Dubai, Singapore and the Future of Neoliberalism

If Dubai and Singapore stop existing, it will mean a return to a more violent and dangerous world.

Dubai United Arab Emirates
Downtown Dubai seen from the Burj Khalifa (Unsplash/David Rodrigo)

It is the little things, they say, that count. The small places can tell us big things.

There are no smaller places than city states. Holdovers of bygone eras, they are quite nearly the oldest form of political organization our species has. Only tribalism is older and city states arose from settled tribes that over generations grew into legendary places like Ur, Jericho, Athens, the Yellow River city of Cai and the Indus Valley site of Harappa.

We have no empires left; a few kingdoms, though they keep dropping off the map. Nobody much minds. Yet if we were to lose our city states or our microstates, it would represent a collapse of the international order as we know it. Despite their tiny size, city states are bellwethers of their time.

Take famed Venice. From 697 until 1797, the Venetian Republic survived in a chaotic, dangerous Europe. The time called for weak loyalties and shrewdness. Venice played Byzantine emperors off German kingdoms, popes off Holy Roman emperors, Ottoman sultans off Austrian Hapsburgs. It used its geography of a deep, swampy harbor to build a great trading empire. Wily and intuitive, Venice’s rulers were hyperaware of their state’s weakness and acted accordingly. They play the game well for over a thousand years. Only when trade shifted westward and great powers like Austria and France began to organize as nation states did Venice’s republic fall.

City states tell us a great deal about their eras because they cannot ignore the trends. They must latch onto what works and discard what doesn’t or risk collapse and conquest.

Each era has its own challenges: Venice used trade in an anarchic, shattered Europe to bribe and battle the many powers surrounding it that were much stronger.

As the twenty-first century advances we have three formal city states: Monaco, Vatican City and Singapore, and several more microstates dominated by a single city like Qatar, the seven emirates of the United Arab Emirates, Bahrain, Kuwait, Andorra and Luxembourg.

And there are two in particular who are our fortune tellers: Dubai and Singapore.

For if the new world is to lose neoliberalism, it is Dubai and Singapore that will show us what that means

Brexit and election of Donald Trump were mortal blows against neoliberalism, the oft-whispered, rarely-named ideology of free trade, free movement, free markets and globalization that has anchored Western geopolitical approaches since the 1970s.

Fantastically detailed by The Guardian‘s George Monbiot, who writes:

Neoliberalism sees competition as the defining characteristic of human relations. It redefines citizens as consumers, whose democratic choices are best exercised by buying and selling, a process that rewards merit and punishes inefficiency. It maintains that “the market” delivers benefits that could never be achieved by planning.

Neoliberalism is what Ronald Reagan and Margaret Thatcher used against both the Soviet Union and their own domestic opponents. It browbeat the Democratic Party away from their beloved New Deal and provided the foundation for the European Union’s economic program. Open free markets and all boats are lifted; regulation, mandated economic equality, protectionism all are the enemy in this world.

While it’s true that both Trump and the now-leader of the Brexit movement, Prime Minister Theresa May, still spout pieties about shrinking the state, cutting taxes and setting the market free, their actions speak louder than words. Trump is going out of his way to shatter trade deals and spook migration of any sort; May talks like she wants to have her cake and eat it too with the European Union, but each day pulls her further from the continent.

For better or worse, the two greatest champions of neoliberalism are withdrawing into nationalistic protectionism. If we are to guess what that means for the rest of the world, we should look at the two city states that benefited the most from this era.

Singapore and Dubai: authoritarian states honed to neoliberal perfection

Singapore has a fake democracy with a rubber-stamp legislature; while the country goes through the motions of elections, none of brought a new party to power since 1959.

Dubai doesn’t even bother. The Maktoum family runs the city as a fief, subservient only to Abu Dhabi, the UAE’s capital, in foreign and defense matters.

In both cases, the two states had elites who understood their geographies placed them at severe disadvantages, though for different reasons. Singapore’s position at the head of the Malacca Straits have long made it a preferable harbor, but unlike others who might fear conquest by neighbors, Singapore was in fact expelled from Malaysia in 1965 after racial tensions ratcheted too high for Malaysia to endure. Susceptible to blockade and closed borders, Singapore’s elites understood they had to push hard to integrate themselves to the international system as it existed and exploit its rules to the hilt.

Singapore avoided the Cold War entirely. While communism influenced every other regional state, bringing wars and bloody violence to Indonesia, Malaysia and the rest of Southeast Asia, Singapore’s small size allowed the PAP to minimize communist influence, keep Chinese influence at bay and hook into the neoliberal free trade system being developed and protected by the United States.

With no natural resources, Singapore developed itself as a harbor, banking center, gambling magnet, transport hub and American military ally. To get there, it imported expatriates and migrants to fill high-needs jobs. Singapore’s human capital just couldn’t make the rapid jump to modernity in the time needed to prevent Singapore from collapsing in on itself or ending up some great power’s vassal. This was eased off starting the 1990s as Singapore’s own population finally began to catch up.

Dubai is a similar story. Enjoying a brief oil boom in the 1980s, Dubai used its wealth to build a major port, Jebel Ali, as a stopover between Asia and Europe. In the 2000s, Dubai grafted onto the neoliberal credit system, building a vast city from nothing on copious amounts of debt. Like Singapore, Dubai sought to become a banking, tourist and transport hub: it even developed its own airline, Emirates, to link Dubai to the rest of the world.

Both used access to international credit, secure sea and air lanes and increasingly open international markets to become corporate states. While not quite classical corporatism as exemplified by Portugal, Italy and Argentina in the 1930s and 40s, both states honed in on a few industries they could run without natural resources. Both took advantage of their geography to serve the global market. Both used tax advantages and state power to develop their respective industries, giving them a boost their international competitors often lacked.

Both cozied up to the United States and bought American military kit, even if they didn’t particularly need it. (Dubai uses kit purchased as part of the UAE’s army, as Dubai no longer has its own defense force.) If the America needs a regional base, both are on call.

Which is why we should watch what happens to them as neoliberalism in the West crumbles

The two city states made all the right decisions of the neoliberal heyday. They benefited from the free flow of capital, credit, skilled labor and technology. They sponsored industries best suited to neoliberalism, like tourism, transport and shipping. They did this through the system America and its allies were crafting in opposition to communism. When the USSR collapsed and neoliberalism became the norm, they were well-suited to grow even further. It’s no accident that Dubai and Singapore both enjoyed spectacular growth in the post-Cold War period.

But the systems that enabled their rise are under attack. Trump’s withdrawal from the Trans Pacific Partnership should be seen as a direct threat to Singapore’s growth plan: the city state would have benefited from a Pacific free trade zone. His insistence that the world has taken the United States for a ride should worry both Dubai and Singapore as well, as Trump may start demanding that nations purchase freedom of the seas from the United States Navy. Neither Singapore nor Dubai can secure their own trade lanes and no other nation on Earth can do the job the US Navy does now.

Both are also in dangerous neighborhoods that need US security guarantees. There is no reason to presume either the UAE nor Singapore will survive the twenty-first century. The UAE is threatened by both Iran and Saudi Arabia, both of whom have differing designs on it. Saudi Arabia wants a Gulf Federation led by Riyadh; Iran’s hardliners would like to see the Persian Gulf become Persian again.

Singapore’s success now means that regional powers like Indonesia, China and Malaysia may all be tempted to snatch up an easy target should American alliances waver in this new era.

But disappearing from the map is the obvious stuff and would certainly presage a bigger geopolitical freefall resulting in America losing total interest in planet Earth. That’s not the near future. Instead, what will happen to Singapore and Dubai as the other rules of neoliberalism fall away?

What will happen to Emirates airlines?

Emirates is a microcosm of the city state’s challenges. Enormously successful, the airline went from just a tiny regional carrier to a global behemoth in just a decade. It did so because the Dubai government gave it all the support a state can: it streamlined visas for its pilots and workers, it made fuel and landing rights cheap and it implicitly backed its debts to get it the loans it needed for growth.

This was all well and good in the era of neoliberalism when Emirates could shoulder into bigger, freer markets in Europe, Asia and the United States. Local airlines complained, but to little avail; neoliberals trusted the market to sort itself.

But now barriers are coming up. Emirates is no longer winning the easy landing rights of yesterday; protectionist barriers loom. This isn’t to say that Emirates will vanish, but its veneer will dull and what was once a rising giant may be relegated to a local carrier once more.

This could happen across the board. The rapid, credit-fueled growth of the past will give way to bare survival. Gleaming towers will age and not be replaced while the planned obsolescence of the city state consumer economy will backfire as people are unable to buy new goods as quickly as their states had once envisaged. This will be a world of rusting monuments, half-empty parking lots, vacation deals to attract cheap tourists and unmanicured lawns. It will not be the apocalypse, but it will be obvious that both Singapore and Dubai have seen better days.

That is a world in which protectionism has gained the upper hand everywhere and in which economic growth slows for most countries. The developing world’s breakneck pace of development slows back to its early twentieth century levels; the developed world looks a lot more like Japan’s, with anemic growth, strong trade barriers, nationalistic immigration policies and little change.

But there is another wind to watch. Will someone else take up the mantle of neoliberalism?

The BRICs perhaps?

Brazil, Russia, India or China could try to save the neoliberal system they have all benefited from. China is already mumbling it might do so. In combination, this could be a parallel market of neoliberal trade that goes around the barriers erected by a suddenly protectionist West. We could spot this world through Singapore and Dubai easily enough. First, both would doubtless begin to buy military kit from the new champion of neoliberalism. Then both would surely set up trade deals and air routes to whoever is keeping the system running while paring back on the West.

There are challenges to that future, however. Russia is little more than a natural resource exporter, something that does the city states little good. Brazil, India and China are all riven with internal divisions that make geopolitical action a tough proposition. China is also a neo-imperial state that might succumb to chaos yet again if the Communist Party is challenged.

Worse, none of them can replace the US Navy in this or even the next decade, barring some calamity that destroys most of America’s battlegroups. Without that security guarantee, the city states will be swallowed up by some great power, either in a federation or in conquest. That would be telling too: a return to expansionism would bode poorly for the century. Yet it is in the cards.

So watch the city states: they are the canaries in the coal mines

If Singapore and Dubai stop existing, it will mean a return to a more violent and dangerous world. If they simply stagnate economically, running their economies on ever-older equipment, it will mean the world has settled for protectionist stagnation. And if they start to align with a new power, it will mean neoliberalism is saved by some other power.

That last part seems the most unlikely, but many unlikely things have already happened.

This story first appeared at Geopolitics Made Super, February 1, 2017.

One comment

  1. Kudos to GMS – there is much to say or pine for the end of Neoliberalism – depending at which end of the stick people are at (merit or punishment). I cannot help but sense this article suggest Neoliberalism is the only and true savior of human development.

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