Dubai, the symbol of globalisation and neo-liberalism is shaking...
The Emirate of Dubai which has accumulated almost USD 80 billion worth of foreign debt had to ask for a credit extension of six months for the large holdings Dubai World and Nakheel it controls. After this request, the credit rating of some of the means of borrowing issued by the emirate were downgraded to ‘toxic’ by some leading assessment firms. The world economy is tolerating Dubai’s bankruptcy and seems to have overcome it so far with minor shocks. However the case of Dubai is telling: the journey to the bottom continues; globally…
Dubai which was engaged solely in fishing in the 1960s, became the trade capital of the region after the 1990s, capitalising o Hong Kong’s turn over to China. The city state which made its name known around the world with grand projects in the 2000s is a correct indicator of the change in the global system. Unbounded luxury, an artificial island in the shape of a palm tree, an archipelago making up the map of the world, grand mansions of reclaimed land and indeed celebrations which can be seen from space abounded in Dubai. Dubai with its population of 2.5 million is small compared to many other countries, but it is the most crowded emirate in the UAE.
Only 17 per cent of the population is originally from Dubai. The proportion of the Asian population is 70 per cent. In wealthy Dubai, more than 250,000 people, that is one in every ten, have an income of less than ten dollars a day. Dubai is an oasis of neo-liberalism, which made it to the top from nothing and now is rolling rapidly back towards nothing. Dubai contains within it all the characteristics of the period of neo-liberalism and globalisation which continues today. The state is run like a company. Markets come before democracy, as well as tradition. Dubai may have grown on oil exports, but its real leap came with large real estate projects.
Dubai is a pearl of the new economic order. For that reason, as it rose with the global system, it is now weakening along with it. The OECD has announced that the debt of 30 countries has grown by 100 per cent in 2010. This means that the figure has doubled compared to 20 years ago. It is estimated that Japan’s public debt will increase by 200 per cent next year. The same figure is expected to be 127.3 per cent in Italy and 111.8 per cent in Greece. Dubai reaped great benefits from the expansion in global trade and rise in value of speculative investment. To make money from money and to realise profits by creating them out of nothing increased Dubai’s wealth many fold. However, the global crisis affected Dubai directly.
During the later months of 2009 real estate prices in Dubai fell by 50 per cent. Some estimate that the value of real estate in Dubai is now at 58 per cent. This has resulted in 12,000 job losses. According to 2008 data, 30 per cent of the GDP of Dubai was made up of “real estate business”. The extraordinary building speed in Dubai, which financed large projects by starting on yet larger projects is now down to a normal pace. His development might sent Dubai back to the years when it made its living from fishing.
Abu Dhabi was brought USD 5 billion worth of bonds from Dubai. Previously it had carried out a similar purchase worth USD 10 billion. What pushes Abu Dhabi to charity is the fact that the collapse of Dubai would spell disaster for the region. The global system is resisting handing Dubai over to the crisis. However, come the end of 2010, one may look back to see that insistence on error brings greater disasters.