Dubai's Demise: No Big Surprise

With all the recent media hullabaloo surrounding the Dubai debt crisis, the one thing that I keep asking myself is 'Why is anyone surprised by this?' Long before the global recession came hurling at us like a fastball to the jugular, the seeds were already sown for what would inevitably turn out to be a nosedive for the world's most famous Emirate.

As a general rule, anything that is hyped up as much as Dubai was during the past decade is usually too good to be true. Like Las Vegas on steroids, Dubai was trying to bankroll on the mythical 'tourism and services' industry at a time when it seemed like the credit party would never end. By building the world's largest mall/man-made island/skyscraper, Dubai was able to grab international headlines, yet the novelty of these accomplishments quickly wore off.

Marketing itself as a 'luxury destination' for the global elite was another asinine idea. I am not part of the global wealthy class, but if I were I could imagine countless other places more suitable for a lavish vacation than a sweltering desert prone to sandstorms-try Paris or Hawaii. Even the Saudi sheiks already have the option of party-hearty Bahrain nearby.

Appealing to such a narrow demographic proved to be unsustainable for Dubai as is physically apparent by the scores of unsold residential property sitting empty-not to mention the financial struggles of Dubai World. Yet not everyone is as pessimistic about Dubai's sense of place (or lack thereof) as I am. Harvard economics professor Ed Glaeser takes a more sensible tone in a recent blog post for the New York Times about The Ascent and Fall of Dubai.

Glaeser understands that Dubai's growth over the past decade has been a gamble and acknowledges the fact that is has been sheik Mohammed bin Rashid al-Maktoum's intention to steer the city's development towards that of consumption in order to make it a place worth staying. At the conclusion of Glaeser's entry he states that, "Even if Dubai’s real estate prices continue to drop, which is certainly quite possible, there will remain a strong incentive to fill its buildings. If the structures remain occupied, then Dubai, and its sheik’s dream of a great metropolis, will survive."

I disagree that this will be the case if Dubai continues on it's path towards being a city solely based on 'luxury consumption'. Instead, if Dubai can assert itself as a bastion of economic freedom and social tolerance in an otherwise ultra conservative Middle East, my feeling is that this will better aid the future chances of long terms success.