An impending economic crisis would be a lot easier to spot if provided with a half-mile-high hint. Such a hint is provided, according to skyscraper theorists. The theory goes as follows: artificially low interest rates ignite a credit boom, which manifests itself in the form of a soaring skyscraper. Typically these towers arise directly preceding a crisis, when confidence (or arrogance) is at its highest.
It's easy to dismiss the correlation as happenstance. And maybe it is. But there are some awfully peculiar construction habits that occur in artificial booms. Some Austrian economists assert that there's a reason for that.
They claim that the skyscraper and other capital-intensive projects are the natural result of unnaturally suppressed interest rates. Generally speaking, grossly suppressed interest rates yield taller towers and big economic bubbles. Indeed, history shows that the world's tallest buildings are often built on a weak economic foundation.
Towers and Turmoil
|Completed||Economic Crisis||Start Date|
|40 Wall Street||1930||Great Depression||1929|
|Chrysler Building||1930||Great Depression||1929|
|Empire State Building||1931||Great Depression||1929|
|World Trade Center 1||1972/73||1970s Stagflation||1973|
|Sears Tower||1974||1970s Stagflation||1973|
|Petronas Towers||1998||Asian Financial Crisis||1997|
|Burj Dubai||2010||Dubai Crisis||2009|
Of course, big buildings don't always signal an economic slump. A recent case in point: Japan's multiyear economic malaise arrived without a hint from a high-rise. On the flip side, skyscrapers can give false signals of ensuing economic weakness. As a case in point on this side, Taipei 101 went up in 2004, and no economic downturn immediately followed. This is all to say that the skyscraper theory is by no means perfect, but it's not preposterous either.
The theory will be put to the test in the coming years, as the skyscape rapidly changes.
Amazingly, the world's second-tallest building – Taipei 101 – is projected to fall to the 18th-tallest by 2020. This means many new high-rises on the horizon.
(Click on image to enlarge)
A couple of things to note about the graphic above:
- Saudi Arabia's Kingdom Tower (far left) is projected to be the world's tallest building in 2020. However, it is still in the proposal stage.
- Five others are in the proposal stage as well – three in China and two in other Asian countries.
- Construction has stopped on two buildings, both of which are located in the Middle East.
- Four are complete. These are: the Burj Kalifa (formerly the Burj Dubai, second from left in the graphic above); Taipei 101 (third from far right); Shanghai World Financial Center (far right); and the Mecca Royal Hotel Clock Tower (eighth from the left).
- America's lone entry is the One World Trade Center, which is the lead building of the new World Trade Center complex.
All remaining skyscrapers are in the construction phase. These are the buildings we should pay particularly close attention to. If the skyscraper theory holds, these buildings will reach the completion stage around the time the economy hits the skids. The table below displays all pertinent information on these projects.
On the Rise
Ping An Finance Center
Goldin Finance 117
Lotte World Tower
One World Trade Center
Chow Fai Fook Centre
Busan Lotte World Tower
As you can see, China appears poised to be the next victim of "the curse of the skyscraper." The theory suggests that China's economic freefall will commence in approximately three years' time.
If the skyscraper theory accurately calls a crisis once again, expect to hear more about it in the years to come.