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Berlin: Rise and Fall of The Pioneer Technopolis

Why was Berlin’s rise and fall a vital turning point in the history of urban innovation?

September 28, 2004

Why was Berlin's rise and fall a vital turning point in the history of urban innovation?

It was in Berlin, where urban innovation for the first time became dependent on systematic research. This research was organized in the laboratories of giant high technology companies — whose very business it was to be innovative.

Also for the first time, these companies came to depend on contracts from government agencies — particularly for national defense — and thus became enmeshed in tight relationships with those agencies.

For these reasons, Berlin in the last quarter of the 19th century seems strangely contemporary — a model for a new kind of industrial city. It bears striking similarities to the high-tech localities that would later supplant it — such as Massachusetts' Highway 128 or California's Silicon Valley.
Parallels can be found in the role of the state and public utilities and — above all — of the military machine and telecommunications agency.
But there are also similarities in the critical importance of organized research both inside and outside the firm, in the needs of industry for skilled labor — and in the role of technological innovation in national economic advance.

Innovation in this era was highly concentrated in three areas of industry, in all of which Germany competed with the United States for world technological and economic leadership: automobiles, chemicals and electrical goods.

Between 1880 and 1913, Berlin became the electrical capital of the world — Elektropolis. By 1913, it was the leading industrial and commercial city of Europe, regarded by contemporaries as the ultimate example of the progressive city.

Whatever the branch of the German electrical industry, whatever its relative importance, Berlin dominated it. Berlin had some 50% of Germany’s total employment in the electrical industry in 1925.

Fourteen years later, just before the outbreak of World War II, close on 56% of employment in telegraphy, radio and telecommunications was in Berlin — a far higher proportion than in any other sector.
All this did not happen by accident. On the contrary, it was the product of more than half a century of state planning. Located neither on a major river nor on any obvious trade route, Berlin — more than any other great European city — was an artificial political creation.
The small and obscure city owed its position entirely to the fact that it was capital of the state that progressively achieved control over the rest of Germany — Prussia.

By the 1820s, Berlin had the most effective technical education system in the world. Scientific research was a crucial factor in the clustering of high-technology industry in Berlin. But another critical element was the availability of venture capital.
The available capital was extraordinarily concentrated in Berlin, which as early as the 1850s and 1860s — despite conservative Prussian bureaucratic controls on bank expansion and joint stock companies — had become the chief center of the German capital and gold markets.

Berlin's electrical complex withstood the shocks of post-1919 reparations, the great inflation of 1923-1924 and the Great Depression of 1929-1932 — though the last led to reductions in output and employment of as much as 40%.

It received a boost from Nazi investment policies after 1933 and from rearmament after 1936. Indeed, in absolute terms — though it had long since relinquished first place to the Americans — it reached peak levels of both output and employment during World War II.
Then, disaster struck. The Berlin factories were repeatedly hit in air attacks during 1943-4, but generally managed to maintain production.

During the war itself, the Siemens company had been compelled to decentralize production out of Berlin to a host of factories all over the country. From the winter 1943 onward, the Siemens works in Berlin were hit by increasingly heavy air attacks.
In February 1945, just before the war's end, the directors of Siemens effectively decentralized operations to a number of regional headquarters in southern Germany — with Siemens & Halske in Munich at the top.

The firm's Berlin headquarters were effectively transferred to Munich — a move made permanent in 1949 after it became clear that Germany was to remain divided.

Immediately after capitulation, Berlin's industrial capacity was all but dismantled by the occupying powers. Siemens and AEG lost close to 100% of their production capacity. At Siemensstadt, of some 24,000 machines only 1,300 remained — and only 400 were useable.
Above all, Munich was the beneficiary of Berlin's collapse. Bypassed by medieval trade routes, the city achieved prominence as a cultural center during the 19th century.
It is not entirely clear why Munich should have benefited as much as it did from the fall of Berlin. One version has it that Siemens acquired secret advance knowledge of the impending division of Germany, which led to the decision to move the headquarters to Munich in February 1945.

In addition, after the war's end, the American occupation authorities allowed the Nazi command economy in Bavaria to remain — which immediately set to work to industrialize the province.
A huge stream of refugees, many with technical qualifications, came from the Soviet-occupied areas. And all this produced agglomeration effects.

As a result, the Munich region eventually became known as "Municon Valley." It was the leading center for manufacturing and trade in microelectronics on the German — indeed the European — market.

One-quarter of all employment in electrical engineering in the pre-1990 Federal Republic of Germany was located in Bavaria — and the state's share of output was no less than 30%. Half of Siemens' German workforce was found here — 50,000 of them in Munich alone.
AEG remained in Berlin and that company's problems illustrate — albeit in extreme form — the resulting difficulties. The war destroyed an estimated 50% of the city's industrial plant.

At war's end, two-thirds of the remaining plant in West Berlin, and one-third of that in East Berlin, was removed by the Russians. In 1947, West Berlin — with nearly two-thirds of pre-war industrial capacity — accounted for less than one half the city's output.
Then, reinvestment was inhibited by uncertainty about Berlin's political future — especially after the blockade and airlift of 1948.

In Berlin as a whole, employment declined from nearly 790,000 in 1939 to 456,000 in 1959, or by no less than 42%.

The loss in the west was particularly marked in capital goods, including electrical products. Thus, Berlin in 1945 was left physically shattered and effectively denuded of its industrial base.
The subsequent years of the airlift and the city's isolation did nothing to repair that damage. This, coming precisely at the great post-war boom, proved lethal.

Between 1960 and 1983, manufacturing employment in West Berlin fell by nearly 50% — from 305,000 to 157,000. By 1981, Berlin actually had a deficit of employment in electrical engineering, particularly marked in skilled work and in higher-level managerial posts.
This should not be surprising. Berlin's very advantages had now for the most part turned into disadvantages. The close ties to the state agencies had been severed with the establishment of the Federal Republic and the effective end of all Berlin's capital city functions.

The existing workforce was ageing and new reservoirs of skill were created in the southern parts of Germany.

The magic circle of contact between industry and scientific research — despite the continued prestige of Berlin's technical university — had been broken.
Effectively and dramatically, this was the end of Elektropolis. And this had more than a local significance. In losing much of the Berlin industrial complex, Germany lost a unique economic asset that could not simply be replaced elsewhere.
Though its electrical industry steadily grew in output and employment, it could never again hope seriously to challenge American leadership in the emerging field of electronics.

Germany had lost much of its finest technical expertise through emigration in the Nazi years, whilst the spoils of war included direct access to what was left.
It recovered strongly to make important advances in such fields as medical technology, but it could never again challenge America at the leading edge of the new technologies.

Extracts from “Cities in Civilization” by Peter Hall (Copyright