Like the fish. Silent l.
Like the fish. Silent l.
Using what he calls the “careless and piecemeal” data of wealth reports, Mr. Piketty calculates that today the richest 1 percent owns about half the planet’s wealth…
According to Mr. Piketty’s calculations, the immutable dynamic of returns on capital being greater than the rate of economic growth will concentrate half the planet’s wealth in the hands of the richest 0.1 percent within 30 years, impoverishing not only the middle, but also the upper-middle classes.
The above quotes appear in the New York Times, in an article by Scott Reyburn.
I would like to ask Mr Reyburn, and the NYT: where, exactly, in his book, or elsewhere, does Piketty make these statements?
I have not read all of Piketty’s book, and it’s hard to prove a negative. But I don’t think Piketty ever attempts to quantify global wealth inequality: it’s hard enough just to get reliable figures on a national basis. And I’m all but certain that he never extrapolates anything to the point at which the richest 0.1% end up with 50% of the wealth. Neither would he consider such an extrapolation to constitute an “immutable dynamic”: after all, his entire final chapter is an explanation of why such dynamics are not immutable.
Reyburn’s claims, then, would seem to be narrowly false: Piketty does not say what Reyburn says he says. They’re also broadly false: nowhere does Piketty paint some dystopian vision where the upper-middle classes have become “impoverished”.
On top of that, Reyburn also violates the NYT’s policy of adjusting all prices for inflation. He talks about a Leonardo bought in 1914 for $1.5 million: what’s that in today’s money? Reyburn never says; he waves only in the direction of an analysis which said that the purchase was a record price, in real terms, in 1961. Has the record been broken in the last 53 years? Maybe if Reyburn did the math, we could work that out!
All in all, this is shoddy stuff from the NYT. Or, is it from the NYT? Officially, the NYT has merged with the IHT, and they’re now a unified news organization. In practice however, stories like this still feel as though they’re IHT pieces, which wouldn’t see the light of day had they gone through editing in NYC. Is a double standard still in place?
I was given my first story to check. I vaguely remember that it was something about new mutual fund products, and it was written by a freelancer. It sounded good — that is, until I started checking it. In essence, the entire thing was wrong. Up until that point, words on the page, in their unambiguous black and white, had always conveyed such authority that I didn’t question them. I never read that way again. An editor once said to me that good writers were really dangerous because you could be so seduced by their writing that you simply drank in their unsupported leaps of logic.
Carlo, a student at the University of Kent, sent me some questions for the thesis he’s writing. He said I could blog my answers, so:
1)Has contemporary art become just a commodity? Do buyers see art purchases mainly as an investment?
No; no. At the very highest end (think Warhol, or Richter) contemporary art can sometimes approach the status of a commodity. But the overwhelming majority of contemporary art is not a commodity, nor is it seen as such. And while some buyers see some art (again, we’re talking mainly about the richest buyers here, and the most expensive art) as an investment, most buyers do not look at it that way. Despite the fact that many dealers and auction houses are encouraging them to do so.
That said, if you’re spending hundreds of thousands of dollars on an art work, you’re generally going to want some kind of assurance that it has a decent chance of keeping its value, or even perhaps rising in value. Dealers in large part compete on the degree to which they can convincingly answer that question in the affirmative.
2) About the current health of the market. In 2013 auction sales were down in China (10%) and the UK (over 5%), but in America increased of 14%. In the beginning of 2014 auction sales picked up again, it seems. Christie’s evening auction in London, for instance, did 40 millions more than the previous year. Is this a sign the market is doing well? And what about the middle market that is never mentioned in the news? And private sales?
The market is very healthy right now — healthy to the point of feverish, you might say. But most of the market, as always, at least in dollar terms, is at the very top end. You don’t hear about the “middle market” because it’s never much of a market to begin with. Private sales are the same way: there is a small number of dealers doing very well by selling a small number of extremely expensive artworks. Art isn’t a middle-class thing any more, and if you’re trying to make money by selling to the middle classes, you’re struggling.
3) In an article on your blog “Is the end of the art-market bubble?” you state there is an ongoing bubble. What are the signs which make you think there is one? And is this bubble becoming/will become eventually a speculative one?
Flipping, mainly; it’s a bearish, toppish sign. Where there are flippers, there are speculators. And art dealers, of course, have always been speculators. The question is whether the flippers and the speculative dealers have become the marginal price setters. They probably have in Oscar Murillo, but have they in general? I’d say not yet.
4) What role auction houses play in creating this bubble? Are they to blame or other actors of the market for creating it? And does the practice of leverage or “on-credit” purchases help to inflate the prices?
Auction houses love bubbles: that’s where they make the big bucks. So they try very hard to get the biggest baubles to sell, and to get the most avaricious buyers to bid up to and beyond their means. If it were entirely up to the auction houses, of course, there would always be bubbles in every asset class. So they can’t do it on their own. But they can add fuel to the fire.
5) Do big prices influence the cultural value given to an artwork?
Yes, especially in contemporary art. There are exceptions, but in general if you find an artist getting big prices, that artist is going to have a lot of cultural cachet.