II.

Economy

Following the division of the city of Berlin in 1949, the economies of the two halves of the city were integrated into the economies of the two newly separated republics of Germany.

The economy of East Berlin was totally integrated with that of East Germany and also benefited from a steady stream of visitors from West Berlin and West Germany. East Berlin was the hub of East Germany's commercial, financial, and transport systems, and, although it comprised less than one-half of the old unified city, it was also a huge manufacturing centre. Among its main products were steel and rubber goods, electrical and transport equipment, chemicals, and processed food. The Spree River, which is connected by waterways with the Baltic Sea, widened in East Berlin to form a major inland harbour. An airport at Schönefeld, just south of the city, served both East and West Berlin.

Much of West Berlin's industrial capacity was destroyed in World War II, and its economy suffered again in 1948 and 1949, when the USSR blockaded the area in an attempt to drive out the Western powers. Beginning in the 1950s, however, West Berlin's economy was revitalized with much assistance from West Germany and from the United States, which provided support under the European Recovery Program (Marshall Plan). The city soon became an important manufacturing centre, producing electrical and electronic equipment and substantial quantities of machinery, metal, textiles, clothing, chemicals, printed materials, and processed food. West Berlin also developed as a centre for international finance, for research and science, and for the important West German film industry. It was linked to West Germany by motorways, canal systems, a railway, and airlines, which used Tegel, Tempelhof, and Gatow airports in West Berlin and Schönefeld airport in nearby East Germany.

With the destruction of the Berlin Wall the two halves of the city were once again physically integrated. Their economic integration became official in July 1990. East Berlin underwent the greatest economic changes with many formerly state-owned businesses succumbing to privatization.

While reunification (Die Wende, or “the change”) allowed many families and friends long separated by the Berlin Wall to reunite, it also brought numerous economic and social problems. Berlin now has to cope with housing shortages, strikes and demonstrations, unemployment, and increases in crime and right-wing violence against foreigners. Unification costs in Germany have led to increased taxes, reduced government subsidies, and cuts in social services. Many East Germans feel patronized and overwhelmed by the West. Complaining of second class treatment, they believe that reunification has failed to deliver the promised “good life”. Many West Germans believe they are sacrificing their standard of living to support East Germans.