After the fall of the Berlin Wall in 1989 hopes were high that many of the investment banks in Frankfurt would relocate to the new German capital in the East. They were hoping this would bolster the floundering East German economy and help bring the two halves of the population back together again. This did not happen and as a result Berlin slipped far into debt as many artists and other creative types started to fill the affordable yet dilapidated East German real estate. They found the lack of established businesses and societal pressures, not to mention the low cost of living, ideal to create and design their world as they saw fit. Mayor Klaus Wowereit tried to put a positive spin on this anti-capitalist way of thinking by giving Berlin a new slogan as he declared the city, “Poor but sexy!”
Over the past decades developed countries like the United States have seen a drop in badly needed engineering graduates as well as significantly lower interest in science and math degrees among university students. The majority of gifted students seem to only be interested in money and are therefore getting degrees in business. The American dream has been reduced to becoming employed by firms like Goldman Sachs and becoming obscenely wealthy. This has ironically played a large role in the current economic crisis taking place in the US. Many people now agree that our capitalist system is broken and as a result a revival of Keynesian economics is occurring, replacing the dominant model set up by Milton Friedman in effect since the 1980’s. John Maynard Keynes believed only by government spending on infrastructure in times of a weak or sluggish economy can we correct, rebuild and maintain financial homeostasis. His methods were used successfully in the years following the great depression and led to decades of prosperity. Milton Friedman however postulated less government spending, less taxes on the rich and deregulation of the financial markets to stimulate the economy. Since we started to transition to a Friedman-based system in the 1980’s we have experienced numerous stock market crashes (1987, 2000, 2010) , an increase in fraud leading to bankruptcy (Enron), profiteering (Blackwater/XE), wild speculation (boom and bust of technology stocks, and more recently sub-prime mortgages) and a growing disparity between rich and poor.
There is however a new focus and a new business model based on the internet and ease of access to information which is causing a redistribution of wealth. Suddenly the small guy with an idea is just as capable if not more likely to be a success than the traditional “trust fund” families born into wealth. Everyone has heard of Bill Gates, Steve Jobs, Mark Zuckerberg, but some names you may not have have heard of are Dov Charney (American Apparel) , David Karp (tumblr), Andrew Mason (Groupon), Drew Houston (Dropbox), Garrett Camp (stumbleon), Daniel Ek (Spotify), Blake Ross (mozilla), and Matt Mullenweg (wordpress). They are all examples of this young nouveau riche created by the new online paradigm. Berlin in the past decade has become home to a creative, artistic and talented yet unemployed subculture who have over the past 5 years turned the city into the startup capital of Europe. All of a sudden people are looking to what is going on in Berlin and trying to understand how these hipsters have blundered their way into success.
The German capital has now become the home to many startups and global business is taking note. A good friend of mine came to Berlin 6 years ago and started a music studio called Normal Bias. He is now discovering he can reach a much wider audience through an online music portal which began here as a startup a few years ago. Soundcloud .com is a music portal for uploading and sharing your music with the world and with over 12 million members it has become a huge international success. It is only one example of successful new businesses to come out of Berlin over the past few years. Some other new companies which have been growing rapidly are; Wimdu.de (a clone startup similar to airbnb.com), 6wunderkind.com (making software more user friendly) and Wooga (a social gaming developer) to name just three. In the tourism industry Berlincitytours, plusoneberlin, and etuktuk are three companies that have also taken advantage of this new medium. There is also an influx of venture capitalists coming to Berlin to cash in on this boom of creativity.
In the late 1990’s when I arrived in Berlin even holding a job was considered selling out. For the first time however people here are realizing that having an income does not necessarily make you part of the problem. On the contrary, as groups like the Chaos Computer Club can attest to, perhaps Berlin is the ideal place to begin to tear down the old and build up a new economy sans nepotism. After all it was here that Karl Marx went to university. It was here that the German monarchy was ended on the 9th of November 1918 and it was here that the battle between communism and free market democracy raged after the end of WWII up to the reunification of Germany on the 3rd of October 1990. Perhaps it is only fitting that this newly unified German capital becomes the starting place for a new business model, based on ingenuity and need, not maintaining the status quo and greed.