In a year that started with sky-high prices for artworks both classic and contemporary, the close of 2008 has been a bumpy landing. So drastic is the shift in the financial climate that many observers are now asking when the contemporary art bubble will burst. While artists struggle to stay afloat as grants and bursaries look increasingly meagre, some might say that the market itself has been the prime mover and shaker in the art world, and eyes are increasingly turning to those who hold the purse strings.
The year kicked off with a headline-grabbing act of apparent altruism. In February when the powerful and enigmatic art dealer Anthony d'Offay gifted his collection of 725 post-war works to the Tate and the National Galleries of Scotland, including works by such artists as Andy Warhol, Diane Arbus, Ian Hamilton Finlay and Damien Hirst, for some it was the supreme act of philanthropy of our time. Nicholas Serota, the director of the Tate Modern, observed: "A gift of this magnitude will completely transform the opportunity to experience contemporary art in the UK. D'Offay's generosity establishes a new dynamic for national collections and is without precedent anywhere in the world." Much of the praise for his donation centred on the belief that d'Offay plugged a gap in Britain's art collection. Others, however, were sceptical. For although d'Offay's treasure trove is valued at about £125 million (Dh678m) and the dealer would receive only £26.5m (Dh144m) - the amount it originally cost him - there was the small matter of the £14m (Dh76m) in tax owed by d'Offay and written off by the government as part of the deal. D'Offay dismissed the matter as of no consequence: "I have no idea about tax. I'm interested in education and art."
Other big-money players include the Russian heiress Daria Zhukova, the girlfriend of the Russian billionaire Roman Abramovich, who asserted herself this year as a force to be reckoned with. Not only did she sponsor the prestigious summer party at London's Serpentine Gallery, she was also behind Moscow's new Garage Centre of Contemporary Culture - 8,500 square metres of Konstantin Melnikov's constructivist landmark in Moscow - which opened in September. Housed in an old bus garage, the centre looks set to become the biggest and best modern art gallery in the Russian capital. But whether Muscovites make the centre the hotbed of contemporary culture that Zhukova envisages is yet to be seen.
Since meeting Zhukova, Abramovich, the owner of Chelsea FC, has also begun buying art. His recent purchases include Francis Bacon's 1976 Triptych for ?55 million (Dh284m) and Lucian Freud's Benefits Supervisor Sleeping for ?21m (Dh108m). He has also been linked to purchases of a Degas pastel and a Giacometti statue. Zhukova's influence as a 27-year-old art patron was summed up by The New York Times, which dubbed her "the art world's It-girl".
Damien Hirst set a new precedent for artists this year when he apparently cut his dealers out of his financial affairs by holding a two-day auction of his work at Sotheby's. Not only did the sale set a record for an auction dedicated to a single artist, raising ?140 million (Dh723m), it also reinforced an increasing trend. Here was an artist going it alone, using Sotheby's as a gallery in which to curate his own public show before the auction. The art went straight from studio to collector, bypassing Hirst's usual dealers, White Cube and Gagosian. But Hirst is by no means the only artist to cut out the middle men. In a similar manner, the photographer Annie Leibovitz announced this year that she was forgoing the services of a dealer to be represented exclusively by the auction house Phillips de Pury. The actions of Hirst and Leibovitz hold consequences not only for other artists but for the entire system of dealership and galleries. The old-fashioned way in which dealers made money, buying from one source and selling at a higher price to another, is apparently under threat. With price information readily available on the internet, there is more need for art advisers and agents than dealers.
It's been a very good year for the Russian husband-and-wife team Emilia and Ilya Kabakov. Kabakov is Russia's most successful (and most expensive) living artist. In the 1970s, he cofounded the Moscow conceptualist art movement but left Russia in 1987 to join Emilia in New York. The couple became well known for their installations, which gave westerners a glimpse into life in the Soviet Union. This year they were awarded the Praemium Imperiale, one of the world's major art prizes. In Soviet days, Ilya made a living illustrating children's books, but he owed the growth of his reputation to his haunting installations.
This year they mounted The Alternative History of Art, part of a citywide exhibition in Moscow that involved a 23-room artificial gallery. On display was the work of three artists invented by the Kabakovs, a blend of impressionism and socialist realism, portraits and sketches that vividly depict an un-realisable utopian future - a haunted place. Also on display is Red Wagon - an unfinished wooden ramp and a series of ladders and platforms. Moving past the unpainted wooden construction, the viewer enters what might appear to be a trailer home but which is modelled on a Russian wagon, or a railway car. The exterior is decorated with socialist realist paintings. Benches are placed opposite the mural, allowing the viewer to rest and take in the music and imaginary scenery. Kabakov's work remains socially and politically relevant while engaging with the rules of art itself. His ideas and observations raise questions about the development and future of installation art, as well as about our current aesthetic horizons.
The British Turner Prize as well can always be counted upon to expand the definition of art, but this year disappointment came from its lack of controversy. Nonetheless, it brought into the limelight the work of the Dhaka-born filmmaker Runa Islam. To a casual observer, all four shortlisted artists shared fundamental stylistic traits, working in installation film and multimedia genres. Islam lost out to the mixed-media artist Mark Leckey, although many would argue that hers was the more interesting work. Her slow, studious films deliberately bend the conventions of cinematography. Among her nominated works was Be the First to See What You See, which depicts an expressionless woman drinking from crockery and then mischievously dashing it, in slow motion, to the ground. In CINEMATOGRAPHY, a mechanised camera shoots a workshop interior while tracing the letters of the title. First Day of Spring focuses on Bangladeshi rickshaw drivers who lounge on their colourful vehicles, some looking with indifferent confidence at the camera, others gazing off into the distance as if at another world. Islam's subject matter is quotidian, but her works seem to stretch time, breaking moments into their component parts and making the spectator aware of how close observation of ostensibly mundane objects and events can make them fascinating. While the medium itself is not new, Islam shows a mastery of her material and subject matter that elevates film to a level where it is both analytical and emotionally charged.
Other exciting installations this year included those of the British artist Sir Anthony Caro, who made waves in Europe when he completed the greatest commission of his lifetime, and in doing so became one of a handful of modern artists to install work in a church. The octogenarian is following in the footsteps of Henri Matisse, whose murals in the Chapel of the Rosary in Venice attract thousands of visitors every year; Georges Braques, who created the stained-glass windows for a chapel at Varengeville-sur-Mer in Normandy; and Mark Rothko, who filled a chapel in Texas with his paintings. Caro's Chapel of Light (Choeur de Lumière) was inaugurated in November and is an extraordinary fusion of Gothic architecture and contemporary sculpture - of soaring stone arches, and monumental works in steel, wood and terracotta.
Entering on the south side of the choir, visitors observe a free-standing circular porch or "threshold sculpture" made of Caro's trademark rust-red Cor-Ten steel and then a mighty door of French oak. Behind, in the nine double niches of the apse, Caro has installed nine constructions of steel, stoneware and timber, each about three metres high and two and a half across. In effect these pieces, unlike anything so far in Caro's enormous oeuvre, are reliefs, though the great billows of distressed steel in "The Deep" and "Sea Creatures" and the savagely rearing maelstrom of curled and jagged edges in "Galapagos" threaten to spill out and overwhelm the viewer. Although the event made few ripples in the UK, it was the largest-ever showing of this world-renowned artist's work.
It was a good year for British artists both dead and alive. Francis Bacon and Lucien Freud were reunited across the grave when Bacon posthumously became the world's best-selling artist, with his work fetching $190m (Dh698m) in one year - and Lucian Freud became the most expensive living artist at auction when his Benefits Supervisor Sleeping sold for $33m (Dh121m) at Christie's New York. As the credit crunch starts to take its toll, it will be interesting to see whether next year artists will start to address these issues in their work. Will there be a reaction similar to that of the great land artists of the late 1960s and 1970s whose interventions in the landscape were partly intended to defy the limitations of the gallery space and its commodification of art? Perhaps we will see another wave of Arte Povera - the movement of the early 1970s whose works were characterised by the use of extremely inexpensive media. Common materials included sticks, rocks, rope and iron. When the system of art patronage that had kept artists in business throughout the centuries collapsed with the disappearance of the court system in France in the late 19th century, artists had to reinvent themselves in order to stay alive. They went out into the streets and fields to paint straight from nature - and Impressionism was born. Next year could see the start of something exciting indeed.