Endless Light

There are plenty of experts who say central bankers have gotten a lot smarter since then—they understand the global economy and their effects on it much better, and know enough to avoid such bad policy decisions. A greater threat to the supercity boom might come from the globalization that started it in the first place. As the middle classes everywhere increasingly worry about downward mobility, protectionist rhetoric and a backlash against free trade and liberalization have been brewing, not only in Europe and the usual developing countries, but also in places like the United States, where, most recently, Democratic Party leaders in Congress may withhold approval of recently negotiated free-trade agreements with Colombia and Peru to reduce the influx of cheap imported goods.

The reintroduction of trade barriers and currency controls would undoubtedly slow down global growth, and eventually cripple residential real-estate markets. It's happened before: a real-estate boom in the United States during the 1920s was aborted by the adoption of protectionist policies, which also helped set the stage for the Great Depression. Property prices back then fell even in the world's greatest cities. That's worth remembering as ex-communist tenement flats in Moscow garner wait-lists of buyers, and dark London mews houses on hip blocks sell for 30 percent above their asking prices. If the power brokers of the world can't figure out a way to ensure that their prosperity trickles down a bit faster, their own houses may eventually take the hit.

© 2007