Contemporary art commands astronomical prices, often exceeding the value of Old Masterpieces. This phenomenon is driven by the complex evolution of the art market, where the roles of artists, dealers, auction houses, and even political forces have intertwined, shaping a unique system of pricing and value perception. From Renaissance workshops to 21st-century global auctions, art has transformed from a craft into an elite investment asset, where prestige and status play a role no less significant than the aesthetic component.

Early Stages of the Art Market: From Workshops to Royal Courts

Until the mid-15th century, art was considered a craft. The interaction between the artist, their workshop, and the patron determined the value of a work. The price depended on the artist's name, the size of the canvas, and the number of figures depicted, as portraying people was considered the most complex task. Many portraitists had set rates: a bust portrait cost a certain amount, a half-length portrait twice as much, and a full-length portrait commanded the highest fee. Additional elements, such as pedigree animals or intricate landscapes in the background, proportionally increased the cost.

The artist and patron would typically agree on an approximate price, subject matter, and size of the painting, after which they would enter into a contract. The artist would receive an advance payment against a receipt and begin their work. Changes during the process could affect the price, but the base cost per square centimeter or inch of canvas was known in advance. Expensive pigments, such as ultramarine from lapis lazuli, which cost hundreds of times more than other paints, were often paid for separately by the patron or stipulated in the contract as a mandatory requirement.

Patrons chose a workshop based on their financial capabilities and commissioned portraits or heroic canvases to adorn their castles or estates. In large cities, there was competition among workshops, which offered discounts and sought to secure lucrative commissions from nobility, the church, or wealthy merchants.

The most prestigious position was to become an official court artist or royal painter. This allowed for the creation of portraits of royal families, elevating the artist to the pinnacle of the art pyramid and enabling them to set the highest prices for their works. Owning a portrait painted by an artist who created portraits of the monarch was considered extremely prestigious.

Work on a painting was typically carried out in stages: one-third or half of the sum was paid as an advance for materials, and the remainder upon completion. The patron or their representative would discuss the subject, characters, and setting with the artist. Before beginning work on the canvas, the artist was obliged to present the patron with a reduced oil sketch or a detailed drawing. The patron would approve the sketch, make corrections, such as requesting a more stern expression or the addition of embellishments. This sketch became the primary legal appendix to the contract, formalizing the agreements.

The contract also specified which member of the workshop would work on the canvas. Large workshops employed many apprentices, who were often responsible for secondary details. The master's time was expensive and limited, so they might only paint the human figures themselves, delegating the rest to apprentices. Contracts clearly outlined the extent of the master's involvement in the creation of the work, as patrons feared receiving a painting executed by an unknown student.

Not all artists were honest; some might entrust the painting of a face to a talented student and then sign it themselves. This made it difficult for the patron to determine the true authorship and is the reason for current difficulties in attributing paintings. A master's signature did not always signify their personal involvement in the creation of the work. Accurately determining the authorship of a painting 500 years later is a complex problem requiring analysis of style, brushwork, and depiction characteristics.

Within the scope of a commission, artists had limited freedom of action, executing what they were instructed to do. Each artist had their own style and methods, but the primary criterion for the quality of a portrait was physiognomic resemblance and the conveyance of status. If a portrait was not a likeness or depicted the patron too realistically without due flattery, the client could refuse the work until corrections were made. This led to disputes and legal proceedings between artists and patrons.

In 1750, the English painter William Hogarth was commissioned by the banker Sir Richard Grosvenor to create a painting with complete freedom of subject matter and an offer of any sum. Hogarth painted the tragic scene "Sigismund Mourning the Heart of her Husband, Guiscard." Grosvenor found the painting too somber and inappropriate for a drawing-room and attempted to cancel the deal. Hogarth perceived this as an insult to his talent, released the banker from his obligations, returned the advance, and vowed never to work for private patrons again, returning to creating prints for the general public. He did not sell the painting during his lifetime.

Most often, disputes arose over the deadlines for completing commissions. Artists, being creative and disorganized individuals, frequently missed deadlines, forcing patrons to insist on the swift completion of the work, especially if the painting was intended for an important event. For example, the French painter Maurice Quentin de La Tour received a commission to create a large ceremonial portrait.

Pricing Challenges and the Artist's Role

The creation of the portrait of Madame de Pompadour, Louis XV's official mistress, took three years. The artist, La Tour, demanded complete submission from his patron during the sittings. Upon completion, La Tour requested 48,000 livres, which the Marquise considered an absurd sum. She offered 24,000 livres, but the artist refused to lower the price, stating that his time and pastel technique were non-negotiable. La Tour effectively blackmailed the court by withholding the portrait from the Salon's opening. Ultimately, the Marquise paid half the sum, and the other half was compensated by the provision of official state housing and a studio in the Louvre. The Royal Picture Gallery of the Louvre at that time served not only as a collection but also as a residence for the best court masters.

Large and complex paintings could take years to complete, which accounted for their high cost. However, even the most expensive works by renowned masters in France typically did not exceed 10,000 livres. The case of Madame de Pompadour's portrait was exceptional. For 10,000 livres, one could purchase a small country estate or secure a modest lifelong income. In today's currency, this amounts to approximately $250,000-300,000. In 1667, by decree of Louis XIV, the French Royal Academy of Arts held the first exhibition of its students' works.

The Emergence of Public Collections and the Division of Labor

In 1725, an exhibition, initially held in closed, semi-private showings, moved to the square salon of the Louvre Palace, giving rise to the historical name "Salon." From 1737 onwards, the Salon became public and free for all citizens, attracting up to 500,000 visitors per season. Paintings were hung "en tapisserie" from floor to ceiling, a practice known today as salon hanging. Any artist could participate in the Salon but had to undergo a strict selection process by academicians. The acceptance of a painting by the jury and the awarding of a medal instantly made an artist a star, increasing their prices five to tenfold and attracting a queue of wealthy bourgeoisie. Rejection by the jury effectively deprived an artist of their livelihood. Thus, the Salon jury, composed of 30-40 academicians, served for almost 150 years as the world's foremost arbiter of painting, determining the fate of all art in Europe.

The situation began to change with the emergence of a new institution that altered the approach to art. Around the mid-15th century, a revolution occurred: art, previously private and accessible only to a select few, began to transform. Prior to this, a patron would commission a painting for personal use, and it would hang in their home, serving a purely decorative function. An ordinary person could only see art in churches or state institutions. Painting remained inaccessible to most people until the advent of museums.

The first step was the opening of private royal collections to a limited public. Pope Clement X in the 15th century opened his collection of antiquities to the residents of Rome for educational purposes. Following this, the Uffizi Gallery in Florence, the last vestige of the Medici family, was bequeathed to the city by Anna Maria Luisa de' Medici, with the condition that the collection be preserved in Florence and made accessible to the public.

The true birth of the public art museum occurred during the French Revolution. In 1793, the new republican government nationalized the royal Louvre Palace and the entire collection of the deposed Louis XV, establishing the first major public museum on their foundation. The museum was based on an ideology consonant with the revolution: art no longer belonged to the king but to the entire nation. The Louvre was opened to all citizens for free, although initially only three days a week, with priority given to artists wishing to copy the works. Museums began to systematically organize art by epochs and national schools. Gaining entry into a museum became the most desired goal for an artist and the highest degree of recognition for their talent, automatically bestowing the work with the status of an absolute standard, a masterpiece.

The Evolution of the Art Market: From Marchands to Dealers

The emergence of public collections and museums led to a division of artists into those whose works were exhibited in prestigious institutions and the rest. Paintings by artists represented in museums like the Louvre or the Uffizi were worth many times more on the market, as the museum became the primary mark of quality and an institutional guarantor for the artist. Museums themselves transformed into significant players in the art market, acquiring private collections, as the British government did, for example, by forming the National Gallery in London from 1824 onwards.

Museums also began to host exhibitions, while salons showcased contemporary art by living masters. Museums, on the other hand, housed works by Old Masters, with the Louvre effectively serving as a hall of fame. Successful exhibitions of an artist at salons could lead to the state purchasing their work for national collections, signifying recognition of their contribution to history and a significant increase in the value of their art.

However, the public nature of art made it accessible to a broad audience, not always discerning in its subtleties. If previously the value of a painting was determined by the taste of an aristocratic patron, the advent of art in public view created a need for professional interpreters. Art criticism and expertise emerged, as did a new player in the art world – picture dealers, who were then called marchands and are now known as art dealers.

In the 16th century, marchands were modest intermediaries. They attended salons, identified promising artists, acquired their works, and resold them in their shops, primarily specializing in emerging painters. They did not determine the value of paintings independently but acted as a link between the salon's recognition and the buyer. However, this role soon changed. Dealers could not challenge the salon's decisions; if the salon deemed an artist unsuccessful, a dealer could not sell their works. The salon held a monopoly on artistic taste, and museums aligned with its opinion. By the end of the 16th century, another important phenomenon related to the art market emerged.

New Players and Shifting Values in the Art Market

In the late 15th century, London became the global capital of the art market. This was facilitated by two factors: the influx of capital into the British Empire from the colonies and the economic upheavals in continental Europe, particularly in France. As a result, masterpieces of art were massively sold off and transported across the English Channel. In the 1760s, the English aristocracy was captivated by the Grand Tour – the obligatory journey of young noblemen across Europe. They brought back ancient statues, canvases by old masters, Italian marble, and French furniture to adorn their estates.

A large class of bourgeoisie had formed in Britain, having grown wealthy from colonial trade. These new rich, not always belonging to the aristocracy and not always possessing the appropriate manners, sought a way to acquire prestige and status that could not be bought with money. Art became the ideal tool for achieving this goal.

It was in this atmosphere that James Christie emerged, effectively capitalizing on the prevailing situation. Before founding his own business, after leaving the navy, Christie worked as an assistant to the London auctioneer Thomas Hull, who dealt in antiques. There, he learned the specifics of auctions and noticed that the auctions of that time resembled noisy flea markets where everything was sold, from hay to clothing. Bankrupts and individuals in desperate financial straits had their property sold at such auctions. Aristocrats avoided such places, sending their servants instead.

Christie hypothesized that a change in atmosphere and an elevation in the quality of items sold could personally attract the wealthy to auctions and ensure high prices. His friends from the art world suggested that there was a significant gap in the market for paintings and antiques. It was inconvenient and considered disreputable for aristocrats to acquire paintings through small, suspicious dealers. A prestigious venue was needed.

In 1766, Christie opened his salerooms in Pall Mall, a prestigious district of London, fully satisfying this need. He refused to sell household junk, offering only paintings, jewelry, expensive porcelain, fine wine, and antique weapons in his catalogs. Christie transformed the auction into a theatrical performance. Dressed in the latest fashion and wearing a powdered wig, he personally conducted the sales. His elegant manner of speaking and subtle compliments to buyers attracted lords and ladies who came to auctions for entertainment, much like attending the opera. James Christie was the first to recognize the value of creating a glamorous and prestigious venue for the art business.

Modern Trends: Prestige, Investment, and Suspicion

The newly wealthy acquire not only works of art but also status, an atmosphere of elitism, and excitement. This gives them the opportunity to be in the same room as aristocrats. The auction house Christie's, founded on this idea, transformed auctions into a social event. In 1779, Christie's successfully sold the painting collection of Robert Walpole, the first Prime Minister of Great Britain. Russian Empress Catherine II acquired the entire collection for the Hermitage for £40,500. This sum is equivalent to $1.2 billion at today's exchange rate.

Thus, a new sales scheme emerged, competing with art dealers. The price in a dealer's shop remained a secret to the buyer, as the dealer set it arbitrarily based on the client's status and wealth. This aroused suspicions of deception and distrust. At auction, however, open market competition appeared. The price rose before the eyes of all bidders. The buyer saw their rivals and understood that a high price indicated the artwork's desirability. This generated more trust among the new bourgeois class, who were not art connoisseurs but possessed significant financial means. Traditional dealers offered a calm, intimate purchase, while Christie's turned art acquisition into a gamble and a sport. Public bidding stimulated adrenaline, and the rivalry between lords for a rare canvas amplified this effect.

The Public and Buyers at Auctions

The publicity of auctions stimulated buyers to overpay under the influence of the moment. Aristocrats who needed to sell urgently to cover debts found auctions more advantageous than traditional dealers. Dealers, aware of the seller's difficult situation, would lower the price and could sell a painting for years. Auction houses guaranteed a quick sale of property on a set date, making them the primary tool for liquidating estates and bankruptcies.

Traditional dealers initially boycotted auctions but later adapted. Dealers became major buyers at auctions, acquiring works in bulk for subsequent resale in their galleries to clients who preferred to avoid public bidding. Additionally, dealers began to act as agents. Wealthy collectors, embarrassed or afraid to bid themselves, hired dealers to conduct bidding professionally.

The end of the 16th century marked a turning point for the financial scheme of the art business. During this period, the embryo of the modern art market took shape. Museums and salons determined the quality of art and the value of an artist's name. Auctions and dealers acted as experts and intermediaries, forming the final price and carrying out the sale of paintings. Initially, these new rules did not significantly impact the price of works, as mainly paintings by living masters were sold, fetching 50-200 units of currency.

Pricing and Examples

Early works by Genia were valued in the range of $10,000 to$40,000. This cost is comparable to the prices of works by contemporary but lesser-known artists. Old masters rarely appeared on the market, as most of their works had been acquired by museums. A shortage of old masters emerged against the backdrop of the growing wealth of the new bourgeoisie. The Industrial Revolution in Europe gave rise to a class of wealthy factory owners and industrialists. The nouveau riche sought to acquire historical artifacts and high-class works of art to enhance their social status.

The History of "The Gainsborough Hat"

In 1823, the sale of George Watson Taylor's collection included Rubens' "Landscape with the Castle of Steen," which was auctioned at Christie's for 1,000 guineas, equivalent to approximately $290,000 USD in today's terms.

The sensation and scandal of 1876 was Thomas Gainsborough's portrait of the Duchess of Devonshire. This painting, depicting the Duchess in a large black hat adorned with feathers, generated a buzz even before its sale. The hat instantly became a fashion trend and went down in history as "The Gainsborough Hat." Later, the painting mysteriously disappeared from the family collection. Fifty years later, it was discovered in the possession of an elderly schoolteacher who had cut off the bottom part of the canvas to fit it above her fireplace. The trimmed masterpiece was sold to an art dealer for £56.

Years later, the painting came into the possession of collector Wynn Willis. After his death, the portrait was put up for auction at Christie's on May 6, 1876. A drama unfolded at the auction as the leading dealers of the time vied for the right to own the portrait. Ultimately, the painting was acquired by London dealer William Agnew for a record 10,000 guineas, which is about $2 million today. At the time, it was the highest price ever paid for a painting at auction.

Three days after its purchase, the painting was stolen by Adam Worth, a notorious criminal of the era. He cut the canvas out of its frame, intending to use it for his brother's ransom from prison. However, the painting proved useless, and Worth transported it for 25 years in the false bottom of his trunk. Eventually, old and infirm, he agreed to sell it secretly in exchange for immunity from prosecution. Agnew's son bought back the portrait for $25,000 and immediately resold it to American banker George Morgan for$150,000 (about $6 million today), recouping the ransom amount sixfold.

This case demonstrates how provenance, or the history of a painting, directly influences its value. If a painting has been stolen, is linked to the artist's life story, or became a sensation or iconic phenomenon, its value can increase manifold.

Issues with Identification and the Rarity of Old Masters

Speculators set record prices for artworks. This also applied to a painting by the old master Rubens. There was high demand for works by old masters with an extremely limited supply. Paintings by old masters rarely appeared on the market, which caused a stir each time they did. The maximum price for works by old masters reached a new level. Wealthy individuals considered such prices acceptable when they had sufficient disposable funds. The growth of the fortunes of the new bourgeoisie and the scarcity of old masters contributed to a gradual increase in the prices of their works. Owning such paintings served as a significant indicator of status for the non-aristocracy.

The Shift to Modern Art and the Role of Dealers

In the mid-19th century, the academic jury of the Paris Salon became excessively conservative. It demanded smooth painting and classical subjects, ignoring the new reality. Young artists such as Édouard Manet, Claude Monet, Camille Pissarro, and Auguste Renoir encountered this conservatism. Modern art, sometimes of questionable aesthetic quality, began to command comparable or even higher sums than the works of old masters. For instance, a painting by Cy Twombly was sold for $70 million, and an abstraction by Jackson Pollock for$86 million. This transformation is largely due to the activities of dealers.

Works with Bright Colors and Visible Brushstrokes

The Salon massively rejected works with bright colors and visible brushstrokes. In 1863, the Salon jury rejected over 3000 paintings. This scandal led Emperor Napoleon III to order the opening of an alternative exhibition, the "Salon des Refusés." This event became the first critical crack in the state's monopoly on art. During this period, insightful art dealers of a new type emerged, among whom Paul Durand-Ruel stood out. Durand-Ruel not only reformatted the art market but effectively recreated it. Before him, picture dealers were passive resellers, awaiting the artist's approval by the academy at the Salon. Durand-Ruel transformed the role of the gallerist into a producer, investor, and market maker. His career path was characterized by significant risk, balancing on the brink of bankruptcy, and developing new methods of the art business.

Dealer History and Art Acquisition

Paul Durand-Ruel inherited a small shop in Paris from his father, specializing in stationery and paintings. In the 1860s, he began to show interest in artists of the Barbizon School, such as Camille Corot, Théodore Rousseau, and Charles-François Daubigny. The official Salon did not appreciate their realistic landscapes, considering them dirty and unfinished. Durand-Ruel acquired their works in large quantities. When the public came to appreciate the Barbizon artists' creations, the prices of their paintings rose significantly, bringing Durand-Ruel his first fortune. He formulated the fundamental rule of the art business: the greatest profit lies where society has not yet recognized the value. This principle is still applicable today. The Impressionists, innovators of a new style and techniques, also faced distrust and criticism.

The Franco-Prussian War and Édouard Manet

During the Franco-Prussian War, Durand-Ruel moved to London and opened a gallery there. In London, the artist Daubigny introduced him to Claude Monet. Monet, in turn, introduced Durand-Ruel to Camille Pissarro. Durand-Ruel was impressed by their experiments with light and saw potential in them.

Upon returning to Paris, Durand-Ruel met other artists, including Degas, Renoir, Sisley, and Monet. He acquired hundreds of their works, despite the Parisian public mocking them. In 1872, Durand-Ruel bought 23 paintings from Édouard Manet for 35,000 francs. This amounted to about $30,000 modern dollars per painting. He also acquired works by Manet, Degas, and Sisley, spending his entire fortune on them.

By 1874, Durand-Ruel was on the verge of bankruptcy, as no one was buying these paintings. He had to sell a significant portion of the works to other dealers and collectors at minimal markup or at cost to survive. Nevertheless, he continued to support the Impressionists. In 1874, with his support, the first Impressionist exhibition was organized.

The First Impressionist Exhibition

The Parisian art world was conservative and rejected new ideas. Dealer Durand-Ruel spent considerable effort and money on paintings that were considered low quality. He continued to acquire the works of the Impressionists, often being the sole buyer for the new generation of artists. This situation persisted for 15 years. In 1886, Durand-Ruel organized an exhibition of Impressionists in the USA. At that time, European art was highly valued in America. New European masters were in demand, much like old masters in Europe. The American public was characterized by open-mindedness and the absence of a rigid academic system. Super-rich Americans showed great interest in status items from Europe. Impressionist paintings were successfully received in the USA.

Sale of Paintings After 15 Years

A painting, purchased 15 years ago for 35,000 francs, was sold for 25,000 francs. This sum is equivalent to approximately 560,000 US dollars at the current exchange rate. By the time of the sale, the artist Édouard Manet had already passed away, which typically leads to an increase in the value of his works.

Despite 25,000 francs being an absolute record for works by new artists, it significantly exceeded the prices for works by living Impressionists, which at the time sold for 2,000–3,000 francs. For comparison, large new canvases by recognized artists of the official salon, such as Ernest Meissonier and William Bouguereau, cost 100,000–150,000 francs.

Formation of the Art Market

Previously, the price of a painting was determined by the client. By the period under review, a new situation had emerged: paintings were no longer painted exclusively on commission. The dealer Durand-Ruel, by buying up the works of the Impressionists, created a new sales model. Artists first created paintings, and then buyers were sought for them. Thus, the artist was no longer controlled by the client, but only by the actual sales results and the dealer's opinion. The Impressionist technique of rapid painting, which took several days, reduced the cost of each canvas and the risks for the artist. Artists gained the opportunity to work as they wished, realizing any ideas without spending years on one painting and without fearing the absence of a buyer. Durand-Ruel created a fifteen-year period that allowed artists to experiment and develop while the market adjusted to the new art. This moment is important because the artist's creative motivation ceased to depend on the client. The client, as a participant in the financial scheme of painting sales, gradually withdrew from the scene. The value of art was no longer determined by an external commission or purchase.

Auctions and Price Growth

The art market began to form within the art community by artists themselves and their dealers. A painting transformed from a commodity intended for a specific buyer into a regular market good, whose creator does not know who will buy it. The final selling price is largely determined by the agent's enterprise and their ingenuity in interacting with the market. Two significant turning points occurred: painting became a commodity, and the infinitely capacious American market was discovered, ready to buy contemporary European art at a decent price. Dealers flooded into Europe from America.

New Artistic Movements and Their Valuation

By the beginning of the 20th century, the works of old masters and contemporary classics were fetching millions of dollars. Modern art, despite its growth, was valued at a maximum of half a million dollars. The commercial success of the Impressionists spurred the art world to experiment in an attempt to replicate their achievements. Each artist strived to find a new approach to establish their own style.

In 1895, Claude Monet sold a painting from his "Rouen Cathedral" series for 15,000 francs. More elaborate canvases from this and subsequent London series were sold by dealer Durand-Ruel to collectors for 20,000–30,000 francs. For 30,000 francs at the time, one could purchase a country house. In comparison, academic paintings cost 150,000 francs, which allowed for the purchase of a luxurious mansion in the center of Paris. In a hundred years, the price of classical painting had increased fivefold, while new art had reached the level of classics from a century prior.

The Emergence of New Styles: Platilism, Fauvism, Cubism

New artistic styles emerged, such as Platilism, Fauvism, and Cubism. These movements, along with Expressionism and Surrealism, became a platform for experimenting with the depiction of reality. Artists sought unique yet recognizable ways of portraying objects, intended to evoke emotions in the viewer. The public often did not understand these experiments, as they were accustomed to art designed to please the eye and soul. The new experimental art did not immediately win over the public, which resisted. However, the situation in the art market changed: a class of experts emerged, acting as intermediaries between the artist and the buyer. Buyers, often lacking sufficient knowledge in art but possessing financial means, hired art dealers. For the first time, a situation of actual conflict of interest arose, where the seller was simultaneously the appraiser of the product's quality. Under these conditions, the seller could not speak negatively about their product, and the buyer was often unable to independently assess its quality.

The Financial Side of Art and Exclusive Contracts

Cubism became the first avant-garde movement to achieve commercial success. German gallerist Daniel-Henry Kahnweiler applied and improved upon the methods of Paul Durand-Ruel. Kahnweiler entered into exclusive contracts with Pablo Picasso and Georges Braque, buying up all their output. He prohibited the artists from exhibiting at official salons, allowing them to display their works only in his gallery. This strategy created an atmosphere of elitism and an exclusive club. Before World War I, Kahnweiler purchased Picasso's paintings for an average of 250-500 francs per canvas, which is equivalent to approximately $10,000 in today's terms.

Russian Collectors and Auctions

In the early 20th century, few people bought art, among them were Russian merchants, Sergei Shchukin and Ivan Morozov, as well as the American Gertrude Stein. In 1904, the first investment art fund was created, uniting thirteen bourgeois individuals. The fund acquired works by modernists, including Pablo Picasso, over a ten-year period. In 1914, the fund organized an auction in Paris to realize profits. Picasso's painting "Family of Comedians," purchased by the fund for 1000 francs, was sold for 11,500 francs, equivalent to approximately $250,000. This case demonstrated that Cubist paintings were a profitable investment, as their price increased tenfold over 10 years, yielding 100$6,000. By 1920, during the Weimar Republic era, the situation had changed.

The Golden Age of Expressionism and Surrealism

German museums in Berlin, Frankfurt, and Dresden were the first in the world to begin mass acquisitions of avant-garde works for state collections. Wealthy local industrialists also emerged as collectors during this period. Art prices reached 5–15 thousand marks, equivalent to $110,000 USD.

Surrealism, which originated in the 1920s, was characterized by scandals and shock value. Initially, the movement's leader, André Breton, disdained commerce, yet artists needed a livelihood. The first exhibitions of Max Ernst and Joan Miró generated meager income. Paintings were sold privately to a select circle of wealthy French aristocrats for 1–3 thousand francs, which amounted to about $2,500 USD. The situation changed with the emergence of Salvador Dalí, whose works began to sell more actively due to his marketing strategies.

Early Avant-Garde Artists and Their Influence

In the 1930s, Salvador Dalí moved to the USA, where an American syndicate of collectors paid him a fixed salary and bought all his works. Dalí's paintings from the late 1930s cost $2,000–$5,000, a significant sum during the Great Depression, equivalent to $50,000–$100,000 today. The public gradually became accustomed to the avant-garde, and artists continued to seek new approaches until they encountered an exhaustion of ideas.

The last leap in art development occurred when artists abandoned the depiction of real objects and moved to complete abstraction. Wassily Kandinsky, Piet Mondrian, and Kazimir Malevich took a step towards abandoning objecthood. Dadaism, which originated during World War I as a protest against bourgeois society and academic culture, delivered the final blow. The main representatives of Dadaism were Marcel Duchamp, Tristan Tzara, and Hans Arp.

In 1917, Marcel Duchamp presented his work "Fountain" at an exhibition, created from an ordinary porcelain urinal, turned upside down and signed with the pseudonym "R. Mutt." This act became a challenge and a test of a new concept, according to which an artist no longer needs to be able to draw or sculpt. The artist's main force became the conceptual idea. Abstractionists and Dadaists proclaimed that the quality of the art object was no longer important, and the conceptual solution became paramount.

Conceptual Art and Its Perception

Conceptual art posits that the idea embedded by the artist is the foundation of the work. This can manifest in the use of construction debris, paint splatters, or glued chairs. Artists sought to convey the notion that art is not obligated to be attractive or pleasing to the viewer. They attempted to free themselves from public reaction. Initially, Marcel Duchamp's objects were rejected and discarded. The early abstract works of Joan Miró and Wassily Kandinsky sold for negligible sums. Museums, auction houses, and the bourgeoisie did not perceive abstract canvases as art. Large financial investments long ignored non-objective art. The situation changed with the merger of large capital and artists, which occurred in the USA. Unlike Europe, the USA did not have a deep artistic school and history, which contributed to a more open perception of new art forms. While Europe, accustomed to classics, struggled to accept non-objectivity, the USA lacked such historical ties, allowing for risk-taking.

Collectors and Early Art Investments

In 1920, Katherine Dreier, an artist and heiress, co-founded a society of the anonymous in the United States with Marcel Duchamp. This initiative effectively became the first traveling museum of modern art in the US. Dreier personally acquired works by Malevich, Kandinsky, and Mondrian in Berlin and Paris for $500-$200 each. She organized exhibitions and lectures in American cities, promoting the ideas of new visuality.

In 1929, the Museum of Modern Art (MoMA) opened in New York. It was founded by three wealthy women, known in the art world as the "child ladies." The first was Abby Rockefeller, wife of John D. Rockefeller Jr. She was the main ideologist of the project, although her husband did not support modern art and refused to finance the museum. Abby used personal funds from her budget.

The second founder was Lillie Bliss, heiress to a textile magnate. She was a passionate collector, acquiring works by Cézanne, Degas, and Gauguin, and provided financial support to avant-garde artists. The third was Mary Sullivan, wife of a successful lawyer, a collector, and an art educator.

The women rented a six-room space in an office building in Manhattan using their own funds. Abby Rockefeller used her connections to attract other wealthy Americans to the board of trustees. The first president of the museum was financier and collector Cong Goodyear, who also invested funds and helped develop the museum's business model. Later, when the museum demonstrated its success, John D. Rockefeller Jr. donated a plot of land on 53rd Street to the museum, where a new building was subsequently constructed.

The Development of Contemporary Art Museums

The commercial breakthrough of abstraction occurred in the 1930s with the arrival of American capital. Steel magnate Solomon Guggenheim, influenced by his advisor, German artist Hilla von Rebay, became interested in non-objective art. Guggenheim began acquiring works by Wassily Kandinsky on a large scale and initiated the construction of a dedicated museum for contemporary art. In May 1939, the Museum of Non-Objective Painting opened in Manhattan, on East 54th Street, becoming the direct predecessor of the modern museum. Hilla von Rebay took on the role of its first director and curator. The famous spiral-shaped Guggenheim Museum building was constructed 20 years later, in 1959. Thus, in the 1930s, two contemporary art museums emerged in New York. Prior to this, contemporary art museums did not exist in the world. Previously, the ultimate goal for any artist was to be included in a museum, but these institutions focused on classical art. Unable to break into classical museums, contemporary art created its own institutions. Not receiving recognition from market experts, contemporary art attracted the attention of generous American investors, which paid off many times over.

The Connection Between the Art Market and Art

The value of abstractionism as art for the elite has significantly increased after one of the richest men on the planet built a museum in the center of New York dedicated exclusively to works of this movement. The avant-garde was not perceived as valuable until large sums began to be invested in it by people directly connected to the art market. The commercial legitimization of Marcel Duchamp's readymades occurred only half a century later. In the 1960s, there was a surge in the popularity of pop art in the USA and Europe, facilitated by Andy Warhol. Young artists considered Duchamp their idol. A desire arose to acquire legendary objects from his collections, but the originals were lost. In 1964, Milanese gallerist Arthur Schwartz, with the consent of the 70-year-old Duchamp, released an official licensed reissue of his readymades. Eight numbered copies of each item were produced, including "Fountain" and "Bicycle Wheel."

Duchamp and His Provocative Works

Marcel Duchamp personally signed reproductions of his works without participating in their creation. On October 15, 1958, Sotheby's auction house held an auction of Jacob Goldschmidt's collection. The event's success was ensured by good PR: the sale was turned into a grand evening event with a strict "black tie" dress code. The world's elite attended the event, including Hollywood stars like Kirk Douglas. Seven Impressionist paintings, including works by Manet, Van Gogh, and Cézanne, were sold in 21 minutes. The total sum was £781,000, equivalent to approximately $30 million in today's currency.

In the 1950s-1960s, Pop Art and Abstract Expressionism emerged in the USA. These new movements were met with skepticism by society and critics. The public saw them as a mockery of common sense or cynical commercial design. Works by Abstract Expressionists and contemporary art in general sold relatively cheaply. The artists were alive and continued to flood the market with their creations, so prices rarely exceeded $10,000. A sum of$10,000 was considered a great rarity.

Abstract Expressionism and its Market Value

In 1948, Willem de Kooning's painting was valued between $200 and$800, equivalent to approximately $2,510,000 today. However, there were almost no buyers for it. In the mid-1950s, Mark Rothko's works sold for an average of$1,030–$3,000. In 1954, Jackson Pollock, needing money for alcohol and living expenses, sold the large canvas "Blue Poles" to collector and engineer Fred Olsen for just$6,000, which is about $70,000 in today's prices. Just three years later, in 1957, after Pollock's tragic death in a car accident in 1956, the same canvas was resold to collector Ben Heller for a then-record$32,000, equivalent to approximately $350,000 today. This transaction shocked the art community, as no one could believe that an American modernist and his "splatters on canvas" could command the price of a good country villa.

Abstract Expressionism and Pop Art became the first art movements to originate in the USA and become its "first artistic offspring." This was the peak of the Cold War, when the US competed with the USSR for the status of world ethical and financial leader. Art was seen as one of the tools of influence in this struggle. There is evidence and investigation results indicating the Central Intelligence Agency's (CIA) involvement in promoting Abstract Expressionism. The influence of American intelligence services on the recognition of this movement was long considered mere rumor in artistic circles. However, the "Cultural Cold War" is fully documented and proven. The CIA created a network of cultural foundations through front organizations to promote new American art.

American Art and Its Promotion in Europe

Artists such as Jackson Pollock, Mark Rothko, and Willem de Kooning were left-wing intellectuals, anarchists, and anti-militarists. They harbored a dislike for the American government, conservatism, the McCarthy era, and the FBI. The Central Intelligence Agency (CIA) did not pay them directly, hire them, or dictate the themes of their works. The artists were used without their knowledge.

The CIA laundered money through numerous real and fictitious charitable organizations. The most well-known became the Farfield Foundation, created by the intelligence services. When prestigious galleries like the Tate in London or national museums in Paris faced financial difficulties in hosting exhibitions of American avant-garde art, a generous American patron, Julius Fleischman, would appear. He was the nominal head of the Farfield Foundation and a CIA agent. Fleischman fully covered the transportation and insurance costs of the paintings.

An organization established in Paris in 1950 under the aegis of the CIA coordinated Europe's cultural life. Under its patronage, dozens of influential intellectual journals were published. These publications consistently praised abstract expressionism and criticized Soviet socialist realism for its lack of freedom. The Museum of Modern Art in New York (MoMA) was also an unofficial partner of the CIA in this operation. The U.S. Department of State officially refused to send Pollock's works to exhibitions.

Political Context and Art

In the 1950s, various US government agencies competed to promote the same artists. The CIA secretly allocated millions of dollars for exhibitions of Jackson Pollock and Mark Rothko in Paris and London, presenting their art as a symbol of American freedom. Simultaneously, the FBI, under the direction of J. Edgar Hoover, initiated criminal proceedings against these artists, and conservative congressmen publicly accused their work of being part of a communist conspiracy. This situation resembled spy comedies. Mark Rothko, an anarchist by conviction, criticized the American government and intelligence agencies, suspecting them of surveillance. FBI agents scrutinized his tax returns, attempting to accuse him of anti-American activities. At the same time, CIA agents, through a front foundation, transferred significant sums to the Museum of Modern Art to cover insurance and transportation costs for Rothko's works to Paris. The artists traveled to European exhibitions organized by the CIA, unaware of this and believing they were supported by private patrons.

Art as a Propaganda Tool

US intelligence agencies used art in 20th-century propaganda operations. They did not create artistic styles or pay artists directly. Instead, intelligence agencies funded the infrastructure that contributed to the global recognition of artists. Without the CIA's financial support, abstract expressionism might have remained a local phenomenon in New York, rather than becoming a significant milestone in world art. The art world, observing this art's participation in exhibitions, museum collections, and purchases by millionaires, began to recognize its value. This led to the "Emperor's New Clothes" effect, where the value of an object is recognized, but no one can explain the reason for it.

The auction of taxi magnate Robert Scull in October 1973 in New York became an event that answered many questions regarding the value of art. Scull was one of the first collectors to start buying pop art and abstraction in the 1950s and 1960s at low prices.

The Rise of Prices in the Art Market

In 1973, a collection including works by Robert Rauschenberg and Jasper Johns was put up for auction. Robert Rauschenberg's painting "Thaw," purchased for $900, was sold for$85,000. Jasper Johns' work "Double White Map," bought for $10,200, reached a record price of$240,000. These sums, while small by today's standards, demonstrated a significant increase in the value of artworks over a short period. In 15 years, paintings increased in value by 85 times, providing returns of up to 600% per year, which surpassed the performance of any other business. The low entry threshold, amounting to just a few thousand dollars, attracted investors, contributing to further price increases.

By the 1980s, the art market was characterized by institutional recognition of contemporary art and the availability of significant funds ready for investment. During this period, Japan became the second-largest economic player in the world. Japanese investors used art as collateral to obtain large loans, massively buying Western art in anticipation of its further value growth. Systemic investments by Japanese companies contributed to a sharp rise in prices for Impressionists, including the sale of a Fang painting for $39 million. This trend then extended to American modernists such as Willem de Kooning.

In 1988, new sales records were set. Jasper Johns' painting "False Start" (1959) was sold for $17 million, which, adjusted for inflation, is equivalent to approximately$45 million today. This sum for a work by a living artist caused a wide resonance, as the public could not comprehend the high cost of abstract works compared to classical masterpieces. A year later, de Kooning's expressionist abstraction "Interchange" (1955) was sold for over $20 million, which today amounts to about$50 million. These sales confirmed that the art market had become a systemic phenomenon, rather than the result of isolated spontaneous purchases.

The Japanese Art Market and Its Influence

In 1990, the Japanese financial market experienced a sharp downturn, leading to a prolonged recession in the art market. Art prices fell by 40-50%, and a period of stagnation ensued. A new, truly global and rapid rise in contemporary art prices began in the mid-2000s and continues to this day.

Modern Super-Rich Collectors

New super-rich collectors include American hedge fund managers Steve Cohen and Ken Griffin, as well as first-wave Russian oligarchs and Qatari sheikhs. Art has definitively transformed into a global financial asset. During this period, new stars of shock marketing emerged, such as Damien Hirst and Jeff Koons. In 2007, Hirst sold his pill installation "Lullaby Spring" for $19.2 million. In the same year, Koons sold the steel sculpture "Heart" for$23.6 million. By the end of the 2010s, prices for works by living artists approached the historical absolute records of Old Masters. In November 2018, new sales records were set.

Modern Sales Records

David Hockney's painting "The Portrait of an Artist (Pool with Two Figures)" was sold at Christie's auction in May 2019 for $90.3 million. Subsequently, Jeff Koons' sculpture "Rabbit" was sold for$91.1 million, returning him the status of the most expensive living artist. Three works from the top 10 most expensive artworks in history belong to Abstract Expressionism of the 1950s and 1960s. Willem de Kooning's painting was sold for $300 million, second only to Leonardo da Vinci's "Salvator Mundi" at$450 million. Pop Art, Readymades, and Abstract Expressionism have gone through similar stages of development, from complete neglect to commercial success, much like Impressionism, Cubism, and Fauvism. However, there is one significant difference concerning price and value.

The High Cost of Art

The high cost of contemporary art is due not so much to an appreciation of its aesthetic, historical, or cultural value, but rather to its artificially created commercial appeal. Influential institutions actively promoted new American art, engaging in reciprocal sales and investing significant funds in this market.

Art Business and the Art World

The art business has convinced the art world of the commercial potential of art, bypassing the stage of aesthetic appreciation for the new approach. This has led to the preservation of a significant gap between the price of a work and its understanding.

Explaining the Value of Paintings

The past 10 years have seen a colossal accumulation of private capital worldwide. The economy has produced a vast number of billionaires from the USA, China, the Gulf states, and the tech sector. The first billionaire in the world appeared just 10 years ago, in 2016. Today, there are already 3,500, with a combined net worth of $20 trillion. Elon Musk is vying for a net worth of one trillion dollars, making one million dollars merely one-millionth of his fortune.

When a person has everything, there arises a deficit of things they can still buy to emphasize their status. Art becomes an elite trophy that solves this problem. The purchase of a Jackson Pollock painting for $180 million, recorded in May 2026, is a way to enter the planet's most exclusive elite club. This is not too expensive for people with hundreds of billions in their accounts. Art has transformed into a tool of prestige, as there are no equally expensive and elite items in the world.

Old masters rarely appear on the market, as they have long been acquired by museums. Therefore, contemporary art, whose price seems unreasonably high, is featured at the top of the most expensive paintings.

The art market is structured as follows:

1. Museums are at the apex. They define art quality by scanning the landscape for new artists. For an artist, getting into a museum means their works become valuable, regardless of their content or creation method. Such an artist becomes untouchable and occupies a high position, comparable to a museum.
2. Auction houses and art dealers are on the second tier. They shape and force art prices by presenting rare lots as objects of competition among wealthy buyers.
3. Galleries, gallerists, and art experts act as a filter on the third tier. They select the most promising artists, organize exhibitions, and conduct PR campaigns to build their reputation. Without their approval, it is difficult for a young artist to achieve success. The Saatchi Gallery, being the largest and most influential, has effectively become an award-giving institution, akin to an academy.
4. Unknown artists are at the lowest tier. They strive to attract the attention of dealers and gallerists by creating a large volume of mediocre works, far from true art. Standing out in the contemporary art world is practically impossible, as everything has already been tried, and repetitions do not generate interest.

The contemporary art world is an artificially created commercial conveyor belt where aesthetics are secondary. This explains the dissonance when seeing a painting worth $70 million, which is actually worth as much as the feeling of prestige from owning an item with a famous name, an entry ticket into the global elite of art collectors, or the opportunity to resell it for more in 10 years. The value of contemporary art does not reflect its aesthetic merit.

Nevertheless, there are true masterpieces in contemporary art created by artists such as Banksy, Anish Kapoor, Maurizio Cattelan, and Flora Yukhnovich.