The Skyscraper Index Strikes Again

Ever since the Tower of Babel, tall buildings have signaled trouble. The Skyscraper Index Theory holds that record-breaking skyscrapers predict economic downturns. A friend called the other day to note the rapidly dropping price of oil and the still-unrevealed final height of the Burj Dubai. The building felt compelled to release a statement saying its completion would not be stalled by the downturn, unlike the Chicago Spire, which is currently a large hole in the ground, or Russia Tower.
The skyscraper theory is not completely whacked. Notes the economist Mark Thornton, in his paper Skyscrapers and Business Cycles,

The skyscraper is the critical nexus of the administration of modern global capitalism and commerce where decisions are made and transmitted throughout the capitalist system and where traders communicate and exchange information and goods, interconnecting with the telecommunications network. Therefore it should not be surprising that the skyscraper is an important manifestation of the 20th-century business cycle, just as the canals, railroads, and factories were in previous times.

Thornton concludes by saying

"it does suggest that both the cause of skyscrapers reaching new heights and severe business cycles are related to instability in debt financing and that the institutions that regulate debt financing should be reevaluated, if not replaced with more efficient and stabilizing institutions."

Look no further than the Shangai World Finance Center, tallest building in the world if measured to its roof. It opened for business at the end of August, just in time for the world to plunge headlong into economic crisis. Hold onto your portfolios -- the Burj is supposed to open in August 2009.

(image of Taipei Tower 101 from http2007's Flickr site via Creative Commons license)