‘We’re at a point where success in market terms justifies and validates everything, replacing all the theories.’ So says a gallerist in Michel Houellebecq’s chilly, rather comic novel from 2010, The Map and the Territory, which is set in the upper reaches of the art world. The book centres on an artist who is struggling to complete a painting titled Jeff Koons and Damien Hirst Dividing Up the Art Market. In a time of financial crisis, the relationship between art and economics – a central theme of Houellebecq’s novel – has never been more urgent than today. But artists who are interested in responding to the crisis face numerous challenges. Many of these are straightforwardly visual: how best to represent or comment on abstract economic systems? Through data-driven text pieces, Brechtian agit-prop or direct market ‘interventions’ as practiced by Hirst at Sotheby’s in 2008? The artist in Houellebecq’s novel falls short. Unable to complete his painting (which depicts the artists meeting in a hotel suite, a flashily anonymous Emirate skyline in the background), he ultimately destroys it.
The economic crisis was and is hard to understand; it is complex to the point that art theory no longer seems like an adequate guide. But economic theory has also failed: not only did economists largely fail to foresee the crisis, even in hindsight their models have had trouble understanding or accepting that something had gone very wrong. The usual suspects for these failures range from the limitations of the reigning theory (the ‘efficient market’ hypothesis, which holds that markets are essentially always right) to the corrupting financial incentives from the banking industry that economists were supposedly dispassionately analyzing. But there is an even simpler explanation: economics didn’t keep up – it fell behind in understanding the new ‘shadow’ banking system. Even today, five years after the initial crisis, there is still a dearth of academic papers on some of the key features of this system.
This is now changing. There have been rapid developments in economic theory, which should be of interest to anyone who is attempting to formulate a response to the crisis (or who is merely trying to understand today’s economic realities). This new framework has only recently coalesced, and goes by the name of the ‘liquidity movement’ or sometimes ‘financial frictions’. (A friction is something that prevents the economy – or an economic model – from working smoothly.) Liquidity economics maps out systemic risk and the hidden fragility in seemingly robust financial markets that can turn illiquid overnight. It is also concerned with how a damaged financial system interacts with the economy, hurting both in an endless negative feedback loop that amplifies a small financial crisis into a much larger near-depression. While this area of financial economics is esoteric, it’s far from a renegade movement – in fact, it’s highly insider-ish and is best known within central banking circles.
Though financial friction theory is expressed entirely mathematically, some of its models have real-world applications. For example, the theory holds that Europe is currently caught in a unique version of a negative feedback loop. Here, the loop is between a weakened banking system and the weakening financial condition of European states. Governments try to prop up their banks, but in doing so increase their own risk of a default. Banks hold this sovereign debt as collateral, only to see its value plummet as default nears. They stop making loans, the economy contracts, tax revenue plummets and governments are further damaged, and so on and so forth, in what economists call ‘the diabolic loop’. It’s not clear how to put an end to this loop – economists have made many proposals. What is clear is that European banks are desperately looking for safe collateral to shore up their balance sheets. In the simplest terms, the problem that the banking system faces right now is that there are no safe assets.
Art theorists, to say nothing of artists, are unlikely to be familiar with these new theoretical frameworks for understanding the crisis, even if they are familiar with some of the terms used, such as ‘systemic risk’. No one is about to abandon the biennial circuit and its parties for the grim central bank conference circuit. More crucially, though, liquidity theory operates on a mathematical plane – it’s hard to import into aesthetics. And, while much recent art theory is influenced by Marxist thinking, it is not primarily economic. The controversial neoliberal theorist Francis Fukuyama recently argued, in the magazine Foreign Affairs, that Marxist theory has been ‘replaced with Postmodernism, multiculturalism, feminism, critical theory and a host of other fragmented intellectual trends that are more cultural than economic in focus’. He went on to suggest that the ideology of the future needs to have ‘two components, political andeconomic’. Lacking an explicit or formalized economic component, current art theory does not fit this bill.
So where does this leave artists today? How can (or should) they begin to visualize a system whose core dynamics are mathematical or regulatory, even if the symptoms are often personal? Few artists have yet to substantively engage with these complicated questions. However, a divergent number of approaches are beginning to coalesce. These range from moving-image works to archival research to activist-affiliated projects. For example, Mark Lombardi’s mapping of the relationships between banks, governments and corporations anticipated connections that are still only being understood today, 12 years after his death, while Cesare Pietroiusti’s performance, Eating Money (2007), provided a more lighthearted take. Recently, Duncan Campbell’s film Arbeit (Work, 2011) focused on Hans Tietmeyer, the architect of monetary union, while Danilo Correale’s 2011 exhibition at Supportico Lopez in Berlin explored the economic concept of ‘Pareto Optimality’. There has also been a string of group shows considering economic crisis, such as ‘It’s the Political Economy, Stupid’ (2011) at Open Space in Vienna, ‘Capital Offense’ (2012) at the Beacon Arts Building in Los Angeles, and the two-part exhibition ‘Homo Economicus’ (2012) at Cabinet Gallery in London and MD 72 in Berlin.
Art, like economics, didn’t see the crisis coming. Unlike economics, we’re five years into the crisis and a lot of the art currently being produced – and the artists mentioned above are exceptions defining the rule – still doesn’t have much to say about it. It’s beginning to look like a vestige from the bubble years, several beats – or, to be more precise, half a decade – behind. There is another way artists are responding to the economic crisis. They are leaving art, unable to make a living. A safe prediction: one outcome of the crisis will be fewer artists.
David Adler was a participating artist in the 3rd Athens Biennale. He writes frequently about economic theory and is the author, most recently, of the behavioural finance book, Snap Judgment (FT Press).
First published in Issue 146