Economy of Berlin

The Treptowers and the Molecule Men

Deutsche Bahn headquarters

The economy of Berlin has been affected through the years by the city's changing political fortunes. Berlin was once a major manufacturing center and the economic and financial hub of Germany. The city suffered economically during the Cold War, when West Berlin was isolated geographically and East Berlin suffered from poor economic decisions made by East Germany’s socialist central planners. Since reunification, the city has relied increasingly on economic activity in the service sectors, but nevertheless still has one of the lowest per capita income of all metropolitan regions in Germany and a record accumulated state debt^{[citation needed]}.

Early history

Berlin was founded at a point where trade routes crossed the River Spree and quickly became a commercial center. During the early modern period, the city prospered from its role as Prussian capital by manufacturing luxury goods for the Prussian court and supplies for the Prussian military.^{[citation needed]}

Industrial Revolution

During the mid-19th century, the Industrial Revolution transformed the city’s economy. Berlin became Germany’s main rail hub and a center of locomotive manufacturing. The city became a leader in the manufacture of other kinds of machinery as well, and developed an important chemical industry sector. Toward the end of the 19th century, Berlin became a world leader in the then cutting-edge sector of electrical equipment manufacturing. As the de facto center of the German Zollverein, or Customs Union, and later the seat of the Reichsbank, Berlin became Germany’s banking and financial center as well.^{[citation needed]}

Air Berlin head office

Berlin suffered from both the German hyperinflation of the 1920s and the Great Depression of the 1930s. The city’s economy revived as a center of weapons production under the Nazis, but it lost a pool of entrepreneurial talent when the Nazis forced Jewish businessmen to sell their holdings and ultimately massacred most who did not flee Germany.

After the World Wars

World War II severely damaged Berlin’s industrial infrastructure, and Soviet expropriation of machinery and other capital equipment as “war reparations” further damaged Berlin’s industrial base. Soviet restrictions on transport impeded communication with West Germany and ended hopes that Berlin would resume a role as Germany’s financial center; most banks established headquarters in Frankfurt. In East Berlin, socialist central planners rebuilt a manufacturing sector, but one that was not competitive internationally or responsive to market demand. West Berlin’s economy grew increasingly dependent on state subsidies and on its role as an educational and research center.^{[citation needed]}

Reunification

New parliamentary building in the government district

Berlin’s and Germany’s unification brought the collapse of many of East Berlin’s producers, which could not compete with market-disciplined Western competitors. Massive unemployment was only partly compensated by the growth of jobs in the construction and infrastructural sectors involved in rebuilding and upgrading East Berlin’s infrastructure. The move of the federal government from Bonn to Berlin in 1999 brought some economic stimulus and tens of thousands of jobs from government employees, parliamentary services, lobbyists and journalism to Berlin. Berlin’s service sectors have also benefited from improved transportation and communications links to the surrounding region. While some manufacturing remains in the city (Siemens and Schering have headquarters in Berlin, for instance), the service sectors have become the city’s economic mainstay. Recently, research and development have gained significance, and Berlin now ranks among the top three innovative regions in the EU (after Baden-Württemberg and the Île-de-France region).^[1] However, growth in the research and development sector has not been sufficient to offset job losses, and unemployment remains high, at 16.5% as of October 2006.^[2]

Current situation and outlook

Universal Music Germany headquarters at Osthafen

Berlin has been called the "Capital of poverty", because in no other State of Germany so many people are living on welfare benefits (in percentage, not in absolute numbers).^[3] In 2005 an estimated 15,2% of the population received welfare (ALGII or Sozialgeld).^[4] In 2006 36,1% percent of all Berlin children aged 15 and younger received Sozialgeld, which is given to children, who live with an able bodied person, who qualifies for welfare.^[5] According to the Bertelsmann Stiftung this is due to the number of minors having to look after the family because of absent parent(s).^[3]

Berlin Hauptbahnhof is expected to connect the new Berlin Brandenburg Airport within 20 minutes by 2015

Fast-growing sectors are communications, life sciences, mobility and services with information and communication technologies, media and music, advertising and design, biotechnology and environmental services, transportation and medical engineering.^[6] Berlin is among the top five congress cities in the world and is home to Europe's biggest convention center in the form of the Internationales Congress Centrum (ICC). It contributes to the rapidly increasing tourism sector encompassing 592 hotels with 90,700 beds (2007 figures) and numbered over 22 million overnight stays by 9.8 million tourists in 2011.^[7] Berlin has established itself as the third most visited city destination in the European Union.^[8][9] Due to increasing growth rates and tax revenues, the Senate of Berlin forecasted budget surpluses in 2008 and 2009.^[10]

Berghain, one of the best known clubs of the Berlin Electronic music scene

Berlin's economy has grown continuously above the German average in the period from 2005 to 2011.^[11] This trend is set to continue, with important improvements to infrastructure, such as the biggest European crossing station, Berlin Hauptbahnhof (inaugurated 2006), the opening of the 3rd biggest German airport, Berlin Brandenburg Airport, scheduled for 3 June 2012^[12] and intended as the major eastern European hub, reflecting the expansion of the EU towards the east.^[13] Also, the revered Berlin music scene, attracting tens of thousands of young tourists flying in for the city's famed clubs^[14][15] has become an increasingly important part of the economy, attracting artists and tourists alike, and is set to gain the support of the new 2011 government in order to protect the free spaces required by the scene through the creation of a city music board^[16] modeled after the German film promotion.^[17]

Some notable companies with their headquarters in Berlin are Air Berlin,^[18] Axel Springer AG,^[19] Deutsche Bahn,^[20] Bombardier Transportation,^[21] Universal Music Germany,^[22] and Vattenfall Europe.^[23]

2005 EUROSTAT[24]	Area		Population	GDP/Nominal in billion	GDP/Nominal per capita
Berlin	align="right"|892 km2	344 sq mi	3,400,000	€ 79 / ~$111	€ 23,292 / ~$32,609
Brandenburg	align="right"|29,478 km2	11,382 sq mi	2,550,000	€ 48 / ~$67	€ 18,781 / ~$26,294
Germany	align="right"|357,050 km2	137,858 sq mi	82,000,000	€ 2,245 / ~$3,143	€ 27,219 / ~$38,107
EU27	align="right"|4,325,675 km2	1,670,152 sq mi	494,000,000	€ 11,019 / ~$15,426	€ 22,400 / ~$31,360

Companies

Air Berlin is headquartered in Berlin.

Siemens, a Fortune Global 500 company and one of the 30 German DAX companies, is headquartered in Berlin. The state-owned railway, Deutsche Bahn, has its headquarters in Berlin as well.^[25] Many German and international companies have business or service centres in the city.

Among the 20 largest employers in Berlin are the Deutsche Bahn, the hospital provider, Charité, the local public transport provider, BVG, and the service provider, Dussmann and the Piepenbrock Group. Daimler manufactures cars, and BMW builds motorcycles in Berlin. Bayer Health Care and Berlin Chemie are major pharmaceutical companies headquartered in the city. The second largest German airline Air Berlin is also headquartered in Berlin.^[26]

Tourism

Berlin has 781 hotels with over 125 thousand beds as of June 2012.^[27] The city recorded 20.8 million overnight hotel stays and 9.1 million hotel guests in 2010.^[28] In the first half of 2012, there was an increase of over 10% compared to the same period the year before.^[27] Berlin has a yearly total of about 135 million day visitors, which puts it in third place among the most-visited city destinations in the European Union.

Berlin is among the top three convention cities in the world and is home to Europe's biggest convention center, the Internationales Congress Centrum (ICC).^[29] Several large-scale trade fairs like the IFA, Grüne Woche ("Green Week"), InnoTrans, Artforum and the ITB are held annually in the city, attracting a significant number of business visitors.

Creative industries

Industries that do business in the creative arts and entertainment are an important and sizable sector of the economy of Berlin. The creative arts sector comprises music, film, advertising, architecture, art, design, fashion, performing arts, publishing, R&D, software,^[30] TV, radio, and video games. Around 22,600 creative enterprises, predominantly SMEs, generated over 18,6 billion Euro in total revenue. Berlin's creative industries have contributed an estimated 20% of Berlin's gross domestic product in 2005.^[31]

See also

• Economic history of Germany

References

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