The Berlin Obama Didn't See

By Bret Stephens
Tuesday, July 29, 2008

"People of the world -- look at Berlin!"
-- Barack Obama, July 24, 2008, quoting Berlin Mayor Ernst Reuter, Sept. 9, 1948

By all means, senator, let's take a long, hard look at Berlin: Germany's hip, and nearly bankrupt, capital.

A couple of years ago, Berlin Mayor Klaus Wowereit -- a man Passport magazine describes as "effortlessly personifying" the city's "hip, sophisticated, and tolerant image" -- petitioned Germany's high court to compel the federal government to assume at least 60% of the city's debt, then topping $77 billion and marking a fivefold increase since the city's reunification in 1990. About 12% of the city's budget went to servicing its debt, close to the 15% figure New York City reached when it nearly defaulted under Mayor Abe Beame in 1975. Worse, unemployment in Berlin was running around 17%, about twice the national average, and the city was poorer than it had been 16 years before.

"We cannot climb down from this mountain of debt alone," complained the mayor. "We have done everything we can and now need federal solidarity" -- solidarity in this case being the German word for "bailout."

The high court demurred. "Berlin adorns itself with the slogan 'poor but sexy,' but it isn't so poor," observed the presiding judge in his verdict. "Berlin doesn't have a budget emergency. Significant indicators point only to a budget that is under stress." The judge suggested the city might consider selling off some of the 270,000 housing units it owned, or cutting the wages of Berlin's civil servants, which on average ran 50% higher than Hamburg's, or consolidating its six housing authorities, two zoos, or three opera houses into more manageable units.

Well, perish the thought. In the matter of opera houses, for instance, no other city except Milan has more; New York and London, each twice the size of Berlin, get by with two apiece. Attendance at the old East German Komische Opera rarely topped 50%. On one notorious occasion, all three houses staged Mozart's Marriage of Figaro on the same night. Until recently, all this cost taxpayers $146 million a year in subsidies.

Now, after years of tortuous debate, the opera subsidies cost taxpayers a mere $120 million a year. Naturally, all three operas remain in business, if "business" is the right word. So do both zoos.

Yet Berlin's problems are not merely, or even mainly, political. Mr. Wowereit has done a relatively creditable job by cutting spending by 11%, slashing tens of thousands of jobs from the city payroll and balancing the budget. Other revolutionary changes include introducing tuition fees for the city's three universities, a shock to the system of Berlin's student class.

Instead, the real problem is ideological. A reunited and rebuilt Berlin was intended to serve as a symbol for a vibrant, bold, energetic country, and the recipe for achieving this vision was government support on a grand scale. First, subsidies to the tune of six billion euros a year poured in. Then the federal government moved in, with all the new jobs that was supposed to entail.

There was also a massive urban planning component, with areas like the old no-man's land of Potsdamer Platz being transformed, through the mechanism of "public-private partnerships," into what was meant to be a glittering cultural and commercial center.

Typically, the planning didn't turn out as planned. In December, anchor tenant Daimler sold its 19 buildings on the Platz to a Swedish banking group, reportedly at a loss. Sony followed suit a couple months later, and Deutsche Bahn also intends to leave in a couple of years. The city's building craze hasn't been a total loss: Berlin has become a renter's paradise, where huge apartments can be had for a pittance. But what's good news for starving artists is bad news for landlords, not to mention the city's tax base. In 2006, revenues amounted to barely half of the city's budget.

All of which brings us back to Mr. Obama's call to "Look at Berlin!" After nearly 18 years of economic decline, there isn't that much to look at, at least in the sense that it might serve as a model. The notion of a "German miracle" has become as much a memory as the Berlin airlift. Mr. Obama's call for Europe to share "the burdens of global citizenship" forgets, or ignores, just how slight a burden Europe is able, much less willing, to bear.

As for Berlin itself, a city that in 1989 seemed to serve as an emblem for the end of history turned out to offer a different lesson: that history keeps rolling along; that the tearing down of walls marks a beginning rather than an end; and that history isn't especially kind to those who fail to keep pace with it.

So, yes, let's look closely at Berlin, a city that's hip, sexy, sophisticated and tolerant. Also a city of wasted promise. It didn't get there by accident.