The art world doesn’t work the way people think it does. In the contemporary art world most of us would imagine an artwork would become sought after because it has some meaning. We’d also assume the artist was talented and their commentary was at least worth hearing.
But it doesn’t quite work that way. The market for art is manipulated in ways that were it the stock market would simply be illegal. The cognoscenti would explain this is to protect the artists, and some would truly believe it. There are dealers and galleries out there who are excited at the prospect of something new and attention-worthy. But there’s also a cynical cadre who is in it for cash and there is an obscene amount of money floating around the art world.
It’s not the aesthetics of the artwork
Desirable art, and in this context, desirable equates to art which counts as an investment, doesn’t necessarily depend on how attractive the paint on canvas is, it is a subjective view and the perspective is influenced by the gallery.
The primary and secondary markets
The first thing to understand is there are two markets. The primary market is where an artwork is bought from the artist and is controlled by the galleries. It is the gallery who sets both the taste and the price. But both parts are important. Once the artist becomes commoditized the prices on any of their pieces can skyrocket and then they become investable. Not because of an aesthetic consideration, but in the same way the S&P 500 does.
The secondary market is the trading of artwork between collectors. These transactions are mostly handled by the auction houses and when the market is performing as normal, prices at auction are usually higher than the price paid in the primary market.
When the general markets wobble, the art market will follow suit. Nervous investors are nervous in all markets, but one effect of a recession is prices in the secondary market fall below the original buying price. The effect on the market is to fold tighter on itself once more. The top-end investment becomes a better investment as the others drop out the bottom of the market. Brands are a very fragile commodity. An artist who is perceived as being over-hyped is in an invidious position.
At the high-end of the art, a recession is a hiccup
In a recession economy everything, but especially money markets, become unstable. Investors become wary of where they put money. But in the art market, investment can still remain relatively safe, and when it comes to it, the people who are investing at this level are the 1-2% who are least affected by the recession anyway.
The result of the vast amounts of cash being spent on what is effectively the whimsy of taste means the entire structure is something of a house of cards. And as we all know, they can come crashing down.