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The Skyscraper Model of Economic Collapse

Stock analysts shake their heads over CEOs with “edifice complexes,” building fancy headquarters despite their cost, but one financial observer thinks that a boom in large buildings could mean something worse than an out of control ego.

Barclays analyst Andrew Lawrence theorizes that a skyscraper boom is very often followed closely by economic turmoil. He gives several examples: the construction in the US of the Chrysler building (1930) and Empire State building (1931) in the early years of the Great Depression; the 1973 opening of the World Trade Center in New York and the Sears Tower in Chicago came during the financial crisis of the 70s; in 1997, Kuala Lumpur’s Petronas Tower became the world’s tallest building and heralded the Asian financial crisis of the late 90s; and the Burj Khalifa in Dubai, now the world’s tallest building, was completed in 2010 during a banking and real estate crisis in the UAE and a global recession.

Barclays’ annual Skyscraper Index is a flawed model but poses a few interesting questions. The construction of especially tall or numerous skyscrapers are signs of economic bubbles, according to Mr. Lawrence, and this model can be applied to today. China will almost double its number of skyscrapers taller than 787 feet by 2017. Meanwhile, over the next five years, India will complete 14 new skyscrapers. Meanwhile, there are signs of a real estate crisis in China and slowing growth in India.

Pyongyang's Ryugyeong Hotel is by far the tallest structure in North Korea

There might be something to this; Pyongyang’s tallest building, the 105 story Ryugyang Hotel, is nearing completion, and nobody is predicting anything but tough times for the DPRK.

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  • Paul C

    In 1977, Detroit built a nice skyscraper, the Renaissance Center, to revitalize the city. The city has lost half its population since the RenCen was opened. In the 1990s, General Motors moved its headquarters to the Renaissance Center. More than half a billion additional dollars were invested in remodeling GM’s headquarters. We know how that turned out. What goes up also comes down, here as well as abroad.

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