Home > Economic Systems, Externalities > Free Market v Communism: Flooding in Berlin

Free Market v Communism: Flooding in Berlin

BerlinParts of Berlin are now suffering the effects of a rising water table which has increased in places to just 2.5 metres below ground level. What is interesting is that there seems to be a correlation between the political ideology and the water level. For instance after 1945 when industrial output was virtually zero the water levels in Berlin started to rise. However in the 1950’s Berlin recovered in the Wirtchaftswunder (economic miracle) and under the communist rule water prices were kept artificially low which meant that East Berlin consumers were much more lax on water conservation. This had the effect of reducing the water table and thus avoiding the threat of flooding.

With the collapse of the Berlin Wall in 1990 came unification pro market policies and the price of water was no longer determined by the Communist party but the free market. This meant that water prices went up and consumers started to consume less. Add to this the increasing presence of the Green movement and conservation of water was on the increase. Since 1989 the level of commercial activity has increased in Berlin but it has been predominately the service sector which are less reliant on water.

Since the fall of the Berlin Wall the groundwater level has risen by over half a meter. Berliners are using 200m cubic metres of water but should be using 300m to avoid the rising water table. There is obviously a case to subsidise water consumption because of its positive externalities.

Imagine the dream-like insanity of a city that needs to turn itself into something like a vertical dam to survive: re-engineering itself not to keep the ocean out, but fortifying itself from below to prevent a lake from rising up onto the sidewalks and streets. It’s as if the fate of Berlin now is to turn itself into a fleet of inland ships, a grounded armada awaiting its moment at sea. [The Economist]

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