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Dubai, Shanghai, Mumbai, or the Highway—A Commentary by Ian Ayres ’86

The following commentary was published in The New York Times on December 17, 2008.

Dubai, Shanghai, Mumbai, or the Highway
By Ian Ayres ’86

In early December, I spoke at a Yale Law School breakfast on the current financial crisis — focusing on Robert Shiller’s book, The Subprime Solution. (Several of my earlier posts — here and here — were actually preparation for my presentation.) The first question to Shiller from the audience began: “Lots of my investment-banker friends are saying: Dubai, Shanghai, Mumbai or the Highway …”

Shiller interjected: “What does that mean?” And the questioner explained that her friends were thinking that going forward, these foreign locales were likely to be much more economically successful than the West. She ultimately rephrased her question: “So I guess what I’m asking … Is America over?”

Shiller was no nattering nabob of negativism, saying that in 15 years the United States would be back “stronger than ever.”

The mention of Dubai in connection with the subprime crisis reminded me that just after the election, I was in Dubai for the World Economic Forum’s Summit on the Global Agenda, which focused on the world economic crisis. Sheikh Mohammed bin Rashid al-Maktoum, the Ruler of Dubai, addressed the conference. (You can read Peter Ubel’s description of the address here. The ruler’s most jarring assertion: “In Dubai, we are building our future with our own hands.”)

Until hearing this speech, I had failed to realize how upset the rest of the world might be with the U.S. for our subprime crisis.

Think about it. U.S. banks make ill-advised loans to poor U.S. citizens. And what happens to the rest of the world? They lose half the value of their stocks. The annoyance over our high-leverage loans is particularly high in Muslim countries, where mortgages are inconsistent with Shariah.