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When Dubai sneezes, poor nations catch cold

So enough about the struggling middle class. In this global financial crisis, how are the really rich holding up?

To find out, I spent several days in Dubai, the most populous city in the United Arab Emirates and world capital of conspicuous consumption.

So far, the ultrarich are bearing up well. If the scene at Dubai's luxury Burj al Arab hotel is anything to go by, there's still robust demand for hotel rooms that start at about $1,500 a night and bikinis that cost $800. This level of consumption is impressive, especially when you consider that the superrich must struggle with a serious unemployment problem — almost none of the designer-clad men and women who grace the Burj al Arab appear to have, uh, jobs. But they cope bravely with this situation, finding in it an opportunity to pay culturally enriching visits to Dubai's many beaches, nightclubs and shopping malls.

Okay, for us normal human beings, it's hard not to be revolted by Dubai, which boasts the world's tallest hotel (the aforementioned Burj al Arab, which is shaped like a sailboat), one of the world's largest indoor ski slopes and the largest shopping mall in the region. Crammed with cold-eyed Russian oligarchs, coked-out London pop stars and the spoiled princelings of global finance, Dubai is repulsive enough to make most ordinary mortals start rooting for the collapse of global capitalism.

I visited Dubai as a participant in the World Economic Forum's Summit on the Global Agenda, where I was assigned to a working group on "fragile states" — though in the midst of Dubai's opulence, it felt strange to be discussing the problems of the world's weakest and least stable states (Afghanistan, Congo, Pakistan, Iraq, Zimbabwe, Haiti and the like).

But even ultra-affluent Dubai is fragile these days. You see, this gem of the postmodern, globalized economy doesn't really produce anything of value — its oil accounts for only about 5 percent of gross domestic product. Its economy relies on services, tourism and … that's about it, actually. Those elaborate hotels, malls, amusement parks and skyscrapers? Heavily leveraged — built out of the shifting sands and the same intoxicating thin air that sustained Wall Street until recently.

And Dubai may be going down. The oil-rich neighbors that helped finance its boom have seen oil prices plummet, and, worldwide, credit for speculative real estate projects is drying up. Sooner or later, even the suntanned loafers here are going to feel the pinch.

I'm tempted to cheer, but, unfortunately, the pain won't be confined to the superrich.

Nearly 80 percent of the United Arab Emirates' population is made up of migrant laborers brought in to build Dubai's skyscrapers and clean its luxurious hotels. These migrants come from India, Bangladesh, Pakistan, Uzbekistan and other poor and fragile regions. Once in Dubai, they work long hours in poor conditions, earning an average of $4 a day.

But it's still more than they'd earn at home, and the wages they send back to their families help fuel development in their own countries. The UAE is the world's third-largest sender of remittances; its migrants send an estimated $6.5-billion to their home countries each year,. If opportunities in Dubai (and other wealthy, migrant-dependent regions) diminish — and they will — many of those migrants will be forced back home, reducing remittances and increasing the pool of labor in fragile states already struggling with high unemployment rates.

The root of the global crisis lies in esoteric financial practices devised by elites, but the fallout will rain down on the globe's poorest states.

Sheik Mohammed bin Rashid al Maktoum — prime minister of the UAE and ruler of Dubai — reminded World Economic Forum Summit participants that "we live in a global village."

It was a safe cliche. But it was also a polite way to remind the assembled movers and shakers that if Dubai goes down, it will take a lot of others down with it.

Rosa Brooks is a professor at the Georgetown University Law Center. E-mail her at rbrooks@latimescolumnists.com.

When Dubai sneezes, poor nations catch cold 11/16/08 [Last modified: Tuesday, November 18, 2008 4:23pm]

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