Bureaucratic dysfunction is holding back development in Germany’s capital

By L.R.S. @ The Economist Explains @ Economist.com blogs, Jan. 2

IN EARLY December Berlin’s local papers reported what might sound like good news: the city’s budget was expected to be in surplus by nearly €1.5bn at the end of 2017, a new record. That means plenty of extra cash for repayment of the capital’s enormous debt and sorely needed investment in its infrastructure. But the tone of the coverage was less than celebratory. One report pointed out that the authorities had been failing to spend their budget for years, with essential projects such as house-building and road repairs running far behind schedule: they were unlikely to do anything more useful with the new money. Why is the capital of Europe’s most successful economy so dysfunctional?

Poverty is part of the explanation. Take London out of Britain, and the average Briton is made 11.1% poorer. Do the same to Paris, and the average Frenchman loses out on 14.8%. Imagine Germany without Berlin, and GDP per person rises by 0.2%, leaving everyone else in the country better off. This is due to structural changes in the German economy [....]