Archive for March, 2011

March 12, 2011

Dubai on Empty

The only way to make sense of Dubai is to never forget that it isn’t real. It’s a fable, a fairy tale, like The Arabian Nights. More correctly, it’s a cautionary tale. Dubai is the story of the three wishes, where, as every kid knows, with the third wish you demand three more wishes. And as every genie knows, more wishes lead to more greed, more misery, more bad credit, and much, much, much more bad taste. Dubai is Las Vegas without the showgirls, the gambling, or Elvis. Dubai is a financial Disneyland without the fun. It’s a holiday resort with the worst climate in the world. It boils. It’s humid. And the constant wind is full of sand. The first thing you see when you arrive is the airport, with its echoing marble halls. It’s big enough to be the hub of a continent. Dubai suffers from gigantism—a national inferiority complex that has to make everything bigger and biggest. This includes their financial crisis.

In just one life span, Dubai has gone from sitting on a rug to swiveling on a fake Eames chair 100 stories up. And not a single local has had to lift a finger to make it happen. That’s not quite fair—of course they’ve lifted a finger; to call the waiter, berate the busboy. The money seeped out of the ground and they spent it. Pretty much all of it. You look at this place and you realize not a single thing is indigenous, not one of this culture’s goods and chattels originated here. Even the goats have gone. This was a civilization that was bought wholesale. The Gulf is the proof of Carnegie’s warning about wealth: “There is no class so pitiably wretched as that which possesses money and nothing else.”

The Arabs live in their own ghettos, large, dull containments of big houses that are half garage behind security walls, weighed down with satellite dishes. We drive by an empty lot, and my driver tells me that this was the site of the house of the second son of a high-ranking official. Daddy had it bulldozed when his boy was caught having a Western-style rich-brats’ party. There is a growing, unspoken problem with the indigenous youth here. Fat, and spoiled beyond reason, they are titanically rude. They have reportedly taken to forming slovenly gangs that have been responsible for random attacks on foreign workers and women simply for the computer-game fun of it. This is a generation of kids who expect to never seriously work—but do expect secure jobs. An Indian manager who runs hotels in Dubai told me that everybody dreads the call from some royal Arab telling them to expect a nephew who will be coming to work. The boy will demand an office, a secretary, a car, wages, deference, and an empty schedule. It’s a sort of protection shakedown that you pay to do business here.

Dubai is the parable of what money makes when it has no purpose but its own multiplication and grandeur. When the culture that holds it is too frail to contain it. Dubai is a place that doesn’t just know the price of everything and the value of nothing but makes everything worthless. The answer to everything in Dubai is money. In the darkness of the hot night, the motorways roar with Ferraris and Porsches and Lamborghinis; the fat boys are befuddled and stupefied by sports cars they race around on nowhere roads, going nowhere. Taxi drivers of their ambitionless, all-consuming entitlement. Shortchanged by being given everything. Cursed with money.

[Vanity Fair]

March 9, 2011

Oil and Unrest: What Uprising in the Arab World Means for Energy Supplies

Many of the factors behind the current protests — high unemployment, large income disparities, rising costs of living (especially for food), and ruling gerontocracies and kleptocracies — have their roots in the emergence of the region’s petro-states, a process that was cemented that year.

Then the price of oil began a nearly two-decade slide. Between 1981 and 1985, the price of oil fell from $35 a barrel to $10, and then stabilized at around $20 a barrel for much of the 1990s (although it did plunge once again in 1998 to $10). Over the same period, the populations of OPEC countries started to mushroom, as both life expectancy and fertility rates rose. With oil revenues falling and populations growing, per capita income began to decline. Yet governments did little to diversify their economies; in fact, oil-producing states did not begin to invest in diversification and increase spending on social welfare until the spectacular rise in oil prices. (Other oil producers, Libya among them, did not even try.)
This neglect contributed to the many factors underlying the current wave of civil unrest, especially to the region’s stagnant incomes and unemployment rates. Now, with the contagion spreading to the oil-congested area of the Arabian Peninsula and Persian Gulf, the likelihood of an oil apocalypse is no longer implausible: in such a scenario, domestic upheaval would bring civil strife and violence, which in turn would lead to a reduction or cessation of oil production. A true apocalyptic scenario would see these events take place in major producers such as Saudi Arabia.

The many domestic factors that have led to the recent turmoil across the region are not going to disappear in 2011. Virtually no oil-producing country in the region has been able to diversify its economy away from oil. Almost all are seeing domestic oil consumption rising rapidly as governments subsidize gasoline, diesel, and power in an attempt to deliver material well-being to their citizens. Cheap energy is critical to the legitimacy of these regimes, making price spikes politically difficult. So far, only Iran has been able to raise domestic gasoline prices — and that is only because of its lack of refining capacity and the squeeze of the U.S.-led embargo on gasoline deliveries to the country. Oil consumption within the Gulf countries rose from 4.8 million barrels a day in 2000 to 7.8 million in 2010, eroding exports and raising the minimum price of oil needed for oil-producing states to break even on their extraction and production costs. As a result, those states dependent on oil from the region are facing troubling prospects: a near-term loss of supply due to the current disruption and a longer-term loss of supply due to growth in domestic consumption.

[Foreign Affairs]

March 3, 2011

Wadah Khanfar: A historic moment in the Arab world

[Ted Talk]

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