Previous financial crises, notably the Great Depression of 1930 and the Great Recession of 2008, function as solid indicators for the state of the art industry as we slowly emerge from lockdown restrictions. Financial crises have a massive economic, social and cultural impact, and the one that will very likely be instigated due to Covid-19 will be no different.
The Economic Impact of Covid-19 on the Art Industry
Spurred by the Lehman collapse, the turmoil of the global financial markets in 2008 did not materially affect the volume of sales until well into 2009. Just when equity prices started to rebound, the average number of expensive artworks bought declined. In terms of prices, effects fluctuated across various collecting categories. Whereas at the postwar and contemporary index was down 33% for the year, the impressionist and modern art index fell only by 4%. Yet, compared to the 57% by which the S&P 500 had decreased by March 2009, the art industry seems to have been fairly resilient. Moreover, where the S&P 500 took five years to recover from the 2008 recession, the Artnet Index for the Top 100 Artists needed only three years.
For the present crisis, it remains speculation what exactly will happen to the industry in a few months’ time. Thus far, it is clear art collectors have been looking to sell their art in order to obtain enough liquidity as collateral to meet margin calls on their quickly tumbling equity portfolios. Indirectly, this seems to indicate that there are also still buyers willing to acquire art even when a crisis is looming. Yet, with regard to art in lower price categories, where art is merely treated as a luxury item rather than an asset class to invest in, there is very little hard data on the impact of a crisis on somewhat smaller artists. Although this is an excellent time for wealthy investors to acquire art at a relatively low cost to have it grow in value over the next few years, retail buyers are likely refraining from buying luxury items at present.
Thus, art from lower price classes is likely to suffer disproportionately from the consequences of a financial crisis as compared to highly priced art. Moreover, evidence from the previous financial crisis suggests that effects can even differ between various art streams. There is nevertheless the overall positive outlook that whatever consequences the industry suffers, it is likely to restore more quickly than other industries.
The Effects of Lockdown on Artists and the Industry
Finally, it has been incredible to see the movement of artists donating their art to be auctioned off for charity. DB Waterman did participate in this and donated the artwork ‘$335 Dollar Dress’ to KazoArt.
Overall, it is unquestionable that there will be large changes in the art industry, at least for the near future. Evidence from the previous financial crisis gives us some indication of what to expect financially, but only the future will tell us the true effect unprecedented lockdown and social-distancing measures have on the industry and on the artistic mind.