Spoiler alert: it was Jimmy Carter
A lot of buildings were falling down in the 1970s and early 1980s. The roof of the Hartford Civic Center collapsed in 1978, as did the roof of the Kemper Arena the following year. Sky bridges in the Kansas City Hyatt Regency collapsed in 1981, about a year after the hotel opened. Over 100 people died and over 200 were injured.
The usual construction process involves architects and engineers designing a project, engineers reviewing everything, city officials reviewing and permitting everything, and then construction begins.
But that’s only the first part of the design/engineering process. After ground is broken, on-site adjustments get made. Usually, those adjustments go back to the architects and engineers for review and approval, and then over to city officials for additional permits or other approvals.
Vendors — the companies that supply the steel and concrete and components — may also make requests for changes. Those changes then go through the usual architect/engineer/permit process, as needed.
But in the 1970s, corners were being cut. It’s not the usual corners such as substandard materials but rather the corners on the engineering review process, particularly from on-site and vendor changes. A field engineer or a vendor may recommend a change, and everyone was under enormous pressure to keep things moving. Many of these projects were “fast-tracked” to begin with (as was the Florida condo).
Why was there so much pressure to move things along as quickly as possible?
In Carter’s last years, inflation was over 10% (peaking monthly at almost 15%). The prime rate (from which other interest rates are derived) peaked above 20%. For construction projects, time was the enemy. A delay of just a few months can turn a small profit into a loss. Even worse, most construction projects are funded on borrowed money, and those 1970s interest rates could quickly bankrupt a delayed project. Everyone was under pressure to move projects along quickly. As the Kansas City Star observed, “The Hyatt collapse occurred in an era of high unemployment, inflation and double-digit interest rates. All those factors added pressure on builders to win contracts and complete projects swiftly.”
Of course, Jimmy Carter didn’t cause the banana republic economy of the 1970s. Kennedy invented the peace-time budget deficit. LBJ spent like a soldier (or 500,000) on leave in Bangkok. Nixon was hell-bent on creating more free-spending social programs than LBJ. Carter just didn’t have the courage to end any of it. He was looking at a destabilizing USD (which was destabilizing the global economy) and didn’t have the cojones to do anything about it. In his defense, this untethering of prices from wages had occurred several times since WW2, and no one else had the courage to slay the inflation beast either.
It wasn’t until Reagan mustered the courage to let Volcker (Fed Chair) do what every economist knew had to be done: tighten the money supply. Such tightening required courage because wages would stabilize (feeling as if they fell) as prices continued to rise. A year or so later, prices would stabilize and align with wages, and everything would be good again. But that “year or so” would be brutal as an unholy alliance of inflation, recession and unemployment would test the political leadership.
Were corners cut in the Florida condo collapse? The building was fast-tracked, and it looks like some on-site decisions were made that weren’t thoroughly vetted (such as seawater draining onto the concrete foundation and a lack of draining for much of the horizontal concrete). Contractors were under extreme pressure to complete and deliver the project.
Lesson: Inflation will make a banana republic out of any country. If you like third-world construction, inflation will deliver it.