There has been strengthening interest in alternative investments in the recent past on the part of those willing to dabble in less liquid and professionalized asset classes. Among these alternative investments are collectables, from stamps to cars. It is art however, and paintings in particular, that get the most regular attention thanks to the price records broken so frequently at auction. A century ago, art was similarly sold for high prices to ultra-rich collectors. However, in that era, the buying seemed more driven by conspicuous consumption than prudent investing. Nowadays, many point to surging valuations for art as evidence that it must be respected as a suitable investment. A great portion of this change in view is the product of the Second World War, when art was used to store and move wealth more discreetly than would have been possible without it.


           Though not seen as an asset class until the mid-to-late 20th century, there has been a trade in art for perhaps as long as there has been art itself. Like in all markets, this trade was also correlated to broader economic trends. During the Renaissance, for example, art was frequently traded at markets and fairs, particularly in cities with growing mercantile classes. It was in these increasingly prosperous urban centers that art found interested consumers in the largest numbers. That the Renaissance was an urban development is due largely to the growing economic importance of cities.

           As the middle and upper classes of these cities grew further, annual fairs gave way to fixed auction houses. Perhaps the first art auction house, the Stockholms Auktionsverk, opened in 1674 in Sweden. Sotheby’s and Christie’s were later established in Britain in the mid-1700s. A formal, if far from efficient, market in art has been around for centuries, even though art ‘investing’ had not yet existed.

           That would change in the 20th century but first, before art could be an investment, it had to be considered a store of value and not merely a consumption good. During the Gilded Age, America’s nouveaux riche spent millions of dollars bringing fine art across the Atlantic from Europe. This was still ‘art for consumption’ but did help globalize the market for art. Because portability and international recognition are valuable aspects of any asset, this was no doubt important. Almost a century later, surging values of impressionist paintings thanks to demand from a new nouveaux riche class in Japan continued the globalization of the art trade but by then the idea that art was an investment was becoming more widely accepted.

           That said, there was a transitional phase between the ‘art for consumption’ of the Gilded Age and the ‘art for investing’ of today. In the mid-20th century, artwork was finally put to the test as a store of value. During the Second World War, the characteristics of art were discovered to be of particular value when dangers lurked everywhere else for those seeking to preserve wealth. During its four-year long occupation, France in particular saw its art market inflate as people sought new ways to protect their wealth.


           For much of the 19th century, the art market in France centered on large public institutions, namely the Académie des Beaux-Arts and the Salon. The Académie was where budding artists would train with the hope of being featured at the Salon, one of the world’s premier art exhibitions. In that era, receiving valuable commissions and fame was contingent on recognition at the Salon and market values of art corresponded to that recognition. However, this system became less centralized and more informal in the late-19th century as artists increasingly sought to work outside of the Salon system and dealers found market niches being unserved, particularly in more avant-garde artistic movements.

           By the start of the 20th century, at the tail end of the Belle Epoque, Paris had the most important art market by volume being traded. Data collected from the Gazette de l’Hôtel Drouot, the weekly publication of one of Paris’s largest art auction houses reveals the performance of art prices during the first half of the 20th century. It reveals that activity evaporated during the First World War, when many fled Paris which was just thirty kilometers from the western front at its closest.

           That depression did not last long though, art market volume boomed immediately after the war ended, perhaps on pent up demand. Over two thousand paintings, drawings, and watercolors were sold in the first half of 1922 at the Drouot auction house alone. This brisk pace of sales slowed over the next two decades. Both volume and sales in art auctions fell in the 1930s during the economic slump. During this period, much like during the First World War, art galleries and auction houses closed up shop. Though it survived the drought, Drouot was regularly seeing under two hundred paintings and drawings sold at its semiannual art auctions by 1938-39.

Defeat and Occupation

           Perhaps unexpectedly though, the industry’s direction changed drastically when Germany invaded France in the spring of 1940. Transactions surged during the occupation of France. In 1942 and 1943, Drouot was once again seeing auctions in which a thousand pieces changed hands. Canvases sold in the entire year of 1942 were valued at forty-five million francs, for example, as compared to under five million francs each in 1939 and 1940. Indeed, in 1942, a single landscape painting by Paul Cézanne sold for five million francs. However, this activity was not a one-off; the following year, almost 3,500 canvases were sold, compared to under a thousand per year in the late 1930s.

           This did not turn out immediately to be the start of a long-run trend. Following the liberation of France, sales actually plummeted, at odds with the experience of the First World War. By both volume and value, artworks sold at Drouot fell back to pre-war levels by 1945. By contrast, the immediate post-war period a generation earlier saw surging demand. However, something about the Second World War was different. For one, during the earlier war, neither Paris nor the vast majority of France was occupied and that wartime experience did not involve the same degree of economic restriction, such as through capital controls and other wartime measures. Perhaps the disorders and fear of the occupation period revealed some useful characteristics of art as a store of value.

           Before elaborating on that thought, it is worth noting that the art market did not operate in a vacuum during the war. It was very much shaped by the ideological nature of the conflict. For example, just before the war started in 1939, art regarded as degenerate by the Nazis had been sold abroad and was banned from reimport into Germany. Much of this art found its way into France. Even a couple of years later, ownership of ‘degenerate art’ was not controlled in occupied France as it was in Germany. As a result, France found itself awash in new supply and the occupation period also brought new buyers from Germany looking to acquire some of the artifacts of their vanquished rival’s cultural achievements. Even Nazi leadership like Hitler and Göring used the depressed franc as an opportunity to pick up French art on the cheap.

“Paintings from the degenerate art action will now be offered on the international art market. In so doing we hope at least to make some money from this garbage” – Diary of Joseph Goebbels

           Whatever its style, paintings turned out to have some valuable financial characteristics. For one, art was being used to store and move wealth in occupied France. Others used purchased art as a way to hide wealth accumulated in black market activities which constituted perhaps 10-30% of French GDP during the occupation. This activity was far different from the purchasing of art for conspicuous consumption alone; indeed, it was very much the opposite. In this case, it was discretion that was sought. The desire to keep a low profile meant the prices of small canvases outperformed larger ones.

           Using the data from Drouot, it is revealed that the monthly real return for art in France from 1941 to 1944 was over 4%. This is compared to just over 1% for gold, itself a solid monthly return, 0% for equities, and a very disappointing -1.5% real return on the inflation-beleaguered French sovereign bonds. It is worth noting however, that ownership of gold was curtailed by law during the war. This meant that art, along with other collectibles and valuables, from stamps to diamonds, were the only legal alternative store of wealth in ready supply. Even these other collectables were reported to have done well as investments at the time.

On the Move

           Of course, an advantage of owning art in times of war include that it can be easily moved; valuable paintings can store a lot of value in a physically small item. It can be trafficked across borders even when capital controls otherwise limit flows of money. Thanks to its secrecy, art can be both a ‘discrete’ and ‘discreet’ investment. In auctions, names of buyers and sellers are usually unknown and in a private transaction, not even the price or whether a sale even occurred at all is known. By contrast, in the modern financial system, most other means of transacting leave some trace.

           For those with something to hide or those wanting to maintain the transferability and mobility of their wealth, art is an unregulated and decentralized market, unlike say the stock and bond markets. In times of war, even commodities can be brought under heavy government control causing other safe havens like gold to be either out of reach or impractical for investing.

           To this day, art has continued to be used as a store of value by those in more state-directed economies that are nonetheless connected to the global economy. In Saudi Arabia, for example, capital flight surged when oil prices plunged in 2009 and again in 2015. Many, including Saudi royalty, used art as a means of moving capital out of the country. Art, along with cryptocurrencies and gemstones, have been used to skirt capital controls on an even larger scale in countries like China. All these ‘investments’ allow for the discreet movement of capital, something valuable when the usual rules that govern modern free-market economies are either nonexistent, restricted, or suspended, whether it be during circumstances of peace or war.    


            It is clear that art has become a popular alternative investment over the last few decades. However, this trend may owe a lot to less sightly aspects of modern economies. Art continues to be useful to those with something to hide. Indeed, during the Second World War, art was used to hide wealth when the rules that govern property rights evaporated. Of course, the importance of discretion may be more valuable for those sorts of people driving art prices higher. For those going along for the ride, art can be perhaps both conspicuous consumption and an investment.

More from the Tontine Coffee-House

Discover more about wartime finance by reading about how stamps helped finance America’s fighting in the First World War and about the curious Japanese Pesos of the Second World War.

Further Reading

1.      David, Géraldine, et al. “Art Dealers’ Strategy: The Case of Goupil, Boussod & Valadon from 1860 to 1914.” CEPR Discussion Papers, Centre for Economic Policy Research, 19 Jan. 2014.

2.      David, Géraldine. “Art as an Investment in Times of Turmoil; The Case of the French Art Market during the First Half of the 20th Century.”

3.      Karlsgodt, Elizabeth Campbell. Defending National Treasures: French Art and Heritage under Vichy. Stanford University Press, 2011.

4.      Klein, Matthew C. “The Long History of Dodgy Art ‘Investing.’” FT Alphaville, Financial Times, 21 Dec. 2017.

5.      Mamonova, Elena, et al. A History of the Art Market in 35 Record-Breaking Sales. Yale School of Management, International Center for Finance, 28 June 2016.

6.      Oosterlinck, Kim. “Art as a Wartime Investment: Conspicuous Consumption and Discretion.” The Economic Journal, vol. 127, no. 607, 2017.

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