Anyone who has been to Dubai can’t help but notice that it’s always been on the brink of disaster. The skyline is filled with the skeletons of half-finished high-rises and abandoned cranes, with brand new highways leading standstill traffic from one opulent (and now, empty) set of malls and condos to another – and all of it slapped in the middle of the desert. With no existing infrastructure, unchecked costs of living, constant traffic nightmares, sewage disposal problems, not to mention the lack of any direct water source, Dubai is $80 billion worth of investment in an avid fantasy, with sandstorms always two steps from eating the whole thing alive.
The amount of wealth in the city is astonishing – the world’s most lavish malls packed with ski slopes and multi-level Gucci stores, the Sheik’s jaw-dropping palace, and hotels so luxe you can’t even stroll through the lobby without a reservation. But even the uber-rich can’t escape the natural environs that run the show in this place – the hordes of Ferraris and Range Rovers are washed multiple times a day to stave off sand erosion.
The ostentatious Emirate is also a place full of the idiosyncrasies that come with being ruled by a single family: A flashing light from a machine on the highway means you’ve just gotten a speeding ticket, and if you’re caught giving the middle finger to another driver, the punishment is deportation.
From its inception, Dubai has been the vision of an elite and powerful group that wanted to build a worldwide tourist hub in the middle of a desert. And to do it, they needed money. Those who borrowed, and lent, that now-notorious $80 billion to build this display of nature-thwarting extravagance must have (or should have) known that the entire project was, at its core, a huge gamble. The media, for its part, has always covered it as such, narrowing in on Dubai’s unique narrative — the spectacular rise, the signs of trouble, and the even more spectacular fall.
There was also the narrative of the dueling Emirates – Abu Dhabi and Dubai – that played out like troubled siblings: Abu Dhabi is the older, wiser brother with its oil reserves and bottomless pockets, while Dubai is the attention-starved youngest, flashing its latest bling in a constant bid for attention. And the elephant under the table was always the $59 billion that sexy little brother borrowed and still hasn’t paid back.
This conflict hit its climax with the news of Dubai World’s potential default on billions in sukuk bonds due in the next few weeks. Given the family history, the expectation is that Abu Dhabi will step in and clean up the mess (after all, it has already handed over $15 million to its prodigal sib). But no sibling likes being taken for granted, and now there’s a question of whether, and how, the aid will come.
The parallels between the Dubai crash and the U.S. mortgage crisis are undeniable: Just as Wall Street was blinded by dollar signs and so ignored the dangers of buying up securities built on garbage loans, so were international investors dazzled by the world’s first seven-star hotel, custom-built islands, and skyscrapers that quite literally scrape the sky. But in Dubai’s case, no one can say it came without warning from the press – it’s not like the Times or the Journal or the Guardian can be blamed for not jumping on the “foreigners abandoning luxury cars at the airport” story or the “massive sewage problem threatens to engulf Dubai in crap” story and clueing investors off to the fact that things were spiraling downward. Whether or not Abu Dhabi performs a massive bailout-apalooza this week, the international media will be poised to cover every detail. And no doubt at least one journalist will be chuckling “I told you so” as he types out his copy.
Melissa Lafsky is the founder of Opinionistas.com. For money, she’s editor in chief of Infrastructurist.com, and the former editor of the New York Times’s Freakonomics blog. You can follow her on Twitter at @lafsky.
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