Dubai, one of the seven United Arab Emirates on the south coast of the Persian Gulf, is a small tribe (now numbering about 300,000) of pearl fishers and date-palm cultivators who found themselves, in 1966, living on top of a small-to-medium-sized lake of oil.Â They arranged to have this oil pumped out and sold as quickly as possible and under the leadership of a heriditary sheikh invested the money around the world, largely in ports and luxury real estate and retailers, and locally, under the truly loony idea that if you build a city in one of the hottest and driest places in the world, and air condition everything in sight (including Metro platforms), ‘they’ will come to do things they could perfectly well do in one of thousands of habitable places.Â Â For a while, they did, including foreign workers amounting to six times the number of citizens, but the bloom is off an economy built on its own growth and no actual local source of primary value.Â Some of the internal contradictions of the whole idea are beginning to bite, especially the expectations of western tourists for amusements deeply distasteful to the official views of reactionary Arab/Islamic men (like prostitutes, nightclubs, uncensored internet access, and social intercourse among unmarried men and women), and the pretzels people have to twist themselves into to do ordinary business, like lending money and investing, within the Islamic proscription of interest.
The local real estate investments, fruits of the most creative and vacuously directed engineering skills of people from everywhere in the world except the UAE,Â comprise some of the most ridiculous follies on the planet, including the world’s tallest building, super-luxury hotels amid zero real tourism destinations, the famous indoor ski slope, and a set of artificial islands prepositioned to go under water with the Maldives when sea levels rise.Â Meanwhile, it is impossible to find a painting, song, novel, play, theorem, or any other enduring artifact of Dubai (or UAE, as far as I can tell) society – as opposed to stuff bought or rented from foreigners, like the Louvre in Abu Dhabi.Â A colleague with extended experience in the UAE described its fundamental post-oil philosophy as “Is there a problem?Â Well then, lets go shopping!” and they do, at retail for chotchkes like the odd Maybach and more grandly at Harvard and Singapore for a school of government.Â In a wonderful irony, a newly-salient conceptual import is the constitution of the city of Mahagonny, where the only crime was being broke, and in a completely unsurprising development, the bubble is breaking and UAE neighbor Abu Dhabi, which still has lots of oil, is trying not be dragged down as the ship founders.
I predict Dubai will be one of the most sought-after post-apocalyptic film locations in the world; there will be no competitor as a site of fantasy ruins, with lots of reliable sunshine.Â Meanwhile, a much smaller bubble, also built on the desires of people with no real class, lots of money, and a need to display both qualities, seems to be breaking at the same time.Â I’ve been waiting for this one for almost two years.
11 thoughts on “Bubbles”
Schadenfreud has never been so much fun.
Ah, targeted internet advertising. Every single ad on this comment page is currently plugging hotels in Dubai. Kids eat free and the internet is free too!
Somehow, it just isn't appealing.
On watches: quartz had effectively supplanted mechanical by 1980 (see David Landes' Revolution in Time). The Swiss went over to watches-as-fashion: at the low end the Swatch, at the high end the kind of over-the-top mechanical designs you wrote about. I think these are best regarded as the exact equivalent of jewelry–but socially acceptable for males in a way that diamond necklaces still are not. Any nominally utilitarian aspect is really just for show, like the quality and size of gemstones. So I'd expect high-end watches to be like other luxury goods: down for a while, then back up, and not really a bubble. Certainly not anything to parallel Dubai, which must be giving the rest of the UAE plenty of heartburn.
M O'H: "…a small tribe (now numbering about 300,000) of pearl fishers and date-palm cultivators…" And gold smugglers to India. Dubai creek was a port before it got ambitions to become a global entrepot and trade hub. I'm not so sure that the idea is as stupid as all that. It assumes the Saudis will always stay that bit more reactionary, so Dubai can provide services not available in Riyadh.
More important, Dubai's (and the UAE's) model of modernisation in a Muslim country is weird and fragile, but it is modernisation compared to most of the rest of the Muslim, and especially the Arab Muslim, world. Qatar's Al Jazeera isn't to everybody's taste, but it is a genuine news organisation, not an unwatchable propaganda outlet. I reckon Dubai should be given temporary help if necessary.
Mens watches have always been a substitute for jewelry. Calvin banned jewelry for men, and that's why the watch industry started there.
Dubai functions in an analogous way to Switzerland, which exists only because it is neither France nor Germany, and creates regulatory arbitrage with its neighbors. (Which might be a stilted way of saying that they allow drinking and hookers, alongside possibilities for tax evasion.) It is my impression (from having been there) that these are not offered as a concession to westerners, but for the Saudis.
James, point taken about the trading history. But they forgot it all. Traders have to be aware of supply and demand, treat debts as real obligations, and be sure their inventory has someone they can sell/ship it to. Dubai's government has borrowed money to build a city of half-empty apartment houses and office buildings (vacancy rates hover around 50% now and lots more space is coming on line) that can't be put on a boat and sold on, in a place no-one wants to be in most of the year, and providing no really unique competitive advantage as commerce has less and less to do with physical movement of large, heavy stuff. Arabs have no trouble setting up in London or Paris, and Dubai's present advantages are easily seized by Qatar or lots of other places. Contrast Singapore, whose investment is in an educated, entrepreneurial, corruption-allergic, multilingual population (yes, and a well-situated extremely efficient transshipment port), and bricks and mortar appropriate to its needs.
"city of half-empty apartment houses and office buildings"
Prices will fall and eventually they will be filled. It is a rich region that imports and lot of goods, services, and capital equipment, and Dubai if it weren't so expensive it would again be an ideal location for Western businesses to locate.
"..built on its own growth and no actual local source of primary value.." zowie. When I think about it, that's a nice polar-extreme statement of the direction the US was going, and for which we are paying now. We do actually have farms & forests & airplane factories, but Vegas sounds a lot like Dubai. Phoenix, too.
"like prostitutes, nightclubs, uncensored internet access, and social intercourse among unmarried men and women"
You forgot one: alcohol! Drinking booze is forbidden in Islam. And while we are on the topic, here is another: usury. Charging interest is against Islam as well.
Michael: “city of half-empty apartment houses and office buildings”
Dave: "Prices will fall and eventually they will be filled. It is a rich region that imports and lot of goods, services, and capital equipment, and Dubai if it weren’t so expensive it would again be an ideal location for Western businesses to locate."
However, if money was borrowed at the height of the market to build these buildings, that means that they won't be filled at prices which will pay for their construction. Which is cool if you happened to sell some otherwise useless land at inflated prices, but not so good otherwise.
"… an ideal location for Western businesses to locate."
From some recent articles, it's far from ideal; the legal environment is highly corrupt and bad; especially for foreigners. This will matter even more now, as Dubai tries to unwind things; right now it looks like a place where being in debt is an imprisonable (and probably torturable) offense for foreigners, but that connected locals might be much more free to default.
"it is modernisation compared to most of the rest of the Muslim … world"
Turkey being the biggest exception.
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