Is this where you are?..........
Posted on 09/09/2005 6:10:54 AM PDT by Our_Man_In_Gough_Island
It's been 15 years since Germany's reunification, and the once communist east of the country is still in the economic doldrums. But it could be here that the next general election - just a week away - could be decided.
The statistics are bleak.
Germany's 'Aufbau Ost' - the rebuilding of Eastern Germany - has cost an estimated 1.25 trillion euro (£843bn, $1,550bn) so far.
Despite the capital injection, the East's unemployment rate is still 18.6% - in many regions it tops 25%. The economy grows by about 5.5% a year, but from a very low base - and that is not enough to create many new jobs.
EAST GERMANY Population 1989: 16.7m Population 2004: 15.3m Unemployment: 18.6% Germany's new 'Laender' Brandenburg Mecklenburg-Vorpommern Saxony Saxony-Anhalt Thuringia
As a result the East is emptying. Since unification some 1.4 million people have moved to the West, most of them young and well-educated.
Take Halle in Saxony-Anhalt. Once a town of more than 315,000 people and dominated by its chemical industry, it has lost nearly a fifth of its citizens.
It is a far cry from what the "chancellor of unity", Helmut Kohl, promised in July 1990: "In a joint effort we will soon turn [the East German regions] Mecklenburg-Vorpommern and Saxony-Anhalt, Brandenburg, Saxony and Thuringia into flourishing landscapes."
Kohl failed, as did his 1998 replacement, Gerhard Schroeder.
Soon the job might fall to an East German, Angela Merkel, Kohl's successor as party leader of the right-wing CDU and tipped to win the elections on 18 September.
The new East Germany
Of course not all is bad.
Jena's students and economic success have made it a modern city
These days it is difficult to spot where the West ends and the East begins.
The acrid smell of the East's polluting chemical industry is gone; its industrial ruins have disappeard.
Autobahns are not potholed any more. Grand bourgeois houses, many riddled with World War II bullet holes until 1989, have been restored to their old glory.
Generous subsidies have attracted nearly 2,000 foreign investors including BMW, Volkswagen, General Motors, AMD and Motorola.
But there have also been plenty of spectacular failures, especially in the Brandenburg region around the capital Berlin.
The result is a patchwork economy, where vibrant cities like Jena are neighbours to dreary and shrinking towns like Gera, which could easily double up as background for a movie set in communist East Germany, circa 1984.
"In towns like Gera and [nearby] Altenburg nearly every family has been touched by unemployment," reports Dr Stefan Russwurm, who runs bio technology start-up Sirs-Lab down the road in Jena.
Marx reloaded
These economically depressed areas are turning into breeding grounds for political disaffection, where voters drift towards far-left and far-right parties.
East Germany's former communists are riding high in the polls
Hans-Juergen Schneider, a 49-year-old trained engineer has been unemployed since January 2004. He has sent out 286 job applications since then, without success.
"The market economy can't solve our problems," he says, "big business is just grabbing the profits without accepting any responsibility."
He is not alone; 73% of East Germans believe that Karl Marx's critique of capitalism is still valid, according to a recent poll by news magazine Der Spiegel.
The PDS, successor to the East German communists and now campaigning as "The Left Party", is expected to get more than 30% of the vote here.
Society of envy
"The people don't see a future, the country's mood is gloomy," warns Gerhard Schade, boss of Jena-based ASI.
Dr Ute Bergner: 'We've turned into a society of envy'
During the past 10 years he has grown his company from a couple of people to 206 employees installing and maintaining heating and air-conditioning systems, fitting kitchens and bathrooms, and more.
However most people in the East are afraid of taking risks, Mr Schade says.
"Entrepreneurs are maligned as nasty exploiters, especially here in Eastern Germany," says Dr Ute Bergner, founder of Vacom, a firm specialising in vacuum technologies.
"We have turned into a society of envy," she says.
The collapse
This is the fallout from the collapse of communism, reverberating around the country 15 years on.
Before the Berlin Wall came down in 1989, the "chemical triangle" Leuna-Halle-Bitterfeld gave employment to 100,000 people - now 10,000 jobs remain.
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Gera once had large textiles and defence industries, and some uranium mining. They have gone, and much the same happened in most other state-owned industries since 1989.
East Germany's industries turned out to be much less competitive and productive than most had assumed.
And East Germans were allowed to swap their currency one-for-one with West German Deutschmarks.
This combined to make most state-owned industries unviable.
Another mistake was the decision to transplant the West's cumbersome bureaucracy.
The biggest mistake was to spread the investments [in East Germany] across the region
Alexander von Witzleben, Jenoptik
"When an investor from abroad comes to Germany, he'll shake his head when he sees all that red tape," says Dr Bergner.
Subsidies are another problem. The region is rife with stories of firms that invested in the East only to pull out as soon as the subsidies stopped flowing.
Some companies were able to compete only on the strength of their subsidies, says ASI's Mr Schade, but quickly went bust once this money was used up.
No focus
But East Germany's biggest problem was a lack of focus.
"The biggest mistake was to spread the investments [in East Germany] across the region. The government made infrastructure investments where they were not needed," says Alexander von Witzleben, boss of Thuringian high-tech company Jenoptik.
Bereft of industry, Gera has failed to develop
It triggered a boom-and-bust in East Germany's construction industry, and wasted money because the investments failed to create self-sustaining industries.
Just look at the number of jobless, says Dr Russwurm of Sirs-Lab.
"Saxony and Thuringia focused their investments on a few industry clusters and small and medium-sized companies. Today they have the lowest rates of unemployment in the East," he says.
His words are echoed by Mr von Witzleben: "Governments should have... waited for the spill-over effects from these areas."
The rebuilding
In West Germany the average working hour costs 28.14 euro; East German companies have to spend a third less, just 17.15 euro, according to Cologne's Institute of German Industry.
Combined with cheaper living costs and a brand-new infrastructure, the East is getting attractive for some investors.
Already a new chemical industry is emerging around Leuna, an automotive industry is re-energising Dresden and Eisenach, while Jena attracts a cluster of firms and know-how in precision engineering, opto-electronics and biotechnology.
Industry clusters lift a whole region, says BioCentiv's Klaus Ullrich
But it won't happen fast.
High-tech firms are not very staff intensive, but towns like Jena "live from their presence and the local buying power they bring," says Dr Klaus Ullrich of BioCentiv, a science park designed to attract biotech firms to the city.
It will take "a generation to replace the collapsed industries [of Eastern Germany]," says Mr von Witzleben, and "there are regions that haven't made the necessary structural changes yet".
But it may require more than a better industrial policy - people's attitude's also need to change.
Thirteen years ago Vacom's Ute Bergner decided to set up her own company in Jena after working for a Swiss firm for a year.
"I manufacture in Germany because I was born here and I believe in the future of my homeland... our children and grand children want to be able to earn a living too," she says.
Eastern Germany needs many Ute Bergners.
This is the third in a series of reports from Germany; in the run-up to the election we are also looking at the country's economy, its unemployed, and how its companies are trying to beat the slump.
It is difficult to turn a bunch of socialists into entrepeneurs and jobs. If the succeed, maybe they can teach W.Germany.
Is this where you are?..........
The entrepeneurs fled the east and are in LA and NYC and London or any other place where risk taking is rewarded. Three generations grew up under communism and it will take the death of those generations for the former east to flourish.
West Germany taking the old East under its wing kept the East Germans with an entitlement mentality, as opposed to countries like Poland that had to count on themselves.
Very good point
Thanks. Cool profile! Ever read any Rand?
"Thanks. Cool profile! Ever read any Rand?"
I read "Anthem", most of "We the living", and started but never finished "Atlas Shrugged". I find it very hard to read fiction even when it has a non-fiction point.
In hindsight, that was probably the worst mistake in the unification of East and West Germany. The other Eastern European countries' currencies found their own value. That was not allowed to happen in East Germany.
She wrote some good non-fiction too. She, like me, was born Jewish even though I'm not religious. Now we just need to help Jews realize that the dems are not their friends, that socialism was misguided attempt to help others, and that anti-semites are much more at home on the Left than the Right these days.
Hmmm... $1550 billion invested divided by 16.7 million people works out to...
Dang, my calculator doesn't go that high, but that's a LOT of $$ per person.
"Now we just need to help Jews realize that the dems are not their friends"
I don't think that there's anything ethnically based about Jews who vote Democrat. We just have a disproportionate amount of secular, educated urbanites. I don't think that Jewish ones vote Democrat any more than secular educated urbanites of any race/religion, we just have more of them.
"that socialism was misguided attempt to help others"
I think that secular Jews have alot of spiritual strength/power to help people, and without Judaism it can be easily misguided. Socialism is in appearance idealistic/altruistic, but you and I know better.
That said, I don't think most Jews on the left are socialists... I just think they're misguided liberals.
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