The ‘Skyscraper Curse’ strikes again
There is often a correlation between financial bubbles bursting and attempts to construct the world’s tallest building, says William Pesek on Bloomberg.com. In 1931, for instance, the Empire State building, designed in the exuberant 1920s, finally opened, “presaging years of gloom”.
The Sears Tower was the world’s tallest building when it opened in 1973, coinciding with the advent of stagflation. In the late 1990s, Malaysia’s Petronas Towers, conceived during the ‘go-go’ days of the mid-1990s, opened in 1998 as the Asian crisis struck. And the “Skyscraper Curse” has struck again in Dubai. The Burj Dubai (pictured, right) is the latest tallest building in the world at almost 820 metres, constructed by property group Emaar. The $1bn tower is due to open in January.
The link between all these buildings is easy credit, fuelling confidence, ambition, exuberance and hubris, says Pesek. “Architectural overreach” thus tends to mark the height of the boom. Commenting on the construction boom in Dubai in 2006, Claudia Zeisberger of the Asia Pacific Institute of Finance at Insead in Singapore said: “all the building going on made me feel like I was experiencing the last days of ancient Rome”. Skyscrapers, says Mark Thornton of the Ludwig von Mises Institute, have become a “marker of the 20th-century business cycle.”
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This won’t be affecting the Chinese though because they have a command economy. They don’t have the accounting idiosyncracies of other nations. Banks dispense money there for what’s determined by government as the public good, not for private profit. Why can’t we have some of this communism over here? It sounds rather more socially productive than this pesky capitalism.
BB
I’m not entirely sure whether you’re trying to be ironic or not, Mr. Kruse.
I would consider Chinese communism to be the ideal system – if men were angels and actually did things for the “common good.”
Once again, communism pencils fantastically on paper, but fails miserably when applied.
Communism fails fantastically on paper, too. Without a free market allowing consumers’ subjective appraisals to impute meaningful prices to goods, a communist planning committe has no idea how to allocate resources or which goods or how many to produce, no matter how saintly their intentions. In practice, it leads to inefficient industrial autarkies (small self-sufficient regions) and collapse.
In a free market, those who invest in ridiculous building projects must pay the price. But the problem is exacerbated by socialist policies like central banks fixing interest rates below what consumers would desire, inflationism (creation of fiat currency), and moral hazard. The provision of funds through criminal bailment fraud (“fractional reserve banking”) backed up by socialized insurance (e.g. FDIC) doesn’t help either.
Gabriel Rizk said:
I am sorry dude like most of the people in America you fail to understand Socialism/communism too. The reason why Socialism fails is not because it cannot work with people without giving them incentives but because it just cannot work on paper, it cannot plan, there is no rational allocation of resources.
All I do to convert Socialists into Capitalists(not just any Capitalists but Austrian Economists) is ask them to solve the problem of economic calculation on paper, they keep on making attempts to do so and they keep on coming closer to market, and eventually they fall on this side of the fence.
The belief that Socialism does not work because of lack of incentives is a cause of great problem in America, this makes Obama’s followers (and even Republicans) think that they can follow Socialist planning all they want in America and it will work because now they have given incentives to Americans.
Renegade Division,
But most socialists are for a mixed system, what Mises called interventionism. How does the calculation argument apply to, say, public schools, where there is no profit/loss, but there are textbook, cleaning goods, and construction enterprises in close association and proximity.
How does one account for the loss in the size of the social sphere in which calculation may take place?
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