New Peril for Berlin

For more than two decades, West Berlin has lived and prospered despite its isolation inside Communist territory. The economic cost of accomplishing that feat is now getting higher and higher. Surrounded by bitterly hostile East Germany, the city (pop. 2,200,000) must bring in most of its food, fuel and raw materials through its air, rail, autobahn and canal lifelines with West Germany, 110 miles away. And to keep their $10 billion-a-year economy afloat under such circumstances, West Berliners have been forced to rely increasingly on powerful infusions of capital and outright subsidies from the West German government.

The latest reminder of the city's vulnerability came last month when the regime of Communist Boss Walter Ulbricht began requiring West Germans to buy transit visas and pay cargo taxes when traveling or moving goods across East German territory to West Berlin. For a city that withstood an all-out Communist blockade in 1948-49, Ulbricht's new restrictions in themselves are little more than a nuisance. Nonetheless, they dramatized anew the perilous state of West Berlin's economic links--a fact that has frightened off both industry and labor.

New Crematorium. Many West Berlin businesses have set up shop elsewhere, with the result that the city has already been superseded as West Germany's financial center by Frankfurt and is now being challenged in the fashion industry by both Munich and Duesseldorf. Siemens, West Germany's biggest electrical-equipment company, moved its headquarters out of West Berlin after World War II, and others have followed suit. The inconvenience of maintaining facilities geared to West German markets in West Berlin is only too apparent. Complained one industrialist after recently abandoning Berlin: "Last year I spent 250 days aboard airplanes."

The business exodus has resulted in a dearth of management talent, and West Berlin has had trouble attracting both research laboratories and growth industries. Significantly, neither computers nor autos are manufactured in the city. Not the least of the obstacles to economic expansion is a critical shortage of workers. West Berlin's labor problem became acute when the Ulbricht government put up the Wall in 1961, thus depriving the city's Western sector of its 60,000 East German workers. Native labor, meanwhile, is difficult to keep at home, since the average hourly wage ($1.25) runs some 10% below that in West Germany. A city without suburbs--and hence commuters --West Berlin is also plagued by a housing shortage that often forces newcomers to live for months in workers' dormitories.

Without a hinterland from which to draw new inhabitants, and because many young West Berliners are moving to West Germany for better jobs, the city's population is growing disturbingly old. More than 20% of West Berlin's residents are now 65 or older (v. 12 1/2% in West Germany). According to one macabre local joke, undertaking is the city's only booming business; yet even that is not free from problems. Because of a shortage of cemetery space and gravediggers, almost half the city's dead are now cremated--with the result that the city's two crematoriums have become overburdened. To cope with the emergency, the city plans to add a third by 1971.

Fertility Pays. The federal government in Bonn has helped shore up West Berlin's economy with some $1.3 billion a year in financial aid. Although many West Germans have been unhappy over such outlays, Ulbricht's latest harassment ended most of the grumbling, paved the way for speedy passage by the West German Bundestag of an expanded Berlin aid law. That law provides for various business incentives, including sales-tax rebates on all goods produced in West Berlin, liberal depreciation allowances and subsidies for investment in the city's industry, and preferential treatment of its firms on government contracts. Bonn also gives annual bonuses of up to $138 to more than 90% of the West Berlin labor force, subsidizes air fares between the city and the rest of West Germany. Nor does it neglect the age problem: for couples who bear three children, fertility pays off with a $750 federal grant.

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