One of the art world’s neatest neoliberal parlor tricks is transforming the real world’s troubles into pleasingly hermetic objects for hobbyists, and in this respect the European Fine Art Foundation (TEFAF)’s ebullient annual economic report is a fine specimen.
Yes, blinkered insouciance is the name of the game, with the report’s stellar results reassuring many that the boom-times are back — the international art economy pulled down a near-record $66 billion last year on the back of unprecedented levels of affluence. In our coverage of the report yesterday, we discussed some of the specific results in greater detail, but what’s most stunning about the report is not so much what it contains, but what it fundamentally misses: its macro-economic bad faith.
In the third chapter, titled “Changing Patterns of Global Wealth,” the report deadpans that “[I]ndividual wealth has been growing faster at the top during the last ten years. In particular, the number of UHNWIs [Ultra-High Net Worth Individuals] and their wealth is growing much faster than general wealth.” That the global economic “recovery” has accrued overwhelmingly to the global elite has even begun to worry the global elite, but the widely-acknowledged macro-economic risks at play are, I guess, too unsavory for TEFAF’s readership to consider. Only a ship of fools, suddenly buoyed, would take a flash-flood for a rising tide.
Which leads us to a far more important study, also out yesterday and issued not from some obscure consultancy but the International Monetary Fund (IMF). The findings there harsh the TEFAF reverie with data on the disastrous relationship between high inequality and long-term growth. This work follows a larger paper published by the IMF last month building on the “tentative consensus” position that
inequality can undermine progress in health and education, cause investment-reducing political and economic instability, and undercut the social consensus required to adjust in the face of shocks, and thus that it tends to reduce the pace and durability of growth.
The paper further finds that beyond this negative relationship, “lower net inequality is robustly correlated with faster and more durable growth, for a given level of redistribution.” These results are especially significant because they are derived from a recently compiled, unprecedentedly large dataset on income inequality and economic growth.
That the broader economic outlook is made more bleak by the same things that power the art market is anathema to the art market advisors behind the TEFAF study. They would, in fact, very much not like you to consider this, despite the anemic GDP growth chart they place not far from the table showing double-digit growth in millionaires among the same key national markets observed. (Or, worse, individual wealth accruing in the face of national failures: “Despite poor economic conditions, the number of millionaires in countries such as Spain and Italy grew, although they represented a tiny fraction of their populations.”) The report then suggests that high-risk luxury assets like art are actually a good idea in times of financial instability, which flies in the face of observed reality in securities markets. Here’s that nugget of nonsense:
Allocations to art have varied over time and trends indicate that in times of financial crisis and uncertainty, people tend to lean towards art, which is seen as a more familiar, tangible asset with considerable longevity in terms of value maintenance and appreciation. At the height of the financial crisis in 2008/09, allocations to art increased to 25%, as art was seen as an asset that would have the most lasting value, and was also a means of diversifying out of other poorly performing asset classes. Many HNWIs are increasingly approaching luxury goods as investments, and looking for those sectors that have the most long-term value, notably art and antiques.
In conclusion: don’t listen to your art market advisor, who probably knows nothing of either art or markets, and buy a panic room. Yayoi Kusama makes nice ones.