Nicholas Lowry, Swann President and Current President of the International Auctioneers consortium, recently shared his thoughts on the impact of the economic downturn on the auction business. Read his editorial below.
The Cycle Continues
What a difference six months can make. Back in October, I wrote that we were on the precipice of a serious economic crisis, but I don’t think anyone realized just how sharp and fast a downturn it would be. Within the last six months, the economic standing of the world markets has plummeted, with financial markets and institutions undergoing perilous drops. Needless to say, the art market has been roiled as well.
Certain prominent multi-national auction houses have experienced such precipitous declines in business that their financial tribulations have made front-page news: chilling stories of drops in sales by as much as 75%, the laying off of staff and cutbacks in financing and credit.
These companies have learned the hard way that when you rely too heavily on star pieces and clients, tie your fortunes too closely to the world financial markets, and sell status instead of quality, you risk falling victim to circumstances outside your control. They left the traditional world of auctions behind and ventured out into the world of high finance. Playing with advances and guarantees, their business models began to look less and less like auction houses and more like the derivatives desk at a hedge fund.
As a commodity, art is subject to the same market fluctuations as the stock market. By most accounts, art has returned to the price levels of 2002 or 2003. Call it the bursting of a bubble or a correction, but prices have definitely deflated, and there are fewer buyers. However, in difficult times there is an aspect of the larger world markets that serves to propel the auction world and sustains our business. As people find themselves in unexpectedly dire financial straits, they often seek to sell some of their collections to help keep themselves solvent.
This cycle helps illustrate the concept that was explained to me as a child: that the auction industry is recession proof. Auctions are said to be the second oldest profession in the world, and as such we are here to stay. There is no doubt that the auction world is facing difficult times, that where we are right now equates to a heady, sobering difference from where we were just last year. But I can’t help remembering that in 2002, we were very excited to be achieving some of the price levels attainted at that time.
The traditional auction houses of the IA are built on the firm principles of an age-old industry. Yes, the markets will rise and the markets will fall. Yes, art will be front-page sexy news and art will disappear from the headlines as the world tackles important problems. But one thing remains the same: the world will not lose its interest in art.
Not losing track of where we are from, and not trying to overstep our boundaries and become something we are not, will continue to stand us in good stead, as we continue to serve our clients whose passion for collecting is a universal constant.