"The market" is not a magic wand, its invisible hand not nearly so reliable as many, apparently including you, seem to think; and "socialism" is also ill-defined as "everything short of rampant unregulated capitalism". Dubai's market was pretty darn free, and its safety nets were effectively nonexistent and certainly nothing even remotely worth of the name "socialism".
Perhaps I didn't make it clear enough in my post that I wasn't suggesting Dubai was remotely socialist. My point was that centralised planning in an economy leads to problems. Where I failed in my haste to post and move on, was that I omitted the next part is that most socialist economies rely, and expect, a greater amount of government control over the economy, right up to the point where you get 100% control of the official economy in the case of communism.
The point I'm making is that excessive government interference in the marketplace leads to undesired outcomes. Everyone who is entrepreneurial should have this as a startup message on their computer or phone. It's so easy to mistake government money flows for real prosperity.
What I'm suggesting is that Dubai World shouldn't have borrowed and spent so much money on non-productive investments. The [tenuous] link to socialism I'm trying to make is that the hallmark of any truly socialist government is that it spends too much money on unproductive investments (aka bridges to nowhere), not because they are stupid, but because they evaluate investment on things other than the ability to return their outlay and make a return in the future.
My post was designed to look absurd, because I'm truly concerned about the reckless amount of government borrowing and spending taking place across the world. It's unprecedented in scale and will affect us all in the fallout. We all look at Dubai and think 'can't happen here' (wherever we might be) but so many places can end up like this.
So your means of identification of socialist government is that you don't agree with its valuations?
Perhaps you mean to say that without stringent focus on a numerical performance measurement, like size of budget deficit or kLOC, optimization theory breaks down. I don't see how that would be particular to any form of government. That said, communal ownership does suffer more here, because it's an attempt at moving past local maxima in the poorly-defined utility space. Perhaps Jesse Schell's point system for people would be a sufficient compromise.
The problem with borrowing in particular is that it leverages the assumption that your use for the money is valued by society. However, you can't nail down a worth and societies are fickle.
Care to name one of these hallmark "truly socialist governments"? I think this is a figment of your imagination. Socialism is one point on a slider and laissez-faire capitalism on the other side. If you slide the bar too far in either direction it breaks. Which is why no one does. Sweden has 52% taxes, free health care, free schooling, etc., etc. Are they one of your "hallmarks"? Because they are also very capitalistic.
What you should really be worried, what is really causing world-wide problems is corporatism/fascism.
Whatever the problems or merits of socialism, it advocates common ownership. Dubai has always been openly a personally owned state advancing financial speculation. You may indeed call it something other than standard capitalism but calling it socialism is clearly an abuse of the term.
From the Wikipedia:
Fascism, pronounced /ˈfæʃɪzəm/, is a radical and
authoritarian nationalist political ideology.
Fascists seek to organize a nation according to corporatist
perspectives, values, and systems, including the political
system and the economy.
The reason people see Dubai going down is the same reason people saw it go up - ambitious/optimistic development by the 'socialistic' ruler.
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.