There is a Dubai story and there is a wider sovereign risk story. The first is straightforward enough; the second, more complicated, more important and more interesting.

The Dubai story itself comes in two parts. One is the economic proposition that it makes to the world, the idea that it is possible to create sustained growth by becoming an entrepôt trading and service centre for the Gulf region. That is the justification behind the port, the airport, the banking offices, the medical centre and so on. This determination to become the service hub for the region led to the property boom, indeed was the only justification for it. As everyone knows, things got a bit out of hand. The "build it and they'll come" approach is all very well but it left Dubai vulnerable to any drop in demand. Ultimately Dubai will recover because the core proposition – that the region needs high-quality services – still stands. But there will be a nasty and continuing adjustment for some years and the more outlandish building projects may never be completed.

Dubai is finally financially bankrupt – but it has been morally bankrupt all along. The idea that Dubai is an oasis of freedom on the Arabian peninsular is one of the great lies of our time.

Yes, it has Starbucks and Dunkin' Donuts and the Gucci styles, but beneath these accoutrements, there is a dictatorship built by slaves.

If you go there with your eyes open – as I did earlier this year – the truth is hidden in plain view. The tour books and the bragging Emiratis will tell you the city was built by Sheikh Mohammed, the country's hereditary ruler.