The Potential Dislocation of the Global Art Market: the flow of capital in the global art ecosystem

‘The global art market is threatened with at best dislocation and at worst collapse in the advent of growing international economic and cultural power from emerging markets.’ While this statement touches on many of the fears of the flux of the global art market, it, perhaps, oversimplifies the mechanics of international art trade. In this essay I will explore the distribution of the global art trade and argue that while there are alternate markets, these do not threaten the status quo, but act in tandem with the global and Western market.

To begin, the term dislocation is, perhaps, misleading. It assumes the idea of a homogenized, non-dislocated global market that exists today and has done in the past. It is perhaps more accurate to think of an over-archingly dominant Western market that was so large as to occupy a global cultural space. While the Capitalist framework theoretically suggested that the art market was global and all-encompassing, the reality is that the art market largely operated in the West. The growing strength of the Chinese art market may suggest that it is poised to become the next dominating market power, but this essay will argue that the Chinese market does not behave identically to the West and does not threaten to overrun ‘The Global Market’.

It is important to clarify what is meant by the different markets in this essay. I will refer to the Global Market to incorporate the gestalt of art market trade. The Western market will refer to the markets of Europe, the UK and the USA, although The UK and the USA are the primarily players within this categorization.  I have grouped these markets under the umbrella term, the Western Market, because these markets often have a cross pollination of both content being sold and of collectors buying the works. This acts in opposition to many of the emerging markets, which often deal primarily in artworks from the region, such as China, South Africa or Brazil.

A justification of these categories, and why I will be focusing on the markets of the USA, UK and China, can be found in the distribution of market share. In 2017, according to Art Basel art report, the distribution of the global market share was as follows: USA held 42%; China held 21% and the UK held 20%. The remaining 17% was held by the rest of the world.

If you’ll indulge in a brief visualisation of the international market, which will allow for the expansion of certain arguments later in the essay. It may be useful to think of the global market as a stream – with various dams, fords and eddies – that diverges and reconnects and contracts and widens depending on the landscape it finds itself in. Under this analogy, the Western market can be represented by a large, the largest, dam in the flow of the river. While water does flow from between dams, from the Western dam to the Chinese and various emerging market dams, it would be incorrect to say that the water has been somehow reduced or threatened. It has, instead, been redistributed. Now, like a well-constructed systems of dams, the global market depends on appropriate distribution for the system to flow. If too much water is leaked from the river or spills over the shores of the dam, it is soaked up by the Earth and leaves the stream. Additionally, past a critical level of loss, and a dam’s integrity is challenged as the water cannot achieve critical mass of to sustain itself. In the same way, unregulated flow of capital from various national markets has the potential of upsetting the balance of the market. However, this, as I will argue in this essay, is unlikely to occur.

The Western Market and The Growth of the Chinese Market

The Western market relies on international trade in order to keep dynamic. To tap into the analogy created, it relies on a constant flow of water in an out of its dams to keep the water fresh. This dependence on free trade, of constant economic growth, was an important factor in colonial expansion and remains a corner-stone of the Western economic system. While this system is working well, it suggests that it’s biggest weakness is the lack of input from the rest of the world. This threat may be represented in the birth of Emerging markets, but I will argue later in the essay that these markets exist in the gestalt of the market and are, thus, effectively subsumed by the Western trade market.

While the Chinese market is growing, it does not represent a valid threat to the Western market. The Chinese Art market reflected the largest global market share in 2015 and 2016 and held the second largest share in 2017. The strength of this market may suggest that the Chinese market may increase to dominate and replace the Western market. The Chinese market may indeed upscale and continue to hold a formidable and even dominating market share of the global market, but the consolidation of political power and its influence on the Chinese market suggest that it will not have the same levels of global penetration that the Western market has seen.

One reason to suggest that the Chinese market will not permeate outwards can be seen in its politically assigned agenda when compared against the history of the Western market. By Western market, I refer primarily to the combination of the European, American and British art market trade. This understanding of the Western Art Market and the assumption of it representing The Global Market will be explored in detail further in the essay.

A version of the Western Market can be argued to have existed for as long as there has been a West for which a market can be housed, and even then informal trade has occurred as long as there have been people to trade. Indeed, the first recoded examples of art trade between China and the West was dated as early as the 13^th century[1]. The origin of the current system, however, can be seen to have germinated in the early 1600s due to colonial interests[2]. Through the various exploratory trade routes of the, primarily, English, Dutch, Spanish and Portuguese empires, well-used trade channels were opened from the rest of the world to Europe. It is important to note that the trade-routes were not only sanctioned, but encouraged. In other words, there was applied penetration of European culture in various forms throughout the world. The expansionist models of these nations were not only designed to allow for the flowing of commerce, but also as a method of impregnating non-European countries with a sense of European culture. This system of trade eventually morphed into colonialism, neo-colonialism and laid the groundwork for the system of globalisation as we see it today.

The colonisation of various countries by European settlers created a memetic transmission of European values which are reflected in European culture and, eventually, European tastes. By this I mean that the creation of value of European culture created a cascade effect that perpetuated an increased appreciation for the value of European culture. The culmination of efficient trade routes and cultural dissemination allowed the Western art market to achieve a place of importance that was recognised all all sectors of the globe that had strong European links. This, in turn, allowed for the dominance of the Western art market, and Western tastes which exist today. To put it simply, the Western Art Market created demand through the export of its culture.

The Chinese Art Market, however, is not founded on these principles. While China’s art trade with the West dates as early as the 13^th century, and official trade occurring in the early parts of the 14^th century[3], China has not historically used its trade routes to further cultural agendas. China’s trade with the West diminished from the late 18^th century due to isolationist policies of the government[4]. China has since been concerned with internal affairs and not with the exportation of Chinese values, cultures or traditions. Indeed, the opposite approach is true. Chinese culture has developed several gate-keeping mechanisms through which it protects itself from outside influence, based on the core concerns of Neiluan and Waihuan – internal worry and external threat –  that govern governmental policy.

Additionally, in the beginning of the 20^th century, when the Western world was globalising and forming links, the internal conflicts within China prevented it’s whole-sale contact with the outside world. Through the fall of the last Dynasty in 1912, through to the May the 4^th movement and the Cultural Revolution of 1966, China has largely been unconcerned with outside trade on an official level[5]. The little outside contact it did have in the later half of the 20^th century was through Russia, which, due to its adoption of communism, like China, was a global pariah. Interestingly, it is this contact that lead to the introduction of oil painting as a critical practise in Chinese art under the direction of Social Realism. The fall of communism in 1989 opened up trade routes from the regions of China and Russia that had previously existed and is seen symbolically as the beginning of the current wave of globalised trade[6].

I would suggest that the Chinese art market is centered on an acknowledgment of cultural heritage and cultural value. The resurgence in traditional works and the focus on contemporary Chinese art may suggest a political agenda beyond simply financial incentive. Art can act as a vessel for ideology[7]. It is both representative of the ideology and it is prescriptive, as while it is often reflective of cultural values, it also helps to define what those values are. Or, as Trotsky strongly put is, art is ‘not a mirror, but a hammer: it does not reflect, it shapes’[8]. Today, China is engaging with the use of culture to exert soft-power to shape cultural discourse[9]. Art from China is used as a form of global leverage, but even this is not to the same scale as the cultural export from the West in the previous half century. By Soft Power, I refer to the practice of elevating a particular element of national culture in order to influence opinions and perceptions of that nation in the international arena. I argue that the use of soft-power tactics is different in kind to the use of soft-power of the West. There seems to be no agenda to make the world more Chinese, but instead, simply to highlight a cultural significance of Chinese history, tradition and cultural strength. It can be, thus seen, more as a tool for global validation as opposed to global dominance. This may come down to the difference in economic approaches. The use of soft power, particularly during the Cold War by the USA was aimed to champion the Capitalist economic system and disrupt Communism. China’s adopting of various layers of Communist and Capitalist economic systems within its nation would suggest that it is not championing the adoption of a particular system, but perhaps a recognition of an historic tradition. These points suggest that China’s engagement in the art market as much political as economic. This in turn suggests that its economic dissemination is limited to political efficacy.

While I hope to have shown that the Chinese economy should not propose a viable alternative to the Western market due to its seeming reluctance to open its markets to the world, there is also the worry of dislocated the market through the spread of various other emerging markets. Regions, such as India, Turkey and Brazil have seen remarkable growth rates[10]. While these markets do represent alternate streams of revenue, it is difficult to see if they will ever challenge the status quo of the international market.

While various emerging markets have the potential to upset the flow of the economic river, in most cases, they simply lack the necessary infrastructure to house enough of the capital to challenge the dominated Western model. In terms of the analogy created, the vessel of their dams are too small to hold a critical mass to self-sustain and thus they require constant injections from alternate sources.

Other Emerging Markets and UHNWI

It may be the case that emerging markets have opened up as a way to counteract a lack of supply of Western Works, as opposed to a demand borne of earnest competition. With the rise of Ultra-High-Net-Worth-Individuals (UHNWI) wanting to validate themselves through art, the demand for high-end Western art has outstripped its supply. UHNWI who lack international status, particularly, have used a strong art collection to validate their wealth and solidify social status[11]. To borrow from Maslow’s Hierarchy of Needs[12], art can be seen as a method to achieve the final stage of self-actualization. Art can be seen as a luxury item of the second order, where it has been argued that it provides ‘luxury’ not only to the body, but also to the spirit[13]. While these buyers may often buy within the region of their birth, many UHNWI operate across various national boundaries. Many buyers in New York sales are indeed foreign[14]. Additionally, there remains a stigma against local dealers in that non-international art is often considered parochial and thus does not provide the same level of status elevation as internationally established art[15]. These factors combined suggest that the international market will remain international and relatively free across various nations.

It must be noted that many emerging markets adopt the Western Model of art trade[16]. This can be seen in the introduction of Western-style galleries, museums and auction houses. The growth of these institutions are impressive. In South Africa over the last three years we can see an explosive growth of Western-style institutions. Aspire Art Auctions was set up in 2016. In 2017, the Zeitz MOCCA museum was opened and 2018 saw the creation of the Norval foundation. While the growth of these institutions represents a growth in the artistic industry, the trade remains local and the style of trade and validation is fundamentally of the Western style. Even if these institutions were to grow to gain a greater portion of the global market share, their reliance on Western systems suggests that they would incorporate themselves into the global market and not challenge it.
The African Market consists primarily of two artistic hubs: Nigeria and South Africa. While the local scenes are growing, Africa and South America together hold less than 4% of the global market share in art sales[17]. This may be due to the relatively low prices in comparison to the global global market- caused largely by currency conversions. These low prices mean that less capital is needed to participate in the market. As such, there is a lower barrier to entry, while simultaneously means regional pieces may traditionally confer less status.

Africa as a frontier market perhaps holds the greatest possibility for personal financial reward, due to the relatively low prices of works at source versus their sale internationally. It is, however, unlikely to grow as a market large enough to challenge any existing frameworks.

In this instance it is important to remember that the market is not a unified object but consists of multiple individual agents acting in a self-interested manner. This means that while the market itself may not reach high levels the possibility of a few key players making a big difference and gaining massive profits from it are high due to this it should not be discounted.

Well the Middle East seems to have the capital necessary to create a stable market the political climate means that is there is not enough regional confidence for outside investors to invest in the region. This stagnates the growth of the institutions necessary for artistic validation such as art fairs auction houses and museums. In particular, the current and indeed historic conflict with North America means that the Middle East has existed in a precarious economic position for many years why it is important to note that the many countries are separate – such as list all the countries and their separateness nonetheless the region as a whole as a gestalt suffers. This means that while the UAE is experiencing economic growth and stability, the instability of Turkey and in Iran may cast a long shadows over the region in the eyes of international investors. International confidence is often unspecific in discrimination.

This essay has attempted to show that while various modes of market trade have opened up in the form of emerging markets, none of these markets present credible threat of dislocating the global market. Instead they represent a symptom of globalization and increased international trade. They represent a growing trend of UHNWIs transcending national borders and thus, transcending nationally constrained spending. While China proposes slightly different model to the Western open-trade system, and has the market strength to challenge the Western model, it’s internal policies mean that it is unlikely to overtake the Western market in the near future. It is also unlikely to offer a viable alternative to prospective collectors to the free Western markets. It is also unlikely to cannibalize the Western market due to its closed-off system of trade. It remains highly monitored by the government, with strict export laws and various gate-keeping mechanisms for foreign buyers. This, as I have argued previously, is due to economic system that does not rely on the premise of free trade. Thus, the largest threat to the Western model is not various emerging markets, but massive political instability that would lead to the disruption of the free market.

BIBLIOGRAPHY

Gladston, Paul. ‘Chinese Art in Context’, Contemporary Chinese Art: A Critical History, edited by Paul Gladston, 40-83. Reaktion Books, 2014.

Maslow, Abraham H., ‘A Theory of Human Motivation’, Psychological Review, 50 no.4, (1943): 370 -96

McAndrew, Clare, ‘The Art Market 2018.’ Art Basel and UBS report, 2018.

Preece, Chloe. ‘The Branding of Contemporary Chinese Art and its Politics: unpacking the power discourses of the art market.’ Arts Marketing: An International Journal, 4 no.1/2, (2014): 25-44.

Robertson, Ian ‘The Globalisation of the Art Market.’ In Art Business Today: 20 Keys Topics, ed. Jos Hackforth-Jones and Ian Robertson, unpaginated, London: Lund Humphries, 2016. Accessed via ProQuest Ebook Central, 8 May 2018.

Velthuis, Olav, ‘The Globalization of Markets for Contemporary Art.’ In Cosmopolitan Canvases, edited by Olav Velthuis and Stefano Baia Curioni, 1-25. Oxford: Oxford University Press, 2015.

FOOTNOTES

[1] Paul Gladston, ‘Chinese Art in Context’, in Contemporary Chinese Art: A Critical History, ed. Paul Gladstone, (Reaktion Books, 2014), 40.

[2] Iain Robertson, ‘The Globalisation of the Art Market,’ in Art Business Today: 20 Keys Topics, ed. Jos Hackforth-Jones and Ian Robertson, (London: Lund Humphries, 2016), unpaginated. Accessed via ProQuest Ebook Central, 8 May 2018.

[3] Paul Gladston, ‘Chinese Art in Context’, in Contemporary Chinese Art: A Critical History, ed. Paul Gladstone, (Reaktion Books, 2014), 43-46.

[4] Paul Gladston, ‘Chinese Art in Context’, in Contemporary Chinese Art: A Critical History, ed. Paul Gladstone, (Reaktion Books, 2014) 46.

[5] Paul Gladston, ‘Chinese Art in Context’, in Contemporary Chinese Art: A Critical History, ed. Paul Gladstone, (Reaktion Books, 2014)

[6] Iain Robertson, ‘The Globalisation of the Art Market,’ in Art Business Today: 20 Keys Topics, ed. Jos Hackforth-Jones and Ian Robertson, (London: Lund Humphries, 2016), unpaginated. Accessed via ProQuest Ebook Central, 8 May 2018.

[7] Chloe Preece, ‘The Branding of Contemporary Chinese Art and its Politics: unpacking the power discourses of the art market,’ Arts Marketing: An International Journal, 4 no.1/2, (2014): 27-28.

[8] Chloe Preece, ‘The Branding of Contemporary Chinese Art and its Politics: unpacking the power discourses of the art market,’ Arts Marketing: An International Journal, 4 no.1/2, 2014: 28

[9] Iain Robertson, ‘The Globalisation of the Art Market,’ in Art Business Today: 20 Keys Topics, ed. Jos Hackforth-Jones and Ian Robertson, (London: Lund Humphries, 2016), unpaginated. Accessed via ProQuest Ebook Central, 8 May 2018.

[10] Olav Velthuis, ‘The Globalization of Markets for Contemporary Art,’, in Cosmopolitan Canvases, eds. Olav Velthuis and Stefano Baia Curioni, (Oxford: Oxford University Press, 2015), 2.

[11] Olav Velthuis, ‘The Globalization of Markets for Contemporary Art,’, in Cosmopolitan Canvases, eds. Olav Velthuis and Stefano Baia Curioni, (Oxford: Oxford University Press, 2015), 14.

[12] Abraham H. Maslow, ‘A Theory of Human Motivation’, Psychological Review, 50 no.4, (1943): 370 -96

[13] Iain Robertson, ‘The Globalisation of the Art Market,’ in Art Business Today: 20 Keys Topics, ed. Jos Hackforth-Jones and Ian Robertson, (London: Lund Humphries, 2016), unpaginated. Accessed via ProQuest Ebook Central, 8 May 2018.

[14] Iain Robertson, ‘The Globalisation of the Art Market,’ in Art Business Today: 20 Keys Topics, ed. Jos Hackforth-Jones and Ian Robertson, (London: Lund Humphries, 2016), unpaginated. Accessed via ProQuest Ebook Central, 8 May 2018.

[15] Iain Robertson, ‘The Globalisation of the Art Market,’ in Art Business Today: 20 Keys Topics, ed. Jos Hackforth-Jones and Ian Robertson, (London: Lund Humphries, 2016), unpaginated. Accessed via ProQuest Ebook Central, 8 May 2018.

[16] Olav Velthuis, ‘The Globalization of Markets for Contemporary Art,’, in Cosmopolitan Canvases, eds. Olav Velthuis and Stefano Baia Curioni, (Oxford: Oxford University Press, 2015), 13-14.

[17] Clare McAndrew, ‘The Art Market 2018,’ Art Basel and UBS report, 2018.