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Wednesday, April 13, 2005

Hello, Dubai?

One of the plots I envisioned for a science fiction story in the 1970s and early 80s was an enlightened ruler of a third world country realising that wealth was not the product of natural resources or capital, but rather the consequence of human minds set free to innovate and create what didn't exist before. This never-written story envisioned the king of a small, desperately poor, country declaring the kind of rule of law envisioned in L. Neil Smith's North American Confederacy (comic book edition), and inviting creative people from all over the world to come and do their best, without having 7/8 of the fruits of their labour looted as is the norm in the United States and the so-called European Union.

"Destroy it" (the all-powerful kleptocratic state) "and they"--the creators of wealth--"will come". I imagined a small state in sub-Saharan Africa becoming the world's technological hub, with research campuses spreading across the landscape, innovative space launch services undercutting the sclerotic military-legacy systems of the Old World, and free people showing that the human mind need only be unshackled to create unimagined wealth anywhere in the world.

I never wrote that story--I had a lot of other things to do in those days, and when I had the free time to scribble, it looked like Singapore had gone a long way to realising the scenario I'd envisioned. Interestingly, it may be happening again in what many people would consider one of the least likely of places, Dubai in the United Arab Emirates. The Emirates are unusual among Gulf states in that they derive only 1/3 of their GDP from fossil fuel exports and, with limited reserves, are expected to be the first to exhaust them. Dubai has been lucky enough to have two enlightened despots in a row, who have invested oil revenue in positioning the country as a world-scale business and trade hub to provide a sustainable economy after the wells run dry. They have built (and are expanding) one of the most modern airports in the world, and Emirates airlines contends with Singapore's for the most modern and rapidly growing fleet.

Douglas Casey, whose 1979 book The International Man first got me thinking about getting out of the U.S., has visited Dubai and was very impressed indeed with what he saw. Certainly there is no shortage of thinking big. The world's tallest building is scheduled for completion there in 2008, and perhaps the most extravagant real estate development ever,The World Islands. And this is not a public debt funded bubble. Public debt is just 18.1% of GDP (compared to 62.4% for the U.S. and Japan's 154.6%) and, at USD20.7 billion is well covered by USD15.8 billion in foreign exchange reserves. GDP growth rate was 5.2% per annum as of 2003. Apart from the oil and banking industries, there are no taxes of any kind. An import duty of 4% is charged, but many items including food, medical supplies, and building materials are exempt, as are all transactions in the free trade zone.

Constructing what amounts to a libertarian paradise (but limited to economic freedom) within a traditional Islamic monarchy located in one of the regions of the world generally considered one of the least stable and economically under-performing is, if nothing else, an interesting experiment. If it works, it may be a lesson to other developing countries, even those without the huge head start that Dubai's petroleum wealth provides.

Posted at April 13, 2005 16:52