Tall Tales of Turmoil: The Skyscraper Curse Chronicles
The Tower of Babel was a structure built in the land of Shinar (Babylonia) some time after the Great Flood.
According to the book of Genesis, the Babylonians wanted to make a name for themselves by building a mighty city and a tower “with its top in the heavens.” The Babylonians displeased God, so he disrupted the work and it was never completed.
Similarly, the "skyscraper curse" links the construction of the world’s tallest skyscrapers with man’s hubris- and an economy’s subsequent collapse.
The Origin Story of the Skyscraper Curse
In 1999, research analyst Andrew Lawrence published a report highlighting the connection between record-height buildings and major economic crises.
He coined the term “Skyscraper Index," which tracks and may even predict- the economy’s inevitable booms and busts.
According to Lawrence, the construction of the world's tallest skyscraper coincides with economic booms and predicts subsequent economic crises.
Lawrence described his index as an "unhealthy 100-year correlation."
Anatomy of a Boom and Bust
The economic boom begins with a long period of easy money and credit.
A rapid expansion in the economy is usually fueled by a specific ongoing event such as:
• New technology: Railroads in the 1840s, radio in the 19202 and the Internet in the 1990s or EVs in the 2020s
• A surge in capital inflows: hot money flowing into the Asian Tigers in the mid-to-late 1990s.
• Speculation on asset prices: The Tulip bubble of 1636 or the Florida Land boom of the 1920s
• Financial Innovations: Limited liability companies in the South Sea Bubble of 1720 or mortgage-backed securities in the 2000s.
Asset prices then rise. The stock market soars.
Capital expenditures start to fund new speculative ventures, which create new industries and transform old ones.
Then, construction of the world’s tallest buildings begins.
At the time of the groundbreaking ceremony of the new world-record-height skyscraper, the economy is booming.
But by the time the opening ceremony arrives, an economic crisis is approaching.
The economy cools, credit tightens, unemployment rises, the stock market drops, and the economy contracts. Panic ensues.
As sure as day follows night, the boom turns into a bust.
Skyscrapers Throughout the Ages
The skyscraper curse dates back nearly a century.
Here are a few examples
• Two of the world's tallest commercial buildings between 1899 and 1901 - The 391-foot Park Row building and the 548-foot Philadelphia City Hall were followed by the NYSE Market crash in 1901.
• Plans for the Metropolitan Life Insurance Company Tower – the tallest in the world- were announced in 1905. The Banker’s Panic of 1907 soon followed.
• Two former best friends, William Van Alen and H. Craig Severance, battled it out for the title of architect of the world's tallest building- 40 Wall Street (later Trump Tower) and the Chrysler Building in 1930.
• In 1931, a year and a half after the Chrysler Building's spire rose, the Empire State Building was completed. t 1,250 feet to become the new tallest building in the world, a title it would hold for four decades. Janitors kept the lights on the empty floors to hide the building's 25% occupancy during the Great Depression.
• In 1972, the original One World Trade Center opened its doors as the tallest building in the world, towering at 1,368 ft.
• Only a year later, Chicago's Sears Tower beat this number when it was unveiled, standing at 1,450 ft. tall. The U.S. economy was soon to face an energy crisis and stagflation.
• The Petronas Towers, built in Kuala Lumpur, Malaysia, in 1997, were the tallest buildings in the world at the time. Their opening coincided with the financial crisis in Asia that peaked in 1998.
• Construction on the Burj Khalifa - 828m (2,717 ft) -in Dubai started in 2004. However, the financial markets were in ruins when it was completed. Lehman Brothers had collapsed. Between October 2007 and March 2009, the Dow Jones Industrial Average lost 55% of its value. The tower's name was changed in honor of the Abu Dhabi royal who bailed out the project.
The crisis took its toll on competing projects that aimed to unseat the Burj Khalifa as the world’s height record-holder.
One Dubai Tower A was supposed to be a whopping 1,008m (3,307 ft) tall – but it was shelved in March 2009. Saudi Arabia's kilometer-high Jeddah Tower suffered the same fate.
The Skyscraper Curse: Myth or Reality
Some economists have questioned whether the skyscraper effect is empirically valid.
And in a curious case of “the dog that didn’t bark,” the Japanese never undertook a skyscraper project even at the height of the world’s largest-ever property boom in the 1980s.
There are other instances that don’t fit the pattern.
The skyscraper index may not be perfect.
Indeed, Andrew Lawrence published his first report in 1999 with this tongue firmly in cheek.
Nevertheless, the skyscraper index remains an essential symbol of the modern global economy’s business cycles…
And the eternally recurring pattern of boom and bust.