Of the eight most expensive Picasso paintings sold, six date from 1901-1905, when Picasso, newly arrived in Paris, was unknown, broke, hungry and so cold that, according to legend, he stoked the fire with his drawings. No one wanted his “Blue Period” works, depicting in icy, melancholy hues the beggars and streetwalkers of Montmartre, nor the “Rose Period” harlequins and jesters, graceful but sad, who succeeded them.

Why are these now so popular, far outstripping in both price and public affection the cubist and later canvases with which Picasso changed the course of modern art? Two answers spring to mind in Picasso in Paris 1900-1907, a revelatory exhibition just opened at Amsterdam’s Van Gogh Museum and travelling to Barcelona this summer.

The first is that here Picasso is at his most human and empathetic. Elongated and bony, the couples in early masterpieces of delicate shadows and blue-beige layers – such as the drooping pair in “Les Misérables”, clinging together for warmth, or the blind man whose skeletal fingers reach out to embrace his indifferent partner in the virtuoso etching “Le Repas Frugal”, with its subtle tonal gradations from velvet black to grey to bursts of light – are as poignantly expressive as anything in El Greco. Secular, modern, instantly engaging, they are touched with the spiritual fervour of the Old Masters.

The second is that, especially seen together in Amsterdam’s perceptively unfolding display, these works invite us into the laboratory of the artist’s mind as he was forging the most radical new artistic language since the Renaissance. There is a staggering gap in sensibility between the show’s major opening piece, “Le Moulin de la Galette”, a post-impressionist celebration of Paris as pulsating capital of light, with cropped, caricature figures in a bright dance hall, and its closing one, the aggressively primitivist, abstracted pastel “Nude with Arms Raised”. Yet only seven years separate paintings that look as if they span several eras.

Tracing canvas by canvas the advances, strategic retreats, definitive breakthroughs in the most nerve-racking years of Picasso’s career, curator Marilyn McCully persuasively recasts revolution as evolution. A 19-year-old provincial from Barcelona in the show’s first room, Picasso realised that his initial task must be to assimilate recent European painting. “The Blue Room (Le Tub)” (1901), from the Phillips Collection, with its Degas-like bathing nude and a reproduction of Toulouse-Lautrec’s “May Milton” on the wall, is a condensed history lesson but also introduces a motif – the model in the studio – that would obsess Picasso for the next 70 years.

Canny juxtapositions with the works of others dramatise from the start how Picasso’s cannibalism – “good artists copy, great artists steal” – served his over-arching project. His “The Embrace” (1900), alongside a similar 1895 composition by Théophile-Alexandre Steinlen, shows his concentration on graphic styles. “Melancholy Woman”, probably a prostitute from the St Lazare prison, depicts an everyday type with monumental seriousness and respect, echoing the democratic impetus animating Van Gogh’s portrait of the postman’s wife, “La Berceuse (Madame Roulin)”. A complex preparatory sketch for “Les Demoiselles d’Avignon” looks to the figures and composition of Cézanne’s deliberately ungainly “Bathers”.

As significant is what is not here: no Matisse, though the fauve artist, boldly freeing colour from realistic constraint, was then undisputed leader of the avant-garde. Picasso, working defiantly in monochrome, took up the opposite position: his blue period works subordinate colour to form and line, emphasising volume, weight and balance. Already the two poles of 20th-century art – Picasso as draughtsman, Matisse as colourist – were established.

So, too, was the lifelong autobiographical impulse of Picasso’s art. Two arresting, privately-owned pieces here – “Head of the Dead Casagemas”, the overall white-blue tonality contrasting with a livid red bullet wound in the forehead, “Casagemas in his Coffin” – commemorate the Catalan friend with whom he set out for Paris in 1900. The pair made a home in Montmartre with a couple of models (“we’ll dedicate ourselves to our paintings and they’ll do women’s work – sew, clean up, kiss us and let themselves be fondled. Well, this is a kind of Eden or dirty Arcadia,” Picasso said). He flourished but Carlos Casagemas, disappointed in love, turned a gun on his girl, missed, then shot himself dead in front of his friends.

Casagemas is the frozen, silent hero of Picasso’s blue period but his suicide also urged a move beyond it. Picasso sought stability with Fernande Olivier, whose lazy, sensuous warmth inspired the more tender rose period works such as “Jester on Horseback” and “Family of Saltimbanques (Pour Fernande)”. Nevertheless, Fernande was also a distraction and was left behind when Picasso travelled to Holland in 1905.

Amsterdam perhaps overplays the significance of this visit but certainly “Three Dutch Girls” is a staging post. The waifs of Montmartre had been the ideal models for symbolism’s fragile aesthetic; now Picasso marvelled at the healthy curvaceous Dutch women (“the size of guardsmen”). He painted them in the statuesque pose of the three graces of antiquity, wearing national costume in the colours of the Dutch flag, in simplified outlines against a flattened ground.

Returning with no money and his paint supplies exhausted, Picasso rejected an offer of 700 francs for this and two further Dutch works from stingy dealer Clovis Sagot. Days later he accepted, whereupon Sagot lowered the offer to 500, then 300 francs. The dealer showed the pictures, however, to Gertrude Stein, who appeared at Picasso’s studio herself and spent 800 francs – “far more than we ever dreamed possible”, gasped Fernande.

Unfortunately, the important portrait of Stein from 1905-1906 has not been lent to Amsterdam. An experiment in paring down representational elements to the minimum, it led to the great, raw mask-like “Self-portrait with a palette” of 1906, which is here: a key work in which Picasso abandoned illusions of reality for concentration on pure form. From then, he was on the rapid, lonely road to deconstructing and reassembling the human figure in any medium: the painting “Nude Combing Her Hair”, the bronze “Woman Combing Her Hair”, the wooden totemic “Doll”, the gouache “Female Nude with Arms Raised” from 1906-1907 all anticipate the savagery and fragmentation of “Les Demoiselles”.

At this point, not even Picasso’s supporters could tolerate them. When collector Sergei Shchukin, who owned blue period trophies such as “The Absinthe Drinker”, visited the studio with Matisse, he left murmuring, “What a loss for French art.” This riveting exhibition shows the opposite: that not only were these works seminal but that Picasso’s entire oeuvre from 1900-1907 formed a continuum which became the essential foundation of modernism.

‘Picasso in Paris 1900-1907’, Van Gogh Museum, Amsterdam, to May 29, www.vangoghmuseum.nl. Museu Picasso, Barcelona, June 30-October 15

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