventilated market is that so little of it has to do with aesthetics, and so much about bragging rights to be seen at the right parties, and unadulterated monetary greed. After a decade of hardship that has even hit millions of middle-class people in America and Europe, it is at the very least in poor taste.
David Dodwell researches and writes about global, regional and Hong Kong challenges from a Hong Kong point of view