Dubai rose so quickly not on shrew calculations, but on simple dreams to house among the most extravagant projects: man-made islands, tallest building, seven-star hotel, DubaiWorld theme park, ect...

All that stuff is well and good, but leaving aside the taste factor and the necessity there is the overriding question of cost. Dubai was so busy planning the next big thing that its state enterprises did not think too much about affordability. Can Dubai pay all this off? The tiny emirate borrowed heavily, now the world recession is downing the economy and the bills are coming in.

Dubai has at least $80 billion in debt (the government is very secretive so the figure is now precisely known) and Dubai’s recently created support fund may not be able to pay that off. Credit-rating firm Standard & Poor’s stated that the fund is “insufficient.” $50 billion of debt will have to be paid for in the next three years and it is not yet clear how/

Dubai will probably turn to its much wealthier neighbor Abu Dhabi which already has loaned the city-state $10 billion. Dubai will not be sunk in debt. The Middle East still needs a financial hub, a major airport hub, and a major trade port. Dubai fills that role better than any.

But the current financial crises should be a lesson: wealth does not just materialize out of high buildings. Dubai’s leaders are not experts on finance or entrepreneurship (a lot of the management is imported). They operated on the fallacy that if Dubai has the same fancy buildings as New York, London and Paris then it will have the economy as well. But real economies are not born from the top-down with rulers building office complexes, but from the bottom-up with small businesses growing and private firms providing the infrastructure (for the most part).

Dubai should recalculate its business model and invest in better schools to build a factory of talent that will then fill those offices rather than on such meaningless projects like THREE man-made islands. Dubai cannot afford the incredible spending seen in recent years, that is not a path to real wealth creation since tourism does not require human capital; Dubai needs to be a entrepreneurial hub first and foremost.