The longest bull run in nearly a century of art-market history ended at Sotheby’s in London on September 15th 2008 with the sale of 56 works by Damien Hirst. With all but two pieces sold, the collection brought in more than $70 million, a record sale for a single artist. The event also marked the end of an era, for just as the auctioneer called out the bids, Lehman Brothers was filing for bankruptcy in New York.

Prior to the sale at Sotheby’s, the world art market had already been slowing down after rising continuously since 2003. The market peaked in 2007 when it was worth more than $65 billion, double the figure from five years earlier. Since then the figure may have dropped to around $50 billion, but the market continues to generate interest beyond simple size calculation. The world art market brings together a variety of factors including wealth, egos, greed, passion, and controversy in a way that is matched by few other industries.

The current downturn in the art market is the worst since the Japanese stopped buying Impressionists in the nineties, a move that initiated the most serious contraction in the market since World War II. This time experts believe that prices are down roughly 40% on their peak, though some have been far more volatile. The difference between this slump and the last is that there are still buyers in the market this time. In the early 1990s, when interest rates were high, there was no demand even though many collectors wanted to sell. The biggest problem now is not lack of demand but a lack of good work to sell – anyone who does not have to sell is keeping away, waiting for confidence to return.

According to the World Wealth Report, in 2007 there were over 10 million people with investible assets of $1 million or more. Last year that number dropped to 8.6 million, and many rich people scaled back their “investments of passion” – yachts, jets, cars, jewelry, and so on. But the proportion of all luxury spending that went on art increased as investors looked for assets that would hold their value in the longer term.

The best that can be said about the art market right now is that it is holding its breath, and that the key to its resurgence lies in globalization. The supply of the world’s best art will always be limited, but in the long run demand is bound to rise as wealth spreads across the globe.

View a previously written post by Mouli Cohen about business