In the 1990s Dubai was virtually unknown, but by the late 2000s most people knew something about the rapidly growing desert metropolis with its indoor ski centre, the tallest skyscraper in the world and a place where even the office buildings were covered in bling. But, why did this economic phoenix crash during the global recession and what lessons can we learn from this?

The UAE’s economic growth was certainly spectacular during much of the 2000s, but it began to stall in early 2009 as the price of oil fell. The collapse of the country’s construction and property bubbles and a 50% fall in the value of real-estate within 12 months quickly followed leaving

Dubai, which was heavily reliant on these two sectors, saddled with outstanding debts of $80 billion.

An announcement in November 2009 that Nakeel, the property development arm of Dubai World, was defaulting on a $4 billion dollar Islamic bond was the final straw.

The Dubai slump happened for the same reasons that every economic slump happens: a combination of greed, ‘irrational exuberance’ and a collective amnesia among some business people in Dubai who had forgotten that all economic booms - particularly heavily inflated and speculative ones - always end in major slumps. The real surprise is that most people were surprised by this, even though booms just like this one have occurred regularly over the last 400 years.

In common with economic bubbles, there was the widespread belief that ‘this time it's different’ combined with a conviction that the inexorable rises in share and property prices in the UAE and

Dubai during the 2000s would continue forever. On my arrival to Dubai in 2007, it was apparent that very few people could see the fallacy of this belief. Some work colleagues were eagerly putting down deposits on yet-to-be-built apartments in late 2007 and early 2008, but all I could see were big flashing signs with, ‘SPECULATIVE PROPERTY BUBBLE - DO NOT BUY ANYTHING!’

A blame-game soon ensued in the media and business schools and MBA programs were the perceived culprits. The Economist wrote: ‘Business schools have been widely accused of fashioning the wrecking balls and training many of the demolition crews that have wreaked […] havoc in the economy over the past two years’.

Local and international commentators then inferred that because some of the people entangled in the numerous business scandals during the 2000s have MBAs that a) there is something systemically wrong with the postgraduate programs and b) deduced that they may actually encourage this kind of behaviour.

There are two reasons why these inferences are false:

One, the criticism of alleged failings of business schools ignores what is actually taught on reputable MBA programs. Yes, finance related subjects are included in all curricula, but so are corporate law, governance, corporate social responsibility and business ethics.

Two, to blame business schools for the few crooks who have MBAs is akin to blaming faculties of government for the incompetence of corrupt politicians. All professions attract a minority of individuals who have a strong predisposition to engage in risky, self-serving and illegal activities, and business is no exception to this.

Having said this, all rational business academics would acknowledge that the problems in

Dubai signified a failure in leadership, but this also signified a more widespread problem: the unwillingness of some business leaders to acknowledge that no company can survive in the long-term if it lacks ethical guidelines to govern its conduct. Business history has proven this assertion repeatedly and so it is essential that business schools continue to address these issues.

I’ve pushed this idea resolutely since the late 1990s, it is one that has gained more support during the global recession. Francesco Guerrera of the Financial Times argued that the, ‘cult of the shareholder was over’. Even Jack Welch, the doyen of ‘shareholder-value’ in the 1990s at General Electric, now describes this as ‘the dumbest idea in the world’.

The global recession repeatedly reminds us of the importance of having regulatory authorities to keep an eye on the behavior of a few unethical individuals. It is well-established that visionary and profitable companies have a purpose beyond simply making profits. Money is still important to these companies but this is balanced by other important considerations.

Dubai

will emerge from its difficulties because oil-rich Abu Dhabi will not allow Dubai to fail. But it is also likely to emerge from this uncertain period in a more resilient state with a more draconian regulatory framework to monitor excessive borrowing and opaque business practices -particularly in the finance, property and construction sectors. In the long-term, these changes will be a good thing for the economic and social development of Dubai beyond 2010.

It is a journey that many Emirati business graduate and MBA will contribute to in the future, but they will need to heed the lessons of the past.