Shop Window For The West THE BOOM COMES TO WEST BERLIN

Press, Volume C, Issue 29499, 28 April 1961, Page 12

Shop Window For The West THE BOOM COMES TO WEST BERLIN

[By a Reporter of tha Times”! (Reprinted by Arran*ssncnt)

Until a few months ago. Western Berlin was the outstanding “depressed area” of Western Germany—a position roughly analogous to that of Northern Ireland in the United Kingdom. The loss of I its natural hinterland, and the inflation of transport costs due to its isolation from the rest of Germany, slowed down economic recovery. In 1950 the production index for Western Berlin was only 32 per cent, of the 1936 figure, while that for the rest of Western Germany stood at 109 Onethird of the West Berlin population was unemployed, and the problem of post-war reconstruction bad only just begun to be tackled. The recovery of West Berlin really only started in 1953. five years after the rest of Western Germany. Today the situation is startlingly different. The production index for last year stands at 153 compared to 1936. Although this is still well behind the rest of Western Germany. where the comparable figure for 1960 was 284, it nevertheless amounts to a five-fold increase on 1950; and in the last few years production has been rising a good deal faster in Berlin than elsewhere in Germany. Last year, for example, the increase was 15 per cent., against 11 per cent, in Ger. many as a whole. Labour Shortage Moreover, in recent months the increase in business in Berlin has 'been steadily gathering force, so that now for the first time since the war Berlin is beginning to suffer from a labour shortage, with more unfilled vacancies than unemployed. Berlin’s present unemployment ratio is 2.4 per cent (against the West Berlin average of'lD per cent.). But this figure include* an irreducible hard core of older white - collar worker*, who used to work in the Ministeries when Berlin was the capita] of a united Germany. For these people there is little that can be done, at least so long as Germany remains divided. The overspill of the boom into West Berlin in recent months largely reflects the boom in the heavy electrical industry, which accounts for 27 per cent, of the city’s industrial employment. Orders here are running some 30 per cent, higher than a year ago. and most firms full order books for at least the next seven months. The tobacco industry a recent arrival in Berlin, which now accounts for 16 per cent, of toe city's industrial labour force, is also booming. Some of the clothing firms are not doing so well, but in general Berlin’s boom seems very firmly based—especially m the capital goods industries, which play a dominant role in toe city’s economy. Magnet for East

Perhaps the most interesting aspect of the Berlin boom is toe extent to which it is acting as a magnet for inhabitants of the "other” Berlin beyond the Brandenburger Tor. It has always been possible for inhabitants of West Berlin to work in the Eastern sector of the city, and vice versa. In recent months there has been a rapid increase in the numbers of East Berliners working in West Berlin, who now number over 50.000. This means that one in twelve of East Berlin's wage earners actually earn their living in the west. The reverse figure —of West Berliners employed by the East—remains fairly constant at around 13,000, of whom 8.000 are employees of the Soviet-run municipal transport system. Since Eastern Germany suffers from a serious and growing labour shortage, this is a serious embarrassment for it, especially as many of these commuters use the money they earn to set up bank accounts for use if and when they decide to come over to the West as refugees. Today’s commuter thus tends to be tomorrow's refugee. In recent months the Inflow of refugees to West Berlin has sharply increased, after a setback in 1959. Part of this is no doubt due to the forced agricultural collectivisation in Eastern Germany, but for the most part it simply reflects toe drawing power of West Germany’s boom. The flow is currently running at an annual rate of over 200,000. despite toe fact that the East German authorities are currently going out of their way to treat their subjects (other than fanners) with unwanted tenderness. Subsidies From Bonn To the outsider the standard of living in West Berlin appear* to be at least as high as in the rest of Western Germany, though the statistic* suggest that it Is in fact a little lower. There is still a definite housing shortage—though this applies to other part* of Western Germany a* well. Berlin doe* of course benefit from the fact that it is regarded by the western power* a* * shop window for democratic capitalism, and it is of course fairly heavily subsidised from Bonn. An industrialist who invest* in Berlin can write off 75 per cent of his investment for tax purpose* within the first year. Berliners pay 20 per cent, less income-tax than other Germans. Goods made In Berlin and sold in Western Germany are exempt from turnover tax; this concession more than off-sets the cost of toll* payable to the 'Eastern authorities for trans;port of goods by road or canal.

These concessions, which are .worth in all over £5O million a year, are unlikely to be a permanent feature of Berlin’s economy, but the Federal contribution to toe

Berlin. City buget, which comes to e third of the total or some £9O million a y»ar. is likely to be longer-lasting This is needed to pay .for toe special services which Berlin’s isolated position necessitate*, and also for some special feature* of Berlin’s vopulation—the high proportion of women and old age pensioners, and the heavy rate of pubi c relief payment* required. The Berlin authorities themselves sum up the position like this. “Ten year* ago we were lest than 50 per cent self-supporting: now we’re 90 per cent, self-supporting. But to deal With the last 10 per cent is likely to be exceptionally difficult.” Little Trade With East Berlin’s position - is of course in almost every way artificial. Although it is surrounded by Eastern Germany, only 1 per cent of its products go to Communist countries compared to 65 per cent to West Germany, 10 per cent to other Western countries and 24 per cent, consumed kcally. This is partly because Eastern Germany has little to offer; its main export to West Berlin is lignite, for which it can find few .other markets at present On the other hand it could undoubtedly supply some products which West Berlin does not want to buy —cheap gasoline from Leuna is an example. The West Berlin authorities claim that they would however like to do more trade with the east —if only because this would help to ensure the maintenance of their communications with the west. The Poker Game This is an aspect of toe endless poker game that goes on all the time between ea*t and west over Berlin. The Communist authorities 'are trying hard to Isolate it so far as canals and railways are concerned. This would enable them to impose a more effective blockade on the city in a future crisis. At the mo. ment they are in no position to do this because they need to use the rail and waterways of West Berlin for their own communications system. But this is a danger for the future rather tha,n the present. Today, West Berlin is in a confident and buoyant mood. As a shop window for the west, it has been a glittering success.' The Kurfurstendamm. a little-known street in the western suburbs before 1945. has now blossomed into Germany'* most opulent shopping centre. Inevitably, economics take second place to politics in Berlin, for the Beriiners realise that in the last resort their survival and prosperity will depend on the political strategy of the cold war. At present the winds blowing from the east are deceptively mild, and the two Berlins have settled down to a sort of crazy normality. Tourist coach tours of the two cities do a thriving trade, and there is a well-established system of smuggling goods from the west to the east But everybody in Berlin knows that the wind can change with frightening suddenness