Dennis Hollingsworth

Sounding the Crisis

During the height of our art world bubble, most folks were wishing for an economic downturn to help us correct our problem. Well, we got what we asked for. Or better put, we are still getting it in spades, with more possibly probably to come. What follows are a few links to gauge just how deep our kimchee is.

The New York Times has an article (hat tip) on the possible depth of the crisis in the Spanish real estate market, specifically the amount of unsold buildings in the banking portfolios. Add to this, the number of properties that had already sold as the bubble broke, which is a reflection of how many folks are currently underwater in their mortgages, or nearly so. The actual depth could only be imagined since no one so far is willing to assess just how profound it is:

Just how big a loss the banks are facing is unknown, at least publicly, and that has investors worried ? the cost of financing Spain?s debt rose 18 percent in the last month alone. But the potential costs of failure go far beyond that. Spain?s economy, the fifth largest in Europe, is much bigger than Ireland?s or Greece?s, and a bailout of its banks could be far more costly, an event that could push the government into default and end up dooming the euro itself.

After Ireland's recent bailout, the EU is biting its nails to see if the bubble will burst before it has a chance to reduce its swelling in time to prevent a domino effect on Portugal, Spain and then to Italy.

Meanwhile, here in the USA, after we had dismembered our bubble and exported the poison of bad loans via the "complex financial instruments" called derivatives (the shell game shuffle of language into euphemisms is astounding) into the world wide market, there is no evidence that I have seen that we have corrected the source of the problem (reforming the loan requirement regime that started this whole sorry mess) and have assessed the extent of the problem in our own banking industry. I guess we have to leave it to the folks at WikiLeaks to let us know how bad things really are with their promised (threatened?) dump of banking information which many have guessed will be Bank of America. Add to this, the municipal debt bubble developing across the USA, with California being the prime example. One could be pardoned to think that things couldn't get worse.

(Check out this report from 60 Minutes on the coming meltdown of State government...)

But consider this:

Doomsayers such as Nouriel Roubini have been predicting a double dip recession for some time now. While we can look at the EU with trepidation, folks have yet to focus on China. I was not too surprised to discover that Beijing's Olympic boom has resulted in a ghost town:

By Rodman's calculations, 500 million square feet of commercial real estate has been developed in Beijing since 2006, more than all the office space in Manhattan. And that doesn't include huge projects developed by the government. He says 100 million square feet of office space is vacant -- a 14-year supply if it filled up at the same rate as in the best years, 2004 through '06, when about 7 million square feet a year was leased.

"The scale of development was unprecedented anywhere in the world," said Rodman, a Los Angeles native who lives in Beijing, running a firm called Global Distressed Solutions. "It defied logic. It just doesn't make sense."

Repurposing festival architecture has always been awkward. But scale in China lifts something like the Olympics into new dimensions. This article doesn't mention the scale of displacement of the folks who originally lived on this land, a figure which is estimated in the millions. I can imagine inviting the people back in to repopulate and re-repurpose the altered built environment into their scale. (Note to self: Find a way to illustrate a Copenhagen's Christiania-style transformation of the Olympic Village. Monumental scale transmogrified into neighborhoods.) Then check this article out. It's pretty sobering, especially since the whole world is relying on China to keep the worldwide economy out of hot water. Click around the last link and you will find reports like this, and you will have to do another gut check.

Apropos of our art world, it's a shame that we take such an attitude toward venality in our own marketplace that we have to passively wait for a collapse in the global market to correct the inflated values that form bubbles in our special little world. It's worth asking: have we corrected our own problem yet? We have had and we still have our own insider trading, our own class of speculators, our own engines of hype run amok, our own portfolios riddled with hidden items of doubtful value aka toxic assets. Normative criticism has died long ago and there is nothing, no one to replace it, much less to expect an emergence of regular critical appraisal of business practice at large.

And by the marketplace, I don't make much of a distinction -as many do- between the gallery system and the institutional system. Both are too interrelated in terms of the valuation of art work to make a significant difference. What I am calling for is not only a renewal of aesthetic criticism but the invention of a criticism of the marketplace in our art world. This is a good time to ponder why the former died and how we might invent the latter. Perhaps this already exists in venues such as The Art Newspaper, but it's worth asking if it is functioning well enough as an early warning indicator, a feedback function and reality check. Perhaps a single venue is too limited to do this job, maybe it has to spread across the board? It's also worth asking if all of this is impossible. Perhaps the normal cycle of art making, collectorship and criticism is too large to accommodate a tighter loop that might correct this problem in a shorter term? If this is true, then our passivity might be forgiven... but can't we struggle against it anyway, despite the odds?

Posted by Dennis at December 18, 2010 12:47 PM