Regional and local variations in the emerging economic landscape of the new German Länder

Applied

Geography.

Vol. 17, No. 4, pp 283-299, 1997 0 1997 Elmer scienceLtd Pnntcd in Great Britain. All rights memd 0143-622W71617.00 + 0.00

PII: S0143-6228(97)000222

Regional and local variations in the emerging economic landscape of the new German Liinder Philip N. Jones and Trevor Wild School of Geography and Earth Resources, University of Hull, Hull HU6 7RX, UK

Events in eastern Germany since 1989 pose major challenges for geographical interpretation. This paper examines the spatial impacts of the post-unification economic and social upheavals in the new Liinder. Using unemployment rates as a key indicator of regional differentiation, spatial variability within the new L&do is examined in terms of two fundamental dimensions. First, the relationship with former patterns of economic specialization is explored, and secondly, the effects of basic geographical properties such as settlement structure, location and peripherality. Prominent regional polarities are described, notably between major agglomeration cores and rural residuals, and between ‘bridgehead’ locations and less-accessible districts. Within this context the paper then identifies some ‘green shoots’ of recovery and new growth. It concludes by emphasizing the importance of incorporating sub-regional variations into any new framework of regional policy. 0 1997 Elsevier Science Ltd. All rights reserved Keywords: agglomerations, East German Liinder, post-unification Germany, regional trends, unemployment

Introduction If everything occurred at the same time there would be no development. If everything existed in the same place there could be no particularity. Only space makes possible the particular, which then unfolds in time. (Msch, 1954)

This statement, written more than four decades ago, assumes a new appropriateness in the context of the immense changes experienced in eastern Germany since unification, and highlights the role of space in creating regional economic differentiation. Events in eastern Germany since 1989 pose important challenges for geographical interpretation. In terms of Losch’s theoretical proposition, the new L&&r have experienced an enormous time compression. In place of the ‘unfolding’, with its implications of gradualism and incremental change, there has been a sudden trauma with huge upheavals in economic organization and social structure. The aim of this paper is to describe and account for the spatial variability in the impacts of post-unification economic change. It will explore this first by examining any possible relationship with the former pattern of economic specialization and, secondly, by assessing the influence of the basic geographical factors of settlement structure and location. 283

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This approach has to consider the contribution of the former GDR regime in manipulating space for its own ends, particularly through the powerful emphasis it gave to regional economic specialization in the space economy. However, it is not the intention of this paper to reiterate the various and sometimes conflicting interpretations of the economic collapse of the former GDR in the early post-unification period; for this the reader is referred to the work of Carlin (1992, 1994), Grabher (1994) and Roesler (1994). However, in examining events in eastern Germany there is a strong sense of ‘starting anew’, which has been occasioned by the completeness of die Wende (‘the change’). This invites retrospective but cautious comparison with the first economic miracle experienced by West Germany after the second world war. The empirical part of the paper is based primarily on unemployment data. For these statistics the administrative and statistical machinery of eastern Germany has already been refashioned along the lines of the West German system, and therefore they command the same reliability. Up to early 1994 unemployment data were produced for the 194 Arbeitsamts-Diensteflenbereiche or ADSBs (Local Labour Administration Districts), which are mostly co-extensive with the old Kreise (county districts) of the GDR. Since this date, these areas have been in the process of being replaced by a new system of more extensive employment areas or Arbeitsamtsbezirke, which breaks the statistical continuity. The use of official unemployment rates as an indicator is not without certain problems, partly because the official unemployment rate does not represent the total calamity of the collapse of work in eastern Germany The real erosion of the workforce has been cushioned by short-time working and job-creation schemes, particularly in the transition years of the early 1990s (Bundesanstalt fiir Arbeit, 1994). Others have withdrawn prematurely from the labour market altogether, especially women and older men (Priller, 1994). Also an estimated 400,000 east Germans travel daily to work across the former inner German border or into West Berlin (Wild and Jones, 1994). Official unemployment rates therefore present a minimum picture of collapse.

Unemployment-the

regional dimension

The above points notwithstanding, local unemployment rates still provide a sensitive indicator of spatial variances of economic performance at regional and sub-regional scales, although they must be interpreted with care. Within the new Liinder, unemployment reached a new peak of 17.8 per cent in January 1994. Amongst the 194 ADSBs, the rates ranged by as much as 19.5 percentage points, from a minimum of 9.5 per cent in Potsdam, which is below even the west German level, to a massive 29.0 per cent in Anklam in rural Mecklenburg-Vorpommern. Even so this range is significantly smaller than the 23.0 points difference (7.7-30.7 per cent) experienced two years earlier at the height of the economic collapse (BfLR, 1993). Figure I, with its shading system pivoting on the new Ltinder average, maps the ADSB data for January 1994. The pattern is best described as a mosaic or patchwork, with two extensive blocks of above-average unemployment. The larger coincides with the agricultural north, severely hit by the contraction of farm cooperatives and the closure of agricultural service enterprises and food-processing plants in most small towns. In these districts, according to Irmen and Sin.7 (1991) the rural workforce lacks appropriate vocational qualifications and experience for employment in the industrial and service sectors, and this has discouraged out-migration and thereby kept unemployment rates high. This unemployment ‘desert’, stretching across northern eastern Germany, is broken only by the occasional urban centre, such as Schwerin, Restock and Neu Brandenburg. It is truncated on its western side by a number of districts with below-average unemployment adjoining the former inner-German frontier, and on its southern side by proximity to Berlin. The other 284

Economic variations in the new German Llnder: I? Jones and iY Wild UNEM

PLOYMENT

RATE

rr0

n

Figure 1 Pattern of unemployment in the new Liinder, January 1994. Note: the areas are ArbeitsamfsDienstellenbereiche (ADSB) districts. Source: authors’ analysis of data in Bundesanstalt fiir Arbeit (BfA) (1994)

block of very high unemployment extends across southern Saxony-Anhalt and northern Thuringia, a zone constituting the least urbanized part of an otherwise much more industrial south. Bounded in the west by one of the least accessible sections of the former innerGerman frontier, corresponding to the eastern Harz mountains (Wild and Jones, 1993), it lies beyond the immediate influence of cities like Magdeburg, Halle, Jena and Erfurt. ADSBs with below-average unemployment rates show a more fragmented pattern of distribution. They are mainly, but by no means exclusively, associated with the larger 285

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urban areas. In total, however, the distribution is highly variegated, which suggests that many complex factors are at work. This is reinforced by an appraisal of local unemployment rates in relation to the pattern of sectoral economic specialization.

Towards an explanation Table 1 presents a simple but illuminating analysis of local unemployment rates and broad economic sectors. The latter are grouped according to the GDR classification: ‘nonproductive’ activities (including social services, health, education and culture); industry (subdivided into heavy, intermediate and light branches); and agriculture, forestry and fishing. Although the statistics are very basic, the results are nevertheless informative. Districts in the non-productive category perform the best on average, the 60 districts in the agriculture, forestry and fishing sector are substantially the worst-performing, while those in which industry predominates occupy an intermediate position. As far as the range of unemployment rates are concerned, the first column indicates that differences are most marked at the lower end of the scale. The modal class is based on the frequency distribution between just four classes and is therefore only a crude indicator. But there is a pronounced difference between the best and the worst economic sectors, and also interesting variations among the industry sub-categories. The third column is the most confirmative, revealing very considerable differences. Almost one-half of districts fall below the new tinder mean in the non-productive activities category, 26.6 per cent in the agricultural sector, and only 19.0 per cent in the light industry sub-group. The degree of variation both among the sectors and the industrial branches indicates the need for a closer analysis of the actual geography of economic specialization near the time of unification. Figure 2 presents a picture of regional economic specialization in 1989, and is a vital reminder of the situation that existed before the onset of reconstruction. It maps out the predominant branch of economic production within East Germany’s original Kreke (county districts). The macro-regional contrast between the mainly agricultural north and the predominantly industrial south is clear. To the north of a line drawn approximately from Magdeburg to Berlin and Frankfurt an der Oder, farming, forestry and fishing form the chief employment in approximately two-thirds of the districts, in some cases occupying over 40 per cent of the working population. Yet even here the pattern is not homogenous. In some districts the non-productive sector predominates, while in others, such as Stralsund on the Baltic coast and Neu Brandenburg in eastern Mecklenburg, the industrial

Table 1 Unemployment Economic

rates (January

sectora

Non-productive Industry Heavyb IntermediateC Light* Agriculture, forestry, fishing

by ADSBs

Range (% rates)

Modal class (So rates)

% of districts
Number of districts

9.5-28.5 12.9-25.0 13.8-24.5 12.9-25.0 13.7-23.3 14. I-29.0

15.0-17.8 15.0-17.8 21.0 15.0-17.8 17.9-20.9 21.0

48.0 31.4 42.0 39.2 19.0 26.6

50 84 19 49 16 60

?$eciahzation in 1989. “Chemicals, energy, lignite, metallurgical ‘Machinery, transport equipment, electrical *Textiles, light industry 286

1994) and former sectoral specialization

Economic variations in the new German Under: PREDOMINANT

1> 21%

Forming,

B

=

Berlin

C

=

Chemnitz

Co

=

Cottbus

D

=

Dresden

E

=

Erfurt

H

=

Hallc

J

=

Jeno

L

=

Leipzig

BRANCH of totol

forestry

M

=

Mogdeburg

P

=

Potsdom

R

=

Restock

s

=

Schwerin

and

OF PRODUCTION loco1 work force)

L Jones and T Wild

ECONOMY

fishing

Figure 2 Regional economic specialization in the new Under, 1990, Note: the areas are Kreis (Landkreis and Kreisfreie Stadt) districts. Source: authors’ analysis of data in BfLR (1993:Maps 1.6,

4.1 and 4.2)

sector prevails, representing gains from the GDR’s policy of dispersing industrial investment into rural regions. Typically, new industrial plants were located in medium-sized urban centres, which became ‘islands’ of industrialization set amidst huge agricultural hinterlands. South of Magdeburg and Berlin the economic landscape becomes much more fragmented, but with a prevalence of industrial districts. In detail, the ‘industrial south’ of 287

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the former GDR comprised a spatial mosaic of different specializations. However some regional patterns can be discerned in this heterogeneity. For example, among the industrial districts the ‘chemicals/energy’ sector contains two distinct clusters: first, the ligniteproducing brown coalfields of the Elbe-Saale basin, focusing on Halle and Dessau; and secondly, another large concentration of lignite production in southern Brandenburg based in Cottbus (see Figure 2). ‘Machinery or electrical engineering’, the largest branch in employment terms, was also more widespread in its distribution, but regional concentrations did occur around Dresden in central Saxony, in western Saxony, and in western Thuringia, including Erfurt. ‘Textiles and clothing’, one of eastern Germany’s oldest industries, retained strong historical links with districts in the Saxony-Thuringia borderland, and in the Chemnitz region of central Saxony. A final but significant point is that districts in which non-productive activities prevail are for the most part coterminous with the larger urban centres; this is a uniform feature throughout the territory of the former GDR. It is clear from these observations that the spatial processes suddenly activated in eastern Germany after unification were to operate across a highly distinctive economic landscape. The essential features of this landscape-notably the broad contrast between north and south (Wild, 1992), the special importance of Berlin and its region, and local and regional traditions of economic specialization-were first established in the era of industrial capital in the late nineteenth and the early twentieth century. Four decades of socialist planning, with policy priorities that included the regional equalization of investment and economic output and the dispersal of industry into nodal positions within rural areas, did not erase this legacy completely. Indeed, GDR economic planning, designed to maximize the use of local natural resources, labour accumulations, and existing transport linkages, actually strengthened local economic specializations in some respects. Each Bezirk (state planning region) was prescribed only a limited range of products upon which to concentrate. For example, the production directive for Bezirk Erfurt in Thuringia specified mechanical and electrical engineering, vehicles, precision instruments, and food processing, while that for Halle in southern Saxony-Anhalt included chemicals, vehicles and heavy engineering (Kohl et al., 1986). Within this regional framework, therefore, the locations of many specific branches of production evolved out of established economic patterns, examples being the strong regionalization exhibited by agriculture, textiles, chemicals and machinery (see Figure 2). However, within these regions the economic role of locality infunctional terms was weakened by another aspect of GDR policy, which concentrated a large proportion of industrial capacity within vertically integrated, but geographically dispersed, networks of factories organized into self-contained enterprises or Kombinate. There were 126 of these in the late 1980s employing on average around 20,000 workers, and containing up to 50 factories, each performing a set role (Carlin, 1992). Yet, as Grabher (1994) has noted, the vertical integration and plant dispersal that was characteristic of these Kombinatenew plants, for example, were often set up in underdeveloped northern and eastern districts by the state planners-were inimical to the continued evolution of regionally embedded economic structures. Nevertheless, the Kombinate and their factories undoubtedly became more than mere units of production and places of work. Mai (1993) stresses their significance as social and cultural milieux, providing workers and their families with a wide range of facilities, including sports stadiums, social clubs, creches and holiday venues. In daily life, therefore, workplaces did become in these respects synonymous with ‘locality’. The dismantling of the Kombinate by the Treuhandanstalt, prior to their privatization, was therefore not only injurious to their economic survival (Leaman, 1995) but also particularly morale-sapping for the former workforce in a communal sense. Therefore in considering the details shown on the map of unemployment, it has to be borne in mind that the actual performance of districts within the same ostensible type of economic specialization can vary as a consequence of the differing experiences of individual 288

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Kombinate or their successors. The overall impression to be gained from Figure 2 is that structural forces have played, and still are playing, a role in the uneven economicgeography of post-unification eastern Germany. However, the numerous cases where detailed comparison between Figures I and2 indicates a departure from this relationship suggest that they are not the sole explanation of regional variability. We now need to examine the influence of additional, essentially spatial, factors.

Spatial factors Reference to Figure I is a reminder that the pattern of unemployment in the new Liinder is complex and in some regions even kaleidoscopic. For the purpose of further analysis the ADSB unemployment data for January 1994 have been resorted and presented in a series of dispersion diagrams (Figures 3 and 4), permitting the testing of two hypotheses. The first tests the significance of the underlying settlement structure, proposing a positive relationship between growth potential and the gradation from urban to rural areas. The second builds upon the specific regional outcomes of unification, examining the significance of propinquity to, and conversely remoteness from, western Germany and Berlin. It must be emphasized that the dispersion diagrams in Figures 3 and4 do not use mutually exclusive categories of districts. For example, an ADSB may appear both as a Polish frontier district and as a rural district. Rural areas, agglomeration fringes and metropolitan centres The generally depressing situation in the rural regions is clarified by the dispersion diagram for the rural ADSBs in which farming, forestry and fishing formed the chief employment in 1989 (Figure 3). The entire interquartile range, including the median of 21.3 per cent, is above the new Ltinder average, and the upper quartile contains 15 of eastern Germany’s 20 worst-performing districts. Rurality is therefore a powerful negative factor. Although presenting a less dismal picture, the dispersion diagram for districts within the ‘agglomeration fringes’ contains a median above the new tinder average, and also includes many ADSBs with over 20 per cent unemployment. This situation differs from that prevailing in western Germany, where, due to a long experience of suburbanization of manufacturing and services since the 1960s the fringes are prominent locales of low unemployment rates. Indeed, one has to return to the 1950s and the period of the Wirtschaftswunder to see some parallels between what is happening now in eastern Germany and what once occurred in former West Germany. At that time post-war recovery in the latter was most vigorous in the urban agglomerations, but was hardly evident in rural areas (Wild, 1983). The rural parts of the old finder were then highly disadvantaged economically and burdened by very backward infrastructures, poor employment opportunities and above-average unemployment. In broad terms this situation is currently replicated in the new Liinder. The agglomeration cores form major focuses for economic recovery and growth in eastern Germany and are thus crucial in the shaping of its new economic landscape. As Figure 3 shows, their median unemployment rate is only 15 per cent, and in no ADSB does the level exceed the new Liinder average. However, there are some significant variations in performance. As represented by the unemployment rates, economic recovery is weaker in the smaller agglomerations and stronger in the larger, particularly Berlin, Leipzig/Halle and Dresden. Again there are historical parallels with the situation in West Germany some 40 years ago, when economic growth was concentrated within the largest cities. However, the economic reconstruction of West Germany’s war-devastated cities during the 1950s was led by the manufacturing sector. Today, the urban agglomerations of eastern Germany have endured several years of catastrophic de-industrialization and economic revitalization is being driven primarily by the service sector. The major impetus by far in this 289

Economic variations in the new German Lgnder: El Jones and T Wild

AGGLOMERATIONS r--L Fringes cores

RURAL AREAS

I-

I-

-

-.-7

I

1 I

I

.

’

;

i’l

N BL overoge 17.0%

I

’

I I

I

I

I

I

L_._ J Figure 3 Unemployment in urban and rural areas, January 1994. Note: each dot represents the unemployment rate of a specific ADSB; the locations are not mutually exclusive. Source: authors’ analysis of data in BfA (1994)

restructuring process up until 1994 has been the massive public capital expenditure, whether in the renewal of the antiquated infrastructure or the development of public sector administration (Blien and Hirschenauer, 1995). This spending has primarily been focused 290

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in the larger urban areas, where it is generating multiplier effects in the private sector. As an illustration, of 470,000 new jobs created in small and medium-sized enterprises in the new finder by December 1994, under 5 per cent were in industrial firms; the vast majority were in small-scale service activities (Fritsch and Werker, 1994). Regional effects-inner

German frontier

(IGF),

the Ostrand and Berlin

Unification undoubtedly gave an immediate and important boost to many localities along the western side of the former inner-German frontier (Jones and Wild, 1994). It is therefore worthwhile looking for evidence of positive impulses in eastern Germany stemming from the impact of propinquity to the huge and dynamic west German space economy. This can be examined in two stages: first, the effect of proximity to the former IGF; and secondly, the special influence of the vast but hitherto constrained Berlin agglomeration. The dispersion diagrams in Figure 4 show three very different outcomes. ZGFzone The median level of unemployment in January 1994 for the 25 ADSBs adjoining the former inner-German frontier is identical to the new tinder average, although the interquartile range extends prominently above this level (Figure 4). In general, propinquity to the western Germany-eastern Germany interface appears as a rather neutral factor, and has not imparted a universally strong growth impulse. As Wild and Jones (1993) have demonstrated, the former IGF zone on the West German side was not one of uniform economic structure nor prosperity before unification, and any evaluation has to recognize this fact. Nevertheless, there are some relatively favoured localities where unemployment is below average. Figure I indicated that these districts occupy localized ‘bridgehead' positions within the broader borderland zone, straddling major transport corridors such as those between Hamburg/Hanover and Berlin in the north, and Nuremberg and Leipzig/Halle in the south. Using the much larger ABZ units, Blien and Hirschenauer (1994) are somewhat sceptical about the significance of growth impulses spilling across the former IGF into adjoining districts of eastern Germany Yet, since around 90 per cent of all private investment in eastern Germany originates in western Germany, the potential for these spillover effects is obviously very high and cannot be so readily dismissed (Grabher, 1994). A relatively small proportion is in the manufacturing sector, with western firms seeking new labour markets and taking up previous trading linkages. Much more apparent in these locations, however, is the explosive growth of new retailing and leisure services, capitalizing upon such factors as cheap land prices, generous government grants and the slow adoption of the highly regulative West German system of land use planning (IHK Coburg, 1994). This type of service-led development in bridgehead locations is exemplified in the Sonneberg district in the meandering borderland of southern Thuringia and northern Bavaria. But Sonneberg also demonstrates that the overspill of any industrial investment from western Germany is usually associated with extensive reorganization and job-killing. Sonneberg was a major export-orientated centre of quality toy production in the GDR days; after unification its factories were placed under the Treuhand in preparation for privatization. The factory of Sonni Puppen und Spieltiere was eventually acquired by a Nuremberg toy firm in 1993, while the three Sonneberg toy factories together employ only 230 instead of the 5000 workers (including outworkers) in the GDR period (Financial Times, 4 Jan. 1994). Even so, the net effect in such localities is to preserve at least a nucleus of former industrial jobs and skills, to upgrade productivity, and to alleviate local unemployment levels to some degree. These positive effects are further reinforced by opportunities for the local population to travel across the former border to jobs in western Germany. A survey by Koller and Jung-Hammon (1993) identified the following east German Arbeitsamtbezirke (labour office districts) as having over 7.5 per cent of their resident working 291

Economic variations in the new German Liinder: E( Jones and T Wild

BERLIN REGION

BOROERLANOS ,: Former trontier

IG

Polish frontier

l--.-1

I

*

I

.r -.-, .

I

I

I I

1

I

1

I

1

I

I

I

1 .

I

I I I I

I I I

N B L average

17. 8 %

Figure 4 Unemployment in the Berlin Umland and frontier zones, January 1994. Note: each dot represents the unemployment rate of a specific ADSB; the locations are not mutually exclusive. Source: authors’ analysis of data in BfA (1994) working in the old Liinder: from north to south, Schwerin (11.9 per cent); Halberstadt (10.5 per cent); Stendal (11.1 per cent); Nordhausen (11.7 per cent); Gotha (9.0 per cent); Suhl(15.2 per cent) and Gera (7.8 per cent). Each of these large districts adjoins, population

292

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R Jones and T Wild

or is near to, the former inner-German frontier. This east-west commuting enables those involved to bring home higher disposable incomes, which boosts local consumption of services and goods and stimulates the growth of investment in the housing market. In many districts along the former inner-German frontier, however, the situation is bleak, and sometimes worse than the new Liinder average. This is most noticeable in the sector of southwest Saxony- Anhalt and northwest Thuringia, which has particularly poor transport connections, and where unemployment uniformly exceeds 20 per cent. Here there is no real evidence of a positive ‘interface effect’, even though these districts are geometrically central within the new configuration of Germany The Ostrand The median unemployment for the 17 Polish frontier districts is 20.4 per cent, thus extending even more strongly above the new Liinder average; the upper quartile is 22.8 per cent (Figure 4). Within unified Germany, and indeed within the wider territory of the European Union, these districts, along with those adjoining the Czech Republic to the south, are the remotest parts of eastern Germany, and the furthest away from any growth impulses that may emanate from western Germany. The worst unemployment blackspots in this zone (nearly 30 per cent) occur to the north of Frankfurt an der Oder, where remoteness is combined with a high degree of rurality in northeast Brandenburg and eastern Mecklenburg-Vorpommern. By a substantial margin the isolation of the Oder valley is the most negative of the three regional effects. Berlin and the Berlin region

No city in western Germany matches the special importance that Berlin commands within the new tinder: its population of 3.4 million is six times larger than its nearest rival, Leipzig. It is beginning to realize its potential as the capital of unified Germany and is experiencing a vigorous expansion of service functions and a massive growth of construction. Although de-industrialization has been severe in East Berlin, the continuation of viable manufacturing in West Berlin, together with informationand research-based activities, means that, taking the city as a whole, the economic base is much more durable than elsewhere (Leopolt, 1993). Suburbanization in the Berlin Umlandzone (hinterland), having been artificially curtailed during the Cold War period, has exploded since unification. It produces a clear effect in Figure I, in which six of the nine ADSBs (including Potsdam) surrounding the city have unemployment rates under 15 per cent, and all have below-average levels. Birkholz (1993), using the price of development land as an indicator, demonstrates that the Berlin effect had already reached distances of up to 40-50 km from the city boundary within three years of unification. The impact is most noticeable in the south and west, where Berlin’s suburbanizing influence is elongated by the important transport axes linking the city with urban agglomerations, especially Cottbus, Dresden, Leipzig/Halle and Magdeburg. Today this zone is colloquially known as the Speckgiirtel (‘potbelly’), a reference to the way in which Berlin is seen to be greedily devouring the surrounding countryside. It is a landscape of intensive land speculation, rapid land-use change, mushrooming housing developments and burgeoning out-of-town shopping schemes. Between June 1990 and December 1992, in the crucial interval before the adoption of the West German regulative planning system in Land Brandenburg, there were 495 planning applications for major private commercial developments, including 82 major retail centres, 61 leisure centres, 44 golf courses and 24 industrial estates; these data exclude residential proposals (Birkholz, 1993). This indicates the speed by which, in this most favoured part of eastern Germany for private investment, a landscape of capitalist suburbanization is supplanting what, until a few years ago, had been one of cooperative farming, crumbling villages and neglected small towns. 293

Economic variations in Seeking

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green shoots -

the polarization

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Wild

of recovery

As indicated earlier, material signs of economic growth within the new Ltinder can now be seen in the former border-zone bridgeheads, and in the Berlin region. However, the concentration of employment growth within services and construction has given a strong metropolitan thrust to the economic growth process in other locations in eastern Germany. Employment collapse was generally less catastrophic in the cities. All except Zwickau and Jena have emerged as centres of positive commuting balances since unification, with particularly large net inward movements being recorded in Dresden, Chemnitz and Leipzig/ Halle (Koller and Jung-Hammon, 1993). The main recipients of growth impulses arising from economic restructuring have been the major cities. The provincial cities have been liberated from the stultifying centralization of political and administrative decision-making in the former GDR, whose bureaucracy greatly favoured (East) Berlin. In the administrative reorganization following unification cities have made energetic efforts to introduce new attitudes and methods, including the appointment of west German ‘city bosses’ in several cases. Furthermore, the replacement of the GDR Bezirk system of regional administration by the more differentiated federal system means that five cities-Schwerin, Potsdam, Magdeburg, Erfurt and Dresden-are receiving very substantial boosts from their enhanced status as Land capitals. There is a substantial time lag to be overcome before east German cities can achieve parity status with cities of equivalent size in the west, whether in terms of quality of service provision, retailing, or infrastructure. The distribution of Germany’s officially designated urban agglomerations, with their populations, is shown in Figure 5. In the new Liinder, two features stand out: first, Berlin’s free-standing location in the predominantly rural north; and secondly, the strong concentration of agglomerations of varying sizes in the south. In the latter, Saxony has a well-developed ‘urbanized triangle’ represented by Leipzig/ Halle, Dresden, and Chemnitz/Zwickau, while the dominant feature in Thuringia is the Reihestadt, or the ‘line of cities’, stretching from Erfurt, eastwards through Weimar and Jena to Gera. The development potential of these agglomerations, each of which contains a major core city or cities, is uneven. They vary greatly in size, locational potential and economic structure. Moreover, they are now having to compete with better-equipped west German cities for many new urban functions, and they also have to battle against the effects of decades of neglect, particularly manifest in their older building fabric. The omnipresence of massive high-density social housing projects in the urban peripheries also indelibly and negatively stamps their collective image. Adding to these difficulties, several cities have hinterlands scarred by environmental degradation on an epic scale. Steins (1993) especially singles out Halle and Magdeburg in this respect. A further considerable burden is the problem of property restitution in and around eastern cities, which will take many more years to resolve (Financial Times, 2326 September 1993). According to Steins (1993) the most favourable category of cities for future economic development in Germany is what he describes as cities of at least European significance, which generally have a population of more than 500,000. In eastern Germany only Berlin, Leipzig and Dresden meet both criteria, and it is clear that all three occupy a special position in the restructuring process. Berlin’s status as the new national capital, which involves the accumulation of federal government functions, is now stimulating the growth of commensurate private control functions. There is a considerable size gap between these cities and the next tier of urban centres which have essentially purely regional roles. Nevertheless, the latter do act as significant focuses for tertiary expansion and construction activity. Cottbus, Chemnitz, Erfurt, Jena, Zwickau and Schwerin fall into this category, and are Oberzentren with good growth prospects. However the prospects for other cities in this 294

Economic variations in the new German Lander: P Jones and T Wild

URBAN

AGGLOMERATIONS

POPULATION : 1991 ~mill~onsl l

0.12 - 0.50

.

0.50 - 1.00

l

1.00 - 2.00

l

2.00 - 4.00 Bremen largest vollle 11.x ther

urban

A

SonncbcrgR

m,?wickou

km

-

Lond boundory

Figure 5

Distribution of official agglomerations 1993. Source: based on BmRBS (1994: Map 3.3)

category are more problematic. Besides having weak economic specializations, they have inherited legacies of poor environment and infrastructure. Halle, Magdeburg and Restock are typical examples, the latter having to contend with the additional disadvantage of isolation. New investment in manufacturing has been less obvious, less regionally embedded and all too often has created very efficient but weakly linked ‘mass production enclaves’ (Grabher, 1994). It is also less directly associated with the urban hierarchy than are service activities. Most industrial firms have taken the opportunity presented by reconstruction 295

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in the new German Eider:

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to cut their labour force to the minimum, conscious that wage rates in the new finder are planned to reach parity with west German rates (The Economist, 1994). Because the bulk of private investment has come from western Germany, the majority of new, or reconstructed, plants have assumed a specialized, branch-plant function with little local managerial involvement. Even the more sophisticated production complexes exemplified by automobile manufacture have only limited autonomy, since they are part of wider panEuropean production networks. Indeed, the new automobile assembly plants established by Opel and Volkswagen have become renowned for their use of the leanest of production technologies, rather than forming nuclei for regional economic regeneration. Only 2000 work at Opel’s DMl billion ‘greenfield’ plant outside Eisenach, while VW’s two facilities at Zwickau and Chemnitz employ only 3000 together (Independent, 21 June 1993; Financial Times, 20 August 1996). In a manner repeated in nearly all east German towns, the antiquated factory that produced the Wartburg car under the communist regime lies largely derelict in inner Eisenach, with only a proportion of the former factory buildings being reoccupied in a piecemeal fashion by a profusion of small service sector businesses. The dominant experience of east German industrialization since unification has been one of truncation, the cutting of local linkages, the lopping of managerial and development functions, and the creation of an essential branch-plant economy (Leaman, 1995). Furthermore, employment levels in the new or restructured industries are generally low, although a few exceptions do occur. For instance, the microchip production plant being built at a cost of $2.8 billion by the American company Advanced Micro Services at Dresden will create 1400 new jobs (Financial Times, 15 December 1995). The most important deficit in the industrial sector remains the underdevelopment of small and medium-sized firms along the west German model. As recently declared by Lothar Spath (chairman of the privatized Jenoptik and former Prime Minister of Baden-Wtirttemberg): ‘a revival in the east must be based on the development of a sound Mittelstand’. This offers the best potential for creating a thriving seedbed for self-generated industrial renewal (The Economist,

1996).

Conclusion No one at the time could have envisaged the magnitude and pace of the economic collapse of the former GDR after 1989, nor could anyone have predicted which way its new economic geography was going to be shaped. But, as this study has shown, the ‘green shoots’ of recovery are highly polarized-economically largely within the service and construction sectors, and geographically within a limited range of locations. By focusing upon the spatial dimension of the restructuring process, this paper has demonstrated that east Germany today exhibits a renewed Loschian-style particularity of economic experience, with increasing spatial differentiation between those regions and localities that are witnessing a strengthening upturn in line with their economic potential, and those where the downward trajectory of economic collapse has yet to be reversed. The former include bridgehead locations along the old inner-German frontier, but more significant are the agglomeration cores, with Berlin and the ‘Berlin effect’ assuming a special role. Since the distribution of urban agglomerations in the new Liinder is tilted towards the south, this polarization is intensifying broad-scale regional differences between north and south. However, until recently the entire territory of the new Liinder has been treated as one extensive, homogenous assistance area both for German Federal Joint Task programme and for regional funding under the EU Structural Funds. The former provided the whole of eastern Germany with enhanced levels of industrial development funding for plant and equipment, amounting to DM6.5 billion between 1990 and 1995. Financial aid from the

Economic variations in the new German LHnder: I? Jones and 31 WiId

EU, largely earmarked for infrastructural investments, such as industrial estates, provided a further ECU 3 billion per annum during 1991-3. Over the period 1994-9 the new Liinder are receiving ECU 36 billion from the Structural Funds (Lippert et al., 1993; Commission of the European Communities, 1994). On the other hand, the process of spatial differentiation which we have identified possesses a strong momentum and is likely to continue in the foreseeable future. Accordingly there is a need for policy-makers to consider, as a matter of priority, adjustments that would create a less universal and more geographically specific framework of regional assistance. This should be designed to reduce excessive spatial polarization and regional divergence. The Oder valley adjoining Poland and the Erzgebirge zone bordering the Czech Republic are two such areas where re-industrialization is particularly difficult because of the enormous wage disparities across the frontier. These types of localities, characterized by small industrial settlements with high levels of economic specialization, need extra assistance to counter this acute problem (Commission of the European Communities, 1996). The first indications that a finer-scale policy brush will indeed be applied has just emerged. Under the funding policy of the new ‘Joint Task' Programme (GerneinschajisauS_ gabe), which came into operation on 1 January 1997, the level of assistance in several labour market regions in the new finder will be reduced below the east German average (Zarth, 1996). Significantly, the regions affected are Berlin, Leipzig, Dresden, Schwerin and the Reihestadt cities of Erfurt, Weimar and Jena. These are defined as ‘structurally strong regions’, and this recognition is largely consistent with the emerging pattern of spatial differentiation identified in this paper. Finally, the immense changes induced by unification constitute a salutary reminder that it would be incautious to make dogmatic pronouncements on the likely path of eastern Germany’s future economic and regional evolution. Lurking in the background is the spectre of the ‘Mezzogiorno scenario’, which sees eastern Germany relapsing into a quasipermanent state of regional poverty and servility (Blien and Hirschenauer, 1995). Support for such pessimism is seen in the demographic crisis caused by unification, as national marriage and birth rates plummet in the face of constant uncertainty. The 6-25-years-age cohort in the year 2000 will be 20 per cent smaller than in 1989, representing a substantial erosion of the future human capital (Bucher and Gatzweiler, 1993). Others fear that the new finder will be increasingly by-passed by west German firms eager to exploit the rock-bottom wages of Eastern Europe (Financial Times, 20 August 1996). On the other hand, eastern Germany is now incorporated into a new political and economic systemthe West German Model1 Deutschland-that does not depend upon cheap labour but derives its competitiveness from a combination of high skill and low unit labour costs of production. It is based upon a culturally embedded system of intensive industrial training and high levels of investment in plant and machinery (Gertler, 1992). The indications are that the economic restructuring of eastern Germany is indeed progressing towards this pattern of high-productivity investment, but there is concern about the limited evidence of self-generated revival in the important manufacturing sector. The ultimate goal must be the reconstruction of the same type of economic culture that prevails in the old Liinder, but attaining this goal will undoubtedly be a slower process than Chancellor Kohl’s original optimistic predictions on the convergence of the two Germanies.

Acknowledgements The authors express their thanks to the following for their kind assistance in the preparation of the paper: the Anglo-German Foundation for the Study of Industrial Society for their generous financial support for our research visit to Thuringia and elsewhere in Germany; the BfLR at Bad Godesberg, particularly Dr M. Sinz; the BfA at Nuremberg, 297

Economic variations in the new German Lander: J? Jones and T Wild

particularly Dr M. Keller; and the many planners and other officials in eastern Germany who gave freely of their advice and time. They are particularly indebted to Dr C. Ellger and Dr F? Bauer of the Freie Universitat Berlin for introducing them at first hand to the planning problems of the Berlin Speckgiirtel in 1996. The maps and diagrams were drawn by Mr K. Scurr of the School of Geography and Earth Resources.

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