Retrospective

"The debate we still ought to have is titled ‘The Future of Democracy’.
The current crisis offers a unique opportunity not only to
question our economic, regulatory and fiscal structures.
More importantly, we should question the process
that generates the choices in the first place
and determines their fulfillment.”

Bijan Khezri, Financial Times (April 22, 2009)

 

‘Generation Dubai’ was printed and released in early December 2008. Not only was the world staring into a full-blown financial and economic abyss following the demise of Lehman Brothers a few months earlier, but the credibility of Dubai’s sustainability was starting to be questioned too.

 

The book’s underlying thesis is that the world is driven by economics rather than laws. The public self-immolation of a young Tunisian street trader which was the birth of the 'Arab Spring’ protests against Middle Eastern totalitarian regimes starting in late 2010 is testimony to the fact that the world is motivated rather by economic aspirations than the fulfillment of political rights: Mohamed Bouazizi’s concerns were not free elections but free trade without arbitrary obstruction by public officials. And there are few places in the world other than Dubai that could serve as a better caricature to make the point. Mohamed Bouazizi is the quintessence of Generation Dubai.

 

For the purposes of the book, Dubai - with all its strengths and weaknesses - served as a mirror to highlight the deficiencies of the Western democratic and economic model. The analysis distilled policy prescriptions that could have made a difference to the unfolding of the financial crisis:(1) fundamentally overhaul the Western tax system with low and standardised tax brackets to neutralise the magnetic power of tax havens and re-allocate to productive use the massive resources increasingly spent on tax mitigation; (2) remove remaining trade and capital restrictions through a new global trade round to counter the potential threat of rising economic nationalism; (3) launch country-specific public infrastructure funds managed and largely capitalised by the private sector to modernise health, education and transport systems; and (4) expand principles-based financial regulations with globally integrated regulatory enforcement powers.

 

The Western democratic model urgently needs to reinvent itself to serve the interests of its citizens. The system does not generate sufficient revenues to fulfill its aspirations. The financial and economic crisis that started in the summer of 2007 as a credit crisis laid bare the thin ice on which Western democracies have been ‘progressing’ for too long. In an opinion piece published in March 2008 I wrote: ‘The prevailing view that an expansive monetary policy can ward off a consumer-driven recession is short-sighted. At best, interest rate cuts will merely postpone the radical reforms democracies’ prevalent fiscal, tax and governance models must undergo to sustainably revive economic growth.’

 

Following almost four years of central bank super-liquidity it is fair to conclude that a depression of the proportions of the 1930s has been averted but economic growth and job creation remain broadly absent. Financial markets have merely been politicised. We are now facing a solvency crisis, not a liquidity crisis. The obsessive fantasy of the Euro, for example, is likely to lay the ground for complete state failure in certain cases. Since the fall of the Berlin Wall in 1989 Europe’s relative weight in the world has been steadily declining. In fact, the Euro has blinded Europeans to their own decline. This is now changing.

 

I have dedicated ‘Generation Dubai’ to my wife Mila and our children Alexi and Stella. I am convinced that our children’s generation will eventually write a New Political Economy, less obsessed with politics and more focused on the satisfaction of people’s economic aspirations in view of fostering more equitable and sustainable creation of wealth.