Tainted love: art's ethos and capitalization suhail malik/ andrea phillips

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t ainted love: art’s ethos
    and capitalization
    suhail malik/
     andrea phillips
    rance was again the target of jittery investors,
   F
   worried its top AAA credit rating is at risk.
   Yields on its benchmark 10-year government
   bonds climbed and their spread over Germany’s
   equivalent bunds hit a record for the euro era.
   Paris said the risk premium was “not justified.”
   … Analysts warn it may well not be the steady
   sale usually expected from a country with a
   coveted AAA rating.

   “ The price action in European monetary union
    (EMU) AAAs (excluding Germany) in the last
    few sessions clearly highlights that it is not about
    value in EMU AAAs at the moment. It is about
    fear and positioning,” said Jamie Searle at Citi.1

One of the primary masks of capital is the naturaliza-
tion of its processes as inevitabilities. British Prime
Minister Gordon Brown’s language in the Autumn
of 2008—that the global financial crisis “happened
to us”—is testament to the rapid and strategic shifts
in alliances of power and profit that support crisis
economics. We were just in the wrong place at the
wrong time; it was chance that it happened to us; it

            suhail malik/andrea phillips
                                                209
was predetermined from above, and so on. The same                 That such passions, chance encounters, and de-
heady mixture of belief and money—or, more precisely,         cisions are irreducibly involved in the operations of
naturalized urge camouflaging monetary transaction—           the art market perhaps accounts for the relative fail-
is evident in the art world when a collector buys or a        ure of investment funds to rationalize it. In his com-
dealer sells an artwork on the basis of an inexplicable       prehensive overview of recent developments in the
and even capricious love. Just as “fear and position-         contemporary art market Noah Horowitz remarks that
ing” now motivate the price action in the EMU, the            the art fund industry “is not only emblematic of the
same sensuous pathologization is evident in the elite         enterprising new ways in which contemporary art is
mechanisms of art buying and selling. We argue that           sold and experienced, … nor of how the art economy
the love of art, here characterized as an ascendant           as a whole has embraced globalization; it is modern
property of art market transaction beyond the norma-          global finance embodied.”2 However, we learn over
tive duties of care and control, is not simply a fetish       the ensuing pages that art investment funds—for
but a powerful agent in the further redistribution of         which art is an “alternative asset class” to standard
wealth, practiced in clear systemic collaboration with        equities, shares, and bonds—have in fact not done
artists, curators, critics, and other actors in contem-       very well over the first decade of the twenty-first cen-
porary art’s infrastructure. As elaborated below, art is      tury. Such funds have generally failed to draw in in-
situated as an “alternative” commodity in part because        vestors, have “weak historical track records” on their
of standard, received expectations of the personalities       returns, dissolve, or have closed down (in the case of
and passions of both artists (as quixotic, passionate,        Fernwood, one of the leading art funds, shutting shop
unpredictable) and their dealers and collectors (vari-        because of suspected embezzlement by its CEO).
ously holding back ready stock from the market, not           These failures, together with the more general broken
selling at the height of profit, etc.) The art market is in   optimism for art investment funds, could be taken as
this sense peculiar not simply because it lacks trans-        an ironic confirmation that they did indeed embody
parency because of its unregulated, opaque, and in-           “modern global finance” over the decade to 2008, not
efficient market but also because its trade is built on       least in the leading role the global finance sector took
the impulsive and chancy gesture of love. As we shall         in bringing about the systematic social and economic
see, such amorous/erotic transactions filter across the       distress that has since ensued.
private to the public sector as museum and state-run              In light of all this it may seem perplexing if not per-
galleries become increasingly reliant on the donations        verse to maintain that the art market can indeed be
and bequests of private collectors in order to maintain       understood as the embodiment of finance. Not that
both their permanent collections and temporary exhi-          this is Horowtiz’ claim: he remarks only that art invest-
bitions, thus significantly blurring the boundaries be-       ment funds are such embodiments even though, as
tween state care and private passion.                         we have seen, this is also why they have limited to no

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   210                                                                                                           211
success in establishing themselves in the art market.         these prices by the artists’ dealers is a well-known
Yet, as we now argue, art does indeed embody the              part of such highly visible valuations. In other words,
truth of finance, and it does so precisely in its failure     the ownership and trade of art is far from being
or limitation as a kind of free-market investment. Pro-       the transparently- and openly-costed, easily-trans-
posing as much not only allows the convergence of             ferred, low-maintenance circulation of claims that
interests and operations of art (in particular contem-        modern global finance is built upon. On the one
porary art) and finance to be apprehended theoreti-           hand, this is the advantage it is supposed to pres-
cally, it also reconfigures the significance of what is       ent to art investors, who look to profit from the high
frequently heralded as the condition and satisfaction         level of “asymmetrical information” offered by art’s
of its collectors: their love of art.                         “pricing inefficiencies” 5 —that is, they deploy to
     Warranted though the acerbic identification of           their advantage knowledge gained through closer
the failure of art investment funds with modern global        involvement with art dealers. On the other hand,
finance may be, it leaves unexplained how and why             however, it means that art’s economy has a “weak
art investment funds in particular did not live up to the     pricing system” because it “lacks a single generally
promises made for them in the finance-led boom of             accepted valuation methodology,”6 such a method-
the mid-2000s. Horowitz presents many of these in-            ology being a primary and constitutive assumption
trinsic reasons, which arise mainly due to the particu-       for the finance sector.
larities of art as an investment. For example, it is highly       There are two interconnected aspects to this
illiquid (it cannot be quickly converted into money           weakness, one is theoretical-ideological, to which
flows); it has many upfront and additional costs in-          we later return, the other is sociological-institutional:
cluding insurance, storage, handling, shipping, etc.;         that “art funds’ investment objective may be intrin-
it does not pay dividends or returns over the time it is      sically flawed”7 because the free-market precepts
held by the investor, and so on. That art generates no        core to such vehicles and their investors are in fact
earnings until its sale but has ownership costs makes         inapplicable to art. In Horowitz’ wry words: because
it a “negative cash flow asset.”3 The particularities of      such investment funds’ “vindication of art as an asset
art as an investment are not, however, limited to its         class is based so strongly upon free-trade economic
material conditions and the requirements of preserva-         theory, they may have underestimated the behavioral
tion; they also arise from the specificities of its trad-     aversion of the market … towards such unabated
ing, which include “high transaction costs, … limited         speculation.”8 It is not only that the art market is
arbitrage opportunities,”4 and highly “opaque market          averse to the standard pricing mechanisms constitu-
information,” in that actual transaction prices are not       tive of modern global finance’s operations and pro-
openly advertised outside of auction resales of art           cesses but, moreover, that art dealers’ “antispecula-
(the secondary market) even as the manipulation of            tive vehemence” makes for “sound business sense.”

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   212                                                                                                         213
In fact, dealers’ suppression of the economic            price on both primary and secondary markets. This
    [meaning here the free market principles under-          art is the “royalty” of the art market (just as the “blue”
    lying modern global finance] … may ultimately            of blue-chip is said to derive from “blue blood”); the
    strengthen their financial prospects: collectors         prizes in private and public art collections the world
    continue to do business with them because they           over (local cultural significations and traditions not-
    trust their prices, and so the quality of their inven-   withstanding). If you have a Picasso or a Warhol
    tory. … As goods leave the dealer’s inventory            in your museum (currently and colloquially, the saf-
    and extend beyond the network of collectors who          est bets, the bluest chips) you are likely to ride the
    comply with the first right of refusal, their control    storm of any market crash. Thus the game of betting
    over supply diminishes—and with it, their                is played by those who like to feign at gambling and
    monopolistic price control mechanism.9                   have the means to do so. The term “blue-chip,” applied
                                                             to companies that are regarded as “safe bets” on a
“Antispeculative vehemence,” highly regulated trade,         stock exchange—corporations of any type that per-
tight control mechanisms on ownership and subse-             form consistently well and operate profitably through
quent resale; all of these standard business practices       ups and downs—is notably transferred to the informal
are how and why dealers “strengthen” their market            “ratings” mechanisms of the art market, evidencing
share and are “commonly regarded” as better art              the relationship between luck and profit actualized in
investors than art investment fund managers.10 But           art investments. The term derives from poker, where
if this is so it is because the methods and transac-         a blue chip is valued higher than a red or white chip.
tional processes most successfully deployed in art’s         Evidently, the game of chance, for those that can or
commercial markets contravene in almost every way            must play it, transitions neatly across money actions,
the free market principles and investment assump-            and the “safe bet” epitomizes in its “anti-speculative
tions and patterns core to “modern global finance.”          vehemence” the critical link between risk and aspira-
If such patterns are indeed embodied by art invest-          tion, the brag of profit and the depths of loss.
ment funds it is little surprise that they tend to fail so       The idea of a safe bet is, of course, a non-sequitur;
often or remain so modest. Equally, anti-speculative         wished for in all capital transactions, the safe bet is
vehemence is intimately allied to the amorous/erotic         perhaps especially and dramatically apparent in the
involvement in art, widely flaunted in the acquisition       art market. Gambling on art is then only a specific
of blue-chip art and the cloying discourses and be-          type of investment, in which the passion of the game
liefs of central figures in both public and private art      is matched by other passions—the love of art and the
sectors who support and rely upon such collectors.           performative instantiation of that love on and through
But such artworks—and therefore artists—are blue-            “buying action.” The titillation of such an ethos for
chip precisely because they return a consistently high       the “civilian” onlooker is clear in the popularity of art

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   214                                                                                                         215
auction and art opening features in popular newspa-         of charisma; a love ‘irreducible to money and any ob-
pers and magazines, as well as in the sales of semi-        jects of bourgeois interest.’”12
serious research publications giving an “insider” and           The centrality of this amorous ethos to the con-
interview-based account of dealing and collecting.11        centration of social and capital power in art of course
Such marketplace hagiographies attempt to make              relies upon and maintains the belief that while art is
public the private world of art dealing, yet they isolate   indeed traded on a market it is the very obstruction of
the privacy of monetary transaction to the shock and        that market to liberal free-market principles and prac-
awe of numerology (in the sense that the cash figures       tices that accords with an involvement in art itself.
are dramatically and thus mystically out of reach). It is   The art market is rather a market of “care,” deemed to
these forms of action, private yet made public in the       be appropriate to art because art itself is decontami-
glare of gossip after art auctions (the secondary mar-      nated from capital accumulation.13 Through art and
ket) and through rumor and the awarding of prestige         the love of art, wealth and power excuse themselves;
and cultural capital through deals made with art gal-       they demonstrate their ethos of human passions over
leries and art consultants (primary market), that are       that of money. Interviewing the art consultant Philippe
under examination.                                          Ségalot about how he finds and matches the right
    Spending on blue-chip art—a practice already            artwork to a buyer, Sarah Thornton asks:
made paradoxical and thus separate from standard
stock and share transactions through the concept                ow does Ségalot know when he has encoun-
                                                               H
of “safe betting”—ties the buyer into an interested            tered the right work? “You feel something,” he
bundle of socio-cultural mechanisms whereby the                says with fervour. “I never read about art. I’m not
action of spending money is primarily seen as quix-            interested in the literature about art. I get all the
otic and impulsive, and only secondarily, if at all,           art magazines, but I don’t read them. I don’t want
as investment-based. Drawing on the research of                to be influenced by the reviews. I look. I fill myself
Raymonde Moulin on the French art market and                   with images. It is not necessary to speak so
connoisseurship in the 1960s, Ulf Wuggenig points              much about art. I am convinced that a great work
to the relation between amateurism, defined as                 speaks for itself.” A faith in gut instinct is common
the engagement in an activity for pleasure rather              to most collectors, consultants and dealers, and
than profit, and love (amator—lover). Reflecting on            they love to talk about it.14
Moulin’s interviews with collectors, and quoting
Pierre Bourdieu, Wuggenig says, “their self image           The asymmetrical shape of the art market is concomi-
was that they collected not for instrumental reasons        tant with the collector being a lover. This in turn ren-
but for the ‘love of art’—and more particularly for the     ders the market one of passion—a passion built on
sort of ‘pure love’ that has its roots in the ideology      the eroticism of impulsive taste and fueled by dealers

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   216                                                                                                       217
and consultants formulating that love competitively.           place in the equity and real estate markets”16 —or in-
Such incalculable passion is the avowed ethos not              deed any conventional pricing calculation deployed
just of the agents in the art market but of art’s insti-       in liberal economic theory. As Jonathon Nitzan and
tutionalization more generally; it is the identifying as-      Shimshon Bichler explain, this formula “tells us how
sumption as to why one would be involved in art at all.        much a capitalist is prepared to pay now”—the price—
But while it is relatively easy to characterize the impul-     “to receive a flow of money later,” reducing “a future
sive collector as a pathological subject, or the aggre-        stream of earnings to their present value.”17 For Nitzan
gate movements of the art market to be of behavioral           and Bichler “capitalization” is defined by the process
rather than rational economics,15 a more complicated           of “reducing” earnings to their present value together
and more urgent issue is the relation between the              with the ordering of that which is thus priced.18 In con-
convenience of that pathology (the irrational collector        trast to the supposed universal salience of this pric-
who bankrupts him or herself in the name of love for a         ing formula, which is core to neoclassical economic
particular artist’s work, for example) and the method          dogma, art has no basis for its future earnings other
of accumulation as it is signaled by art’s price. Our          than speculative guesses. The best the art buyer can
interest is precisely the logic of the relation between        do is “make an educated bet that the price of an art-
the art market’s price-setting mechanisms and the              work may rise in the future, but calculating such gains
evident “irrationality” of art’s pricing in relation to pro-   is hardly a perfect science”19 —hence the problematic
duction costs or other supposed “real” bases for pric-         relation between investment fund strategies, which as-
ing. We aim here to remove the (proto-ideological)             sume such pricing formulas, and art market dealings,
support for the decontamination of power through               which decry them. Contrary to this apparently irreduc-
art’s ethos, which is no less a moral-affective support        ible incongruity, Nitzan and Bichler propose that the
for finance gained by the separation in principle of           neoclassical formulation of price is itself a falsehood
economy (price), social order, and art, the rationality        if not a mystification. The unsurmountable problem it
of one being opposed to the irrationality of the other.        faces is that since expected earnings are gained in the
                                                               future, those earnings and therefore the rate of return
The rationality of the liberal markets and the art mar-        are in fact unknown and only speculative expectations.
ket’s countermanding of it are central to the more             Furthermore, since the expected rate of return is cal-
theoretically-ideologically situated aspect of art’s           culated on the basis of future earnings, it is not even
“weak pricing system.” Not only are art prices on the          known if variables in this “elementary” calculation of
primary market set “monopolistically,” but these prices        capitalization are interrelated or not. The core formula
do not observe the basic diktats of modern economic            for the neoclassical price-setting model thus says
theory: “art investors cannot simply determine the dis-        nothing to the content or relation of its determinants.
counted value of its future cash flows, as is common           Or then price. In other words, standard price-setting is

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   218                                                                                                          219
never in fact the “discount value of future cash flows.”     that, as such, price and capital are not predicated
    While the pretence that price can be calculated          on production, use-value, consumption, or other
on the basis of discounted earnings can be mostly            bases external to finance.21 It is not then that art
maintained by reference to a “real economy” of earn-         pricing is a puzzle compared to other, produc-
ings, debts, production, and so on—all of which can          tive or consuming, sectors of the economy, but
be called upon as a supposed basis for calculating           that the art market dispels their obscuring of
“future earnings” and “rates of return”—its actual im-       capitalization as the primary determinant of price
plausibility is wholly apparent in art’s price-setting, as   (which is also why its price-setting mechanisms
Horowitz recognizes. In other words, the price-setting       present such a practical and theoretical difficulty
of art reveals capitalization as such, without the le-       to neoclassical and Marxian (NCM) accounts).
gitimizing, retro-fitted measurements and theories           For Horowitz, the only tendentious salience of
seeking to justify earnings on the basis of production       standard theories of price-setting to art is the fact
(Marxism) or consumption (neoclassical liberalism).          that art has a “weak pricing system.” And while it
That is, the art market demonstrates the truth of all        is indeed “weak” from the perspective
price-setting: that there is no basis in production or       of the neoclassical precepts to which
consumption for pricing, only capitalization. In itself,     Horowitz subscribes, it is for just that reason
this result is hardly news: art prices cannot be ratio-      a pronounced example of the conditions of
nalized by reference to production.20 But its deriva-        capitalization as Nitzan and Bichler account for
tion from Nitzan and Bichler’s theory of capitalization      it, namely that “all capital is finance and only fi-
brings with it two important corollaries, which return       nance.”22
to the sociological-institutional conditions of art and
its market:                                                  (ii)

   (i)                                                        s Horowitz observes, interest from regular
                                                             A
                                                             financial investment funds in the art market
   If art prices are explicitly financially generated       tends to go rather badly thanks to the
    without reference to production, they make               “monopolistic price control mechanisms” of the
    manifest the condition of all price-setting, or          primary market. Nitzan and Bichler’s notion of
    what could be called capital’s procedural and            capitalization, however, proposes that such mo-
    operational “fincanciality” (the term is not Nitzan      nopolistic price controls are not the exception
    and Bichler’s). Financiality here designates that        in price-setting but the standard. In particular,
    finance is a primary condition for, rather than con-     the primary market is only a trenchantly orga-
    sequence of, capitalization and price-setting and        nized market of “administered prices” that are

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   220                                                                                                    221
usual business practice. Administered prices            Buffet’s assets to anyone at all is an issue of ownership
   stabilize earnings on the basis of the markup on        not technical limitation. In more general terms, private
   their wares.23 As for the primary art market, such      ownership is the condition of capitalism because “it is
   prices are set by highly concentrated and often         wholly and only an institution of exclusion, and institu-
   colluding businesses and sectors. More exactly,         tional exclusion is a matter of organized power.” What
   administered prices are a form of control over          is key here is that ownership is not productive per se
   prices and represent the “degree of monopoly”           since it “has no bearing” on industry intrinsically, and
   of the firm over the market. Horowitz’ remark is        certainly does not add to it. Industry and business are
   then a recognition from inside the neoclassical         different in kind. But business can profit by gaining an
   paradigm that the primary market is one of admin-       advantage over industry it does not own by damaging
   istered prices.                                         it, and thereby lowering the maximization of industry
                                                           overall. Sabotage is then the condition and actuality
That capitalism’s financiality is independent of its pu-   of capital earnings. Furthermore, since business capi-
tative justification of production is, however, only a     tal necessarily sabotages industry, capital is then not
partial result in Nitzan and Bichler’s larger and more     just sometimes unproductive with regard to industry
general claim, which they make following Thorstein         but is necessarily counterproductive.27 In stark con-
Veblen’s distinction between generalized social pro-       trast to the shared tenets of NCM paradigms, capital
duction (industry) and private ownership (business).       always lessens industry rather than profiting from its
Industry is “an integrated creative process whose          increase: “the only way for capitalists to profit from
productivity derives from the totality of its purpose-     productivity is by subjugating it and limiting it. And
ful resonating pulses,”24 the latter phrase meaning        since business earnings hinge on strategic sabotage,
the integrated effects of production across society.       their capitalization represents nothing but incapacita-
Business, on the other hand, is the “power process         tion.”28 Sabotage is the shaping of generalized indus-
carried out through the prerogatives of ownership.”25      try, ordering it to specific and particular interests; it is
For Nitzan and Bichler the primary question core to all    a technique of concentrating power. As such, capital-
capital accumulation is “how does private ownership        ization is a social ordering for the sake of privatized
‘generate’ earnings?”26 They note that the etymology       earnings and is therefore directly power. Economy
of private is from the Latin privatus, “restricted,” and   is then always and necessarily a political economy;
related to privare, “to deprive.” Private ownership is     there are no “free” markets.
for them the “power principle of capitalism” not be-            While this general result holds for art as it does
cause “it enables those who own” but because, as           for anything else that is capitalized, what is specific
just noted, “it disables those who do not.” To use         about art’s financiality is that because art prices are
their local example, not being able to transfer Warren     set with reference to nothing but its financiality and

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   222                                                                                                        223
as its market is so highly administered, art prices           — Since sabotage is a necessarily social act
explicitly demonstrate the ordering and sabotage of              of institutional ordering and exclusive priva-
general production by and for private earnings.29 Art            tion, capitalization cannot be analytically or
prices are unequivocal instantiations of capital-power           practically separated from social organization.
without any recourse to socio-political accountability.          In particular, wealth accumulation is not ana-
In these terms, the difference between art’s primary             lytically or practically distinct from symbolic,
and secondary markets is that such sabotaging capi-              cultural and technical power. The integrity of
talization—the degree of monopoly, the concentration             political economy proposed by Nitzan and
of institutionalized power—is greater in the primary             Bichler’s theory of capital power thus
market, while the demonstration of sabotage is more              dispenses with the explanatory categories
overt in the secondary market. These two aspects are             established by Pierre Bourdieu of symbolic
in no sense contradictory nor do they even contravene            or cultural capital, or of direct and indirect
one another as in the “Hostile Worlds” scenario in               capital, which presume a difference in kind
which art and money do not touch, identified by Olav             between economic capital and social capital
Velthuis to be commonly mobilized by agents defend-              where the latter is mobilized in the service
ing the monopoly of the primary market against the               of the former.31 Rather, and as art clearly in-
encroachments of the secondary, often by recourse                stantiates, prices are correlated at once and
to the impassioned ethos of the former.30 Rather, both           necessarily with cultural or symbolic institution-
markets are effectively mobilized together to further            alization. “Values” of many kinds are intimately
increase the total and specific “degrees of monopoly”            coordinated in a nexus or complex that inte-
of capital power. This result accords with the obser-            grates meaning and its (dis)establishment, “in-
vation that for all the drama concerning the shifting            tellectual property,” social status, money, price-
power and positioning of the two markets with re-                setting mechanisms, and so on. Art prices thus
gard to one another, in practice both are deployed by            rescind the “Nothing But” paradigm, in which
the same agents as part of their standard business               the value of art is determined simply and exclu-
operations; and, that the degree of monopoly over                sively by its price.32
prices is never really weakened by competitive sales
but only differently administered (art does not com-          — Art’s marketization is constituted by its finan-
pete against other art in arriving at its price; it is only     ciality, without reference to its production, or
ever a question of the markup).                                 the basis for production, or even its products.
    Identifying art’s financiality with sabotage enables        In particular, art’s marketization is not an issue
yet further characteristic features of art’s current in-        of commodification, or of art’s content. The
stitutional ethos to be systematically accounted for:           influential Marxian disputes on this identifica-

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   224                                                                                                     225
tion result from an anxious recognition of the               autonomy, is then a legitimizing figure of highly
   historical error of art’s commodity status in                monopolistic production that is itself emblem-
   contradistinction to another kind of production              atic of the configuration of business-sabotage
   that would somehow free it from its marketi-                 contra social industry.
   zation. In this they base art in production—
   perhaps even the generalized production of                — The now standard critique proposing art to be
   industry at large—and look to surpass art’s                  irreducible to capital and the latter’s culture
   financiality for this reason. However, capital-              because of art’s unproductivity, dejection,
   ization qua sabotage is wholly indifferent to                non-perfomance, failure, useless expenditure,
   production: it makes no odds to capitaliza-                  and so on (in short, the Adornian-Beckettian-
   tion how or why production takes place, only                 Bataillean repertoire) advocates a cultural
   that some production is to be institutionally                determination of art qua sabotage. Accepting
   affirmed and others sabotaged (thus reduc-                   this “Hostile Worlds” paradigm of art comple-
   ing industry overall). Whether or not art is a               ments art’s financiality even as these counter-
   commodity is no issue for its capitalization, the            capitalist theories claim to contend it. These
   question having no traction on its financiality.             institutionally stable discourses thus take a
                                                                leading role in the justification and legitima-
— Similarly, looking to the (individual or collective)         tion—the remoralization—of institutional
   artist as the basis and condition of art in                 sabotage, most notable perhaps in the sup-
   need of support against the depredations of                 port they give to the highly concentrated
   marketization and institutionalization (inflicted           monopolies of art already in place and the
   by those very markets and institutions) is an               prevailing social power represented thereby.
   appeal to a return to production as the basis               The continuity of interests between financiality
   for art’s value. When such appeals act as a                 and such prevalent critical claims is evidenced
   moral vindication of the ethos of art’s financial-          by the their centrality in the marketization of art
   ity (selling the artist’s work is for the benefit of        through theoretically-informed journalism.
   the artist), the artist acts a compensatory fable
   for the continued sabotage art’s institutional         If it’s a commonplace that art’s financiality damages
   capitalization inflicts on general production.         a more general proliferation of “art” simply because
   Art’s amorous ethos looks to individualize and         the art market excludes more art than it includes, the
   give alibi to ownership-sabotage by configur-          analysis proposed here offers a different, specific
   ing the artist as a unique producer of original        determination of the damage inflicted by art’s finan-
   works who, on the basis of their putative              ciality: it is a sabotage of art as a part of general

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226                                                                                                       227
production, as industry. Art’s price indexes the power      aspects of its privatization, which are interrelated. The
of such sabotage in the terms set out by that sabo-         subjective account requires one last visit to the deri-
tage. Art’s capitalization is not then predicated on        vation of price-setting as institutional sabotage.
aesthetic-artistic determinations but sociological-              Given that art has “little intrinsic worth” in terms of
financial power; or, at least, the power concerns of        material costs,33 art’s financiality is only another way of
institutional capitalization determine its aesthetic-       saying that prices are set almost entirely by its mark-
artistic interests. Art’s amorous/erotic ethos is a cru-    up.34 If one of the standard puzzles in art-pricing is how
cial medium of transmission between the two: the im-        to justify prices in “fundamentals” beyond hype and
plementation of power-sabotage is authorized by the         risk, Nitzan and Bichler’s derivation of pricing suggests
common yet unaccountable enactment of the love of           that prices in general have no foundation in objective
art, which in any given case is an irreducible element.     conditions such as production but are predicated only
Such institutional power is on the one hand fashion         on convention (historical earnings and a standard rate
within art, in which every party looks to every other for   of return) and a subjectively determined speculative
an unaccountable and otherwise criteria-less valida-        zeal or positioning, which is a trade-off between hype
tion of what counts as worthwhile art. And on the other     and risk above a standard rate of return.35 Moreover,
hand it is the prevailing institutional insistence on       while the sabotage business inflicts upon industry in
presenting work of putative “quality” and “value.” The      general is a consequence of sectorial-collective sabo-
assumed obviousness (and consequent consent)                tage (outlined above for art as the appeal to “quality”
enforced by such terms inflicts in morally protected        and “excellence”), that sabotage is nonetheless un-
form the social sabotage of a power that need not           dertaken for earnings made by private ownership and
account for itself but is simply occasioned by its claims   is exclusively against industry. There is then a private,
on/through art.                                             subjective correlate to the sectorial sabotage of capi-
     The love for art declared not only by collectors but   talization and, in particular, its positioning. When spec-
also by any of its agents is the subjective, privatized     ulative zeal is low (hype is low or outweighed by the
account of such a morally protected sabotage power.         risk coefficient)—as when markets contract or, with
It is an ethos. While such power equal to capitaliza-       art, the speculative interest is directed towards art that
tion, and thus finance, is perhaps most evident with        is not secured by power (or reputation, another name
the collector-dealer nexus, where monetary transac-         for sectorial sabotage)—the general name for this pri-
tions are most palpable, it is by no means restricted       vate, subjective correlate is fear. When hype is high
to these actors since capitalization is a matter of gen-    or outweighs risk—when positioning is highly positive,
eral social ordering organized through private owner-       as it is with blue-chip art—the received name in art’s
ship. The reorganization of power legitimized through       ethos for the private subjective dimension of sabotage
art’s amorous ethos has both subjective and public          is love. Love completes the logic of the privatizing

                financialization of art                                  suhail malik/andrea phillips
   228                                                                                                         229
sabotage of production in general; it is the confirmation    displayed, and accounts for much of the pandering and
of power over the social order through capitalization        groveling that takes up an increasing percentage of the
pursued through institutions. Love is but the private,       time of all publicly-funded galleries and museums. The
subjective—and therefore capricious, owned—posi-             sheer fact that “public” art museums and galleries in
tive positioning of art’s capitalization.                    many parts of the world are now being predominantly
    The love of art is thus still a “source of legitimacy”   funded by private donation attests to this. Once the im-
for empire-making allied to capitalization; it is how        brication of private patronage in spaces once deemed
sabotage can be privately and publicly vindicated.36         ideologically public is complete it becomes clear that
Looking at the recent history of this socio-cultural         contemporary art, its production and curation, be-
privatization, the political economy of culture, in Eu-      comes an advanced mechanism of experimentation for
rope and North America, it is clear that the hierarchies     the sabotage of (ideologies of) access and equality.
ascribed through such territory-building projects have
dissipated to a major extent through the reorganization      Taking art’s institutional capitalization to be a mode of
of fiscal power mechanisms at a transnational scale,         sabotage vectored/legitimized through an amorous/
prioritizing revenue for the type of finance that works      erotic ethos then permits a number of medium-term
beyond the simple philanthropic, charitable gestures         future scenarios for the political economy of art and
of previous decades, and beyond the clear territorial-       the privatization of care to be anticipated. Though
ization of ownership. Love has no borders. Playing the       practically-integrated, these transformations can be
risky game of buying and selling art not for profit but      thematically demarcated as follows:
because you love art and are perhaps addicted to its
irrationalities and impulses in some way is a sure fire         I
method of distracting a public gaze, which accepts the
distinction between capitalization and love, from ques-         capital
tions concerning the deep inequalities caused by your
wealth accumulation or indeed the investments you                espite the claims of the art investment sector
                                                                D
may make in order to produce that wealth. Such dis-             that it is counter-cyclical or uncorrelated to the
connection between normative investment and return              movements of broad equities markets, the art
methodologies and the practices of the contemporary             market is entirely dependent on the available
art market leave stranded a welfare state model of pub-         cash flows or liquidity available to higher-income
lic art beneficence, which the funders are simply un-           earners.37 Two schematic scenarios can then be
able (though of course not unwilling—in fact have no            put forward for the decade from 2012, depend-
choice but) to compete with. This suggests a marked             ing on the fate of the finance sector and private
shift in the modes through which art is distributed and         wealth accrual in the period.

                 financialization of art                                  suhail malik/andrea phillips
   230                                                                                                        231
(i)                                                    prevalent as art will seek to gain greater moral
                                                       value in order to stabilize capitalization in terms
 increase in liquidity (which is not to say
an                                                     other than those of wealth accumulation. Here,
a strengthening of wider economies) will               terms such as “quality” and “excellence” will be
strengthen the art market, which will be most          contested as public-collective (moral) claims
ostentatiously marked by escalating prices for         rather than privatized gain, but will again, for this
blue-chip work. The “Hostile Worlds” scenario          reason of securing power, mark the sabotaging
between primary and secondary markets will             institutionalization and marketization of art.
be resurrected, but as mock-battles because
all sides will increase the power of art’s institu-    II
tional capitalization against (art’s) industry. The
characteristic ethos of art will concentrate power     institutional infrastructure
with even greater degrees of monopoly to those
who are most able to love art subjectively—that        It’s said that you can’t help who (or what?) you
is, without care for what that love means, how it       fall in love with. In loving art and playing safe bets,
is constituted, and what it more generally reorga-      modern and contemporary art collectors mask,
nizes. The period of the art market slump, 2009–        inadvertently or not, their worldly dealings. Soci-
201X, will be seen as a valuable “correction” in        ologies of collecting, whilst often focusing either
an otherwise continually developing market of           on museums and patronage or the oddities of
privately recognized “quality” and “excellence.”        obsessive collectors of everyday objects, throw
Dominant art institutions will exacerbate this          light on the relation between collecting and forms
concentration of power.                                 of domination, but they do so under the terms of a
                                                        type of statist thinking that the buyers and sellers
(ii)                                                    of contemporary art now move far beyond. John
                                                        Elsner and Roger Cardinal, for example, propose
 ragile or thinning liquidity in the coming period
F                                                       that “if the peoples and the things of the world are
will result in a contraction of the total market,       collected, and if the social categories into which
again putatively intensifying a conflict between        they are assigned confirm the precious knowl-
primary and secondary markets but increasing            edge of culture handed down through genera-
their co-dependency to secure a shrinking capital       tions, then our rulers sit atop a hierarchy of collec-
base. In this scenario, power will again be con-        tors.”38 The rise of the private museum, its public
centrated but the appeal to subjectively private       accessibility, its collection built on the impulsive
love as its legitimizing ethos will probably be less   and quixotic taste of its owner (in fact advised by

            financialization of art                              suhail malik/andrea phillips
232                                                                                                   233
a group of arts consultants and public museum          over at least the next two decades as this type of
directors hoping to gather some crumbs), attests       inventive public-private methodology becomes in-
to a pathological and political shift from a culture   creasingly necessary to maintain institutions in the
of care to a culture of love within the dominant       wake of the decline of state funding for culture.
structures of neoliberal states.39 If care is what
the state-funded arts were supposed to do, either      III
through psychic and experiential transformations
of the viewer or through participation in programs     reputational venues
of community cohesion, such narratives of amelio-
ration and healing of publics have been replaced       If privatized sabotage becomes more prominent as
by privatized love. The private collector, making       the organizing principle of art and its institutional-
his or her mark, through the use and abuse of his/      ization, then institutional capitalization and its
her own passions by trading art, no longer does        attendant prestige- and reputation-building of art
so on the basis of a public’s expectation of benefit   will shift more decisively to overt market-based
(he is not doing it to “do good”). This is not the     organization—notably, from biennials to art fairs.
field of patronage developed in the industrial age      Given the importance of prioritizing subjective
of Europe and North America. Instead of a gen-          positioning as a condition for art’s institutional
eral commitment to care (however homogenized            capitalization, and the importance of providing
and hierarchized this system of care was), private      an ersatz public service, these procedures of
art buyers care for their own passions and then         legtimization are not conducted through the vend-
allow the public to see glimpses of them though         ing formats and venues themselves but the prolif-
the gauze of mediators, arts consultants, and the       eration of off-site projects (entry to which is only
like. Rather than be understood as a neo-feudal         sometimes charged). Such projects rely upon the
arrangement, here the previously state-organized        veneer of a “Hostile Worlds” scenario internal to
public is demanded to share in the love of art          the primary market itself, allowing the love of art
on the terms of private corporatism. The new            “for its own sake” to continue to be materialized
museum (The New Museum?) is identified as a             and specified at precisely the point of its most
location in which any civilian can participate—         intense sites of marketization. If the availability of
publicly—in the spectacle of elite spending, doing      such art fair project programs to the public is a
so in the sharing or appreciation of a privatized       leading factor in their presentation, the transforma-
love. This endemic configuration of people, space,      tion of state-level organization by capitalization and
and shared but unequal love will be the ever more       its private solace again comes to the fore.
prevalent shape of public galleries and museums         The availability of art to a (bourgeois) public was

            financialization of art                             suhail malik/andrea phillips
234                                                                                                   235
the task of the national museum and, in post-war         notes                                      — with
                                                                                                             which capitalism is ordered”
                                                                                                        and the “pattern of order—namely,
Europe, the biennial, overcoded as these were         1	G raeme Wearden and Katie Allen,              the way in which prices are struc-
                                                           “Eurozone Bond Markets in Turmoil            tured and restructured relative to one
by a pedagogic-formative command typical of                as France and Germany Dig in over            another—is governed by capitaliza-
modernizing industrial nation-states seeking (to           ECB,” guardian.co.uk, November               tion” (153). The argument in the
                                                           16, 2011, www.guardian.co.uk                 main text depends on the following
project) a public base. The art fair project re-           /business/2011/nov/16                        schematic formulation of capitaliza-
places this complex network of institutional and           /eurozone-bond-markets-germany
                                                           -ecb/.
                                                                                                        tion (185–192, paraphrased in the
                                                                                                        following lines and in n. 34 below):
social care, in which culture and art might have      2	N oah Horowitz, Art of the Deal:              representing capitalization at a
acted as vectors of common identification, with            Contemporary Art in a Global Finan-
                                                           cial Market (Princeton: Princeton
                                                                                                        certain time as Kt , earnings as E, and
                                                                                                        the rate of return as r, the formula of
the eliciting and adulation of private excitements;        University Press, 2011), 145.                capitalization is:
                                                      3	Ibid., 170.                                	
a dab of knowledge-generation in such projects        4	Ibid., 170.                                  (A) Kt = E / r
allows them to also take on the mantel of cultural    5	Ibid., 174.                                	
                                                      6	Ibid., 170.                                   ( The / operator marks a division,
education from that previous formation. Yet what      7	Ibid., 186.                                    which finds the ratio between the
is public here is not a common or collective task     8	Ibid., 188.
                                                      9	Ibid., 176.
                                                                                                        quantities on either side of it. Below,
                                                                                                        x is the operation of multiplication of
but subjective positioning, the power of private,     10	Ibid., 177.                                   the quantities on either side; op-
speculative zeal we are all permitted to occasion-    11 Sarah Thornton, Seven Days in the
                                                           Art World (London: Granta, 2009);
                                                                                                        erations in brackets are carried out
                                                                                                        before the operator outside of them.)
ally taste.                                                Don Thompson, The $12 Million            	To take the simplest example,
                                                           Stuffed Shark: The Curious Econom-           expected earnings of €1000 at 5
                                                           ics of Contemporary Art and Auction          percent interest rate over a year re-
                                                           Houses (London: Aurum, 2008).                quire an initial capitalization (invest-
                                                      12	Ulf Wuggenig, “Attached by an                ment) of 1000 / 0.05, or €20,000.
                                                           Umbilical Cord of Gold,” Texte Zur          	 Price can be directly formulated in
                                                           Kunst 83 (September 2011): 56.               terms of capitalization through the
                                                      13	Suhail Malik, ‘‘Critique as Alibi:           example of shares. The share price
                                                           Moral Differentiation in the Art Mar-        for a company at a given time (P t ) is
                                                           ket,” Journal of Visual Art Practice,        its total capitalization (Kt ) distributed
                                                           Special Issue on Critique, ed.               over the total number of shares (N).
                                                           Mary-Anne Francis, 7:3 (December             The price per share is also the pres-
                                                           2008): 283–295.                              ent value of the perpetual earnings
                                                      14	T hornton, Seven Days in the Art             per share (EPS) of that company
                                                           World, 10.                                   (or total earnings per share, E / N):
                                                      15	H orowitz, Art of the Deal, 173.
                                                      16	Ibid., 170.                              	(B) P t = Kt / N = (E / N) / r = EPS / r
                                                      17	Jonathan Nitzan and Shimshon             	
                                                           Bichler, Capital as Power: A Study             (A) and (B) here are basic formulas
                                                           of Order and Creorder (London:                 for price as the index of present value
                                                           Routledge, 2009), 153 and 183.                 of future earnings.
                                                      18	In order to keep the main text on        19	H orowitz, Art of the Deal, 171.
                                                           topic, details of Nitzan and Bichler’s   20	Ibid., 78.
                                                           argument are relegated to the foot-      21	P redicating price on finance reverses
                                                           notes with references to Capital as            neoclassical pricing doctrine, which
                                                           Power in parentheses. Capitalization           drastically changes how the relation
                                                           for Nitzan and Bichler “represents             between prices and markets are to
                                                           present value of the future stream             be understood. Rather than markets
                                                           of earnings” (153). Price is “the unit         setting prices, for Nitzan and Bichler

            financialization of art
236                                                                                                                                  237
— “modern capitalists are ‘price              28	Ibid., 249.                                — the extent to which capitalists are         — a factor against the rate of return
     makers’: they fix the price of the        29	Administered prices demonstrate               investing optimistically (H is greater          in which investors have maximum
     product and then let ‘markets forces’          two business principles: (i) profit is        than one) or pessimistically (H is less         confidence (rc ). As with hype, confi-
     do the rest for them” (242). It is not         maintained by generalizing sabotage           than one). Whether capitalists have             dence can be incorporated into the
     that market imperatives set prices             (ibid., 241); (ii) prices are determined      hyped their capitalization up or down           price formula (C) by decompositing
     but that prices “set” the market.              by a target rate of return and the cost       can only be known when their initial            the rate of return:
     While there may indeed be market               of goods is set to meet this return.          capitalization or price is assessed              
     forces, such forces are not primarily          The degree of monopoly is a mea-              against their actual earnings. The               (D) P t = EEPS / r = (EPS x H) / (rc x ∂)
     those shaping prices but rather those          sure of industrial sabotage required          hype coefficient thus “represents the            
     that prices impose on social, indus-           in order to maintain a rate of return.        ex post collective error of capital-             When confidence is high, the risk-
     trial, and institutional arrangements.         As the phrase implies, it is a measure        ists when pricing the asset, and is              coefficient is close to one and it
22	Nitzan and Bichler, Capital as Power,          of power: higher prices mark a                revealed only once the earnings are              increases when confidence falls
     262.                                           greater degree of monopoly over               announced” (189)—at which point                  back, resulting in a lower share price
23	As noted, the classical doctrine of            industry, indexing more power to              hype can be measured.                            (all other things being equal). The
     price theory has it that market pres-          sabotage. That is, the greater the         	 Nitzan and Bichler remark two                   risk coefficient is not to be confused
     sures and competition generate the             markup that can be set, the greater           important key characteristics of                 with the risk premium described
     prices set by firms or competitors             the power of those who set it; and            hype (191): it actively shapes price             in standard finance theory, which
     for their wares. However, following            the contrary.                                 and thus commands markets; it is                 claims to measure the risk in prices
     the work of Gardiner Means at the         30	O lav Velthuis, Talking Prices: Sym-          not an individual intervention but a             and actual volatility, not speculative
     time of the Great Depression, Nitzan           bolic Meanings of Prices on the Mar-          collective-sectoral coalition combin-            confidence. Higher risk premiums
     and Bichler emphasize that there are           ket for Contemporary Art (Princeton:          ing regulators, policy-makers, execu-            imply higher returns but a higher risk
     in fact “two types of prices” (240):           Princeton University Press, 2005),            tives, opinion-makers, traders, and so           coefficient means less confidence
     competitively formed market prices             24–26.                                        on—a capitalist ruling elite—to push             and so lower prices.
     set by standard supply and demand         31	P ierre Bourdieu, Distinction: A              prices up or down and give confi-           35	T he price per share is the trade off
     constraints and also what Means                Social Critique of the Judgment of            dence that such swings are justified             between how much earnings per
     called “administered prices,” which            Taste, trans. Richard Nice (London:           and rationally explainable. The intro-           share are hyped-up against the risk
     are typical of concentrated industries.        Routledge, 2003 [1979]).                      duction of hype in the formulations              that the shares will not beat a stan-
     Administered prices do not respond        32	V elthuis, Talking Prices, 26–27.             of capitalization makes apparent that            dard rate of return. Actual earnings
     to market circumstances very fast         33	H orowitz, Art of the Deal, 208.              investors are not essentially reactive           and the standard rate of return can
     (if at all) and the firms setting them    34	T he complication in the schematic            to market forces through pricing, as             both be retrospectively measured.
     do not seek to maximize their profits          formulas of capitalization (A) and            neoclassical precepts have it (208),             Though Nitzan and Bichler do not
     but to secure them. Desired profit             price (B) in n. 18 is that the future is      and that prices are not automatically            take their argument in this direction
     rates are set in advance and this, in          uncertain, which means that the ba-           or mechanistically derived from earn-            in Capital as Power, the retrospec-
     addition to “output costs,” determines         sic variables are in fact unknown and         ings (just as the market does not set            tively measured “objective” factors in
     prices that are kept relatively stable         unmeasurable. But each variable can           prices but is “set” by prices).                  price-setting can be separated out
     (Apple is a good example of one such           be retrospectively decomposed into            	 It is then the earnings projections           from the right-hand side of formula
     firm). In other words, administered            the objective aspects of earnings and         of capitalists that are the key factor in        (D):
     prices are not guided by the market’s          rate of return and, on the other hand,        price-setting. Yet these projections
     invisible hand. Moreover, studies              a speculative element that measures           also depend on the confidence of in-        	(E) P t = (EPS / rc ) x (H / ∂)
     show that most prices are adminis-             the degree of “expectation” that was          vestors in their own predictions. This
     tered prices (n. 19, 241). Nitzan and          the capitalist’s projection into the          confidence can be measured against          	Implementing this separation allows
     Bichler turn to Michal Kalecki’s notion        future, itself composed of hype and           a benchmark (government bonds,                  the speculative element of price-
     of the “degree of monopoly”—the                confidence in predictions. In detail:         for example) in which a maximum                 setting to be identified as the trade-
     extent of control over prices—as an       	E xpected earnings are first decom-             certainty of a given rate of return is          off between hype and risk. Price-
     explanation of how and why price               posited. For the share-price formula          assumed. This is called a “risk free”           setting as it is formulated in (E) can
     setting is determined by conditions            in particular (188):                          rate in standard finance theory                 be split into the following descriptive
     other than those of market circum-                                                           though, as Nitzan and Bichler                   terms:
     stances (242).                            	(C) P t = EEPS / r = (EPS x H) / r              observe, it is not explained “why it        	
24	Nitzan and Bichler, Capital as Power,                                                        is risk free nor what determines its          P rice per share = (objective return) x
     239.                                      	W here EEPS is expected future                  level” (209). By contrast all other             (speculative zeal)
25	Ibid., 239.                                  earnings per share, EPS is actual               investments have a degree of con-           	
26	Ibid., 228.                                  future earnings per share and H the             fidence that can be measured by                If this formulation corresponds with
27	Ibid., 249.                                  hype coefficient which measures                 the “risk coefficient” (∂) that acts as        a conventional sense of what

     238                                                                                                                                                                       239
— speculation
                   involves—the anticipato-    — eds., Caring Culture: Art, Architec-
    ry “hunch” of the investor who follows         ture and the Politics of Public Health
    the markets—what is telling about              (Amsterdam/Berlin: SKOR/Stern-
    it is that: (i) subjective speculation         berg Press, 2011).
    “shapes” the price rather than follows
    it (even when there is no hype (H = 1)
    and no risk (∂ = 1)), and thus shapes
    the future of the market (210); and (ii)
    speculative zeal can be given an ex-
    act measure (it is the ratio of the price
    per share to its actual return, which is
    a number that can only be retrospec-
    tively known). In the words of Jamie
    Searle at Citi Bank in the epigraph
    to this essay, speculative zeal is the
    “positioning” of the speculator who
    shapes the market and the future but
    whose “accuracy” or “distortion” of
    what the price should have been can
    only be retrospectively measured.
    Speculative fear is when hype is
    outweighed by risk (H / ∂ is less
    than one); speculative enthusiasm
    is when hype outweighs risk
    (H / ∂ is more than one). Since the
    future is unknown, however, confi-
    dence can never be at a maximum.
    And since hype is a sectoral (which is
    to say collective-institutional) pres-
    sure, positioning is but the shaping of
    price by power. It can be measured
    by comparing price to actual earn-
    ings, which is to say: capital accumu-
    lation, profit gained by sabotage.
36	Wuggenig, “Attached by an Umbilical
     Cord of Gold,” 62.
37 H orowitz, Art of the Deal, 161, 186,
     199–201; Suhail Malik, “A Boom
     Without End? Liquidity, Critique
     and the Art Market,” Mute: Living in
     a Bubble: Credit, Debt and Crisis,
     2:6, (2007): 92–99, www.metamute.
     org/en/A-Boom-Without-End
     -Liquidity-Critique-and-the-Art
     market; Andrea Fraser, “L’1%, c’est
     moi,” Texte Zur Kunst 83 (September
     2011): 114–127.
38	John Elsnor and Roger Cardinal, eds.
     The Cultures of Collecting (London:
     Reaktion, 1994), 2.
39	A ndrea Phillips, “Too Careful: Con-
     temporary Art’s Public Making,” in
     Andrea Phillips and Markus Miessen,

     240
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