Where Germany’s potentials lie
How will Germany’s regions fare in the knowledge-based society of the future?
Major discrepancies in job creation and economic power exist between Germany’s federal states. These differences are caused by development potentials that have not materialised to the same degree everywhere. The creation and realisation of potentials hinges largely on the surrounding political and social conditions, which include the amount of support provided for businesses and industry, the level of bureaucracy, and the number of creative individuals. These are the factors that will determine the future of Germany’s regions.
The standard key indicators of a market economy ¬– such as gross domestic product and per capita income – are not the only means of gauging the regions' sustainability. New criteria that have proven effective in measuring innovation and future economic growth in other highly developed industrial nations can also be used. According to these criteria, the most successful societies are "creative" ones that are the best and quickest at combining existing knowledge to create new, lucrative products and services. According to the American economist Richard Florida, who developed this theory of the "creative economy", such an economy requires a society in which talent, technology and tolerance can all flourish equally.
The Berlin Institute was the first organisation to apply this model to the 16 German states – in a 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; instead they are increasingly deploying know-how and intellectual abilities for this purpose. Today, education and educated individuals constitute the most important source of capital in highly developed societies – which will need to maintain their quality of life in future with a constantly decreasing supply of raw materials. However, dealing with things new and foreign affects sustainability as well: in a globalised world – where population movement is becoming more frequent – societies that are open to immigrants, and which integrate immigrants and assimilate 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 of all the German federal states, followed by Hamburg and Baden-Württemberg. Bavaria, Hessen and Bremen also performed relatively well. The eastern German states of Brandenburg, Thuringia, Sachsen-Anhalt and Mecklenburg-Vorpommern lag far behind in this nationwide comparison.
However, the ability of a state to translate its TTT potential into affluence is another question altogether. While Berlin comes top in terms of TTT, it is far inferior to Germany's other business and industrial hubs in a productivity comparison. According to various studies, the states of Bavaria, Baden-Württemberg, Hessen and Hamburg rank top in terms of real economic power. Using this yardstick, Berlin is even eclipsed by Saxony, the economic star among the new German states, despite Berlin’s bonus as Germany’s capital city.
As an urban centre, Berlin is situated similarly to Hamburg in terms of TTT. The two cities are brimming with creative people – the highest numbers in Germany. Culturally, they are also the most open-minded. But while the people of Hamburg have successfully tapped their abilities to create a disproportionate amount of wealth, the German capital has fallen behind. Its unemployment rate remains high, relatively few new jobs are being created, and companies are hesitating to locate new operations there.
This analysis clearly reveals where the development deficiencies of the various regions lie. While Berlin, for instance, is hardly benefiting from its huge investments in research and development, and needs to improve its provisions for setting up new corporate locations, Hamburg is investing too little in research and technology – despite its business-friendly policies. If Hamburg were to eliminate this single weakness, it would head the nation's TTT league. Furthermore, the economically successful regions in southern Germany could also further increase their appeal. With its comparatively large number of inhibitions vis-à-vis external influences, Bavaria is not typical of the regions that are modern, open-minded and strong in technology.
The situation in the eastern German federal states is worrying. Measured according to the criteria of talent, technology and tolerance, they show relatively little potential. An openness to foreign influences is in especially short supply. Yet this receptiveness is a precondition for an influx of qualified individuals, an increasing number of whom will be foreigners in the future. A population influx itself is sorely needed here. In the long term, the eastern German regions have almost no prospect of surviving without help, not least due to the wholesale exodus of young women and very low numbers of children. Today most of the growth in the new German states is created by outside funding, which is not a sustainable source as the Berlin Institute's study also demonstrates.
Above all the analysis of the "creative economy" – measured using the indicators of talent, technology and tolerance – illustrates the discrepancies between potential and reality in Germany and, in doing so, highlights the fault lines in its economic evolution. While a clear link between the three Ts and regional development can be demonstrated in other industrial nations, this link is only discernible a limited extent in Germany. This is particularly due to the country's unique situation, with reunification severely hitting business and industrial locations in the former East Germany territories and the enormous amounts of aid distorting market competition.
Nevertheless, the three T’s "talent, technology and tolerance" are all required for growth in Germany. At the point where they converge, an unbeatable critical mass of human capital, infrastructure and quality of life forms. 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 capacity to transform knowledge into profitable inventions; and third, an openness and tolerance toward immigrants, minorities and individuals active in the arts. The fact is that the places where these people can create homes and feel accepted will be infused with a social climate in which the elite members of the creative economy feel comfortable. Wherever this elite lives, thinks and works, wealth and new jobs will be created, producing an environment that will attract creative people and motivate them to stay.
Click here (PDF, 1,58 MB) to view the full German version of the study.
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