1. Economics
November 13, 2017updated 02 Aug 2021 2:02pm

Why Berlin is like a teenager: European capitals, and their effect on GDP per capita

Cities are real money spinners, the economic power houses of the world.

That’s all the more true when you look at capital cities. As well as national governments, they often house a country’s business elite as well. Many also have a panoply of history and culture for the tourists to come snap at, too. Throw in the fact they often have larger populations, and you’ll find that many capitals provide a significant share of their country’s GDP.

But how far do capitals dominate, economically? In an age where secessionists are getting uppity and despots are itching to start firing missiles, what would happen to countries if their respective capitals disappeared?

A study, conducted by the Cologne Institute for German Business (IWD), calculated the impact various countries would see on their GDP per capita if their capital cities and their inhabitants were suddenly removed. It found that the most severely affected – and therefore the most capital-centric – economies were Greece and Slovakia. If Athens and Bratislava suddenly eloped together, those states would be 19.8 per cent and 18.9 per cent poorer respectively.

At the other end of the scale lies Germany. If, perhaps inspired by the efforts of Scotland or Catalonia, Berlin were to secede, then German GDP per capita would actually increase by 0.2 per cent. Berlin is basically a teenager of a capital city, lacking the financial responsibility of supporting its neighbours.

The data in chart form. Image: Statista.

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There are a number of reasons for the capital’s lack of productivity. One is the country’s federal system, which means Germany has many different economic centres. What’s more, Berlin was split in two until less than thirty years ago, by the Cold War and a big wall. Despite having come leaps and bounds since reunification (thanks in part to the burgeoning start-up scene fueled by Club Mate), it still has further to go.

Rome is close behind Berlin in the capitals-not-pulling-their-weight race: taking away the city’s economic contribution would leave Italians with 1.6 per cent less GDP per capita. The richest cities in Italy are its northern economic powerhouses, such as Turin and Milan.

London falls in the middle of IWD’s rankings. If the Brexit jitters got too much for the City and the bankers led cosmopolitan London into forming a city state, then the remaining Brits would suffer an 11.1 per cent hit in GDP per capita.

This is perhaps surprising, given the gulf between London and the UK’s other major cities. In Greater Manchester, Birmingham, Glasgow and Liverpool, GDP per inhabitant falls below the national average. London has considerable higher standards of living than all of those.

Given that, it’s perhaps little wonder that the otherness of London and Londoners has started to enter the political discourse, with phrases like “metropolitan elite” getting bandied about by politicians and populists alike. A number of attempts to correct the London/everywhere else imbalance have been made, through initiatives such as the Northern Powerhouse Project, but the progress is slow, to say the least.

Perhaps being less financially less responsible for the country is preferable. Ah Berlin, to be a teenager again.

You can read more about the study here, provided that you speak German.

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