The Impact of the Global Economy on the Art Market
Globalization and the Art Market
The art market is highly globalized; in fact, it is probably the most globalized sector of the economy. One of the reasons that art is such a great investment is the way it transcends borders, cultures, and nations. Art is a universal language that is used to communicate ideas and emotions. It is a social and cultural lubricant that is able to break down barriers between people and bring them together to share and celebrate ideas. Art is truly international, and this has been the case since the Renaissance, when art became a global language. Nowadays, art travels more quickly, more easily, and more frequently around the world than ever before.
Commodity Markets and the Art Market
One of the biggest changes in the global economy in recent years has come from the rise of commodity markets. The price of raw materials, such as oil and metals, has been rising steadily since the middle of the last decade, as supply has struggled to keep pace with demand. This has had a knock-on effect on art markets, particularly for the Impressionist and Modern art submarkets, which have experienced significant price rises in recent years. The rise of commodity markets has also been a major driver of growth in the contemporary art market, with both the supply of, and demand for, contemporary art being strongly impacted by these price movements.
Emerging Markets and Art
The emergence of emerging markets has played a major role in the growth of the art market since the financial crisis. The growth of Asian and South American economies has resulted in huge gains in demand for art in those regions. In China, with its growing middle class, art has been a great way to store value. The Chinese art market has grown significantly since the financial crisis, with the country now one of the top five art markets in the world. The growth of Chinese and other Asian markets is good news for Western art markets, which have seen their own demand sag as a result of various economic headwinds. As a result, Asian demand has balanced out the global art market and provided some much needed stability in the post-crisis environment. The same can be said of the Middle East, which has also seen a significant rise in art buying as a result of its strong economic growth.
Monetary Policy, Instability, and Inflation
Could monetary policy and the way in which central banks around the world have responded to the financial crisis have an effect on the art market? The short answer is yes. Most Western central banks have pursued aggressive loose monetary policies since the crisis, resulting in very low interest rates, a weak dollar, and rising inflation. The latter of these is a particular concern for the art market, as it impacts art’s twin use as an investment and a luxury good. High levels of inflation would erode the value of money in the long term, meaning that any gains made by art as a result of price increases would be offset by inflation. The impact of monetary policy on the art market will, therefore, depend on how long these loose policies are pursued by central banks. Inflation will likely rise, but if it starts to fall, the art market could be impacted, as the price of art is likely to fall in real terms.
The global economy has had a huge impact on the art market in recent years. The rise of commodity markets has had a significant impact on the high-end art market, while the emergence of new markets has provided much needed stability to the lower end of the market. Monetary policy has also had an impact on the art market, although this is likely to be a short-term effect. In the longer term, however, the rise of the global art market is a positive development, with art becoming more accessible to a wider range of people across the world.