The seeming decline of Dubai requires several “lessons learned” report for future aspiring city-states: Money does not grow on trees. Simple, yes, and fundamental as well.

Dubai was delusional about its projects. Planning one outlandish man-made island after another and with little concern about finances. And why would it thought the shiekhs? The good times will never stop! Well, alas, they have and now Dubai has a lot of empty buildings, unfinished or canceled projects and debt. Lots and lots of debt.

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’s debt has continue so much so that Japanese firms are going with pay:

“Japanese construction companies are facing “serious debt problems” amid issues with being paid for work done in Dubai, a top ranking official has said.”

Dubai needs a new business model: build only what you can afford.