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American museums have in fact been hit with a double whammy: art inflation and a punitive rewriting, in 1986, of the U.S. tax laws, which destroyed most incentives for the rich to give art away. Tax exemption through donations was the basis on which American museums grew, and now it is all but gone, with predictably catastrophic results for the future. Nor can living artists afford to give their work to U.S. museums, since all the tax relief they get from such generosity is the cost of their materials. Thus, in a historic fit of legislative folly, the Government began to starve its museums just at the moment when the art market began to paralyze them. It bales out incompetent savings-and-loan businesses but leaves in the lurch one of the real successes of American public life, its public art collections.
The inflated market is also eroding the other main function of museums: the loan exhibition. Without a doubt, the past 15 years in America have been the golden age of the museum retrospective, bringing a series of great and (for this generation of museums and their public) definitive exhibitions, done at the highest pitch of scholarship and curatorial skill: late and early Cezanne, Picasso, Manet, Van Gogh, Monet, Degas, Watteau, Velazquez, Poussin, up to MOMA's current show of Picasso's and Braque's Cubist years and, perhaps, Seurat to come in 1991.
But who can now pay for the insurance? When the Metropolitan Museum of Art's show "Van Gogh at Arles" was being planned in the early '80s, it was assigned a global value for insurance of about $1 billion. Today it would be $5 billion, and the show could never be done. In the wake of Irises, every Van Gogh owner wants to believe his painting is worth $50 million and will not let it off the wall if insured for less. Even there, the problem is compounded by the auction houses: when consulted on insurance values or by the IRS, they tend to stick the maximum imaginable price on a painting to maintain the image of its market value and tempt the owner to sell.
Auction has transformed the very nature of the art sale. In 1983 the old English firm of Sotheby's was taken over by A. Alfred Taubman, American conglomerator, real estate giant and collector. The deal had to be approved by Britain's Monopolies and Mergers Commission. At the commission hearings, Taubman declared that he would be "very concerned" if the public ever got the idea that Sotheby's was centered anywhere but Britain, and that the "traditional nature of the business and of the services offered would be changed as little as possible." Request approved.
Taubman then recentered Sotheby's in New York and, over the next few years, changed its business to such an extent that its lending and other investment services generated $240 million in 1988 -- nearly a tenth of Sotheby's gross income of $2.3 billion. What Taubman saw (and staider Christie's was not slow to pick up) was that an auction house could go directly to the public, not only at low price levels but also at very high ones. In the past, auction houses sold mainly to dealers, who put on their markup and then sold to their clients. People were shy of going to auctions; the whole apparatus of reserves, attributions, codes and bids seemed mysterious and scary. Scratch your nose at the wrong moment, the urban folktale went, and -- yikes! -- you've bought a Rembrandt.