Central Asia, the next Gulf?

One of the more amusing -- and predictive -- economic indicators is the "skyscraper index."  Rapidly constructed skylines tend to signal a credit bubble.  The best example of this is the Persian Gulf states, where places like Abu Dhabi and Dubai raced one another to get the highest skyscrapers.  The bubble finally burst in the Gulf, and many of the edifices sit unoccupied.

This same race to blow the bubble is on display in Central Asia.

Bloomberg is reporting on Azerbaijan's new fortunes as an oil country. What caught my attention the most is the story of Tajikistan's one-upsmanship in building a bigger flagpole than Azerbaijan.  This isn't quite the destructive use of capital as a 100-story skyscraper, but it's in the same spirit.

With Russia looking to control the flow of oil into Europe, oil-rich places in Central Asia like Azerbaijan will benefit.  But without a change in the underlying institutions or attitudes toward capitalism, this will be a fleeting moment.  Eventually, the inflow of interest payments will not be able to get repaid, and that flagpole may not be such a symbol of pride.