Gone are the days of seemingly endless boom in Dubai as credit has dried up. Today, Dubai sits on $50 billion of debt, had to seek a $10 billion loan from the far richer Abu Dhabi, the expats are heading home, and 60% of proposed projects have been either canceled or postponed.

It could not have gone on forever. Watching Dubai build one skyscraper after another, I could not help but wonder to what end? Do the rules in Dubai think that architecture just fills itself up with productive workers?

What’s the point of having the world’s tallest office building if there is no local talent to lease office space?

That entrepreneurs are born in the womb of fancy hotels. The Sheik of Dubai seemed to believe that as long as Dubai as similar streets to, say, New York than the dynamic economy of New York would spring up in Dubai. But this is such a gross fallacy that it is hard to believe one could not see it as anything but.

New York is not just skyscrapers, New York is home to educational institutions. And New York is in a nation with the best university system in the world. The rules in Dubai invested in property, but not in human capital.

Despite the first-class infrastructure, Dubai has an native population this is low-skilled. It boosts not a single highly-rated university and due to the generous welfare state, most young people do not even care to find employment. Or at least not employment in the private sector. Many Gulf Arabs are content working for state institutions. In Kuwait, for instance, 95% of Kuwaitis [not to say foreigners living in Kuwait] work for state institutions. This mindset stifles innovation and entrepreneurship, people are just content with having a generous state salary. Very few seek out to become someone like Bill Gates.

It was so myopic for Dubai’s rulers to think that if the city has a world-class trading floor, the stock exchange would flourish. As The Economist once noted, in order for Dubai to have a preeminent stock exchange it must first develop an indigenous base of traders. Dubai’s rulers thought that if the recreated the shell of Western institutions, the core would just magically fill itself in.

Alas, things do not work that way. Sheik Mohammad al-Maktoum could still turn things around. He could cancel all fancy projects and divert all money for the canceled projects into building a world-class education system. He should encourage private employment but cutting public sector job growth and welfare.

Unless the rulers of Dubai realize that what makes Western economies so dynamic is free enterprise, education and entrepreneurs; all Dubai and other Arab wannabees will develop into is satellite sites for Fortune 500 companies instead of being pioneers in business themselves.

Dubai should be more than just a hub or dumping ground. It should be a genuine Honk Kong. But first it needs a revaluation of priorities.