It’s easy to be critical of Dubai and its socioeconomic model.
The city-state’s racialized labor hierarchy is plain as day. South Asian and African workers sweat in the broiling heat to expand the city’s infrastructure and erect its “iconic” skyscrapers. Filipinos, women and men, manage everyday commerce. Women, some of them Eastern European, service the male contractors in bar-brothels. In cool, air-conditioned comfort, white Western Europeans collect the commissions and the handful of Emirati citizens reaps the rents. These segregated communities exist in and around the hotel pools and restaurants frequented by tourists (and academic researchers), who look the other way.
So it came as little surprise when Dubai’s 2009 fiscal crash, part of the global financial meltdown, was welcomed with joy in many quarters. Plummeting real estate prices, abandoned projects and widespread layoffs seemed to signal an end to the Dubai experiment.
But predictions of doom have consistently fallen short. When the US began its pullout from Iraq, for example, the expectation was that the contractor and security business that had flooded Dubai’s hotels and port facilities would dry up. Yet that custom has been replaced by a new flow of Western prospectors looking to cash in on Iraq’s oil-fueled rebuilding and greatly increased consumption of consumer goods. When the city-state announced plans for a light-rail system, doubters said no one would ride, but today the lines are efficient and enthusiastically used. And when another of the world’s largest malls, Dubai Mall, opened in the midst of the fiscal crash, many believed its storefronts would never be filled. That prognostication, too, has turned out to be hilariously wrong.
So is Dubai really back? Well, first one must recognize that the 2009 crash was real and lasting. The emirate’s debt-leveraged growth came to a screeching halt when foreign creditors called in the interest all at once. For the first time, an Arab petro-princedom was at serious risk of default on its loan obligations. The various corporations tied to Muhammad bin Rashid Al Maktoum, the absolute monarch, were on the hook for billions. And while officials claimed a collective equity of $80 billion in domestic assets, no one knew what that amount consisted of or how it could be liquidated. Expatriates exited the country, simply abandoning mortgages and car leases with no fear of legal repercussions. Dubai’s laissez-faire approach generated its own blowback: easy come, easy go.
But Dubai’s leaders had two key political advantages. First, absolute rule comes with a special kind of rule of law. Many of the creditors who extended loans to fuel the city-state’s growth did so under the legal impression that Dubai’s real estate firms (Emaar) and transport operators (DP World) were sovereign, that is, state-owned, entities, thereby guaranteeing repayment. But when the crash hit, officials reverted to claiming that those entities were “private,” that is, family-owned, meaning that if creditors wanted to demand payment, they would have to do so within Dubai’s legal structure, where the rulers are also rather conveniently the arbiters of the rule of law. This neat trick persuaded most creditors to ease the terms of loans and accept a reduction of the interest charges. Second and more important, Dubai had the neighboring UAE capital of Abu Dhabi in its corner. Dubai’s crisis threatened Abu Dhabi’s investments as much as Al Maktoum’s, and so Abu Dhabi’s central bank came to the rescue with $10 billion. After all, the ultimate collateral is still the plentiful oil in the ground.
What the crisis and subsequent recovery revealed is not so much Dubai’s brilliance at development but the point to which global capitalism has evolved in the Gulf. Dubai was certainly not the first Gulf monarchy to institute a race-based labor hierarchy. The city-state trumpets its diversification from oil, but that is a myth, for without Abu Dhabi’s help (and Saudi Arabia’s), there would be no Dubai. While some Dubai corporations like Emirates Airlines expand internationally, those profits cannot cover the debts. As a result, officials have rolled out a number of regressive indirect taxes (the kind of value-added taxes libertarians in the West admire) on the expatriate community that, while short of income extraction, make a mockery of Dubai’s proclaimed tax-free status. Indeed, much of what is claimed as Dubai’s achievement is owed to external factors. Arang Keshavarzian has persuasively demonstrated that the growth of Dubai’s Jebel Ali port in the 1980s was tightly linked to the Iran-Iraq war and the rise in costs of shipping and insurance in the northern Gulf. In the 2000s, the money generated by America’s wars in Iraq and Afghanistan buoyed Dubai, only to be replaced by elite capital flight from Arab countries experiencing the 2011 uprisings. Washington’s recent crackdown on tax havens in Europe has only made Dubai’s financial and real estate sectors more attractive.
Less revealed through crisis have been the domestic social repercussions of Dubai’s openness to the world. Segregating and then expelling foreign workers when they attempt to strike is one manifestation. But the reaction from citizens is difficult to observe. High-profile arrests and the hunt for Muslim Brothers in the wake of the 2011 uprisings suggest that locals are not as quiescent as assumed. Maintaining the façade of a socially conservative Dubai (Muslims do not buy alcohol and women do not wear short dresses in public) requires not only increasing financial rents to the locals but also their own segregation. Over the years, the areas of the city occupied primarily by citizens have shifted, but the imperative to keep the locals away from the expatriates has remained. As the city has grown, new enclaves have opened to service this isolation of the citizenry, a tiny, ultra-privileged minority who are fearful of living in a city they did not build. Their educational facilities are handsome, but appearances deceive: Dubai has high secondary-school dropout rates and remedial programs at the university level are common. Decades of programs to push nationals into private-sector employment are rolled out again and again, only to fail again and again since unproductive public-sector jobs are so much easier. Expatriates express disgust with Dubai’s citizens, as they do throughout the Gulf, but few pause to ponder whether the sons and daughters of the sheikhs are more effects than causes of the boom-and-bust societies in which they live. Indeed, the most damning failure of Dubai’s development may be the cultivation of a feudatory younger generation.
Social scientists have typically looked at financial crises as the times when the most important politics happen. But that judgment may require reevaluation since boom and bust seem more symptomatic than exceptional with regard to the path of neoliberal globalization in the Middle East.
Dubai experienced smaller though no less jarring crises in the 1990s and 1980s. Kuwait, the usual contrasting case to Dubai, set the bar with the crash of Souq al-Manakh in 1981. Then, postdated checks instead of external creditors fueled a semi-legal stock market that traded in shares of corporations located outside Kuwait and, ironically in many cases, in the Emirates. Kuwait’s bailouts took longer, but, in the end, it was oil money that did the trick, with intervening help from Iraqi occupation and war. Boom and bust is just business as usual in the Gulf and local observers expect Dubai to experience another “downturn” ahead of the planned 2020 Expo.
So, yes, Dubai is back, but it never really left.