Dubai provides another reminder of the volatility of emerging markets.
Are all emerging markets built on sand? Certainly anybody who thought emerging markets offered a one-way path to riches might think twice after the events in Dubai.
Investors who swallowed the fashionable notion that talent and capital will inevitably drift from West to East until all our wealth and influence is washed away will now be having hiccups.
Or at least they should be. Because Dubai's demise suggests the transition of power to the developing world isn't going down quite as smoothly as some people have suggested.
As the emirate has shown, democracy, accountability, a free press, corporate governance and all the other attributes of the West that we often take for granted turn out to be quite handy tools in a crisis.
Paper tigers
It's not just that Dubai has run up billions of dollars in debts that it can't repay without outside help, anyone can do that these days. It is the way it handled the mess that should really worry investors.
Everybody knows Dubai has been running into trouble for months, but getting a look at the books has been almost impossible.
Investors who suggested that the city-state was slow to react to the financial crisis were told to "shut up" by Dubai ruler Sheikh Mohammed bin Rashid Al Maktoum. That's how autocrats slap down impertinent questions.
When Dubai World demanded a six-month debt standstill for some of the $59 billion it owes, it did so in a curt five-paragraph note published on the eve of the Eid religious festival, just before the country shut down for 10 days. So much for transparency and accountability.
And many Dubai newspapers have either downplayed the crisis, or ignored it altogether. The Middle East edition of The Sunday Times, printed in Dubai, was canned after publishing a cartoon showing Sheikh Mohammed sinking in a sea of debt.
Canary in the desert
Investors in emerging markets have been here before, of course. Russia went through a sovereign default in 1998. Mexico, Thailand and Argentina have all been through tough times in recent years. Nobody should need reminding that these are risky places to do business, but investor memories are shockingly short.
Developing countries don't always play by the rules. Remember how Russia tried to bully BP (LSE: BP) and Royal Dutch Shell (LSE: RDSA) out of the country just three years ago? They're begging them to come back now, but for how long?
Companies trying to do business in China report the country opaque and difficult to break into. Basics such as copyright aren't respected. These are not easy places to do business.
The myth of endless growth has been sold harder in China than anywhere else. Unlike Dubai, it is a real country, which makes stuff, and has trillions in the bank, and Chinese workers can't flee for the airports when things go belly up.
So it seems unlikely to go the way of Dubai, but you never know. It has many of the trappings of an asset and property bubble, although Anthony Bolton disagrees.
The UK ain't Dubai
And yes, it is true the UK is also in a multi-billion pound mess after embarking on an equally insane debt-fuelled splurge. And yes, we are planning to borrow three times as much as Dubai in this financial year alone. And yes, our politicians also have a tradition of burying bad news on public holidays. And yes, the Bank of England did lend HBOS and Royal Bank of Scotland (LSE: RBS) more than £60 billion of taxpayer money without telling us.
So we're not exactly innocent here.
But at least people who fall into debt in the UK don't have to dump their car at the airport and flee the country, or face prison. And we have Parliament, the legal system, the police, health service and social security benefits to keep the country together, plus a general election next year when we can avenge ourselves on those responsible.
And at least out journalists are free to print the truth, if they can find it, and our cartoonists can viciously lampoon Gordon Brown. They don't have the same freedom in Dubai, and it's even worse in China and Russia.
In this respect at least, The West Is Still The Best.
Tax breaks and tower blocks
Plenty of people are running around claiming they foresaw Dubai's demise years ago, just like they predicted the credit crunch.
If China was to suffer a similar fate, no doubt the same people would be claiming much the same thing.
Dubai's collapse looks inevitable in retrospect, but plenty of people were still buying into the dream until the last minute. And who knows, it may recover. Russia did. Thailand did. Argentina kind of did. Even Britain might, one day.
But they are real countries, with history and infrastructure and local populations, rather than a glitzy desert mirage built on sand desalinated water.
The World in one place
Dubai is not the world (although The World is in Dubai). The consensus seems to be that the global economy will survive this crisis, although we now feel slightly less confident about the next one.
And investors should feel rather less confident about grandiose claims that emerging markets offer a smooth path to riches. Dubai suggests that they are likely to be just as volatile as they always have been.
Online UK newspapers reporting on Dubai's travails have drawn a storm of postings from angry expats claiming journalists have unfairly singled out Dubai, and should be turning their sights on their own country.
They clearly have been reading the papers, because British journalists have been doing little else but rip apart Gordon Brown's bungling. Every City banker and Westminster politician is now treated as a greed-addled thief.
They don't have a tradition of this in Dubai, or China, or Russia. At least our south Asian immigrant workforce is allowed to retain its passports and (should) earn minimum wage.
Dubai couldn't have done a better job of pulling the Persian rug from under investors' feet if it had tried.
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