Dissecting Dubai – Part 4: Output, O = ƒ(K,L)

Well, the Dubai residency was certainly a surprise. And in more ways than one! The pace was certainly not as hectic as London, and for the most part the group was able to go out and actually see the city, find time to know more about each other, and ourselves, appreciate some not so obvious things, and welcome if not tolerate some of the more confusing aspects of living an international life. I’ve mulled over a whole lot of new things from the course of that week, and as the whole experience has left me with a rather dense collection of inner musings, I am left with little choice than to split up my next few blog posts.

This is Part 4 of a series of 5

I may have spent the entire residency with the wrong group of people.

I met up with a friend of mine on the last evening I was there, just before heading off to the airport. I first met the guy some 5 years ago, and he was just some dude, my best mate’s cousin, travelling around the world with his fiancé. Great fella though, we ended up drinking Beijing dry. He went back to Ireland and was about to live happily ever after, up until his wedding was called off right on the day. He moved to Dubai after that.

Meeting him again after so many years, I felt that nothing much had changed. He was still the salt of the earth, humble and real. Nary a word about the call-off. Not a hint of arrogance in his voice when he started talking about Dubai’s insane property prices and why he had to move out of his beach-front villa at the Jumeirah Palm. He’d bought himself a Porsche, brand new, just to make the ride home faster and he was now forced to trade down for a BMW as it gets better mileage in bad city traffic.

I offered to buy a round, but he waived it off. He would have none of it. “Put it on my tab” he yells at the Filipina bar maid. Apparently he wanted to get all the drinks on his tab so that he could get a free T-shirt. Solid fella. Rich enough to make my nose bleed, but he’s solid.

And somewhere in Galway, his ex is kicking herself up her arse.

My friend is living the high life, the kind of secure, comfortable existence that I’d like to enjoy after this program. If the government has something to say about it, however, this sort of expat lifestyle might be over faster than you can say injured-Bangladeshi-construction-worker. My friend after all is just a foreign guest-worker. He’s basically hired help, an imported factor of production. He’s a living, breathing operating lease, an economic agent whose cost is amortized over the x-years that he’s financially productive for the government.

One of the recurring sub-themes of this residency was the Emiratisation Program. Within the next few years, the government aims to get at least 40% of all financial sector jobs manned by Emiratis. This is perhaps the reason why my friend has 2 or 3 trainees under him in any given project.

Labor re-allocation. I have no qualms about that. I think it’s a fantastic idea – a locally empowering project with nationalistic objectives. After all, as was underlined during one of the panel talks, Dubai is a land where there are no social or moral contracts between workers and employers. There’s no obligation to keep you after you’ve stopped being economically productive.

And why should “they”? Output, O equals the production function of Capital, K, and Labor, L. The model works without having to include any moral scruples about job security and continued employment. The model works.

It’s not like the government is actively trying to cheat you out of anything. You got what you came for, money. The government got what it wanted from you, labor and expertise. It’s a fair deal, and the equation still holds. Dubai’s production function works. The model works.

Or does it?

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I can't say I totally agree with your article. People are tangible assets therefore they would be depreciated and not amortized (the ghost of accounting past).

On a serious note though, I feel there is flaw in the equation as far as Dubai is concerned. From what I see Dubai is more of K=f(K,L) - they are using K and L to build more K. I don't see any production happening - only capital being built and traded. It's more of a trading hub - no production happening; more of imports than any tangible exports.

What do you mean the wrong group?
It works as long as the replacement policy moves slowly and they start offering some kind of permanent residency to people who would like to settle in Dubai. I doubt it would work if they decided one fine day that they wanted to replace all of the foreign workers with Emiratees within a year.

Dude, you're killing me! The theme of my next post was going to be how cleanly everyone is separated into K and L (or useless).

Next time you're going off to party with the rich and/or famous, do let me know.