Will the Skyscraper Index Kill the World Economy?

60564565There’s a curious fact: once the economy of a country begins overtaking other states, monumental building start appearing out of thin air, superior in height to each and every single skyscraper that exists in the rest of the world. But once the construction of the highest buildings in the world is finally finished, retribution that is embodied in a large-scale economic crisis follows, and more often than not it is provoked by the country where the skyscrapers were erected.

This pattern was first observed in biblical times, when for an attempt to build the Tower of Babel, which was destined to reach heaven, people were punished by a heavy penalty, which still makes them speak different languages and wage endless war on one another. To honor this analogy, the inexplicable connection between skyscrapers and economic crises that follow after their construction, journalists have dubbed it the “curse of the Tower of Babel.”

This “curse” has had a particularly strong effect in the past century. The most striking example, which has already become a classic one, was the Empire State Building in New York. The finishing touches of this grand 381 meter high construction were completed in 1931, coinciding with the peak of the Great Depression – the world’s first global economic crisis that erupted in the United States and had grave consequences for Canada, Britain, France and Germany. By the way, at that time the Empire State Building was not the only tall tower in New York, the city had already seen two “harbingers” of the catastrophe rise before it – the Trump Building (283 meters) and the Chrysler Building (319 meters).

It is noteworthy that before the 1970s no other country in the world built a single skyscraper taller than the Empire State Building – although in economically prosperous countries tall buildings were built, in particular, television towers. Thus, in the USSR in 1967 (arguably the year of the highest GDP rates in the whole of Soviet history) the 540 meters tall Ostanskinskaya TV Tower was built in Moscow, which remains the highest building in Europe to this date.

Yet the economic strength of America in those days was indisputable. As if in confirmation of this, in 1972 the World Trade Center’s Twin Towers were built in New York. The northern tower was the second tallest skyscraper in the world after the Empire State Building. However, as you know, in those years, due to high oil prices the United States was undergoing prolonged economic stagnation, which then swept Europe and the USSR.

The third obvious example that confirms the indisputable link between strong economic performance and the desire to build the world’s tallest skyscraper are the Petronas Towers in Kuala Lumpur. The year when the construction of the two 452 meters skyscrapers ended coincided with the peak of the financial crisis across Asian markets in 1998, which became a major shock to the world’s economy.

And finally, the most severe in its effects, the global economic crisis that began in 2008 in the United States coincided at its peak in 2010 with the completion of the highest tower in the world, Burj Khalifa (828 meters) in Dubai, the largest city in the UAE. It would seem, in this case, the curse had no effect since the country which built the tallest building in the world was not the source of a major crisis. But we should not forget that the world has changed in the past 25 years: the rapid spread of new technologies – especially the Internet, has led to the intensive growth of international cooperation. Globalization has allowed the American architect Adrian Smith to construct Burj Khalifa, while the Belgian company «Besix Group» – played a key role in the construction of this skyscraper,as for investors they came from India, Iran, Great Britain and a number of other countries to contribute their money to this project. That global crisis has taken its source not in the UAE, but in the US – the home of the architect, and quickly spread across the globe. (of course, the last statement is unlikely to be taken seriously, but maybe it is still not without a shred of common sense).

The first obvious connections between the highest buildings and the global crises was noticed by the economist Andrew Lawrence in 1999, who based his assumptions on the data that he had been collecting for 13 years. This allowed him to link economic cycles with the construction of exceedingly tall skyscrapers. His theory, which was at first a good topic for jokes, was later confirmed by other economists, and is now adopted as the concept known as the “skyscraper index”.

Today, the skyscraper index is being tracked by the investment bank Barclays Capital, and recently its experts have sounded the alarm about a possible imminent collapse of the global economy. According to them, this time the shock wave can come from the East: where the tallest building in the world is being constructed. The highest skyscraper will be in the Kingdom Tower in Saudi Arabia (almost a kilometer in height), the second – Sky City in China (838 meters, 10 meters taller than the Dubai Burj Khalifa Tower), and India, that will build the tallest residential building in the world (442 m).

Experts at Barclays Capital believe that the construction of outrageously expensive and impractically tall buildings – is nothing but a sign of irrational use of a state’s financial resources at a time when the economy is booming. That contributes to the creation of economic bubbles that can burst at any given moment, triggering an aftershock of the next crisis. As a rule, the construction of tall skyscrapers around the world coincides with an increase in investments in infrastructure projects, which are often excessive. This in turn means that if a country’s budget is being spent in the wrong way this can lead to the subsequent recession.

As if to confirm these fears, media reports indicate that the Chinese economy may be “overheating”, which can only lead to one thing – an impending global crisis. These assumptions are supported by reports on the growing bubble in the Chinese real estate market; a 30% collapse of the local stock market that occurred this summer, along with corporate debt problems that Chinese companies are facing today, which exceeds the GDP 1.5 times. In general, according to analysts, the beginning of the economic slowdown in China can  already be observed, while a full-scale crisis may start in 2020.

Globalization dictates us that the countries that erect today’s tallest buildings are closely tied with the birthplace of their architects. While the Chinese skyscraper Sky City is designed and now being built by local companies, Indian residential skyscraper World One is being erected in accordance with the project of the New York architectural office Pei Cobb Freed Partners, while those willing to buy spaces in it are the wealthy Indians who live in London’s Mayfair. The architect of the Kingdom Tower in Saudi Arabia is the above mentioned Adrian Smith, that contributed his efforts to the construction of the Burj Khalifa in the UAE. Construction of the world’s tallest building will be carried out by local investors and will be completed by 2020.

Therefore, in just 5 years the world may actually face yet another large-scale economic crisis. However, as historical wisdom tells us, “you can’t make an omelette without breaking eggs.” So any crises and shocks will only benefit the world community in the future, forcing governments to spend resources in the right direction and to calculate their budgets with a watchful eye looking toward a “rainy day”. The most reasonable outcome of a future crisis would be the wisdom to leave behind the competition for the tallest skyscrapers. And who knows – perhaps after 2020 there will be no skyscrapers left to built.

Sofia Pale, Ph.D. Candidate of Historical Sciences, Researcher with the Center for South-East Asia, Australia and Oceania of Institute of Oriental Studies of the Russian Academy of Sciences, exclusively for the online magazine “New Eastern Outlook”.

Leave a comment