Just as hopes were being raised that the worst of the recession might be over, the lunacy of the market strikes again.
Dubai’s rich borrowed to finance a speculative construction boom—building palaces in the desert and islands in the sea.
Across the globe, the rich invested in luxury apartments and visited a glitzy new world of luxury hotels and casinos.
Rather than “once bitten twice shy”, banks and corporations rushed back to the casino table at the first opportunity and wagered billions of pounds.
British construction firms, banks and businesses came to the fore to lend money, invest in property and bid for alluring contracts. Dubai World has said it cannot pay its £35.7 billion debts. British banks are thought have sunk up to £20 billion into the United Arab Emirates.
At the head of the pack were Lloyds and RBS—despite the fact they have been bailed out at vast expense to us.
No-one knows what the impact of the Dubai crash will be, but whatever the outcome, the bill for this collapse will be footed by working people who will lose their jobs, suffer extra taxes and cuts in public spending.
The crisis in Dubai shows that this is a system addicted to making a profit with no concern for the waste and destruction it sows.
Capitalism doesn’t work. It needs replacing urgently.