I had the pleasure of visiting Dubai for the first time last week. The city is a wonderful example of unintended consequences; because it had the misfortune of almost running out of oil, it was forced to create other ways of generating income. It has since made huge investments in both tourism and the financial sector.
Although I didn’t get to do any touristy things myself, my good friend Nigel spent a week there with his family and could not have been more pleased with the beaches, (indoor) ski slope, dune buggy adventures, etc. Outside the city is a giant construction project for something called “Dubailand,” which looks like it will be a Disney World-scale family amusement complex. For Americans, travel time is a big obstacle to vacationing in Dubai — the trip home took me almost 24 hours door-to-door, including a connection in London. For Europeans and Asians, however, Dubai is pretty convenient. It is quicker to fly from Europe to Dubai than Europe to Chicago.
On the finance side, Dubai has created something called the Dubai International Financial Center. If I understand it correctly, it is a 100-acre area that is both a tax-free zone for financial activities and the place where financial transactions are done under a different set of laws designed to protect foreign capital. Interestingly, some recent economic work suggests that rule of law is important for economic growth, but democracy is not. Dubai is following that path: strong rule of law and protection of foreign assets, but with foreigners (who make up roughly 85 percent of the population) unable to vote.
How upset are the foreigners over the fact they can’t vote? Among the ones I talked to, at least, not the slightest bit — just as an economist would expect. All they seemed to care about was the fact that they make good wages, have a nice lifestyle, and are free from crime.