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tainted love: arts ethosand capitalizationsuhail malik/andrea phillipsFrance was again the target of jittery investors,worried its top AAA credit rating is at risk.Yields on its benchmark 10-year governmentbonds climbed and their spread over Germanysequivalent bunds hit a record for the euro era.Paris said the risk premium was not justified. Analysts warn it may well not be the steadysale usually expected from a country with acoveted AAA rating.

The price action in European monetary union(EMU) AAAs (excluding Germany) in the lastfew sessions clearly highlights that it is not aboutvalue in EMU AAAs at the moment. It is aboutfear 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 PrimeMinister Gordon Browns language in the Autumn

of 2008that the global financial crisis happenedto usis testament to the rapid and strategic shiftsin alliances of power and profit that support crisiseconomics. We were just in the wrong place at thewrong time; it was chance that it happened to us; it

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was predetermined from above, and so on. The sameheady mixture of belief and moneyor, more precisely,naturalized urge camouflaging monetary transactionis evident in the art world when a collector buys or adealer sells an artwork on the basis of an inexplicableand even capricious love. Just as fear and position-ing now motivate the price action in the EMU, thesame sensuous pathologization is evident in the elite

mechanisms of art buying and selling. We argue thatthe love of art, here characterized as an ascendantproperty of art market transaction beyond the norma-tive duties of care and control, is not simply a fetishbut a powerful agent in the further redistribution ofwealth, practiced in clear systemic collaboration withartists, curators, critics, and other actors in contem-porary arts infrastructure. As elaborated below, art issituated as an alternative commodity in part becauseof standard, received expectations of the personalities

and passions of both artists (as quixotic, passionate,unpredictable) and their dealers and collectors (vari-ously holding back ready stock from the market, notselling at the height of profit, etc.) The art market is inthis sense peculiar not simply because it lacks trans-parency because of its unregulated, opaque, and in-efficient market but also because its trade is built onthe impulsive and chancy gesture of love. As we shallsee, such amorous/erotic transactions filter across theprivate to the public sector as museum and state-run

galleries become increasingly reliant on the donationsand bequests of private collectors in order to maintainboth their permanent collections and temporary exhi-bitions, thus significantly blurring the boundaries be-tween state care and private passion.

financialization of art

That such passions, chance encounters, and de-cisions are irreducibly involved in the operations ofthe art market perhaps accounts for the relative fail-ure of investment funds to rationalize it. In his com-prehensive overview of recent developments in thecontemporary art market Noah Horowitz remarks thatthe art fund industry is not only emblematic of theenterprising new ways in which contemporary art is

sold and experienced, nor of how the art economyas a whole has embraced globalization; it is modernglobal finance embodied.2However, we learn overthe ensuing pages that art investment fundsforwhich art is an alternative asset class to standardequities, shares, and bondshave in fact not donevery well over the first decade of the twenty-first cen-tury. Such funds have generally failed to draw in in-vestors, have weak historical track records on theirreturns, dissolve, or have closed down (in the case of

Fernwood, one of the leading art funds, shutting shopbecause of suspected embezzlement by its CEO).These failures, together with the more general brokenoptimism for art investment funds, could be taken asan ironic confirmation that they did indeed embodymodern global finance over the decade to 2008, notleast in the leading role the global finance sector tookin bringing about the systematic social and economicdistress that has since ensued.

In light of all this it may seem perplexing if not per-

verse to maintain that the art market can indeed beunderstood as the embodiment of finance. Not thatthis is Horowtiz claim: he remarks only that art invest-ment funds are such embodiments even though, aswe have seen, this is also why they have limited to no

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success in establishing themselves in the art market.Yet, as we now argue, art does indeed embody thetruth of finance, and it does so precisely in its failureor limitation as a kind of free-market investment. Pro-posing as much not only allows the convergence ofinterests and operations of art (in particular contem-porary art) and finance to be apprehended theoreti-cally, it also reconfigures the significance of what is

frequently heralded as the condition and satisfactionof its collectors: their love of art.Warranted though the acerbic identification of

the failure of art investment funds with modern globalfinance may be, it leaves unexplained how and whyart investment funds in particular did not live up to thepromises made for them in the finance-led boom ofthe mid-2000s. Horowitz presents many of these in-trinsic reasons, which arise mainly due to the particu-larities of art as an investment. For example, it is highly

illiquid (it cannot be quickly converted into moneyflows); it has many upfront and additional costs in-cluding insurance, storage, handling, shipping, etc.;it does not pay dividends or returns over the time it isheld by the investor, and so on. That art generates noearnings until its sale but has ownership costs makesit a negative cash flow asset.3The particularities ofart as an investment are not, however, limited to itsmaterial conditions and the requirements of preserva-tion; they also arise from the specificities of its trad-

ing, which include high transaction costs, limitedarbitrage opportunities,4and highly opaque marketinformation, in that actual transaction prices are notopenly advertised outside of auction resales of art(the secondary market) even as the manipulation of

these prices by the artists dealers is a well-knownpart of such highly visible valuations. In other words,the ownership and trade of art is far from beingthe transparently- and openly-costed, easily-trans-ferred, low-maintenance circulation of claims thatmodern global finance is built upon. On the onehand, this is the advantage it is supposed to pres-ent to art investors, who look to profit from the high

level of asymmetrical information offered by artspricing inefficiencies5that is, they deploy totheir advantage knowledge gained through closerinvolvement with art dealers. On the other hand,however, it means that arts economy has a weakpricing system because it lacks a single generallyaccepted valuation methodology,6such a method-ology being a primary and constitutive assumptionfor the finance sector.

There are two interconnected aspects to this

weakness, one is theoretical-ideological, to whichwe later return, the other is sociological-institutional:that art funds investment objective may be intrin-sically flawed7 because the free-market preceptscore to such vehicles and their investors are in factinapplicable to art. In Horowitz wry words: becausesuch investment funds vindication of art as an assetclass is based so strongly upon free-trade economictheory, they may have underestimated the behavioralaversion of the market towards such unabated

speculation.8

It is not only that the art market isaverse to the standard pricing mechanisms constitu-tive of modern global finances operations and pro-cesses but, moreover, that art dealers antispecula-tive vehemence makes for sound business sense.

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In fact, dealers suppression of the economic[meaning here the free market principles under-lying modern global finance] may ultimatelystrengthen their financial prospects: collectorscontinue to do business with them because theytrust their prices, and so the quality of their inven-tory. As goods leave the dealers inventoryand extend beyond the network of collectors who

comply with the first right of refusal, their controlover supply diminishesand with it, theirmonopolistic price control mechanism.9

Antispeculative vehemence, highly regulated trade,tight control mechanisms on ownership and subse-quent resale; all of these standard business practicesare how and why dealers strengthen their marketshare and are commonly regarded as better artinvestors than art investment fund managers.10 But

if this is so it is because the methods and transac-tional processes most successfully deployed in artscommercial markets contravene in almost every waythe free market principles and investment assump-tions and patterns core to modern global finance.If such patterns are indeed embodied by art invest-ment funds it is little surprise that they tend to fail sooften or remain so modest. Equally, anti-speculativevehemence is intimately allied to the amorous/eroticinvolvement in art, widely flaunted in the acquisition

of blue-chip art and the cloying discourses and be-liefs of central figures in both public and private artsectors who support and rely upon such collectors.But such artworksand therefore artistsare blue-chip precisely because they return a consistently high

price on both primary and secondary markets. Thisart is the royalty of the art market (just as the blueof blue-chip is said to derive from blue blood); theprizes in private and public art collections the worldover (local cultural significations and traditions not-withstanding). If you have a Picasso or a Warholin your museum (currently and colloquially, the saf-est bets, the bluest chips) you are likely to ride the

storm of any market crash. Thus the game of bettingis played by those who like to feign at gambling andhave the means to do so. The term blue-chip, appliedto companies that are regarded as safe bets on astock exchangecorporations of any type that per-form consistently well and operate profitably throughups and downsis notably transferred to the informalratings mechanisms of the art market, evidencingthe relationship between luck and profit actualized inart investments. The term derives from poker, where

a blue chip is valued higher than a red or white chip.Evidently, the game of chance, for those that can ormust play it, transitions neatly across money actions,and the safe bet epitomizes in its anti-speculativevehemence the critical link between risk and aspira-tion, the brag of profit and the depths of loss.

The idea of a safe bet is, of course, a non-sequitur;wished for in all capital transactions, the safe bet isperhaps especially and dramatically apparent in theart market. Gambling on art is then only a specific

type of investment, in which the passion of the gameis matched by other passionsthe love of art and theperformative instantiation of that love on and throughbuying action. The titillation of such an ethos forthe civilian onlooker is clear in the popularity of art



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auction and art opening features in popular newspa-pers and magazines, as well as in the sales of semi-serious research publications giving an insider andinterview-based account of dealing and collecting.11Such marketplace hagiographies attempt to makepublic the private world of art dealing, yet they isolatethe privacy of monetary transaction to the shock andawe of numerology (in the sense that the cash figures

are dramatically and thus mystically out of reach) . It isthese forms of action, private yet made public in theglare of gossip after art auctions (the secondary mar-ket) and through rumor and the awarding of prestigeand cultural capital through deals made with art gal-leries and art consultants (primary market), that areunder examination.

Spending on blue-chip arta practice alreadymade paradoxical and thus separate from standardstock and share transactions through the concept

of safe bettingties the buyer into an interestedbundle of socio-cultural mechanisms whereby theaction of spending money is primarily seen as quix-otic and impulsive, and only secondarily, if at all,as investment-based. Drawing on the research ofRaymonde Moulin on the French art market andconnoisseurship in the 1960s, Ulf Wuggenig pointsto the relation between amateurism, defined asthe engagement in an activity for pleasure ratherthan profit, and love (amatorlover). Reflecting on

Moulins interviews with collectors, and quotingPierre Bourdieu, Wuggenig says, their self imagewas that they collected not for instrumental reasonsbut for the love of artand more particularly for thesort of pure love that has its roots in the ideology

of charisma; a love irreducible to money and any ob-jects of bourgeois interest.12

The centrality of this amorous ethos to the con-centration of social and capital power in art of courserelies upon and maintains the belief that while art isindeed traded on a market it is the very obstructionofthat market to liberal free-market principles and prac-tices that accords with an involvement in art itself.

The art market is rather a market of care, deemed tobe appropriate to art because art itself is decontami-nated from capital accumulation.13 Through art andthe love of art, wealth and power excuse themselves;they demonstrate their ethos of human passions overthat of money. Interviewing the art consultant PhilippeSgalot about how he finds and matches the rightartwork to a buyer, Sarah Thornton asks:

How does Sgalot know when he has encoun-

tered the right work? You feel something, hesays with fervour. I never read about art. Im notinterested in the literature about art. I get all theart magazines, but I dont read them. I dont wantto be influenced by the reviews. I look. I fill myselfwith images. It is not necessary to speak somuch about art. I am convinced that a great workspeaks for itself. A faith in gut instinct is commonto most collectors, consultants and dealers, andthey love to talk about it.14

The asymmetrical shape of the art market is concomi-tant with the collector being a lover. This in turn ren-ders the market one of passiona passion built onthe eroticism of impulsive taste and fueled by dealers



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and consultants formulating that love competitively.Such incalculable passion is the avowed ethos not

just of the agents in the art market but of arts insti-tutionalization more generally; it is the identifying as-sumption as to why one would be involved in art at all.But while it is relatively easy to characterize the impul-sive collector as a pathological subject, or the aggre-gate movements of the art market to be of behavioral

rather than rational economics,15

a more complicatedand more urgent issue is the relation between theconvenienceof that pathology (the irrational collectorwho bankrupts him or herself in the name of love for aparticular artists work, for example) and the methodof accumulation as it is signaled by arts price. Ourinterest is precisely the logic of the relation betweenthe art markets price-setting mechanisms and theevident irrationality of arts pricing in relation to pro-duction costs or other supposed real bases for pric-

ing. We aim here to remove the (proto-ideological)support for the decontamination of power througharts ethos, which is no less a moral-affective supportfor finance gained by the separation in principle ofeconomy (price), social order, and art, the rationalityof one being opposed to the irrationality of the other.

The rationality of the liberal markets and the art mar-kets countermanding of it are central to the moretheoretically-ideologically situated aspect of arts

weak pricing system. Not only are art prices on theprimary market set monopolistically, but these pricesdo not observe the basic diktats of modern economictheory: art investors cannot simply determine the dis-counted value of its future cash flows, as is common

place in the equity and real estate markets16or in-deed any conventional pricing calculation deployedin liberal economic theory. As Jonathon Nitzan andShimshon Bichler explain, this formula tells us howmuch a capitalist is prepared to pay nowthe priceto receive a flow of money later, reducing a futurestream of earnings to their present value.17For Nitzanand Bichler capitalization is defined by the process

of reducing earnings to their present value togetherwith the ordering of that which is thus priced.18In con-trast to the supposed universal salience of this pric-ing formula, which is core to neoclassical economicdogma, art has no basis for its future earnings otherthan speculative guesses. The best the art buyer cando is make an educated bet that the price of an art-work may rise in the future, but calculating such gainsis hardly a perfect science19hence the problematicrelation between investment fund strategies, which as-

sume such pricing formulas, and art market dealings,which decry them. Contrary to this apparently irreduc-ible incongruity, Nitzan and Bichler propose that theneoclassical formulation of price is itself a falsehoodif not a mystification. The unsurmountable problem itfaces is that since expected earnings are gained in thefuture, those earnings and therefore the rate of returnare in fact unknown and only speculative expectations.Furthermore, since the expected rate of return is cal-culated on the basis of future earnings, it is not even

known if variables in this elementary calculation ofcapitalization are interrelated or not. The core formulafor the neoclassical price-setting model thus saysnothing to the content or relation of its determinants.Or then price. In other words, standard price-setting is



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neverin fact the discount value of future cash flows.While the pretence that price can be calculated

on the basis of discounted earnings can be mostlymaintained by reference to a real economy of earn-ings, debts, production, and so onall of which canbe called upon as a supposed basis for calculatingfuture earnings and rates of returnits actual im-plausibility is wholly apparent in arts price-setting, as

Horowitz recognizes. In other words, the price-settingof art reveals capitalization as such, without the le-gitimizing, retro-fitted measurements and theoriesseeking to justify earnings on the basis of production(Marxism) or consumption (neoclassical liberalism).That is, the art market demonstrates the truth of allprice-setting: that there is no basis in production orconsumption for pricing, only capitalization. In itself,this result is hardly news: art prices cannot be ratio-nalized by reference to production.20But its deriva-

tion from Nitzan and Bichlers theory of capitalizationbrings with it two important corollaries, which returnto the sociological-institutional conditions of art andits market:

(i)

If art prices are explicitly financially generatedwithout reference to production, they makemanifest the condition of all price-setting, or

what could be called capitals procedural andoperational fincanciality (the term is not Nitzanand Bichlers). Financiality here designates thatfinance is a primary condition for, rather than con-sequence of, capitalization and price-setting and

that, as such, price and capital are not predicatedon production, use-value, consumption, or otherbases external to finance.21 It is not then that artpricing is a puzzle compared to other, produc-tive or consuming, sectors of the economy, butthat the art market dispels their obscuring ofcapitalization as the primary determinant of price(which is also why its price-setting mechanisms

present such a practical and theoretical difficultyto neoclassical and Marxian (NCM) accounts).For Horowitz, the only tendentious salience ofstandard theories of price-setting to art is the factthat art has a weak pricing system. And while itis indeed weak from the perspectiveof the neoclassical precepts to whichHorowitz subscribes, it is for just that reasona pronounced example of the conditions ofcapitalization as Nitzan and Bichler account for

it, namely that all capital is finance and only fi-nance.22

(ii)

As Horowitz observes, interest from regularfinancial investment funds in the art markettends to go rather badly thanks to themonopolistic price control mechanisms of theprimary market. Nitzan and Bichlers notion of

capitalization, however, proposes that such mo-nopolistic price controls are not the exceptionin price-setting but the standard. In particular,the primary market is only a trenchantly orga-nized market of administered prices that are



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usual business practice. Administered pricesstabilize earnings on the basis of the markup ontheir wares.23As for the primary art market, suchprices are set by highly concentrated and oftencolluding businesses and sectors. More exactly,administered prices are a form of control overprices and represent the degree of monopolyof the firm over the market. Horowitz remark is

then a recognition from inside the neoclassicalparadigm that the primary market is one of admin-istered prices.

That capitalisms financiality is independent of its pu-tative justification of production is, however, only apartial result in Nitzan and Bichlers larger and moregeneral claim, which they make following ThorsteinVeblens distinction between generalized social pro-duction (industry) and private ownership (business).

Industry is an integrated creative process whoseproductivity derives from the totality of its purpose-ful resonating pulses,24 the latter phrase meaningthe integrated effects of production across society.Business, on the other hand, is the power processcarried out through the prerogatives of ownership.25For Nitzan and Bichler the primary question core to allcapital accumulation is how does private ownershipgenerate earnings?26They note that the etymologyof private is from the Latin privatus, restricted, and

related to privare, to deprive. Private ownership isfor them the power principle of capitalism not be-cause it enables those who own but because, as

just noted, it disables those who do not. To usetheir local example, not being able to transfer Warren

Buffets assets to anyone at all is an issue of ownershipnot technical limitation. In more general terms, privateownership is the condition of capitalism because it iswholly and only an institution of exclusion, and institu-tional exclusion is a matter of organized power. Whatis key here is that ownership is not productive per sesince it has no bearing on industry intrinsically, andcertainly does not add to it. Industry and business are

different in kind. But business canprofit by gaining anadvantage over industry it does not own by damagingit, and thereby lowering the maximization of industryoverall. Sabotage is then the condition and actualityof capital earnings. Furthermore, since business capi-tal necessarily sabotages industry, capital is then not

just sometimes unproductive with regard to industrybut is necessarily counterproductive.27 In stark con-trast to the shared tenets of NCM paradigms, capitalalways lessens industry rather than profiting from its

increase: the only way for capitalists to profit fromproductivity is by subjugating it and limiting it. Andsince business earnings hinge on strategic sabotage,their capitalization represents nothing but incapacita-tion.28Sabotage is the shaping of generalized indus-try, ordering it to specific and particular interests; it isa technique of concentrating power. As such, capital-ization is a social ordering for the sake of privatizedearnings and is therefore directly power. Economyis then always and necessarily a political economy;

there are no free markets.While this general result holds for art as it doesfor anything else that is capitalized, what is specificabout arts financiality is that because art prices areset with reference to nothing but its financiality and



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as its market is so highly administered, art pricesexplicitlydemonstrate the ordering and sabotage ofgeneral production by and for private earnings.29Artprices are unequivocal instantiations of capital-powerwithout any recourse to socio-political accountability.In these terms, the difference between arts primaryand secondary markets is that such sabotaging capi-talizationthe degree of monopoly, the concentration

of institutionalized power

is greater in the primarymarket, while the demonstrationof sabotage is moreovert in the secondary market. These two aspects arein no sense contradictory nor do they even contraveneone another as in the Hostile Worlds scenario inwhich art and money do not touch, identified by OlavVelthuis to be commonly mobilized by agents defend-ing the monopoly of the primary market against theencroachments of the secondary, often by recourseto the impassioned ethos of the former.30Rather, both

markets are effectively mobilized together to furtherincrease the total and specific degrees of monopolyof capital power. This result accords with the obser-vation that for all the drama concerning the shiftingpower and positioning of the two markets with re-gard to one another, in practice both are deployed bythe same agents as part of their standard businessoperations; and, that the degree of monopoly overprices is never really weakened by competitive salesbut only differently administered (art does not com-

pete against other art in arriving at its price; it is onlyever a question of the markup).Identifying arts financiality with sabotage enables

yet further characteristic features of arts current in-stitutional ethos to be systematically accounted for:

Since sabotage is a necessarily social actof institutional ordering and exclusive priva-tion, capitalization cannot be analytically orpractically separated from social organization.In particular, wealth accumulation is not ana-lytically or practically distinct from symbolic,cultural and technical power. The integrity ofpolitical economy proposed by Nitzan and

Bichlers theory of capital power thusdispenses with the explanatory categoriesestablished by Pierre Bourdieu of symbolicor cultural capital, or of direct and indirectcapital, which presume a difference in kindbetween economic capital and social capitalwhere the latter is mobilized in the serviceof the former.31 Rather, and as art clearly in-stantiates, prices are correlated at once andnecessarily with cultural or symbolic institution-

alization. Values of many kinds are intimatelycoordinated in a nexus or complex that inte-grates meaning and its (dis)establishment, in-tellectual property, social status, money, price-setting mechanisms, and so on. Art prices thusrescind the Nothing But paradigm, in whichthe value of art is determined simply and exclu-sively by its price.32

Arts marketization is constituted by its finan-

ciality, without reference to its production, orthe basis for production, or even its products.In particular, arts marketization is not an issueof commodification, or of arts content. Theinfluential Marxian disputes on this identifica-



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tion result from an anxious recognition of thehistorical error of arts commodity status incontradistinction to another kind of productionthat would somehow free it from its marketi-zation. In this they base art in productionperhaps even the generalized production ofindustry at largeand look to surpass artsfinanciality for this reason. However, capital-

ization qua sabotage is wholly indifferent toproduction: it makes no odds to capitaliza-tion howor why production takes place, onlythat some production is to be institutionallyaffirmed and others sabotaged (thus reduc-ing industry overall). Whether or not art is acommodity is no issue for its capitalization, thequestion having no traction on its financiality.

Similarly, looking to the (individual or collective)

artist as the basis and condition of art inneed of support against the depredations ofmarketization and institutionalization (inflictedby those very markets and institutions) is anappeal to a return to production as the basisfor arts value. When such appeals act as amoral vindication of the ethos of arts financial-ity (selling the artists work is for the benefit ofthe artist), the artist acts a compensatory fablefor the continued sabotage arts institutional

capitalization inflicts on general production.Arts amorous ethos looks to individualize andgive alibi to ownership-sabotage by configur-ing the artist as a unique producer of originalworks who, on the basis of their putative

autonomy, is then a legitimizing figure of highlymonopolistic production that is itself emblem-atic of the configuration of business-sabotagecontra social industry.

The now standard critique proposing art to beirreducible to capital and the latters culturebecause of arts unproductivity, dejection,

non-perfomance, failure, useless expenditure,and so on (in short, the Adornian-Beckettian-Bataillean repertoire) advocates a culturaldetermination of art qua sabotage. Acceptingthis Hostile Worlds paradigm of art comple-ments arts financiality even as these counter-capitalist theories claim to contend it. Theseinstitutionally stable discourses thus take aleading role in the justification and legitima-tionthe remoralizationof institutional

sabotage, most notable perhaps in the sup-port they give to the highly concentratedmonopolies of art already in place and theprevailing social power represented thereby.The continuity of interests between financialityand such prevalent critical claims is evidencedby the their centrality in the marketization of artthrough theoretically-informed journalism.

If its a commonplace that arts financiality damages

a more general proliferation of art simply becausethe art market excludes more art than it includes, theanalysis proposed here offers a different, specificdetermination of the damage inflicted by arts finan-ciality: it is a sabotage of art as a part of general



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production, as industry. Art s price indexes the powerof such sabotage in the terms set out by that sabo-tage. Arts capitalization is not then predicated onaesthetic-artistic determinations but sociological-financial power; or, at least, the power concerns ofinstitutional capitalization determine its aesthetic-artistic interests. Arts amorous/erotic ethos is a cru-cial medium of transmission between the two: the im-

plementation of power-sabotage is authorized by thecommon yet unaccountable enactment of the love ofart, which in any given case is an irreducible element.Such institutional power is on the one hand fashionwithin art, in which every party looks to every other foran unaccountable and otherwise criteria-less valida-tion of what counts as worthwhile art. And on the otherhand it is the prevailing institutional insistence onpresenting work of putative quality and value. Theassumed obviousness (and consequent consent)

enforced by such terms inflicts in morally protectedform the social sabotage of a power that need notaccount for itself but is simply occasioned by its claimson/through art.

The love for art declared not only by collectors butalso by any of its agents is the subjective, privatizedaccount of such a morally protected sabotage power.It is an ethos. While such power equal to capitaliza-tion, and thus finance, is perhaps most evident withthe collector-dealer nexus, where monetary transac-

tions are most palpable, it is by no means restrictedto these actors since capitalization is a matter of gen-eral social ordering organized through private owner-ship. The reorganization of power legitimized througharts amorous ethos has both subjective and public

aspects of its privatization, which are interrelated. Thesubjective account requires one last visit to the deri-vation of price-setting as institutional sabotage.

Given that art has little intrinsic worth in terms ofmaterial costs,33arts financiality is only another way ofsaying that prices are set almost entirely by its mark-up.34If one of the standard puzzles in art-pricing is howto justify prices in fundamentals beyond hype and

risk, Nitzan and Bichlers derivation of pricing suggeststhat prices in generalhave no foundation in objectiveconditions such as production but are predicated onlyon convention (historical earnings and a standard rateof return) and a subjectively determined speculativezeal or positioning, which is a trade-off between hypeand risk above a standard rate of return.35Moreover,while the sabotage business inflicts upon industry ingeneral is a consequence of sectorial-collective sabo-tage (outlined above for art as the appeal to quality

and excellence), that sabotage is nonetheless un-dertaken for earnings made byprivateownership andis exclusively against industry. There is then a private,subjective correlate to the sectorial sabotage of capi-talization and, in particular, its positioning. When spec-ulative zeal is low (hype is low or outweighed by therisk coefficient)as when markets contract or, withart, the speculative interest is directed towards art thatis not secured by power (or reputation, another namefor sectorial sabotage)the general name for this pri-

vate, subjective correlate is fear. When hype is highor outweighs riskwhen positioning is highly positive,as it is with blue-chip artthe received name in artsethos for the private subjective dimension of sabotageis love. Love completes the logic of the privatizing



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sabotage of production in general; it is the confirmationof power over the social order through capitalizationpursued through institutions. Love is but the private,subjectiveand therefore capricious, ownedposi-tive positioning of arts capitalization.

The love of art is thus still a source of legitimacyfor empire-making allied to capitalization; it is howsabotage can be privately and publicly vindicated.36

Looking at the recent history of this socio-culturalprivatization, the political economy of culture, in Eu-rope and North America, it is clear that the hierarchiesascribed through such territory-building projects havedissipated to a major extent through the reorganizationof fiscal power mechanisms at a transnational scale,prioritizing revenue for the type of finance that worksbeyond the simple philanthropic, charitable gesturesof previous decades, and beyond the clear territorial-ization of ownership. Love has no borders. Playing the

risky game of buying and selling art not for profit butbecause you love art and are perhaps addicted to itsirrationalities and impulses in some way is a sure firemethod of distracting a public gaze, which accepts thedistinction between capitalization and love, from ques-tions concerning the deep inequalities caused by yourwealth accumulation or indeed the investments youmay make in order to produce that wealth. Such dis-connection between normative investment and returnmethodologies and the practices of the contemporary

art market leave stranded a welfare state model of pub-lic art beneficence, which the funders are simply un-able (though of course not unwillingin fact have nochoice but) to compete with. This suggests a markedshift in the modes through which art is distributed and

displayed, and accounts for much of the pandering andgroveling that takes up an increasing percentage of thetime of all publicly-funded galleries and museums. Thesheer fact that public art museums and galleries inmany parts of the world are now being predominantlyfunded by private donation attests to this. Once the im-brication of private patronage in spaces once deemedideologically public is complete it becomes clear that

contemporary art, its production and curation, be-comes an advanced mechanism of experimentation forthe sabotage of (ideologies of) access and equality.

Taking arts institutional capitalization to be a mode ofsabotage vectored/legitimized through an amorous/erotic ethos then permits a number of medium-termfuture scenarios for the political economy of art andthe privatization of care to be anticipated. Thoughpractically-integrated, these transformations can be

thematically demarcated as follows:

I

capital

Despite the claims of the art investment sectorthat it is counter-cyclical or uncorrelated to themovements of broad equities markets, the artmarket is entirely dependent on the available

cash flows or liquidity available to higher-incomeearners.37Two schematic scenarios can then beput forward for the decade from 2012, depend-ing on the fate of the finance sector and privatewealth accrual in the period.



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(i)

an increase in liquidity (which is not to saya strengthening of wider economies) willstrengthen the art market, which will be mostostentatiously marked by escalating prices forblue-chip work. The Hostile Worlds scenariobetween primary and secondary markets will

be resurrected, but as mock-battles becauseall sides will increase the power of arts institu-tional capitalization against (arts) industry. Thecharacteristic ethos of art will concentrate powerwith even greater degrees of monopoly to thosewho are most able to love art subjectivelythatis, without care for what that love means, how itis constituted, and what it more generally reorga-nizes. The period of the art market slump, 2009201X, will be seen as a valuable correction in

an otherwise continually developing market ofprivately recognized quality and excellence.Dominant art institutions will exacerbate thisconcentration of power.

(ii)

Fragile or thinning liquidity in the coming periodwill result in a contraction of the total market,again putatively intensifying a conflict between

primary and secondary markets but increasingtheir co-dependency to secure a shrinking capitalbase. In this scenario, power will again be con-centrated but the appeal to subjectively privatelove as its legitimizing ethos will probably be less

prevalent as art will seek to gain greater moralvalue in order to stabilize capitalization in termsother than those of wealth accumulation. Here,terms such as quality and excellence will becontested as public-collective (moral) claimsrather than privatized gain, but will again, for thisreason of securing power, mark the sabotaginginstitutionalization and marketization of art.

II

institutional infrastructure

Its said that you cant help who (or what?) youfall in love with. In loving art and playing safe bets,modern and contemporary art collectors mask,inadvertently or not, their worldly dealings. Soci-ologies of collecting, whilst often focusing either

on museums and patronage or the oddities ofobsessive collectors of everyday objects, throwlight on the relation between collecting and formsof domination, but they do so under the terms of atype of statist thinking that the buyers and sellersof contemporary art now move far beyond. JohnElsner and Roger Cardinal, for example, proposethat if the peoples and the things of the world arecollected, and if the social categories into whichthey are assigned confirm the precious knowl-

edge of culture handed down through genera-tions, then our rulers sit atop a hierarchy of collec-tors.38The rise of the private museum, its publicaccessibility, its collection built on the impulsiveand quixotic taste of its owner ( in fact advised by



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a group of arts consultants and public museumdirectors hoping to gather some crumbs), atteststo a pathological and political shift from a cultureof care to a culture of love within the dominantstructures of neoliberal states.39If care is whatthe state-funded arts were supposed to do, eitherthrough psychic and experiential transformationsof the viewer or through participation in programs

of community cohesion, such narratives of amelio-ration and healing of publics have been replacedby privatized love. The private collector, makinghis or her mark, through the use and abuse of his/her own passions by trading art, no longer doesso on the basis of a publics expectation of benefit(he is not doing it to do good). This is not thefield of patronage developed in the industrial ageof Europe and North America. Instead of a gen-eral commitment to care (however homogenized

and hierarchized this system of care was), privateart buyers care for their own passions and thenallow the public to see glimpses of them thoughthe gauze of mediators, arts consultants, and thelike.Rather than be understood as a neo-feudalarrangement, here the previously state-organizedpublic is demanded to share in the love of arton the terms of private corporatism. The newmuseum (The New Museum?) is identified as alocation in which any civilian can participate

publiclyin the spectacle of elite spending, doingso in the sharing or appreciation of a privatizedlove. This endemic configuration of people, space,and shared but unequal love will be the ever moreprevalent shape of public galleries and museums

over at least the next two decades as this type ofinventive public-private methodology becomes in-creasingly necessary to maintain institutions in thewake of the decline of state funding for culture.

III

reputational venues

If privatized sabotage becomes more prominent asthe organizing principle of art and its institutional-ization, then institutional capitalization and itsattendant prestige- and reputation-building of artwill shift more decisively to overt market-basedorganizationnotably, from biennials to art fairs.Given the importance of prioritizing subjectivepositioning as a condition for arts institutionalcapitalization, and the importance of providing

an ersatz public service, these procedures oflegtimization are not conducted through the vend-ing formats and venues themselves but the prolif-eration of off-site projects (entry to which is onlysometimes charged). Such projectsrely upon theveneer of a Hostile Worlds scenario internal tothe primary market itself, allowing the love of artfor its own sake to continue to be materializedand specified at precisely the point of its mostintense sites of marketization. If the availability of

such art fair project programs to the public is aleading factor in their presentation, the transforma-tion of state-level organization by capitalization andits private solace again comes to the fore.The availability of art to a (bourgeois) public was



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the task of the national museum and, in post-warEurope, the biennial, overcoded as these wereby a pedagogic-formative command typical ofmodernizing industrial nation-states seeking (toproject) a public base. The art fair project re-places this complex network of institutional andsocial care, in which culture and art might haveacted as vectors of common identification, with

the eliciting and adulation of private excitements;a dab of knowledge-generation in such projectsallows them to also take on the mantel of culturaleducation from that previous formation. Yet whatis public here is not a common or collective taskbut subjective positioning, the power of private,speculative zeal we are all permitted to occasion-ally taste.

notes

1 Graeme Wearden and Katie Allen,Eurozone Bond Markets in Turmoilas France and Germany Dig in overECB, guardian.co.uk, November16, 2011, www.guardian.co.uk/business/2011/nov/16/eurozone-bond-markets-germany-ecb/.

2 Noah Horowitz, Art of the Deal:Contemporary Art in a Global Finan-cial Market(Princeton: PrincetonUniversity Press, 2011), 145.

3 Ibid., 170.4 Ibid., 170.5 Ibid., 174.6 Ibid., 170.7 Ibid., 186.8 Ibid., 188.9 Ibid., 176.10 Ibid., 177.11 Sarah Thornton, Seven Days in the

Art World(London: Granta, 2009);Don Thompson, The $12 MillionStuffed Shark: The Curious Econom-ics of Contemporary Art and AuctionHouses(London: Aurum, 2008).

12 Ulf Wuggenig, Attached by an

Umbilical Cord of Gold, Texte ZurKunst83 (September 2011): 56.13 Suhail Malik, Critique as Alibi:

Moral Differentiation in the Art Mar-ket, Journal of Visual Art Practice ,Special Issue on Critique, ed.Mary-Anne Francis, 7:3 (December2008): 283295.

14 Thornton, Seven Days in the ArtWorld, 10.

15 Horowitz, Art of the Deal, 173.16 I bid., 170.17 Jon athan Nitzan and Shimsh on

Bichler, Capital as Power: A Studyof Order and Creorder(London:Routledge, 2009), 153 and 183.

18 In order to keep the main text ontopic, details of Nitzan and Bichlersargument are relegated to the foot-notes with references to Capital asPowerin parentheses. Capitalizationfor Nitzan and Bichler representspresent value of the future streamof earnings (153). Price is the unit

with which capitalism is orderedand the pattern of ordernamely,the way in which prices are struc-tured and restructured relative to oneanotheris governed by capitaliza-tion (153). The argument in themain text depends on the followingschematic formulation of capitaliza-tion (185192, paraphrased in thefollowing lines and in n. 34 below):representing capitalization at acertain time as Kt, earnings as E, andthe rate of return as r, the formula ofcapitalization is:

(A) K

t= E/ r

(The/operator marks a division,which finds the ratio between thequantities on either side of it. B elow,

xis the operation of multiplication ofthe quantities on either side; op-erations in brackets are carried outbefore the operator outside of them.)To take the simplest example,expected earnings of 1000at 5percent interest rate over a year re-quire an initial capitalization (invest-ment) of 1000 / 0.05, or 20,000.

Price can be directly formulated interms of capitalization through theexample of shares. The share pricefor a company at a given time (P

t) is

its total capitalization (Kt) distributed

over the total number of shares (N).The price per share is also the pres-ent value of the perpetual earningsper share (EPS) of that company(or total earnings per share, E / N):

(B) Pt= K

t/ N= (E/ N) / r= EPS/ r

(A) and (B) here are basic formulasfor price as the index of present valueof future earnings.

19 Horowitz, Art of the Deal, 171.20 Ibid., 78.21 Pr edicatin g price on finance reverses

neoclassical pricing doctrine, whichdrastically changes how the relationbetween prices and markets are tobe understood. Rather than marketssetting prices, for Nitzan and Bichler

financialization of art


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modern capitalists are pricemakers: they fix the price of theproduct and then let markets forcesdo the rest for them (242). It is notthat market imperatives set pricesbut that prices set the market.While there may indeed be marketforces, such forces are not primarilythose shaping prices but rather thosethat prices impose on social, indus-trial, and institutional arrangements.

22 Nit zan and Bichle r, Capital as Power,262.

23 As noted, the classi cal doctrine ofprice theory has it that market pres-sures and competition generate theprices set by firms or competitorsfor their wares. However, followingthe work of Gardiner Means at thetime of the Great Depression, Nitzanand Bichler emphasize that there arein fact two types of prices (240):competitively formed market pricesset by standard supply and demandconstraints and also what Meanscalled administered prices, whichare typical of concentrated industries.Administered prices do not respondto market circumstances very fast

(if at all) and the firms setting themdo not seek to maximize their profitsbut to secure them. Desired profitrates are set in advance and this, inaddition to output costs, determinesprices that are kept relatively stable(Apple is a good example of one suchfirm). In other words, administeredprices are not guided by the marketsinvisible hand. Moreover, studiesshow that most prices are adminis-tered prices (n. 19, 241). Nitzan andBichler turn to Michal Kaleckis notionof the degree of monopolytheextent of control over pricesas anexplanation of how and why price

setting is determined by conditionsother than those of market circum-stances (242).

24 Nit zan and Bichle r,Capital as Power,239.

25 Ibid., 239.26 Ibid ., 228.27 Ibid., 249.

28 Ibid., 249.29 Administered prices demonstrate

two business principles: (i) profit ismaintained by generalizing sabotage(ibid.,241); (ii) prices are determinedby a target rate of return and the costof goods is set to meet this return.The degree of monopoly is a mea-sure of industrial sabotage requiredin order to maintain a rate of return.As the phrase implies, it is a measureof power: higher prices mark agreater degree of monopoly overindustry, indexing more power tosabotage. That is, the greater themarkup that can be set, the greaterthe power of those who set it; andthe contrary.

30 Olav Velthuis, Talking Prices: Sym-bolic Meanings of Prices on the Mar-ket for Contemporary Art (Princeton:Princeton University Press, 2005),2426.

31 Pierre Bourdieu, Distinction: ASocial Critique of the Judgment ofTaste, trans. Richard Nice (London:Routledge, 2003 [1979]).

32 Velthuis, Talking Prices, 2627.33 Horowitz, Art of the Deal, 208.

34 The complication in the schematicformulas of capitalization (A) andprice (B) in n. 18 is that the future isuncertain, which means that the ba-sic variables are in fact unknown andunmeasurable. But each variable canbe retrospectivelydecomposed intothe objective aspects of earnings andrate of return and, on the other hand,a speculative element that measuresthe degree of expectation that wasthe capitalists projection into thefuture, itself composed of hype andconfidence in predictions. In detail:

Expected earnings are first decom-posited. For the share-price formula

in particular (188):

(C) Pt= EEPS/ r= (EPSx H) / r

Where EEPSis expectedfutureearnings per share, EPSis actualfuture earnings per share and Hthehype coefficient which measures

the extent to which capitalists areinvesting optimistically (His greaterthan one) or pessimistically (H is lessthan one). Whether capitalists havehyped their capitalization up or downcan only be known when their initialcapitalization or price is assessedagainst their actual earnings. Thehype coefficient thus represents theex postcollective error of capital-ists when pricing the asset, and isrevealed only once the earnings areannounced (189)at which pointhype can be measured.

Nitzan and Bichler remark twoimportant key characteristics ofhype (191): it activelyshapes priceand thus commands markets; it isnot an individual intervention but acollective-sectoral coalition combin-ing regulators, policy-makers, execu-tives, opinion-makers, traders, and soona capitalist ruling eliteto pushprices up or down and give confi-dence that such swings are justifiedand rationally explainable. The intro-duction of hype in the formulationsof capitalization makes apparent thatinvestors are not essentially reactive

to market forces through pricing, asneoclassical precepts have it (208),and that prices are not automaticallyor mechanistically derived from earn-ings (just as the market does not setprices but is set by prices).

It is then the earningsprojecti onsof capitalists that are the key factor inprice-setting. Yet these projectionsalso depend on the confidence of in-vestors in their own predictions. Thisconfidence can be measured againsta benchmark (government bonds,for example) in which a ma ximumcertainty of a given rate of return isassumed. This is called a risk free

rate in standard finance theorythough, as Nitzan and Bichlerobserve, it is not explained why itis risk free nor what determines itslevel (209). By contrast all otherinvestments have a degree of con-fidence that can be measured bythe risk coefficient () that acts as

a factor against the rate of returnin which investors have maximumconfidence (r

c). As with hype, confi-

dence can be incorporated into theprice formula (C) by decompositingthe rate of return:

(D) P

t= EEPS/ r= (EPSx H) / (r

cx )

When confidence is high, the risk-coefficient is close to one and itincreases when confidence fallsback, resulting in a lower share price(all other things being equal). Therisk coefficient is not to be confusedwith the risk premium describedin standard finance theory, whichclaims to measure the risk in pricesand actual volatility, not speculativeconfidence. Higher risk premiumsimply higher returns but a higher riskcoefficient means less confidenceand so lower prices.

35 The price per share is the trade offbetween how much earnings pershare are hyped-up against the riskthat the shares will not beat a stan-dard rate of return. Actual earningsand the standard rate of return can

both be retrospectively measured.Though Nitzan and Bichler do nottake their argument in this directionin Capital as Power, the retrospec-tively measured objective factors inprice-setting can be separated outfrom the right-hand side of formula(D):

(E) Pt= (EPS/ r

c) x (H/ )

Implementing this separation allowsthe speculative element of price-setting to be identified as the trade-off between hype and risk. Price-setting as it is formulated in (E) can

be split into the following descriptiveterms:

Price per share = (objective return) x(speculative zeal)

If this formulation corresponds witha conventional sense of what


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speculation involvesthe anticipato-ry hunch of the investor who followsthe marketswhat is telling aboutit is that: (i) subjective speculationshapes the price rather than followsit (even when there is no hype (H= 1)and no risk (= 1)), and thus shapesthe future of the market (210); and (ii)speculative zeal can be given an ex-act measure (it is the ratio of the priceper share to its actual return, which isa number that can only be retrospec-tively known). In the words of JamieSearle at Citi Bank in the epigraphto this essay, speculative zeal is thepositioning of the speculator whoshapesthe market and the future butwhose accuracy or distortion ofwhat the price should have been canonly be retrospectively measured.Speculative fear is when hype isoutweighed by risk (H/ is lessthan one); speculative enthusiasmis when hype outweighs risk(H/ is more than one). Since thefuture is unknown, however, confi-dence can never be at a maximum.And since hype is a sectoral (which isto say collective-institutional) pres-

sure, positioning is but the shaping ofprice by power. It can be measuredby comparing price to actual earn-ings, which is to say: capital accumu-lation, profit gained by sabotage.

36 Wuggenig, Attached by an UmbilicalCord of Gold, 62.

37 Horowitz, Art of the Deal, 161, 186,199201; Suhail Malik, A BoomWithout End? Liquidity, Critiqueand the Art Market, Mute: Living ina Bubble: Credit, Debt and Crisis,2:6, (2007): 9299, ww w.metamute.org/en/A-Boom-Without-End-Liquidity-Critique-and-the-Artmarket; Andrea Fraser, L1%, cest

moi, Texte Zur Kunst83 (September2011): 114127.

38 John Elsnor and Roger Cardinal, eds.The Cultures of Collecting(London:Reaktion, 1994), 2.

39 Andrea Phillips, Too Careful: Con-temporary Arts Public Making, inAndrea Phillips and Markus Miessen,

eds., Caring Culture: Art, Architec-ture and the Politics of Public Health(Amsterdam/Berlin: SKOR/Stern-berg Press, 2011).

malik tainted love

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