It has been an uneasy season for the art world, with dealers asking themselves whether, in the midst of the subprime-mortgage crisis and a credit squeeze, the winds are bound to blow foul. A report published in January by Arttactic, a London-based firm that measures confidence in the contemporary-art market through biannual surveys, recorded a 40 percent drop between May and November 2007. Then, in a gossipy tidbit in New York magazine, the Manhattan dealer Mary Boone—a poster child of the go-go 1980s—was quoted as saying, “We are definitely in a recession.” Although some contend that Boone’s comment was taken out of context, the dreaded R-word’s appearance in print may have damaged morale.

Whatever the speculation, and despite some mixed signals, the market looked resilient. According to some exhibitors, February’s edition of the Art Show, the Art Dealers Association of America (ADAA)’s annual fair in New York, saw decent sales, although attendance was down, at 10,000 compared with 15,000 last year. That same month, the London auctions at Christie’s and Phillips posted solid results. Here again, however, there were signs of trouble, with fewer American buyers present, replaced by Europeans wielding stronger currencies. Even as the press trumpeted high sales totals, the possibility of a U.S. recession was still being broached in financial news reports, and it wasn’t far from some dealers’ and collectors’ thoughts. One New York dealer attending the auctions says he could “read the tea leaves” in some of the buy-ins.

The current art market boom has been a long one. The frantic growth of the 1980s gave way to a slump in the early ’90s, but since the first glimmerings of recovery, in 1996, except for a hiccup after September 11, 2001, the market has been rising relentlessly. As a result, a large chunk of today’s most prominent galleries, art fairs and collectors, having entered the game during the past decade, are like surfers who caught a great curl their first time out and have never known a slow run. With this in mind, whether or not any ominous rumblings are to be heard in the distance, it is worth checking in with established dealers who have been around long enough to have weathered previous storms: How did sleepier cycles play
out? What were some of the lessons learned?

Perhaps the most sensible approach to a market downturn is to “be prepared,” says Janelle Reiring, who, with Helene Winer, cofounded the Metro Pictures gallery in New York in 1980 and who has represented such artists as Cindy Sherman and Robert Longo ever since. When the economy suffered in the 1990s, it took time for it to fully affect the art market. About two years into the slowdown, Reiring remembers, “it was a shock from day to day. I jokingly said every collector must have sent a fax around to the others saying, ‘Don’t buy any more art.’ ” Some recognized the signs of a pullback sooner. The New York gallerist Perry Rubenstein calls the aftermath of the lackluster May 1990 auctions “the summer of our discontent.” These days Rubenstein and others say they rely on the frequent auctions and art fairs, which act as market gauges, as well as on the real-time art-news reporting on the Internet, for more accurate assessments of what is happening.  

Beyond keeping on top of trends, dealers can take measures to recession-proof their operations. Paula Cooper, who has been in the business for more than 30 years, points to one of the most obvious: Own your space, as Cooper, Andrea Rosen, Larry Gagosian, Lawrence Luhring and Roland Augustine and others in Chelsea do. Another method mentioned by nearly every dealer interviewed for this story is keep­ing your artists’ prices sane. During periods of prodigality like the ’80s—and more dramatically now—values increase rapidly and steeply. When dealers talk about cultivating their artists’ careers by managing their prices, it isn’t ethical posturing but good business. Most professionals agree that the art market has a kind of reverse gravitational pull: You can raise prices wildly, but lowering them risks destroying demand. In the ’90s, some artists and dealers “ suddenly saw prices go down and then experienced firsthand a kind of free fall,” recalls Marc Glimcher, the director of PaceWildenstein. “If prices go down, demand goes down.” What gets dealers into trouble during a decline, he adds, is “the pumping up of artists’ prices and the treatment of collectors like they are supposed to beg for work.” For those who indulge in such practices, he cautions that, by the time the market slows, it may be “too late for a strategy change. Your strategy should be to find a new business.”

“We were always careful about pricing and not being excessive,” says Gordon Veneklasen, the director of the Michael Werner gallery, citing the “reasonable” values (typically starting at about $500,000 per painting) the gallery sets for its star Sigmar Polke. “We’ve never been greedy in terms of the primary market.” This policy reflects lessons learned from past slowdowns. Pricing reasonably entails not being swayed by auction results. “If you have a long-term view, you totally ignore the auction houses,” says Veneklasen. “You price the primary market differently from the secondary market. Even if the secondary market starts to go wild, you’re still careful.” Pierre Levai, president of Marlborough galleries, agrees. “We have been always very careful not to adjust our prices according to auction prices,” he says. “But in a strange way, a lot of artists we’ve dealt with—Frank Auerbach, Fernando Botero, Red Grooms—sell very well but are not fashionable.” For that reason, their works have been less subject to price jumps in the salesroom.

At the first whiff of economic ills, some speculators may opt to unload their holdings quickly. “If there is anything that undermines the market during a recession, it is that there is a significant number of collectors who have nothing but a monetary attachment to the work,” says Glimcher. “It’s off to the auction house.” He adds, however, that even an ailing economy, like that in the ’90s, won’t bring buying to a complete halt. In fact, immediately following turmoil in the financial markets, people often take their money out of equities and invest in art instead. “ There was always something about the recession that drove an interest in art collecting with some people,” he says. “When everything looks like it’s meaning­less, it’s nice to see economic value tied to some deeper level of meaning. There were artists who achieved their record prices at auction throughout those years.” (That purchasing phase is usually brief—six to nine months—after which the slowdown hits artworks as well; this time gap is why financial analysts sometimes call art a lagging indicator.)

The effect of economic woes on art buying was discussed during an ADAA-sponsored panel discussion at the Museum of Modern Art in February. Panelist David Zwirner observed that “there are great collectors who have been frustrated by price developments and are waiting in the wings to make purchases as soon as things change a bit. I think that balance will keep things moving nicely.” (Zwirner should know—he opened his first space in SoHo in 1993, a market nadir.) Michael Findlay, of Acquavella, also on the panel, agreed with Zwirner, adding that collectors will become more selective, but “the good stuff will continue to sell.” Andrea Rosen, while pointing out that she wasn’t saying the current downturn was a recession, claimed to have learned a lot from launching her gallery during the last one, in 1990. Rosen noted that buying habits change during slower times, shifts that can help artists, such as Lynda Benglis and Robert Morris, who have been flying under the radar. Collectors gravitate toward the part of the market not driven by the auction houses, she explained, and “begin to look at things that have been overlooked by the market. It is not buying with your ears.” Or as another dealer, not on the panel, put it, in the early 1990s, “people stopped buying names.”

One strategy that has helped dealers through lean years is cooperation. If the ’80s were characterized by cutthroat competitiveness, the ’90s were a time when dealers often helped one another pull through. “There were people who fell on hard times,” notes Glimcher. “And artists, dealers and collectors said, ‘We can’t see that institution just go out like that.’  And we did things that were not necessarily market driven in order to support that institution.” The Chelsea gallerist Jack Shainman recalls that in SoHo, where he rode out the ’90s downturn, one dealer might buy an artwork from another to keep him or her in business.  “There was a comforting acceptance that many people were operating on a shoestring.”

The London- and New York–based dealer Bernard Jacobson harks back wistfully to the community spirit of his hardscrabble days in England during the global oil crisis of the 1970s. “It was fun because we were all kids,” he says. “We had what we called a three-day week, because on two days we had no electricity and worked by candlelight. I’d make my money for the week from selling one Warhol. Now I’m a grown-up and have a big staff and headaches.” As for surviving a recession, Jacobson says, “I think it’s a matter of keeping calm and being extremely cautious.”

In any event, downturns “are all different,” says the Old Masters dealer and avid market observer Richard Feigen. “I think past lessons apply, but I don’t necessarily think some of today’s contemporary-art collectors, dealers and auctioneers are going to believe that the same forces are at work or necessarily will be repeated.” One theory holds that because we are in a vastly expanded, global art world, the market is recession-proof. But those who have been around for a while tend to think it will remain cyclical. If that is the case, the only approach to take may be a good-naturedly Sisyphean one. “You keep pushing the rock up the hill,” says Shainman. “Sometimes it’s very heavy.”

"History Repeating?" originally appeared in the May 2008 issue of Art+Auction. For a complete list of articles from this issue available on ARTINFO, see Art+Auction's May 2008 Table of Contents.