A new report suggests Berlin costs more money than it produces.
Germany would actually be better off without Berlin. That, at least, might be the skim-read conclusion to be drawn from a challenging new report from Cologne’s Institute of German Economy. The report, released Tuesday, notes that Germany’s per capita GDP would actually be higher if Berlin and its population were removed from national economic figures.
This state of affairs isn’t just striking, it seems to be unique. Of the 15 E.U. countries covered by the survey, only Germany possessed a capital that failed to boost per capita GDP above what it would have been had the city not existed. So is this a sign that Berlin is failing?
Before we look at why Germany’s figures skew differently, it’s worth looking more fully at the figures the report provides. They don’t, for instance, actually suggest any inherent relation between the size of a capital’s contribution to national GDP and the overall prosperity of a country. Of all capitals surveyed, it’s actually Athens that shows the greatest national dominance. If that city and its habitants were removed from national figures, then Greece’s GDP per capita would drop by 19.9 percent. The Paris region shows similar levels of national contribution: its absence would slash French per capita GDP by 15 percent. In the U.K., no London would mean a drop of 11.2 percent in per capita GDP. A Madrid-free Spain’s per capita GDP would drop by 6 percent, while even Rome—known for playing second fiddle to the economic powerhouse of the North Italian Plain—would cause Italy’s per capita GDP to drop 2.1 percent if it were removed from the country’s economy.
It’s only in Berlin that these figures appear to suggest Germany would actually be better off without it. Removing Berlin and its residents from German economic tallies would, according to the report, actually boost the country’s per capita GDP, albeit by a meager 0.2 percent.
The reasons for this are as distinctive as Berlin’s standalone negative performance. Certainly, a rather sluggish economy doesn’t help. Without its capital status, Berlin might be just another rustbelt city, an ex-industrial metropolis whose swing towards an economy based on the service, technology, tourism and creative sectors has (as so often is the case) failed to fully compensate for the decline of the city’s industrial base. It’s not for nothing that Berlin had until recently a reputation as a cheap place to live. Prices long remained low because jobs were often scarce and wages relatively meager. As of this July, Berlin’s unemployment rate of 9.5 percent was the second highest (after Bremen) of any German federal state. If there is a loser hidden behind Berlin’s relatively poor performance, it’s unemployed, underpaid Berliners who are struggling despite living cheek-by-jowl with the government of Europe’s most powerful country.
Berlin’s unusual performance is still arguably as much an example of the strength of Germany’s regions at the weaknesses of the city itself. While in other countries, capitals suck in all the wealth, talent and investment, Germany remains a mosaic of prosperous cities scattered throughout its territory. Its largest metropolitan area (as opposed to its largest city) is not Berlin but the huge Rhine-Ruhr region, an industrial conurbation that’s home to over 11 million residents. Munich and Hamburg are both major economic and cultural centers with higher median wealth than the capital, while the heart of continental Europe’s finance industry is in Frankfurt. The Federal Constitutional Court is in the modest city of Karlsruhe, while the city with the highest per capita GDP is actually Wolfsburg, home to Volkswagen.
This situation is substantially a product of history. Germany only unified in 1871 and never underwent the rigorous centralization of a France or Great Britain. Division after World War II meant that many institutions in the larger, wealthier western sector bedded down and took root in regional cities. So while finally reinstating Berlin as the seat of government in 1999 meant moving many national and governmental institutions to the city, they moved to a beleaguered, somewhat marginalized city whose economic power didn’t match its role as a political hub.
Does all that mean the city is failing to pull its weight? Not necessarily. While the cost of running Germany’s Berlin-based government are high, so are the benefits that effective government reaps—they just happen to be reaped elsewhere in Germany rather than in the city itself. Having a capital evenly split between the former eastern and western sectors has been invaluable in making reunification smoother, while Berlin’s boost to its country’s international prestige is huge. Without Berlin, Germany would likely be damned outside its borders as a boring, conservative place, a broad-brush stereotype that’s still not entirely without foundation. The rest of Germany may be contributing to keeping Berlin afloat rather than vice versa, but when you think about it, they’re still getting a pretty good deal.