Is Dubai crashing? Will it rebound?

The tiny Persian Gulf kingdom of Dubai, part of the United Arab Emirates, has made a name for itself in recent years with its outrageously over the top skyscraper and development projects. It has tried to sell itself as a financial, intellectual and tourism destination of the Middle East. Apparently, it is now crashing, a la Las Vegas.

Perhaps. But, Las Vegas isn't necessarily the best comparison. Dubai isn't mostly selling glitz, although it does have that in spades. Before the boom its entertainment offerings were something like the Crimean Peninsula was for the Soviets. It was a family friendly small resort targeting the relatively modest Islamic world.

Hong Kong, Macao, Singapore, Switzerland, Luxembourg, Monaco, Delaware and various tax havens like the Cayman Islands are probably a better comparison, in economic model, if not in climate. Yes, it has opportunities for R&R, but that isn't the main draw. Essentially, what Dubai was selling had more to do with its business and financial environment than it did with its entertainment appeal.

Certainly there is pent up local demand for a relatively orderly business climate in the region historically known for its savvy merchants. Consider the some of the local Islamic world alternatives to Dubai.

* Saudi Arabia (with harsh and indifferent royal justice, gross influence from the huge royal family, hordes of idle radicalized scions, and imported labor),
* Iraq (home of the violent insurgency with a justice system that has only functioned for a few years and recently saw the exodus of the entire middle class),
* Iran (the original Islamic theocracy),
* the Palestinian territories (all the rocket attacks and refugee camps, with none of the effective self-government),
* Sudan (genocides R us),
* Yemen (we decided to be one country again if the insurgents don't change their minds),
* Somalia (a failed state with pirates),
* Ethiopia (we still have droughts and starvation),
* Eritrea (a new born nation where almost all men and women are military veterans who spent a generation fighting an insurgency),
* Afghanistan (home of the Taliban and a thriving heroin trade),
* Pakistan (where judges are removed by military dictators with nuclear weapons, religious violence thrives, al-Queda makes its home and governments are changed via street protests),
* Syria (where elections are won by the political party with the most missiles),
* Lebanon (where we used to be like Dubai until our buildings were blown to smithereens by religiously motivated terrorist, anti-Israeli militias took over the South, refugees flooded our brothels, and Syria took over)
* Qatar (home to large numbers of infidel American soldiers),
* Egypt (where bloggers go to prison and tourists are attacked by terrorists), and
* Kuwait (where slavery thrives because George W. Bush saved our butt in the First Gulf War, and Iraq is right next door and still wants our oil).

Dubai still has to compete with Oman, which doesn't have nearly the infrastructure, Dijbouti, which is too close for comfort to Somalia, fellow UAE states, and Jordan, but who is to say that a little hustle couldn't make it an attractive place to do business for merchants not interested in jetting off to Istanbul, Paris or London to do deals.

When the real estate crash hits bottom, and Dubai's economy collapses, Dubai will still have nice real estate and everyone else will have receipts from oil money pissed away. It will be a bit like Grand Junction, Colorado after the oil bust; empty but ready to go when the boom returns. The Asian economic model has demonstrated that people and culture matter a lot more to economic prosperity than raw materials. The skyscrapers matter as much because the demonstrate an ability to organize large business ventures in a way that produces results as they are for the office space that they provide. Alas, a lack of transparency in the crash has cast doubt about whether Dubai can live up to the claims that it can be the fair and open economy that a financial center requires, upon which those skyscrapers were built.

The demise of Baghdad as an Islamic world business center full of middle class professionals has also opened up a gap in the Middle Eastern economic ecology.