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Faulty towers

There’s nothing like a skyscraper to tell you where the next bubble will burst

1 September 2012

8:00 AM

1 September 2012

8:00 AM

Ever since the Arab Spring sprang its bright new dawn, the old regimes of the Middle East — along with their economies — have fallen like dominoes. But one authoritarian regime, at least, stands taller than ever: Saudi Arabia. Its shimmery skyline, its modern minarets, all testify to the infallibility of petroleum-rich power. Yet there’s one enormous sign that Saudi may be headed for the skids.

This year, the Saudis started construction of the Kingdom Tower, a 200-floor skyscraper which is due to be completed in 2017. This citadel has the backing of Prince Alwaleed bin Talal, and will be built by the Bin Laden family (the late Osama was a relation, though they disavowed him years ago). The building will have 59 lifts, luxury apartments, offices and a Four Seasons hotel. There will be a viewing platform at the top, from which to survey the gleaming metropolis of Jeddah. Kingdom Tower will be the tallest building in the world. It will be a kilometre high.

The Saudis should know better. The building of a record-breaking skyscraper has almost always been a harbinger of economic doom, as the people who study this phenomenon seriously (there are one or two of them) will tell you. Take, for example, America. In the 1900s, Manhattan was laying the groundwork for the two tallest buildings the world had yet then seen — the Singer Building, construction of which started in 1902, and the Metropolitan Life Tower, begun in 1907. Then came the panic of 1907, which saw the New York Stock Exchange fall 50 per cent from its peak the year before. The Empire State Building and the Chrysler Building popped up around the time the Wall Street crash of 1929 triggered the Great Depression. The World Trade Center and the Sears Tower coincided with the 1973 stock market meltdown and the oil crisis.

Examples can be found across the world. Malaysia’s Petronas Twin Towers, which held the title of world’s headiest erection for six years, was built between 1993 and 1998. The Asian financial crisis struck while it was being completed. The UAE’s Burj Khalifa shot into the Emirati heavens just as Dubai began defaulting on its loans. In London, work began on the Shard, Europe’s tallest edifice, just as the US subprime crisis was going transatlantic. This year, the Shard opened its glassy doors to a city in the throes of a double dip.

Andrew Lawrence of Barclays Capital in Hong Kong, creator of the ‘Skyscraper Index’ which links building booms and business busts, helpfully points to two other economies headed for crisis — India and China. China, says Lawrence, is ‘the world’s biggest bubble builder’. China already has half the world’s buildings over 240 metres, which is considered the minimum for a skyscraper. In the next six years, the Middle Kingdom will pile up 66 more skyscrapers. A downturn is on the upswing, for sure.

Perhaps the Dire Spire theory can best be tied to reasons of psychology rather than economics. It is a matter of hubris. Giant towers embody the human tendency to go beyond our means, to overreach and then collapse. Look at the brochures and press releases announcing the world’s skyscrapers, and the language and imagery are always the same — we’re building this because we’re bigger, better, more bountiful than you. We’re doing this just because we can.

Initially, Saudi Arabia’s Prince Alwaleed wanted the Kingdom Tower to be a mile high, but he appears to have settled for a mere kilometre instead. The shape of the building will, we’re told, resemble desert fronds; its architecture will be a fusion of nature and technology. ‘Building this tower in Jeddah sends a financial and economic message that should not be ignored,’ the prince has intoned. ‘It has a political depth to it to tell the world that we Saudis invest in our country.’

It is easy to see why the Saudis feel confident. The West is in a debt-fuelled decline and has had to rely on foreign bailouts, meaning the oil-rich Arabs now own huge chunks of European banks. With Chinese growth also sputtering, it is not unreasonable to talk about the Arab century. Any financial analyst will tell you it is almost impossible to tell when a trend has peaked — but when it comes to countries, there is usually a sign. If they start to boast about the longest elevator ride in the world, it’s time to get off.

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