Why Dubai?

Posted December 31, 2009

Categories: Articles

Here’s the premise: an entire region is up for auction. “Mark your calendars for an opportunity of a lifetime,” reads the ad copy. “In a bold step towards the future of global real estate, Nayruz invites you to bid for the ultimate luxury: the Middle East.”

In her “corporate intervention,” entitled The Equity Is in the Circle, recently on display at the Istanbul Biennial, artist Oraib Toukan has designed a project for selling the 16 countries of the Middle East, from wealthy Abu Dhabi to conflict-prone Afghanistan. She created the holding company Nayruz and prepared all the materials for an auction in Dubai in 2012. Then she interviewed a set of experts — advertising executive, real estate agent, game theorist, diplomat — on how to execute her audacious scheme. Should the region go up as a whole or in pieces? Should the bidding be open or secret? How to deal with the potential backlash from pesky nationalists?

A few years ago, such an art project would simply be satire. But everything appears to be up for sale these days. The Salahis are trying to get six figures from the media for the story of their recent White House gate-crashing. Calvin Gosz of Sheboygan, Wisconsin just sold his name to a Finnish consumer electronics retailer: He will now be known as Verkkokauppa Com. Several towns have gone up on Ebay’s auction block.

So why not a country, or even an entire region? In the past, imperial powers carved up the Middle East, drew boundaries, extracted resources. The United States is vainly trying to build nations in Afghanistan and Iraq. Why not go auction off countries to the highest bidder rather than the superpower with the most fighter bombers? Maybe Warren Buffett can do a better job rebuilding Afghanistan than NATO has so far.

Toukan’s speculative project came even closer to reality last week when Dubai World, the enormous investment company, teetered on the verge of default. What’s bad for Dubai World is bad for Dubai. The government-run business is responsible for three-quarters of the country’s $80 billion debt. And what’s bad for Dubai, at least according to global financiers, is bad for the world economy. After all, a number of major banks are invested in Dubai World. And if a wealthy Middle Eastern emirate goes belly up, what does that say about the prospects for pulling the global economy out of recession?

The story of Dubai World parallels the financial problems experienced elsewhere. The corporation built a huge bubble of real estate, port facilities, transportation ventures, and the like. And it was largely financed through debt. Dubai, you see, is almost tapped out of oil, which accounts for only about 5% of the tiny country’s GDP.

Dubai’s economic vision is perhaps best epitomized by Dubai World’s latest project, an $8.5 billion casino in Las Vegas that is opening just in time to take advantage of Sin City’s recession-era contraction. It’s a grand gesture that is literally and metaphorically built on sand.

Meanwhile, back home in Dubai, it’s not Sin City but Sim City. “Dubai’s constitution is the Guinness Book of World Records as it builds the largest theme park in the world double the size of Disneyland, throwing in the Pyramids of Egypt, an Eiffel Tower that is taller than the original tower, Taj Mahal that is one-and-a-half times bigger, and the Leaning Tower of Pisa that duplicates the defect,” writes Canadian architect H. Masud Taj. “Also the biggest mall in the world containing the largest aquarium in the world, the tallest building in the world, the tallest hotel in the world, the largest international airport in the world, the biggest artificial island in the world with the longest artificial beachfront in the world.” Dubai has even brought in Brad Pitt as a “design consultant” for a new hotel.

Dubai, then, represents everything that is wrong with the global economy. Dubai World, which sports the slogan “The Sun Never Sets on Dubai World,” has leveraged its way to the top. Its expansion has been sustained by an enormous real-estate bubble. Its survival depends on rampant consumerism. Its image revolves around size and celebrity and simulacra. And the whole edifice relies on migrant workers, most of them from South Asia, who are paid poorly, treated terribly, and forbidden to strike.

It’s no surprise that the Dubai house of cards is on the verge of collapse. It’s also no surprise that the Dubai government is trying to distance itself from the problems of Dubai World: always a good strategy to let others pick up the pieces (like richer Abu Dhabi). The problem is that Dubai is not alone in its profligacy. Other countries — Latvia, Hungary, Greece — are also struggling with mountainous debt. Investors are getting antsy. The auction block, as Oraib Toukan predicted, may well be just around the corner.

Maybe Google will step in and buy up its first country.

Speaking of Nation-Building…

President Obama is set to announce his plan to send more troops to Afghanistan. He’s listening to his top advisors. But he’s not listening to the American people. A new poll out of the heartland shows that support in Iowa for the president’s war policy has dropped 16 percentage points in the last two months to reach a 38% approval rate.

Al-Qaeda is largely gone from Afghanistan. The Taliban have only gotten stronger as a result of troop escalations. So, why are we escalating? Do we really think we can build a nation in Afghanistan at the point of a gun?

“Nation-building must be conducted by the people of nations concerned,” writes Foreign Policy In Focus senior analyst Adil E. Shamoo in Nation-building in Afghanistan, the most recent addition to our South Asia focus. “This process will take decades, but that is no different than the current manner of military-led nation-building. The education of future generations will provide the nourishment for prosperous and democratic systems of government in Afghanistan. There are no shortcuts to modernity, as the case of Iraq demonstrates. To help Afghanistan, we must paradoxically engage over the long term and yet also engage from a distance so that the Afghan people are the creators of their new nation.”

Meanwhile, the Obama administration is doing practically nothing to reform the military budget. As FPIF research fellow Miriam Pemberton points out, 87% of our security dollars still go to the military rather than diplomacy, peacekeeping, or economic development — just as in the Bush era.

“In his first speech to Congress, President Obama promised to ‘reform our defense budget so we’re not paying for Cold War-era weapons systems we don’t use,’” Pemberton writes in Bush-Style Military Spending Not Over Yet. “To their credit, his administration did manage to knock off a few this year. Though short, it was a longer list than at any time since the period of defense cuts following the end of the Cold War. The biggest prize was the F-22 fighter jet. F-22s, which cost $350 million each, were designed to fight planes the Soviet Union planned to build and never did. The F-22 is too exotic and costly ever to have been used in the wars we are actually fighting. It deserved to die. It took a furious battle to keep this plane from coming back from the dead: The F-22’s contractor has craftily placed jobs building the plane in 44 states. The Obama administration had to threaten to veto the entire defense spending bill if Congress reversed its plans for the F-22’s demise. But while the Obama administration successfully cut about $10 billion in spending on such turkeys, it then added about $20 billion in additional military spending.”

Finally, in Postcard from…Tawang, FPIF contributor Saransh Sehgal reports from the China-India border. “Tawang is once again in the news because of a visit by the Dalai Lama to a Buddhist monastery that was his first stop after leaving China in 1959,” he writes. “India’s growing economic and diplomatic clout has made it more assertive in dealings with its regional rival. The government has stood firm in the face of Chinese protests over the Dalai Lama’s trips to Arunachal. The religious leader’s visit there is seen as a double provocation — a challenge to China’s control over Tibet and to its claims over this part of India.”

FPIF, December 1, 2009

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