For someone interested in modern architectural marvels, not knowing Burj Dubai is akin to being a car enthusiast and not knowing the Ferrari! At 2,684 feet, it is the tallest man made structure ever built. And until most recently, it was a testimony to the rapid strides the Emirate kingdom of Dubai had taken in establishing itself as one of the most popular destinations in the world. But henceforth, Burj Dubai is also going to be remembered for something else. It will be remembered for validating once again, an economic theory called as 'The Skyscraper Index'. Created by the economist Andrew Lawrence, the theory states that the building of world's tallest building may be a useful way to predict the onset of a major economic downturn.
Interestingly, in October 2009, Emaar, the construction company that was constructing Burj Dubai announced that it had completed the exterior of the building and within two months, the Dubai government came close to defaulting on its loans. And this is not an isolated case. As shown in the table below, there seems to be a healthy correlation between construction of landmark buildings and the occurrence of a financial crisis.
Skyscrapers & economic crisis: Is there a link?
| Year | Skyscrapers | Height | Economic crisis |
| 1907 | Singer Building | 612 ft | US banking panic |
| 1931 | Empire State Building | 1,250 ft | The Depression |
| 1973 | Sears Tower, Chicago | 1,450 ft | Oil crisis |
| 1998 | Petronas Tower, Malaysia | 1,483 ft | Asian crisis |
| 2009 | The Burj, Dubai | 2,684 ft | Subprime crisis? |
And this phenomenon could not be without reason? Construction of tall buildings is a long gestation and a capital intensive project and the most favorable time for it to start is during a low interest and strong liquidity regime. Hence, by the time the building gets completed, the loose policy may have run its course and the markets ripe for a correction, leading to the completion of construction coinciding with a slowdown. It should be noted that like all economic theories, this one may also not be a foolproof one, but is definitely an important tool towards assessing the health of the economy.
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