While Dubai is held out by many as an example of capitalism at work, I actually see it as another case of socialism gone wrong. While you might scoff at the suggestion of linking socialism and Dubai together, what you effectively had with Dubai world was a government entity making investment decisions seemingly with no regard to price signals as more land sat unsold, and more buildings sat unrented, as more hotels sat unoccupied, but still the construction went forwards. It's this central government command of the economy that has arguably caused the problems with overinvestment and overbuilding, and a tightly controlled workforce (no freedom to associate, no rights) that supplied the labour to do it.

If there had been proper price signalling (insistence, for example, that the existing hotels turned a profit before new ones were built) and a properly free labour force, which would have seen rising wages during contruction booms, then the growth would have slowed somewhat. Instead, because of these artificial market conditions, overinvestment continued and tripped off a speculative frenzy, which has caused the grief.

I'm not pretending this is the only cause, but when you have a central authority blazing away wasting money, it's only a matter of time before the economy as a whole suffers from overinvestment in unproductive assets.