Global Economics

Fall of the Berlin Wall: A Victory for Europe


Two decades after the collapse of the Iron Curtain, Europe and the world have gained enormously from democratic and economic integration

On Nov. 9, 2009, Germany will celebrate the 20th anniversary of the fall of the Berlin Wall. The event epitomized the collapse of the Iron Curtain and provided the final impulse for the end of communist rule by the Soviet Union. Everyone in Europe has been affected by it and has reason to celebrate. Almost forgotten by some, it is one of the events that has most shaped our contemporary history, identity, and future options. Across the world, the fall of the Berlin Wall has become as strong a symbol as can be found for democracy and the voice of the people. The integration of countries under democracy has proved itself, once and for all, as the system that lasts and that benefits citizens, vs. the oppressive union of states under totalitarianism. German by birth, I was a student in Scotland (thanks to the EU—at that time the EEC), and I saw the events from an outsider's perspective: On Nov. 9, 1989, following many weeks of unrest, the East German government authorized private travel to the West. Hundreds of citizens had already tried to flee the East, through Hungary, Czechoslovakia, and over the wall—and much blood and many lives were wasted on those and other communist frontiers. Rapid Transformation

I had learned about the economic and political systems of the East at school. My parents took me to Berlin when I was a teenager, so that I could see the divided city and better understand it. At home, we regularly collected items such as clothes, school materials, and toys to send to East Germany. We were trying to help people there we did not know but with whom we shared a history, divided by the Iron Curtain. When the wall came down, change came rapidly to the East: Hungary opened its borders; Vaclav Havel was elected President in Czechoslovakia; Solidarity came to power in Poland. The Baltic States were freed two years later, and through this movement, Eastern Europe became democratic. The Federal Republic of Germany, comprising the former East and West Germany, was inaugurated on Oct. 3, 1990. In a stroke, the European community was enlarged—though without the traditional accession process. The inclusion of East Germany was the community's only expansion that did not add a new member state, but it did bring in 16 million citizens, 108,000 square kilometers of land (almost 42,000 square miles), and much more. Reunification opened doors to the accession of Eastern Europe, and hence altered the scale and scope of European integration forever. This was not painless: Economic aid and assistance to the transition of Eastern European countries was costly. Rapidly, Western taxpayers felt the effects on their wallets (the total costs of reunification are estimated to be more than €1.5 trillion, or $2.2 trillion at current exchange rates). Citizens of the West who held ownership or investments in the East before World War II started to claim rights, with more than 2 million claims filed in all. Culture Clash

The repercussions were enormous. Labor moved around the countries, causing a brain drain; unemployment rose because of the transition, and salaries diverged. The government of Helmut Kohl pushed wages way up beyond productivity levels in the East. The disappearance of communist promises such as total employment and guaranteed child care caused dissatisfaction among the populace. Infrastructure, productivity, and innovation levels were terribly low in the East. From here on, mindsets had to change—in the East and the West. Policies had to enforce positive transition, and business had to play its part through investment. The fall of the Berlin Wall may have been a peaceful revolution, but the violent end of the communist dictatorship in Yugoslavia and the continuing struggles over ethnicity and identity in the Western Balkans painfully illustrated that taking such a path was rarely that easy. By the time I returned to Germany, its capital had moved from Bonn to Berlin. There had been massive investment from Western companies. My cousin moved with her family to Weimar—which had been in East Germany—while my best friend's husband came from the East to work in her hometown. These previously unbelievable changes turned into normal occurrences. My work brought me frequently from Paris to Brussels, where uncertainty about the scope of change, its costs and benefits to Europe as a whole, eventually morphed into a coherent policy approach. With time (and amazingly quickly), European integration of the Eastern countries became thinkable. Doing so offered tremendous potential for political, social, and economic evolution—not to mention for peace and prosperity. Twenty years after its symbolic beginning, this integration is now accomplished. And it has become a valuable means of avoiding harmful protectionism and exclusion. Trade Boost

For business, far-reaching changes in the global economic environment kicked off at that time: The transition to market-based economies in most Central and Eastern European countries created significant opportunities for markets, resources, supplies, and manufacturing. We saw a huge increase in cross-border trade and foreign direct investment, including in services. Almost simultaneously, the emergence of the digital revolution brought with it a decrease in international transaction costs and led to offshore service advantages. Innovations in both developed and developing countries and the emergence of the Asian tigers and the BRIC countries—Brazil, Russia, India, and China—increased the speed of product life cycles and market opportunities, with accelerating globalization taking hold of our economies. Companies turned to cross-border mergers and acquisitions in an effort to improve their global competitiveness, boosting multinational activity in locations until then untouched by market capitalism. From an EU business standpoint, the fall of the Berlin Wall brought a revolution of a unique kind. German reunification expanded the common market in size and population; now, thanks to EU enlargements in 2004 and 2007, the market encompasses 500 million people, with yet more set to join in future years. Indeed, it could be argued that the fall of the Berlin Wall set in motion steps that have solidified Europe's position in international affairs. Victory over Totalitarianism

I now live permanently in France and teach European integration and international business at the campuses of CERAM Business School, its partner universities, and companies around the world. Outside of Europe, I am always amazed by the awareness students and managers have when it comes to the significance of our democratic European integration and how it has developed since November 1989. We have, in many parts of the world, become an example. Inside the EU, I always remind my students that the 27 member states work together because they share many values, features, and objectives. Stable institutions, guaranteed democracy, rule of law, human rights, minority protection, and a functioning market economy: All of these membership obligations for members are essential for peace and prosperity. The fall of the Wall was a trigger for the efficiency and credibility of Europe in the globalized world—and a glorious victory over totalitarianism.


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