The Unregulated Nature of the Art Market and Its Potential Impact on the Economy

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The Unregulated Nature of the Art Market and Its Potential Impact on the Economy
Introduction
When of the most defining quotes from The Lost Leonardo documentary is that after drugs and prostitution, the art business is the most unregulated in the world (Koefoed). This quote not only summarizes the secrecy of the art market but also provides a conclusive synopsis of what the documentary is all about. The unregulated nature of the art market and its potential to move money without taxes makes it an invaluable destination for wealthy and powerful individuals to hide money. The purpose of regulating any business or sector is so that people involved can conduct their affairs within the legal market. However, while there have extensive efforts to regulate the art market, the story told in the documentary and others unheard of highlights the extent to which the market is porous and to which people involved will remain silent as long as there is money to be made. The porosity of the market allows people to transfer money or wealth without paying taxes (Baranello). More importantly, the secrecy in the market makes it challenging to define people who have stakes in it. This means issues like money laundering or funding of terror activities can pass unnoticed. Thus, the current paper builds on the theme of the unregulated nature of the art market from the documentary and builds it to call for practical and actionable regulations.
Summary of The Lost Leonardo
The Lost Leonardo documents the inside story of the painting that seduced and shocked the world in equal measure. It follows the mysterious appearance of a supposed Salvatore Mundi painting. The Salvatore Mundi is believed to be the lost among the few documented and highly valued artworks by the great Leonardo Da Vinci. Since it mysteriously appeared in Illinois, its value increased drastically, starting with $1,175 in 2005, $83 million, and $127 million in 2013, to $450 million in 2017 (Koefoed). While this increase in value is something to amaze it, underneath the surface is a concerted effort by various stakeholders focused on making money. There is the role of experts who fail to authenticate the painting, the role of the media in creating hype around the painting, the curators who appraised the painting and gave it a global significance, the regulatory agencies that failed to detect anything wrong, and buyers and sellers who are hidden behind the protection of the free port system. Driving these stakeholders the forces of power, politics, and greed. In other words, the documentary reveals a watershed moment in the history of financial dealings in the art business.
The theme of Unregulated Market
Some of the subthemes that appear in the documentary include the inability to tell who is buying a painting, the role of the free port, the inability to authenticate a painting, greed, and the silence of those who know something is wrong but do not speak up.
One of the significant problems in the supposed Salvatore Mundi painting was the lack of evidence of its origin. There was no complete provenance record, and ownership information was murky (Koefoed). Experts who looked at it appear to be confused about its authenticity, and it appears as though authentication depends only on the word of revered experts in the field. If anything, the film is evidence that the art market does not have established authentication techniques, or if there are, people in business are willing to avoid them. Today, technology has fostered the development of various techniques for determining the authenticity of art and artifacts (Shortland and Shortland 115). Nevertheless, throughout the Salvatore Mundi saga, there was no point such were utilized. This marks the first problem with the art market.
The second problem is that buyers and sellers may never be known unless the transaction turns controversial, like Salvatore Mundi's. Here, there is the issue of the free port system. The free port is a tax-free haven where the wealthy can keep valuable items. Transactions within the free port are not taxed because the goods are considered in transit (Kumar 173). Thus, within the free port, people have the freedom to move millions of money through art. The art is kept within accessible port facilities, but the capital generated from it can be redeployed outside the free port (Koefoed). The free port makes the art market an opaque world where no one knows who owns what and whoever is selling or buying.
Thirdly, there is the problem of people who saw something wrong with the painting but did not speak up. While an explanation is given that it is because everyone wants to be close to power and influential individuals, it also shows the unregulated nature of the market. Where the market is relatively regulated and with a high degree of transparency, those involved have an incentive to protect its integrity (Hufnagel and King pr. 8). However, what we discover from the documentary is that people are unwilling to speak up, which only highlights the secrecy in the market and the fear of challenging the status quo.
The inability to authenticate paintings, the silence of individuals in the industry, and the inability to tell between sellers and buyers are symptoms of an underlying force of greed. The whole essence of regulations in the market is to limit the extent to which greed can impact the market. Furthermore, Baranello (700) argued that greed comes with the problems of corruption, money laundering, tax evasion, and the potential to fund criminal or terrorist activities covertly. Thus, these subthemes form the theme of an unregulated market which is the basis of the documentary on the supposed Salvatore Mundi painting. As Doug Patterson sums it up, “the history of the Salvatore Mundi is opening eyes to how many can be moving in different ways through the free port system” (Koefoed). In other words, among other factors, the free port system is a key characteristic that makes the art business challenging to regulate.
Literature on the Unregulated Nature of the Art Market
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