Talents, Technology and Tolerance

Where Germany’s potentials lie

How will Germany’s regions fare in the knowledge-based society of the future?

Large differences in economic power and numbers of new jobs exist among Germany’s states. The differences are caused by development potentials that have not taken shape to the same degree everywhere. Whether potentials are created and are able to develop depends on the surrounding political and social conditions, which include support of businesses and industry and the amount of bureaucracy, but also the number of creative individuals. These factors will decide the future of Germany’s regions.

Using the usual indicators of a market economy, such as gross domestic product and per capita income, is not the only way to determine the sustainability of the regions. New criteria that have proven effective as measurements of innovation and future economic growth in other highly developed industrial nations can also be used. According to these criteria, the especially successful societies are “creative” ones that are the best and the quickest at combining existing knowledge to create new, lucrative products and services. According to the American economist Richard Florida, who developed the theory about this kind of “creative economy”, such an economy requires a society in which talent, technology and tolerance can all flourish equally.

The Berlin Institute is the first to apply this model to the 16 German states in the study entitled Talents, Technology and Tolerance – Where Germany’s Potentials Lie (link to PDF). This theory can be proven when applied to modern, knowledge-based societies: they are using raw materials and mass production less and less to generate their wealth, and instead are increasingly using know-how and intellectual abilities for this purpose. Today, education and educated individuals constitute the most important source of capital in highly developed societies, who must achieve the future goal of ensuring quality of life with a constantly decreasing amount of raw materials. However, dealing with the new and the foreign affects sustainability as well: In a globalised world where population movements are becoming more frequent, societies that are open to immigrants, and integrate immigrants and outside knowledge as quickly and beneficially as possible will profit the most. A modern economy cannot survive without talent, technology and tolerance.

Measured according to the TTT criteria, Berlin possesses the largest creative potential out of all the German states, followed by Hamburg and Baden-Württemberg. Bavaria, Hessen and Bremen also do relatively well. The East German states of Brandenburg, Thüringen, Sachsen-Anhalt and Mecklenburg-Vorpommern lag far behind in this Germany-wide comparison.

However, whether a state can turn the opportunities resulting from its TTT potential into financial wealth is another question altogether. While Berlin is at the top in terms of TTT, Germany’s capital city falls far behind the other German locations of business and industry in a productivity comparison. According to various studies, the states of Bavaria, Baden-Württemberg, Hessen and Hamburg are at the top in terms of actual economic power. In this assessment Berlin is even behind Sachsen, the economic showcase state of the new German states, despite Berlin’s bonus as Germany’s capital city.

As a large city, Berlin is situated similarly to Hamburg in terms of TTT. Both of these metropolises are bustling with the largest numbers of creative people in Germany, and both cities are culturally the most open-minded. But while the people of Hamburg have been successful in using their abilities to create a disproportionate amount of wealth, the capital city has been lagging behind – its unemployment rate remains high, relatively few new jobs are being created, and companies are hesitating to set up new locations there.

From this analysis, one can clearly see where the development deficiencies of the various regions lie. While Berlin, for instance, is profiting little from its large investments in the areas of research and development and should therefore improve its policies concerning the setup of new corporate locations, Hamburg is investing too little in research and technology, despite its business-friendly policies. If Hamburg would only eliminate this one weakness, it would lead in the nation-wide TTT ranking. In addition, the economically successful regions in southern Germany could likewise further increase their attractiveness. Especially Bavaria, with its comparatively large number of reservations towards outside influences, does not conform to the image of a modern, open-minded region that is strong in technology.

The situation of the new German states is worrying. Measured according to the criteria of talent, technology and tolerance, they have relatively little potential. Openness to foreign influences is especially lacking. Yet this openness is a requirement for an influx of qualified individuals, an increasing number of whom will come from foreign countries in the future. A population influx itself is sorely needed here: East Germany has almost no chance of surviving in the long-term using its own demographic strength, especially due to the massive exodus of young women and very low numbers of children. Growth in the new German states today is mostly created by transfer payments, and is therefore hardly sustainable. The Berlin Institute’s study demonstrates this fact as well.

Thus, the analysis of the “creative economy”, measured according to the indicators of talent, technology and tolerance, especially illustrates the difference between potential and reality in Germany, and by doing so points out deficiencies in Germany’s economic development. While a clear link between the three Ts and regional development can be demonstrated in other industrial nations, this link can only be demonstrated to a limited extent in Germany. Above all, the reason for this is the special situation of the country after its reunification, which placed a heavy burden on the locations of business and industry in the East and, due to the massive amounts of aid, created an imbalance in market competition.

Nevertheless, talent, technology and tolerance (all three T’s) are required for growth in Germany. At the point where they merge, an unbeatable critical mass of human capital, infrastructure and quality of life comes together: First, well-educated specialists, particularly in industries with bright futures such as information technology and engineering; second, a research environment with high-quality educational institutions and the opportunity to transform knowledge into profitable inventions; and third, openness to and tolerance of immigrants, minorities and individuals active in the arts. Because in a place where these people can create a home for themselves and feel accepted, a social climate comes into being in which the elite members of the creative economy feel comfortable. Where this elite lives, thinks and works, wealth and new jobs are created, in addition to an environment that attracts more creative individuals and motivates them to stay.

You can view the german version of the complete study here (PDF, 1,58 MB).

For questions and interviews Steffen Kröhnert can be reached at + 49 30 22 32 48 44 and Dr. Reiner Klingholz can be reached at + 49 30 31017560.

You can order the german version of the study for a nominal fee of € 4. Please send an e-mail with information about the copies needed to info(at)berlin-institut.org.