For the past two weeks Damien Hirst has been telling news crews and reporters that his auction, which begins tonight, is a way to democratise the art market. Yet far from being a new dawn in democracy, the historic Hirst sale is the most stage-managed auction ever.

Tonight, at the first session of the sale in three parts (with the other two tomorrow morning and afternoon), in Sotheby's New Bond Street auction room, heavily invested Hirst collectors will be placed in the front rows.

Polite Sotheby's sales staff will open phone lines to oligarchs to facilitate anonymous bids. Two different senior sources from the London art world have told me that in recent days the auction house has contacted clients on its books, even those who don't collect Hirst, and urged them to bid at the auction, intimating that the future of the art market depends on its success. This suggests a dire warning: “Buy Hirsts or watch your own collections lose value.”

Only carefully vetted art critics will fill the press pen and sympathetic TV channels pack the camera podium. Several members of the press thought to be critical of Hirst has been refused accreditation — among them me.

I have been banned from attending the sale in a professional capacity. The reason? Because I criticised the contemporary art boom in the pages of this newspaper last November, in an article titled: Who put the “con” in contemporary art?

Citing that article, Matthew Weigman, the head of sales publicity at Sotheby's, wrote to me: “In the ordinary course of things, your impressive credentials as a journalist, film-maker and commentator would have provided easy entrance through Sotheby's doors. But these are not ordinary circumstances. The frank bias, even contempt, you have expressed in your commentary about the world of contemporary art, which is an important part of our business, is impossible to ignore … Therefore … we have taken the virtually unprecedented decision not to allow you to film during our upcoming exhibition and sale of works from the studio of Damien Hirst, nor to allow access into the press area for the print media.”

Sotheby's has more than me to fear. Tonight Damien Hirst will attempt to sell 223 new works of art amid damaging revelations that he and his business partners were less than frank about the £50 million sale of his diamond-encrusted skull last year when they purchased a controlling stake in the object themselves, and that White Cube, the gallery of Hirst's London dealer, Jay Jopling, has £100 million worth of unsold “Damiens” in its store.

On top of that comes a fortnight of grim economic data from tumbling stock markets and bursting asset bubbles. Bloomberg even reported a fall in Sotheby's share price on Friday — amounting to $188 million — stating that analysts and dealers cited “investor unease” about the sale.

Hirst has always taken risks, but never have the stakes been so high. By 9pm tonight, the contemporary art world will have changed irrevocably, yet there are two starkly different possible outcomes.

In the first, the majority of lots in Beautiful Inside My Head Forever, the name Hirst has given his auction, will sell for a total of £80 million-£120 million, as Sotheby's hopes. They did, after all, sell Lullaby Spring last summer for
£9.6 million, briefly making Hirst the most expensive artist at auction. In this case, the growth of the contemporary art market will be proven to be continuing, immune to the economic rules which govern lesser mortals who aren't artists or billionaires.

There would be huge implications for art-dealers. This is the first time that an artist has offered a new exhibition of work directly at auction (even if the idea of artists sending new works to auction comes from the Chinese art markets). If the gambit works, Hirst will break the link between artist and gallery, opening the way for a new era in which auction houses and celebrity artists dominate the art world, as gallerists have until now.

But there is another — doomsday — scenario, in which many of the lots fail to sell or sell for close to their reserve price — perhaps mostly to anonymous phone-bidders. Finally, the auction makes not much more than its low estimate of £65 million. Prices for Hirst's work then fall steeply, and, as the world's most successful contemporary artist, Hirst's collapse impacts on the rest of the contemporary art market. What could then happen is exactly what happened in the early Nineties art crash — much contemporary art loses 50 per cent of its value overnight.

To Hirst's credit, he is always proving the nay-sayers wrong. In 2004 analysts said the auction of the contents of his Notting Hill restaurant, Pharmacy, would not work, but it made £11 million. Hirst's 2005 show at Gagosian, his New York gallery, which was full of clumsy paintings executed by his assistants, was panned by critics but sold well. This month, he was on the cover of Time magazine: his imagery is known across the world; his spot paintings are icons of our time (even if they are symbols of the emptiness of our lives).

He started with nothing except his imagination and audacity. No artist is more widely collected, which means there is an army of multi-millionaires who don't want to see his prices plummet. Only the foolhardy would predict that this auction will bomb. But I'm foolhardy.

Until two weeks ago, everyone imagined that Hirst shows sold out and that there were long waiting lists for his work. Then the Art Newspaper published details of White Cube's inventory of Hirst pieces in stock. This revealed that many of the works from his last exhibition, Beyond Belief, last summer failed to sell. Among them, Hirst's lazy blown-up reproduction of the periodic table of elements could still be had for £3 million. There were plenty of the photorealist paintings of Hirst's wife giving birth left over, some of which carried the ludicrous price-tag of
£2 million. White Cube had almost 30 monochrome butterfly paintings (£475,000-£675,000) executed in 2007-8, and were still trying to offload 23 spin paintings from 2007 (£225,000-£300,000), even though Hirst is selling heaps of new spin and butterfly paintings in the auction. One might question whether the demand for “Damiens” was slack and that his work was over-priced.

Other indications of the diminishing demand for
his work have been accumulating. In July, the US art world tip-sheet Baerfaxt noted “how sparingly Damien Hirst material was offered by Christie's and Sotheby's [in their summer contemporary art auctions] … and how actively White Cube was involved in acquiring or supporting his work [at auction]”.

In recent times, some heavily invested Hirst buyers, such as Helly Nahmad, scion of the world's richest family of “specullector” art dealers, have sold up.

This would explain why Sotheby's stated that its ambitious Hirst auction would target new buyers from Asia and the Middle East. But the leaked inventory has put a spanner in their well-oiled publicity machine. In New Delhi, art critics and newspapers interpreted the list of unsold work as evidence that Hirst was trying to palm them off with his sloppy seconds, because Western collectors had wised up to him.

Then, earlier this month, Hirst's business adviser, Frank Dunphy, admitted that when, on 30 August last year, he and White Cube announced the sale of the diamond skull, For the Love of God, at the £50 million “full asking price”, they weren't telling the whole story. Dunphy now says that he, Damien and Jopling bought “a controlling stake” in the skull. White Cube has so far refused to specify what that is, but a controlling stake can be 100 per cent.

If Hirst and his cronies were corporate directors managing a share issue, they could be prosecuted for fraud for this, just as Natwest was in the Eighties in the Blue Arrow scandal. Confusingly, however, Hirst recently told an art critic something different: that he owns a third share in the skull and that an investment group owns two-thirds.

Now Hirst is leaving the protection of his galleries behind, and embracing the relatively public world of the auction room. Feed into that stock market woes and the collapse of property markets across the world and there's just two words for it: bad timing.

And then there is the art itself. No one who earns a living in the contemporary art world will go on record openly criticising Hirst's new work, but the verdict of the dealers I spoke to last week was unanimous: these are all the old Damien formulae with jewels stuck on. This time around the butterfly paintings have diamonds glued on and the cow in formaldehyde comes in a gold-plated case. Some Hirst acolytes have sought to explain this as a reflection of our contemporary “bling” culture. If so, it is an extremely uncritical one, and poorly suited to the new age of austerity.

Other works in the sale hybridise the Damien trademarks — skeletons and skulls are given the spin-painting treatment, while diamonds now line the vitrines that once contained pills. A third set of works, which were impressive first time around, are barely altered grandiose repetitions of preserved fish and fish skeletons in display cases, an office chair and table in a giant glass box, a load of cigarette butts lined up in a vast vitrine.

There are still works of marvellous aesthetic intensity, such as the dense collages of butterfly wings in the style of stained glass and kaleidoscopes, but there is no originality here, and plenty of pomposity. This is not art that is developing, but art that is turning in on itself, whose only notion of progress is greater scale and expense. This is work by an artist who thinks the shinier it is, the better it is.

In addition, we all know that Hirst's assistants help make his work, but this time it appears that his studio helpers may actually have devised or designed them. Speaking to this newspaper last week, Hirst remarked, “I've started making black butterfly paintings — they were all very bright colours at first — and I've just noticed [the canvases] have got rosary beads, scalpel blades, broken glass on them [too]. It's all gone a bit dark, and then suddenly I thought: Oh well, maybe these kinds of paintings are not the right vehicle for communicating what I'm feeling at the moment.'”

Perhaps this is Hirst reviewing his paintings up on the wall, but it sounds like he is looking at something he has never seen before. Perhaps one of his staff came up with the tedious idea of combining butterflies and scalpels?

It's the message of this work, as much as the over-production, that's likely to alienate Sotheby's bidders. There is a tragic subtext of Hirst's contempt for himself and his market in these pieces, that first emerged in the diamond skull, a mockery of the vast prices collectors are paying for his art today. The works that are new no longer offer a reminder (you say immediate, I say obvious) of the brevity of life.

Instead there is a convergence of price-tag and subject matter — this is literally art about how over-priced it is. Hence the centrepiece of the auction, the Golden Calf, estimated at £8 million-£12 million: a biblical symbol of a false God.

This theme may indicate why Hirst is taking his work to auction. In interviews he claims one motivation — democracy aside — is that his galleries take all the money. Many critics have fallen for this sob-story, but Gagosian and White Cube have spent millions building Hirst's reputation, and now he's giving them the finger.

“There's a hell of a lot of money in art — but artists don't get it,” says Hirst, owner of some 40 properties, who buys Bacons for tens of millions of pounds and has a net worth of several hundred million.

He has made plenty of money out of art, but he wants more.

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