Dubai as a giant bubble

The Toronto Star has an interesting article on Dubai called Dubai: How not to build a city. It's interesting throughout, but something that stuck out was this part:

It's Abu Dhabi, back down the road, that has the vast bulk of the U.A.E.'s oil reserves – 95 per cent. Dubai has less than five per cent, and it is not expected to last more than a decade. The economy relies on real estate, tourism and Abu Dhabi, the emirate that is reported to have invested upwards of $10 billion (U.S.) in Dubai's economy.

You always hear that Dubai's wealth is a sort of anti-Dutch disease (this idiot was saying it last year), whereby the oil ran out and the rulers had to get smart, and they turned their economy into a wealthy trading state. But is it possible that the entire city and economy of Dubai was just an Abu Dhabi-inflated bubble?

And how are the real beacons of democracy doing?

Kuwait, in contrast to its other microstate neighbors, has a constitutional monarchy with overwhelming majority of power invested in the parliament. Suffrage is extended to all citizens, and all citizens can run for office. And yet, according to a NYT story, Kuwaitis are beginning to question the wisdom of democracy. Though its Gulf ministate neighbors like UAE states and Bahrain are more authoritarian, they also seem to have economies that are moving much faster than Kuwait's. Kuwait is a tax-free state with a generous welfare system for citizens (who comprise only a third to 40% of its population), but it seems to have been afflicted with the resource curse. Because of the tremendous oil wealth that allows the state to provide generous welfare benefits without taxation, there has been little pressure on the government to deliver sustainable, non-resource-driven wealth. Owning 10% of all proven oil reserves means that petroleum-related industries account for half of the GDP and 95% of exports, according to Wikipedia. Foreigners are also heavily restricted in what sort of assets they can own.

Dubai, by contrast, has largely weened itself off oil. Though the city-state originally earned its wealth after the discovery of oil, the reserves have since declined and the economy has successfully diversified, so that now only a single-digit percentage of the economy is devoted to the energy sector. Reading about this reminds me of Austrian school economist/philosopher Hans-Hermann Hoppe's theory that singular ownership and control of a country in the form of a monarchy is preferable to the institutionalized mob rule of democracy. Being an anarcho-capitalist, he obviously believes that a state of anarchy would produce preferable results to both democracy and forms of dictatorship. I never read it, as I'm not much into theory, but perhaps I should some day...