My (First) Belated Berlin Post: How Cheap = Cultural

So I was stuck in Berlin during the Icelandic volcano back in April and have been meaning to write a post about my experiences in the city since then.  I was reminded of this procrastination last night when I was catching up on Marginal Revolution and came across a post by Tyler Cowen that starts off “Living (in Berlin) feels natural.”  Here are a few of the  macro themes I picked up on this latest visit to Berlin that help explain how the culture, diversity and economic order make the city feel so “natural.”  (a follow-up post will provide recommendations on the city’s (in)famous Berlin nightlife scene).

Modern Berlin is a product of the Cold War.  This fact was somehow lost on me during my previous two visits to the city, but as I sought to understand how Germany’s capital city provided one of the highest quality of life in Europe at one of the lowest costs of living, the legacy of the Cold War jumped out at me.  Rent in Berlin is incredible cheap.  Even in the best parts of the city, a nice 70m² apartment (one average sized bedroom, one mid-sized living room, at least one bathroom, fully equipped kitchen/dining room plus a hallway and closest for storage (laundry, etc.) rents for between 300-400 euro/month in most parts of the city, and even in the trendier areas around Friedrichshein, Kreuzburg or Prenzlauer Burg, rents rarely exceed 600 euros.  To put this into perspective, this is about 1/2 of what a comparable apartment would cost in DC, and under 1/3 of the cost for most other major cities in Western Europe.

For this visit, rather than stay in hostels as I had done previously, my friends and I took advantage of these low rents by renting an apartment near the Hermanstrasse S-Bahn stop for just 70euro/night off of Craigslist (and the last night for just 10euro).  The reason rents are so low in Berlin is because the city has relatively little business or financial activity.  While many other parts of Germany (e.g., the dense Rhine-Ruhr region) maintain the large industrial base that support the world’s fourth largest economy, Berlin is oddly isolated from all of this economic activity.  While the city is still a giant, sprawling metropolis, the buildings and apartments are mainly  rented by the Creative Class — students, artists, politicians, IT entrepreneurs.  While catering to the Creative Class makes the city an incredibly interesting place to visit or live, the unemployment rate in Berlin is somewhere around 20 percent officially, and unofficially it’s probably quite a bit higher.  The result?  Low rents and a low cost of living.  The reason?  The Cold War.

During the Cold War, neither the Soviets or Western Powers invested much into Berlin’s business base.  Instead, each side built up world class universities, theaters, symphonies/orchestras, etc., to “out-class” the other side.  Today, this cultural vibrancy remains, but business is still lagging behind.  Even with a concerted effort to attract business to Berlin, the city remains a hotbed for artists, students, writers and “revolutionaries” who all benefit from the low cost of living.  In addition to rents, food is also very reasonable…at restaurants, we rarely spend more than 10euro for an entree, drinks at bars were cheap (2euro for beers, >4euro for mixed drinks) and a 40euro stop at the Supermarkt lasted for most of the week.

While many cities can claim a “low cost of living,” Berlin is probably the only place on the planet that also provides the cultural and creative infrastructure that make the city such a fascinating place.

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