Posted Sunday, July 18, 2004; 8:34 BST
Before he left office last month, President Johannes Rau lashed out at this culture of complaint. "I don't know of a country where so many people in positions of responsibility take such pleasure in speaking so negatively about their own country," Rau said. "Have we put ourselves down so much that we don't believe in ourselves anymore?" Matthias Horx, director of the Future Institute in Frankfurt, a private think tank, sees a "doomsday" attitude infecting the media. "A blend of hysteria, pessimism, crisis demagogy and catastrophism is overwhelming us," he says. That sort of dire prophecy can be self-fulfilling. But so can optimism.
Since reunification in 1990, the people of the former East Germany have certainly had their confidence tested. The German government gave them €1.2 trillion to build railways, highways, schools and communications networks. But the money did relatively little to create permanent jobs — unemployment is over 18%, more than double the jobless rate in western Germany. Two-thirds of the funds are used to pay unemployment and retirement benefits to people who never contributed to the system. "Everything was concentrated on social policy," says Joachim Ragnitz, an economist with the Institute for Economic Research in Halle. "There was not a policy to attract foreign investors." Ragnitz warns it could take 20 to 30 years for living standards in eastern Germany to reach western Germany's level.
Klaus von Dohnanyi, a former mayor of Hamburg who headed a commission looking at the future of the east, maintains that current assistance — €90 billion a year — has damaged the west, too. "Ninety billion euros is 4% of GNP," Dohnanyi says. "It's money not being spent on west German universities, not being spent on west German streets, not being spent on west German investment in research." Dohnanyi's commission recommended that the government switch to spending on "economic clusters" of expertise to help create jobs. That idea has already proved a success in Dresden, where the state government has created a cluster devoted to computer chips. More than 20,000 people now work in the chip sector, helping to reduce Dresden's unemployment rate to 13.5%. U.S. chipmaker Advanced Micro Devices (AMD) built one factory in Dresden in 1999 and completed another last month. The key was €545 million of federal and state assistance toward the €2 billion cost of the facility. But AMD says it wasn't only about money. "The people here are highly motivated and some have experience of microelectronics from the former East German times," says Hans Deppe, general manager of AMD's Dresden operations. "The Dresden [factory] has proved itself very successful."
In 1991, just after reunification, there were 4,000 private enterprises in Dresden; now there are 240,000 — 40,000 launched in the last year alone. "We succeeded by building some economic lighthouses," says Mayor Ingolf Rossberg. Dresden is the scene of another dramatic rebirth: the reconstruction of the glorious 18th century Frauenkirche, destroyed by Allied bombers in February 1945. The rebuilding has taken 10 years so far, at a cost of almost €130 million, most of it from private donations. "There is a feeling — not pride, not entirely joy — but a deep satisfaction linked to the knowledge that all of us have created something lasting," says Ludwig Güttler, a classical trumpeter who is leading the effort.
Another upbeat promoter of Germany is Wolfgang Grupp, ceo of leisure-clothing company Trigema, Germany's largest T shirt manufacturer. While many clothing firms have moved production to cheaper Asian factories, Grupp keeps all 1,200 of his employees in Germany, in the western town of Burladingen. "There is no reason to go abroad," Grupp maintains, saying his German workforce allows him to produce orders within 48 hours of receiving them. It's an example of how Germany's high productivity can compete against lower wages abroad. "I need employees who are flexible, well trained and think while they are working," Grupp says. "I can't get that if I produce in a country thousands of miles away."
At home, one of Germany's biggest dilemmas is how to cope with the economic consequences of an aging population. Over the past 30 years, the birth rate has declined from 2.1 to 1.4 children per woman, while the average life expectancy has grown from 72 to 82 for women and from 66 to 76 for men. "Fewer young people and more old people means you're going to face a problem in the social security system, because you have fewer people paying in and more people taking money out," says Reiner Klingholz, director of the Berlin Institute for World Population and Global Development. That sets up a battle between the generations for control of the nation's purse strings. Klingholz says the only way to solve it is to increase immigration. The government and opposition took a step in that direction with a new immigration law that will allow some 200,000 immigrants — both highly skilled economic migrants and asylum seekers — into the country each year, starting in 2005.
But Germany's greatest challenge will remain what Horst Köhler, the new President, describes as "the uncertainty" felt throughout society. "We need a new spirit of initiative ... to face the major changes sweeping through the world," Köhler said. That spirit of initiative may be taking hold. One indication is all the do-it-yourself stores and how-to classes springing up across the country as people adapt to hard times. According to marketing company SevenOne Media, Germans spend €36 billion a year on DIY home improvements, double the amount spent in Britain and France. The biggest beneficiary of this trend is OBI, the Home Depot of Europe, whose ceo, Sergio Giroldi, says the company sold €6.3 billion worth of tools, wood and home decorations across Europe last year. He expects 10% growth this year. That's a good sign, since Germans still have a lot of work to do if they want to turn their country around.
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