There he stands alone on his horse, a fierce giant shimmering out of nowhere rising 131 feet against the vast Mongolian sky. Eight hundred years after he declared the Great Mongolian State in 1206, Genghis Khan rides again, all 250 stainless-steel tons of him. As I bump along on one of the few paved roads 20 miles outside the capital, Ulan Bator, this kitschy monument to the new mineral-rich and independent Mongolia seems more like a huge middle finger raised to its powerful neighbors, China and Russia. July marks the 21st anniversary of Mongolia's robust democracy after more than 200 years of despised Chinese rule followed by 70 years as a satellite of the Soviets, during which time the proud history of Genghis Khan, who spawned the largest contiguous empire in world history, was banned from public view and utterance. Today, owing to deposits of 80 different minerals, including immense reserves of coal, copper, gold and uranium, as well as ongoing exploration of oil, this sparsely populated country, twice the size of Texas, is undergoing a dizzying transition. No other nation today so squarely faces the choice that Mongolia does. Will it become Nigeria or Chile? Venezuela or Australia?

"Mongolia really is the land of opportunity," says Howard Lambert, head of corporate banking for ING in Mongolia. "Everything can be done here. The financial infrastructure doesn't exist, so you can be a part of building it. Instead of sitting in an office in London turning a wheel, you can build the machine. Every day I see new buildings, developments going up—people buying sports cars in a country that doesn't have roads. The social divide is getting wider."

Nothing illustrates the topsy-turvy nature of Mongolia today more than the capital city's main Sukhbaatar Square, where a bronze statue of Lenin once presided. Now a gleaming Louis Vuitton store, opened in October 2009, offers clients champagne in a circular VIP room outfitted with a lavish ceremonial Mongolian saddle and antique caviar case. Outside the store, however, several hundred yards away, a group of dissident poor have pitched their round felt and wood yurts (gers in Mongolian) to protest the government's cozying up to foreigners and not doing enough for them. "We want jobs. The poor need to have a better quality of life," 52-year-old I. Baganuur tells me. "The government is implementing policies for themselves, not for its citizens."

Sharing the same luxury mall with Vuitton are Burberry, Zegna, Emporio Armani and Hugo Boss. Burberry is planning a second store in a Shangri-La hotel currently under construction. Ferragamo and Dunhill are also looking for space. At the same time, the capital, which boasts the most vibrant democracy in Central Asia, does not have street addresses and has just begun to introduce zip codes. "The irony for Mongolia," says American ambassador to Mongolia Jonathan S. Addleton, "is the more successful they are, the more challenging it becomes."

How could it be that luxury retailers have come to Mongolia? The country has only 2.8 million people, almost half of them living in a capital built for 500,000, including 700,000 destitute former nomads whose gers crowd the surrounding hills and who burn coal and even plastic bottles in the harsh winters, choking the city with extreme pollution. I wanted to understand how a luxury brand could turn a profit in this antiquated land where the livestock outnumbers the people 16 to 1.