In “Art and the Global Economy,” University of San Francisco professor John Zarobell examines “how the art world has blossomed into a global economy in the past generation, and what that means to artists, dealers, curators, cultural administrators, educators, and the public.” Zarobell, an artist and former curator, calls for a deeper questioning into the tendency to measure and justify culture as an economic force, looks at how museums, biennials and fairs are evolving, and asks what the current vogue for “cognitive capitalism” means for the arts and artists themselves. Zarobell also explores less-public aspects of the global art market, what he calls “the art market in the margins.” In the following excerpt, he takes us on a tour of the freeport, and relates it to other frontier elements of the global economy.
Art is one of the most unregulated industries on the planet. Auction houses provide a space for exchange with prices determined in an open public forum, but many aspects of the auction house business are completely hidden from the public and government regulators. They are not required to release the names of their consignors or their bidders and though they make good-faith efforts to provide the most complete provenance for a work of art, they are often forced to accept documentation provided by the owner, and very few provenance records are without lacunae.
Global trading increasingly means that artworks are constantly crossing borders, and every country has a distinct legal framework for regulating the import and export of works of art. Sending works overseas basically means paying customs duties, unless one can find a way to avoid it. In December of 2014, the think tank Global Financial Integrity released a study
claiming that capital outflows from the developing world to offshore financial centers totaled $991 billion in 2012.
In our current global art market, many actors are doing just that. Of course, there are the outlandish cases of brazen fraud. A recent one involved in the import of a
, from London to the United States. The customs forms claimed that the artwork inside the crate was worth $100, and therefore was below the value for a duty payment. The painting was actually worth $8 million and was part of an elaborate money laundering scheme set up by a Brazilian embezzler.
But we should not think only of the black market when it comes to averting customs duties, because arbitrage is an important part of the legitimate global economy, and it is used by not only dealers and auction houses but collectors and investors.
In brief, gaming the global legal patchwork is part of effective business practice today, and if Apple and Starbucks use tax avoidance strategies to lessen their fiscal liability, why not sellers and buyers of art?
There are two terms that will help to capture many nuances of the hidden aspects of the global art trade: offshore and informal economy (Editor’s note: This will be the subject of a subsequent excerpt). “Offshore” is a word full of complexities, but it can be summed up as the transfer or exchange of assets beyond regulatory authorities. The informal economy is usually defined as the part of the economy that is unregulated or unrecorded or both. While the off shore metaphor directs one’s attention to the money squirreled away by the wealthiest, studies of the informal economy more often focus on how those at the bottom of the economic pyramid find the means of survival between domains of legality.
At first glance, the global art trade—currently valued at $57 billion or so
—is a miniscule piece of global economic production. But due to the unregulated nature of the art market, it serves a key function within the larger network of the accumulation and distribution of capital worldwide. The art trade can serve as the proverbial canary in the coal mine. Examining offshore economic activity will, paradoxically, allow the reader to locate some of the hidden mechanisms that allow the global art market to flourish.