It was dubbed the sparkling jewel of the Persian Gulf – and held up as proof of the wonders of the free market.
When the credit crisis broke in September, Dubai’s rulers, leading economists and the financial press gloated about how the Gulf kingdom would buck the trend.
A £13 million mega-party was held to celebrate the completion of £1 billion Atlantis resort complex – with a fireworks display that “could be seen from space”.
Celebrities, the global rich and investors flocked to see this oasis of calm under the rule of “visionary” Sheikh Mohammed bin Rashid al-Maktoum.
British investors, in particular, were sold the idea that they could buy into the “Dubai dream” – and young prostitutes, mainly from Iran, Iraq and Eastern Europe, were shipped in to tend to their needs.
Anything and everything was possible, if you had the money – until the real world came crashing in. Two days after the party, Dubai admitted it was on the verge of bankruptcy.
Oil-rich Abu Dhabi, one of the seven kingdoms that make up the United Arab Emirates (UAE), lent the kingdom $80 billion – more than the value of Dubai’s entire economy in 2006 – to see off a potential financial meltdown.
It was a rude awakening to the Gulf state that sought to make itself the playground of the rich – with skyscrapers, luxury villas dotted on man-made island oases, and £42,000 a night hotel suites (breakfast excluded).
The financial news agency Bloomberg reported that the classified ads section of local newspapers “read like an obituary for a real-estate market”.
Real estate prices are expected to collapse by 40 percent, pulling down investors who fuelled the property boom by “flipping” – buying and then reselling properties that are yet to be built.
Sheikh Mohammed jumped in to guarantee bank deposits and in effect nationalised the two main home mortgage lenders, which had run out of money.
Mortgage companies that used to offer 90 percent loans on homes have stopped lending altogether, while others have scaled back.
Many of the state-run construction firms borrowed huge sums – driven by speculation, easy mortgages and cheap credit. These companies now owe the equivalent of the emirate’s entire economy.
Emaar Properties, which is building the tallest skyscraper in the world, has seen its share price plummet by more than 80 percent.
Nakheel, the state-owned developer of three palm-shaped islands in the Persian Gulf, announced that it is scaling back its $30 billion in projects.
Oil wealth, speculators’ dollars and dirty money fuelled this boom, but jobs are now disappearing. Construction companies are laying off workers and slashing wages.
These cuts are set to have a dramatic impact on the region – the Lebanese government, for example, fears that some 30,000 Lebanese families will be heading home as work dries up.
Similar stories are emerging from Egypt, Yemen, Syria and Iraq.
The Dubai dream created nightmares for many. The region is rich in oil yet the vast majority of people live in searing poverty and deprivation.
This monument to free market capitalism always came at a price.
Over one million workers, the majority drawn from South Asia, toiled in the cruel summer heat to complete the construction projects.
The average monthly salary in the UAE is £1,340, but these migrant workers earned just £63 – half of which was deducted for food and the cost of a work visa.
These workers live in vast shanty slums on the edge of the gleaming cities. Banned from joining unions or going on strike, they have been at the mercy of the construction firms controlled by the government.
They are the first to suffer the impact of the economic downturn. Thousands are said to be leaving, many without receiving their final pay cheque.
But on many occasions they have been on strike, occupied construction sites and clashed with riot police.
They caused panic in the ruling circles when they marched down the glittering Sheikh Zayed street in Dubai City in March 2007.
Yet the global rich still see Dubai as a refuge to escape the impact of the financial crisis, and any rise in taxes.
Despite the property crash new money, mainly from Iran and Iraq, is said to moving in.
Today Dubai’s incomplete towers, those vast empty monuments to conspicuous wealth, remain a testament to the madness of the free market.