In the middle of last month’s financial meltdown, a remarkable event occurred in London. While the City of London was shaken by the collapse of Lehman Brothers and the run on HBOS, Sotheby’s staged a record-breaking auction for the works of the artist Damien Hirst, which produced a gross take of around US$200 million.
Compared with the value that was being destroyed on Wall Street, this was small change; but it was a remarkable vote of confidence in the work of one artist.
Financial bubbles, like the one that has just definitively burst, are intimately related to the world of art. Renaissance Florence depended on the patronage of the Medici. Sixteenth-century Venice turned the wealth of the spice trade into the canvases of Titian and Tintoretto.
The world’s next great commercial center was Amsterdam, where again the successful burghers pushed for a new style of art and produced the age of Rembrandt. The great 19th and early 20th-century financiers, men like J.P. Morgan, Henry Frick and Andrew Mellon, spent a large part of their fortunes on art.
From their viewpoint, collecting art was not simply a matter of benevolence or public spiritedness. Nor was it simply a very expensive hobby. Their galleries showed in a visible and very public way the discernment and judgment that their financial business depended on.
Financial judgment, by contrast, is not by its nature open to inspection. It depends on inside deals, on moving ahead of the market. It is impossible to tell who is making good bets and who is gambling recklessly. Consequently, it is helpful to have a proxy activity that enables outsiders to see that the process of discernment and valuation really occurs.
The recent era of global finance — maybe we can already possibly speak of it as being past — differed from the financial surge of a century ago. Its cultural manifestations also appeared to be novel.
To some of its participants, collecting contemporary art showed how finance had become much more of a creative process than it was in the world of the older financiers. Morgan or Mellon collected largely old masters from the cinquecento, whose reputation was clearly and solidly established.
The new art collectors, however, were more like the Medici: they were really stimulating new cultural creation. As with their investments, the habitues of contemporary art markets relied not purely on their own judgment, but on teams of sophisticated advisers and dealers who could give opinions on what trends best caught the spirit of the age.
Naive outsiders found the world of contemporary art bewildering. Why was a cow preserved in formaldehyde a great cultural achievement? What did the sheets of cloth covered by regularly interspersed colored dots — the products of Hirst’s large and mechanized workshops — have to do with artistic innovation or originality?
Was not the same incomprehension on the part of the broad public characteristic of the increasingly sophisticated financial products that were being traded? Indeed, the nature of the risks involved was not clear, even to regulators or the senior management of the firms that were building the business.
Some modern artists and their patrons explicitly point to the parallel between contemporary art and new financial products. Deutsche Bank, Europe’s most prominent art-collecting bank, published the view of academic experts to the effect that customers, the broad public, were “extremely conservative, boring, lack imagination, and don’t know their own minds.”
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