War and the Art Market

As
the first major conflict involving the United States after the Cold
War, the Persian Gulf War was always going to be an unsettling event
for the US. The beginning of the US involvement in the Persian Gulf
conflict began in January 17 1991 when coalition forces began a massive
air attack on Iraqi targets codenamed Operation Desert Storm. By the
28th of February 1991 the Iraqi resistance had collapsed and Kuwait had
been recaptured which fulfilled the goals of the coalition resulting in
a cease-fire.

Although the United States’ involvement in the Persian Gulf conflict
was relatively short, it did happen at a time of great economic
uncertainty and at a time when people were seriously questioning the
long term viability of the art market. According to the University of
Michigan consumer sentiment index, US consumer confidence dropped from
88.2 in July of 1990 to 63.9 in October of 1990. Interestingly, it
wasn’t so much the beginning of the involvement of the US in the war
that triggered the drop in consumer confidence but the period of
uncertainty before the US made their move in February 1991 in response
to Sudam’s invasion of Kuwait.

Because of the reliance on the Middle East for the supply of oil,
there was an even greater perceived threat to the wallets of gas
guzzling Americans that contributed to the reduced consumer confidence.
The difference between the current situation with oil and the situation
with oil during the Persian Gulf War is that the current high prices
are being caused by a general increase in the consumption of oil
whereas the Persian Gulf War posed a direct threat to the production
and supply of oil. We are currently aware of the situation with oil
which, although problematic, is relatively predictable whereas the
potential effect of the Persian Gulf War on the supply of oil was an
unknown. When ever there is an unknown people tend to want to prepare
for a worst case scenario and rightly so.

If the Persian Gulf War had of been the only factor affecting
people’s financial situation and their confidence in the future of the
economy I doubt that the war would have had such an impact on the art
market which, although small, was one of many untimely events that were
detrimental to the art market. What I think the situation with the art
market and the Persian Gulf war shows is that economic and financial
uncertainty is potentially a far greater problem for the art market
than an actual financial or economic movement.

To be continued…

See the other two posts on this topic here:

http://artmarketblog.com/2008/05/12/crashing-the-art-market-japanese-style-artmarketblogcom/

http://artmarketblog.com/2008/05/14/art-plus-wealthy-egotists-equaled-chaos-artmarketblogcom/

**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of http://www.artmarketblog.com,
writes the art column for the magazine Antiques and Collectibles for
Pleasure and Profit and contributes to many other publications.