The Lessons of Dubai
"The World" with Dubai's skyline in the background. So far, only the project's model island has been developed. (photo via Time)
It's hard to believe that anyone was really that shocked last month when Dubai's real estate bonanza finally collapsed. For those who could see beyond the glitz, the writing had been on the wall for quite some time. Even on a short visit to the emirate almost a year ago, it was already obvious that Dubai's development model was built upon unstable and partially hollow foundations. Don't get me wrong - I really liked Dubai. Compared to its conservative neighbor Abu Dhabi, where beer is only sold in hotel bars, Dubai felt like one big party.
The place was overflowing with energy: a forest of cranes looming over hulking construction sites, swanky clubs and bars buzzing with well-dressed, well-paid expats letting loose. A cosmopolitan atmosphere in which people from all over the world interacted freely with one another, as if such a Babel of overlapping languages and cultures were the most natural thing in the world.
In a very short time, I managed to see many of Dubai's icons: the indoor ski slope, the palm islands, the fancy hotels. Flying out of the emirate, I saw two more images that lodged themselves in my memory: "The World," an unfinished, multi-billion dollar man-made archipelago, reportedly already sinking back into the sea, and the older, less glamorous other part of town, where Dubai's imported (and exploited) underclass lives.
Perhaps the world needs places like this, I thought to myself as Dubai's skyline receded from view, places with that "last frontier" feel about them, where people feel comfortable taking enormous risks in search of seemingly boundless opportunity.
Dubai was founded on a 'live for today, to hell with tomorrow' attitude. That was the idea all along: strive for maximum growth, reap its many benefits, and worry about the ill effects of the endless growth machine later. As long as it managed to thrive and prosper, Dubai's success became a model that many sought to emulate, and Dubai became a successful brand.
However, last month when Dubai World announced that it would have to hold off on paying back almost $60 billion in debts, the whole Dubai mirage came to a screeching halt. In the end, it was Dubai World's real estate investments, the very same sector that brought all the glitter and flash to the emirate's image, that sank the ship.
The media, for its part, focused mainly on how Dubai's "collapse" would affect the already battered world economy. The answer: apparently not significantly.
But there's another important lesson to be learned from Dubai's rapid rise and fall. Turns out, there really are no free lunches in this world - you can feast only for so long until you finally have to pay the bill.
Detail from Blue Crystal's website.
In Dubai, no project was too ambitious, or too ridiculous. Like the plan for a luxury hotel with a refrigerated beach or the building with 57 private swimming pools. Or the "Blue Crystal," a man-made floating iceberg containing a variety of entertainment facilities. Just how such a super-sized igloo would make it through the scorching Gulf summer was not clear.
Even as these projects were being promoted, luxury cars were turning up orphaned at the airport as expat owners fled onerous debts, buildings continued to go up although the global financial crisis made it unlikely that they would ever find buyers and raw sewage filled the sea - the very same sea that brought in all the tourists.
Like Enron, Bear Stearns and Lehman, Dubai chose an unsustainable path. Socially, ecologically and economically, Dubai was and is the very antithesis of a sustainable city, and thus its eventual collapse was inevitable.
Those elsewhere who sought to build their own little slice of Dubai (and there were many copycats) would be wise to reassess their plans. No rational businessman should expect to succeed where Dubai's businessmen-rulers tried and failed.
Whether Dubai manages to land on its feet at the end of all this or not, the freewheeling development model that it pioneered has effectively been rendered obsolete. And that, perhaps more than anything else, may end up being the most significant lasting effect of its current crisis.