In an amazing change of fortune, it appears that the massive building boom in Dubai may be meeting a messy end. Similar to the “irrational exhuberance” that took place during the Dot-com era, real-estate speculation took hold and housing prices escalated rapidly along with the dramatic office towers and off-shore islands. But now with the credit crisis and the precipitous drop in oil prices, the bottom appears to be falling out.
A fascinating feature in this week’s Newsweek picks apart all of the reasons for this dramatic decline in fortunes.
The future of Dubai rests on the availability of cheap fossil fuels for energy generation, and the willingness of the world’s wealthy to travel by airplane to the this luxurious destination. New evidence suggests that Dubai could be irreparably harmed by climate change that could dry up the available water.
Will Dubai be remembered as one of the many excesses of early this century or can it save itself? There are growing movements for more green approaches in this city state, but the pendulum of globalization may have swung too far away toward recessionary frugality to return it to prominence as infrastructure spending turn toward internal and practical pursuits.