I wrote a short text, commissioned by katya Sander for Circulation, a special issue of Printed Projects.
Markets are a brilliant bundle of technologies, assembled to circulate things. All kinds of things. The most visible form of market, is the competitive market. A neo-classical economic model of a competitive market, pictures rational individuals pursuing their own self-interest - without regard for others - as the motive force for markets. The laws of supply and demand at play amongst these rational individuals, extrudes the values - often represented by a financial price – exchanged, in any transaction. These fundamental elements; rational agents, supply and demand and price mechanisms function in all markets everywhere; like natural laws.
Except of course competitive markets don’t actually work like this. Or at least, only in ideological models.
Principally this is because, the neo-classical model is spectacularly under-socialized. Enabling values to be made, and made present is part of the work that markets do. And every value expressed as a price, is a nexus of myriad social processes. Markets are meshworks of embedded desires, needs, rules, technologies, rituals and obligations, and nowhere is this more apparent than in the markets for the circulation of contemporary art.
Outside of public museums, and some secretive private collections, artworks circulate through competitive markets. But how does this circulation take place? What are these embedded desires, rules, behaviours and obligations? The bankruptcy of art history, the public failure of criticism and art theory, the lack of consensus over the relevance of art, has enabled the values of competitive markets to dominate our recent evaluations of contemporary art.
And markets mark the things that circulate within them.
2. Primary Market
The circulation of contemporary artworks is structured by two competitive markets – and prices in one, are routinely half that of the other. The primary market is convened by Gallerists who organise and manage ‘commercial’ galleries. Whether as small single person enterprises or vast corporate machines, what Gallerists share is the desire to work directly with artists, promote their work through exhibitions, and sell their artworks to potential collectors.
To become a Gallerist is easy, the start-up costs are extremely small – some enthusiasm, contacts, a small exhibition and office space, and an advertising budget. There are no formal qualifications necessary; no indemnity required, no trade association to join, and no regulatory bodies. The primary market is virtually without a ‘formal’ professional structure. It’s also easy to attract a group of artists keen to exhibit, and typically a gallery will ‘represent’ between 10 and 25 of them. To be ‘represented’, usually means that an artist will be offered a solo exhibition annually or bi-annually and their artworks will be included in appropriate gallery group exhibitions. ‘Representation’ for the gallery, includes bringing the artwork to the attention of curators and collectors, and placing the work in curated public exhibitions, Biennials, and at Art Fairs; nationally and internationally. They also arrange studio visits with select collectors and curators, organise Private Views to launch exhibitions, assemble press brunches and lunches, and choreograph lavish dinners and after-parties. The primary Gallerist chooses, nurtures and develops the artists they ‘represent’ through creating a dense social network. Much of the labour of nurture is in the management of the informational prosthesis of the circulating artworks; through producing press releases and exhibition invites, buying advertising space, placing articles in newspapers and magazines, publishing catalogues, documenting and archiving artworks, and by cultivating critics, editors and publishers.
These are some of the mechanisms through which an emergent market for artworks is convened. And into this potential market, the Gallerist introduces new artworks to collectors. Usually artworks are taken on consignment from artist for exhibition, and it’s common for the Gallerist to take a %50 commission on any sales. Sold artworks leave the artists studio, pass through the gallery at exhibition and enter private collections. Here they remain until the collector decides to sell, or donate. Unsold artworks return to the sleep of storage, while some linger in the gallery as ‘stock’ to be displayed to prospective collectors, or curators.
All ‘represented’ artists have a primary gallery. Any curators, public institutions or museums that want to exhibit the artists artworks have to deal with the primary gallery; and, any other commercial galleries who wish to exhibit and sell the artists artworks also have to do business with them too. Gallerists talk endlessly about supporting young artists, they love visiting studios and ‘hanging’ exhibitions; they love art, and prefer not to let commerce and the market ‘complicate’ their relationships. And yet when they discuss gallery stock, or their private collections, they know exactly how much they initially paid, the last market evaluation, any potential discounts to be offered to select collectors or museums, and of course the artwork’s financial appreciation.
Primary Gallerists thrive by taking risks and having confidence in their ‘taste’. They seek to hedge the risks involved, through their promotional practices and by managing their network of friends and collectors into an economy of taste. Sociologist Pierre Bourdieu suggested that ‘taste, is what other people like you, like.’ If you were to stroll into a gallery from the street with a pocket full of cash, fall in love with a painting on display, and decide you really, really want to buy it for your home, the Gallerist will not necessarily sell it to you. Even if you offer to pay over the asking price. She or he will feel that you are probably buying it for the ‘wrong’ reasons, or are the ‘wrong’ sort of person to own the artwork. If you are not already known to the Gallerist, and therefore outside of their economy of taste, then definitely you are the ‘wrong’ sort of person.
Nurturing the ‘right’ collector, and placing an artwork with them for the ‘right’ reason is the principle means of control the circulation of an artwork through the primary competitive market. Selling for the ‘right ‘ reasons include, placing an artwork with a prestigious collector who will add to the evaluation of an artist and artwork – not necessarily the person prepared to pay the highest price. The ‘right’ collector might already have, or be in the process of building an ‘important’ art collection. The ‘right’ reasons might include the collector being prepared to sign a resale agreement, a quasi-legal document guaranteeing a ‘right of first refusal” on any future sale back to the Gallerist. The ‘right’ reason could be encouraged if the collector promised to donate the artwork to an important public museum collection at some future date. Gifting an artwork to a national collection removes the artwork from circulation, but also lends prestige to the artist – and therefore future artworks, the generous collector, and perceptive Gallerist.
Through managing the circulation of artworks, an artwork and artist is never entirely disentangled from their producer – the Gallerist. It’s not surprising that relationships, and particularly long working relationships develop into friendships between Gallerists and artist, or Gallerist and collector, or perhaps all three. Collectors are often referred to as supporters, or ‘friends’ of the gallery. In the extraordinarily dense flow of gifts and obligations, debts and favours, loans and discounts that lubricate artworks in their circulation, economic transactions merge into relational exchanges. A discount offered between Gallerist and collector is as much a sign of mutuality, as a display of economic of power.
Although they remove artworks from circulation, major public Museums are often offered price discounts if they purchase directly from a Gallerist. Gallerists often rationalise the reduction as a public subsidy, generously reducing the price in support of the public good. In times of draining market confidence, as bubbles burst, and capital flees from contemporary art to more secure assets, purchases from public institutions can keep commercial galleries afloat; tide them over in lean times.
Gallerists do everything possible to delay an artworks spiral into the secondary market.
3. The Secondary Market
The secondary market for contemporary art is structured through auction houses. Auctions are relational competitive markets, and breathtaking theatre. The twin poles of drama - the flicker between despair and euphoria is endlessly produced, because buyers compete to establish an appropriate evaluation – when the hammer falls. The price is extruded as the auction is conducted, by the last person standing in the tournament of value. Of course there are precedents to refer to, and there are reserves, published estimates, and guarantees offered, and yet none of these can be taken as true. An auction has to be convened and set in motion to perform the social production of evaluation, live and in real-time.
The primary market relies on deep, personal and complex relationships between artists, Gallerists and collectors. In the secondary market, artworks circulate through looser, more diverse and contingent networks outside the manipulation and monopolization of the primary market. While the primary market is reproduced within established communities of taste, the secondary market has to continually perform itself.
In theory, an auction is close to the ideal of a ‘free’ market. Anyone can participate, and everyone has equal access to the market, all the information regarding the market is readily available, and artworks are distributed on the ability to pay the ‘spot’ price. Except again, this is an ideological fantasy. Auctions are secretive and information is guarded, auctions are very sensitive to hype, excitement, gossip and rumour. And very, very susceptible to the arbitrary competitive clash of two determined bidders. When two or more collectors are determined to acquire the same artwork, or, when a particular individual wants to make a statement, a sensational or ‘sacrificial price’ can be achieved. A ‘sacrificial price’ inscribes a mark in the market “I can afford this” or “I want this, this much” or “ look at the scale of my desire” or simply “look at me”! There could also be a financial logic in the desire to establish a ‘sacrificial price’, other comparable artworks already in the collectors collection will (notionally) have a similar evaluation. Simply, a sensational price recalibrates the market.
Anyone can attend an auction, no tickets are issued, no booking is required. Like legal trials, auctions are truly public judgements. And, anyone can purchase an artwork offered for sale, as long as they have the access to the appropriate sum of money, or credit-line. In the secondary market, there are only ‘right’ reasons to transact. The auction does not care where the money comes from or where the artwork goes, as long as international laws are not seen to be broken. In the secondary market, the only taboo is around stagnation. Artworks must always circulate, and their extruded prices escalate. A stalled lot – an artwok offered for auction which does not reach its reserve price - fails to sell. It’s ‘passed’. This can damage the artwork, the artists reputation, all the other artists artworks currently in circulation, or exhibited in private collections. Worse, a stalled artwork could trigger a collapse of the current auction, and confidence can simply evaporate from the sale room; in an instant. And even more catastrophically, a failed lot can puncture a bubble and trigger a systemic market collapse. So, artworks that fail to reach their reserve price at auction are literally ‘passed’, they are passed over with a stifled incantation by the auctioneer of words barely audible on the saleroom floor. ‘Passes’ are contagious. Perfectly healthy auctions can stutter, stop and die. If the secondary market thrives on constant circulation, record-prices and buoyant confidence, on the management of a ‘virtuous circle’ of evaluation, ‘passes’ expose the sensitive underbelly of market confidence. If you only want what other people like you want, and they no longer want the goods on offer; its over. Circulation ceases. ‘Passes’ are the inverse of the ‘sacrificial price’.
One of the instruments for managing circulation in the secondary market is the reserve price. The reserve is a financial boundary, agreed by the seller/collector advised by the auction house specialist. At auction, if the lot does not reach its reserve it returns to the seller/collector unsold. If bidders drive the price above it’s transacted from one collector, or dealer to another. Reserves are private financial agreements, usually somewhere towards the lower margin of the published estimates. To encourage collectors to circulate important artworks in the secondary market – and not with a rival house – financial guarantees may be offered. The guarantee is a fee, which is probably close to the reserve price, paid to the seller/collector up-front. It’s in the auction House’ interest to pressure the edge of the previous market evaluation, to tease-up prices. If the lot is ‘passed’ the auction house looses the financial guarantee, as well as the confidence of the saleroom. To recoup some of their losses, after the sale, quietly and behind the scenes, the auction house will try and broker a private sale.
The auction house ‘expert’, or collector or dealer active in the secondary market needs to be aware of which collector owns what artworks, how the collection is being developed and through which Gallerists, and what artwork is about to be ‘offered’ to the market. A prominent artwork is located, prised from a collection, offered for sale and achieves a record evaluation. It passes from one collector to another, and a window of opportunity opens. An opportunity for other collectors with similar holdings of artworks to ‘realise’ their value, a chance to ‘refresh, or ‘re-focus’ their collection. Or, for the ‘experts’ and dealers to encourage collectors to buy-into this fleeting market opportunity. This is the moment for dealers to ‘flip’ artworks or ‘churn’ the market. ‘Churn’ the secondary market, because it thrives on difference within repetition. There are endless Andy Warhol prints and each one can be narrated into difference.
The traditional slow steady circulation of artworks – with concomitant checks and balances; like a solid record of prestigious exhibitions, a range of critical reviews, citation in refereed articles and scholarly books, representation in respected private collections, museum acquisition, etc - is being replaced by the shriek of record prices, achieved in the secondary market with artworks straight from artists studios! If markets mark the things that circulate within them, then recently, the slower processes of evaluation of artworks has been overwritten by the swaggering confidence of a competitive market bubble. Gallerists, so powerful in the primary despise the secondary market. It’s an aggressive, volatile and parasitic environment. And yet they participate in auctions, either brazenly in person or discretely by proxy. They bid-up or buy back artworks that have temporarily spun outside their sphere of influence, to ‘protect’ the artists they represent.
Buck L. (2004) Market Matters: The Dynamics of the Contemporary Art Market
Arts Council England ACE
Hargreaves McIintyre M. and (2004) Taste Buds: How to Cultivate the Art Market Arts Council England ACE
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Ruskin J. A Joy Forever; And its Price in the Market. 10th and 13th July 1857. Reprinted in Cummings N & Lewandowska M Free Trade (2003) Manchester Art Gallery
Smith C. (1989) Auctions: the Social Construction of Value University of California Press
Velthius O. (2005) Talking Prices; Symbolic Meaning of prices on the Market for Contemporary Art Princeton University Press
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