The Skyscraper Curse

Real estate development has always and still does account for a fairly large proportion of GDP of every sizeable economy. The development of tall skyscrapers has historically been offset during times of economic expansion and booms when funds and monetary resources are more easily accessible, and there is assurance of profitability, naturally. Also, skyscrapers are fairly lucrative by nature because they create more space horizontally in the same plot of land. However, skyscrapers are often just conjectural development projects that are built without any concrete plans relating to usage of the space being created. However, the completions of tall skyscraper buildings seem to have formed a recurring pattern, in the past century or so, of often being pre-cursors to economic recession or financial crises. This correlation between the construction of tall skyscrapers and economic business cycles that ended in recession was first studied in the 1930s, around the time of the Great Depression in the United States. Historical examples of this from the past century include the completion of the Empire State Building in the 1931 when the Great Depression had just started, the completion of the Petrnoas Twin Towers in Malaysia in 1996, which was when the Asian financial crisis began, and of course, the completion of the Burj Khalifa in Dubai in 2010 which was right after the 2008 worldwide financial crisis. Another key example would be the construction of the Sears Towers and the World Trade Center Towers that were built in 1973, during both the 1973 stock market crash and the 1973 oil crisis. According to substantial research done by economists, and there are conflicting opinions about weather there seems to be a correlation between skyscrapers and economic business cycles. While there are some rational explanations as to why the constructions of skyscrapers began during economic booms and ended during major financial crises, opposing research has also shown that there is almost no correlation between construction of skyscrapers and economic conditions, and that past events have been, to an extent, coincidence. Economists who concur with the fact that there is an important association between constructions of skyscrapers reinforce the Skyscraper Index, which was created by Andrew Lawrence in 1999. It states that tall skyscrapers have escalated right before or after serious economic downturns. It is self-evident that large projects like building one of the tallest skyscrapers in the world would get investment during an economic boom, due to lower interest rates, higher demands and easier access to monetary resources. However what’s interesting is that all of these components reach a peak during the growth or construction period of the building of a skyscraper, and this right when the economy has already reached its peak and is about to go into a recession. On the other hand, there are also exceptions to this and there are many economists who would agree that the skyscraper index is not a good enough economic indicator. But it is still an intriguing concept. There are numerous skyscraper projects coming up in the world’s fastest growing and high potential economies, India and China and it would be gripping to see how the completion of the new structures could be correlated to economic conditions in the future.






The Happy Meal Indicator

We often search to find indicators to help us prepare for the good and the bad. An economic indicator is defined as a statistic used to gauge future trends in a nation’s economy. Reports on these indicators are released monthly, quarterly, and annually to help the public understand how things are going within our country. Gross Domestic Product (GDP), personal income, and retail sales are among the more popular indicators we analyze.

However, there are many other markers that people have come up with to predict the economy. Notoriously known by its slogan “i’m lovin’ it” and its clown mascot, McDonald’s has contributed to create affordable meals during times of need. While most people are nervous and sad when the economy is falling or acting poorly, the Happy Meal Indicator reacts in direct correlation with the economy.

Happy Meal

At McDonald’s and other restaurants around the globe, the Happy Meal Indicator works such that “in an effort to protect profit margins, restaurants downsize free offerings to kids like crayons and toys” (Platt). This measure allows us to see how big corporations are adjusting to the poor economic activity and loss in revenue. During the 2009 recession, gourmet burger chain Red Robin halved the amount of crayons they gave to kids to color at their tables. I would assume many children were upset that green was no longer when they were given blue and red crayons.

REd Robin

There are no actual numbers that can be calculated from the Happy Meal Indicator, other than alerting us how the hospitality industry is reacting. By analyzing the expense cuts on things such as toys, crayons, and other freebies we are able to predict that corporations have less free cash on their balance sheet and spending is becoming a concern. Another example of this is that many hotels held back from leaving chocolates on their guests’ pillows during the recession as a means to save money.

Although restaurants like McDonald’s and Red Robin look to cut costs during these hard times, they have a better survival rate than others. People want to find the cheapest alternatives to feed their family and support a “normal” lifestyle, so they turn to the dollar menu and cheap food options.

We may or may not notice when our favorite brands have left out a toy in our happy meal, but economists do. There are reasons behind this madness, the themes of toys always coincide with the latest hit film or a major event going on. It is a way to attract people to spend more money; however, the companies can sometimes no longer afford this marketing stunt. Now understanding the Happy Meal Indicator, we will be one step ahead of our colleagues only by knowing whether or not we receive a toy or if our Red Robin no longer has crayons.