What Art Basel and UBS’s Art Market Report Teaches Us About Wealth Inequality

Insights from The Art Market 2021. Image by CoBo Social.
Insights from The Art Market 2021. Image by CoBo Social.
The Art Market 2021: Figure 6.7: Number and Wealth of Billionaires 2008–2020. © Arts Economics (2021) with data from Forbes.
The Art Market 2021: Figure 6.8: Global Share of Billionaires in 2020. © Arts Economics (2021) with data from Forbes.
TOP
1500
50
0
 
23
Mar
23
Mar
Asia Society Hong Kong

In the course of 2020, the affluence of the uber-rich grew; the world saw 7% more new billionaires and increase of 32% in wealth, much of this in Greater China. The latest annual global art market report from Art Basel and UBS reveals the daunting reality of a widened wealth inequality, and how, despite all, the art market is reaping the benefits of this.

TEXT: Denise Tsui
IMAGES: Courtesy of Arts Economics

Over the past week, I spent hours brooding after reading the latest Art Basel and UBS global art market report, unable to firmly place a finger on what was so intrinsically upsetting. Released on 16 March, The Art Market 2021 reported this: Global sales of art and antiques reached an estimated US$50.1 billion in 2020, down 22% on 2019, with the COVID-19 pandemic triggering the largest recession in the art market since the 2009 global financial crisis. The overall volume of dealer sales is estimated to have decreased by 23%, to 31.4 million, dropping to its lowest level since 2009. Meanwhile just 37% out of 365 global art fairs slated for 2020 held live events, with a whopping 61% ultimately cancelled. The remaining 2% held hybrid or alternative events. The auction sector also suffered setbacks, with public auction sales globally plummeting to its lowest in a decade, realising US$17.6 billion in 2020, a sharp 30% decline from US$25.2 billion in 2019, and US$32.4 billion in 2011. But this wasn’t what I found disturbing. After all, the art world has been on a downhill slope since 2018, and the incessant headlines across mainstream art media through 2020 already primed us for the expected market contraction. The shocker for me was really 266 pages into the report, where findings of the high net worth individual (HNWI) surveys were shared, at which point I’m sure many people had already stopped reading. The findings of the surveys attest to the growing wealth inequality and further affirm the alarming truth that acquiring art (and antiques and luxury collectibles for that matter) is more often than not a hobby of the privileged. It also suggests the art market isn’t in as dire shape as you might be led to think.

 

Insights from The Art Market 2021. Image by CoBo Social.
Insights from The Art Market 2021. Image by CoBo Social.

 

Led by Dr. Clare McAndrew, cultural economist and founder of Arts Economics, the report, which utilises data compiled by UBS, Forbes, and other sources, noted that in 2020, millionaires accounted for only 1% of the global adult population yet possessed 43% of the world’s wealth. While the US continued to hold the biggest share of the millionaire population, Greater China gained the greatest number of new millionaires in the first half of 2020—during the height of the pandemic. As the wealth segment increases, the reported numbers also become more astonishing. Amid the ultra-high net worth (UHNW) segment—defined as those with net worth exceeding US$50 million—both the US and Greater China gained year-on-year, at 3% and 2% respectively.

Although the global distribution of billionaires saw little shift, Greater China’s billionaire population rose by 63%—or 200 new billionaires—while India came in at second with 11% growth and the US at third at 7% or 43 new billionaires. Most remarkably, while France and the US also saw significant gains at 49% and 28% respectively, the wealth of Chinese billionaires increased by more than 150% over 2020, reaching US$2.5 trillion.

“Billionaire wealth generally had all increased for the whole cohort of billionaires,” says McAndrew. “And to see this kind of jump up in wealth of the billionaires was just jaw-dropping.” From March to December 2020, the top three richest billionaires increased their wealth by some 113%; the top 10 saw gains of 65%; and the top 500 billionaires worldwide became 50% more wealthy—all while a global health crisis was ravaging the world. While lives are being lost to the pandemic, jobs are being cut, small and medium businesses are going bankrupt, and governments are going further into debt, the uber-rich are getting richer. “The billionaire wealth is just shocking. It’s a very particular crisis, I suppose. It’s very different from, for example, the global financial crisis where high net worth wealth fell quite substantially,” explains McAndrew. In 2009, the fallout from the global financial crisis saw the number of billionaires worldwide plummet by 30%, and their wealth tumble 45%. Yet in 2020, the number of billionaires not only rose by 7% but their wealth grew a further 32%. “This is I think, definitely what helped the market not have as big a contraction as we could have seen.”

So here’s the good news translated for the art world.

Not only has the art market over 2020 not fallen nearly as significantly as many forecasters first feared in the early months of the year—with the resiliency of equity markets as a key reason for the wealth preservation and growth at the high end of the global financial circuit—but many of these HNWI are collectors. In fact, the collector survey, which gathered responses from 2,569 collectors across art, antiquities and luxury collectibles from 10 regional markets, indicated relatively consistent average expenditures year-on-year, meaning not only did their wealth possibly increased but they also continued buying, and even bought more than pre-pandemic times.

The Art Market 2021 report found some 66% surveyed agree that the pandemic had increased their interest in collecting—and nearly a third reporting it “had significantly done so”. Moreover, a quarter of collectors surveyed reported spending more than US$1 million in 2020 to amass new acquisitions, up 4% year-on-year. “I think this factor of people having money, having time, and having perhaps not as many outlets for their spending, particularly in the kind of luxury sectors, I think really did save the market a little bit from having a much worse contraction than it could have,” says McAndrew.

 

The Art Market 2021: Figure 6.7: Number and Wealth of Billionaires 2008–2020. © Arts Economics (2021) with data from Forbes.
The Art Market 2021: Figure 6.8: Global Share of Billionaires in 2020. © Arts Economics (2021) with data from Forbes.

 

And here’s where the spending of the art world really leaves me emotionally torn and morally baffled (as someone who is employed by this very industry and thus benefits peripherally from a healthy art market).

It is already a known fact that COVID-19 has affected those individuals who are more financially vulnerable with certain sectors, age groups, even gender and class, carrying a heavier burden. The World Economic Forum noted more than 44 million people have lost their jobs in the US alone between April and June 2020, while the rising wealth inequality in Hong Kong has attracted increasing media attention in recent months, with the city’s unemployment rate reaching a 17-year high in February 2021 at 7.2%. One could go on for days digging into the impact of the global health crisis on each country. In developed countries, the pandemic set off unprecedented government recovery and stimulus packages, which have been vital in maintaining some buoyancy in economic health largely speaking but these will come at a cost. Although the International Monetary Fund World Economic Outlook (WEO) forecasts a GDP growth of 5.5% in 2021 and 4.2% in 2022, there is still a tough ascent ahead, and lives will not just get better overnight. Governments will continue to be expected to bridge the gap and support their economies to return to normal functioning as vaccine rollouts begin to shed hope, yet consequentially this will in turn lead to higher debt build-up, resulting in possibly higher inflation and taxation down the line. So who will pay this price? It appears the post-COVID-19 world will see the wealth inequality margin widened, with wealth distribution even more tilted.

McAndrew’s report further highlights the prediction of wealth transfer in the coming years with millennials set to inherit significant wealth from their parents, with estimates of anything between US$20 trillion and US$70 trillion from billionaire and UHNW parents by 2030 in wealth and assets, including art. And with younger collectors showing more interest in a higher proportion of their wealth portfolio invested in art, the art world can be confident that some of this shift in wealth will no doubt trickle into the art market.

The art world is not crumbling into non-existence, as all the findings of this report—from dealer and auction sector sales to collecting habits and art consumption preferences—indicate. The wealthy became wealthier and art remains somewhat a priority expenditure for most. So for now, it would seem the art world should worry a little less about the decline of the art market and a little more about other branches of the art world such as the survival of museums, the rising unemployment in the industry, and even more so, the wider global priorities of social and economic equity as the world at large is forced to face up to the challenge of an impending return to normal.

 

 

 
Leave a Comment

Leave a Reply