I’d just arrived in Germany when the Berlin Wall came down. It was hard to appreciate the enormity of the change that had just happened at the time but the reunification of the two Germanys changed everything and also highlighted just how difficult it is to change not only an economic system but the ideology and values of people that had lived for generations under a powerful ideology.

The first I knew of the fall of the wall was from the news reports and the chatter in the bar in Heidelberg where I had arrived to visit a friend after spending the summer on the beach in France. The pictures on the evening news were dramatic, but life in this Black Forest university town went on although a few people left to spend the weekend in Berlin that was at the epicentre of the action.

Following the fall the German government under Helmut Kohl did all the right things. Kohl promised USSR General Secretary Mikhail Gorbachev in a series of historic meetings that Nato would not advance its troops to the Russian border (a promise that was soon broken), agreed to swap one Ost Mark, the eastern German currency, for 1DM, the western currency, in an incredibly generous gesture, and then launched a massive €1.5 trillion investment programme to bring the standard of infrastructure and life in the DDR up to that in in the FDR. A special solidarity tax was introduced to pay for it, which produced some grumbling amongst West Germans, as the state launched itself into the work with typical Teutonic efficiency.

But it didn't really work very well. Or at least while the roads, bus stops, hospitals and schools in East Germany were rapidly transformed, there was a mass internal migration from east to west. Unemployment levels in East Germany skyrocketed and despite the huge amount of money poured into a region that housed only 17mn of the total 80mn population, the local economies stagnated. To this day a difference in income remains with those in what was the DDR earning less money and those areas suffer from higher unemployment than in the west. 

An ill-defined divide remained after the fall of the wall. The West Germans, known in German as Wessis (pronounced “Vezi”) as opposed to the Ossis (“Ozi”) from the East, found that they had less in common with their brethren than they at first thought and the inculcations of socialism had deep roots, even if the Ossis were not married to the ideology.

Even to this day my German friends say they can tell who is a Wessi and who a Ossi fairly easily, although the differences are lost on me.

This difference has also translated into the politics. I have spent most of the last three decades moving backwards and forwards between Moscow and Berlin, my two homes. By 2003 the decade of integration was complete and everyone had established new lives, but this period was marked by the rise of “Ostalgie” where the TV was full of DDR-era movies and the stars and singers from those days on that side of the wall were enjoying a revival in popularity. The genre was summed up in an excellent and funny film called “Goodbye Lenin!” with Daniel Brühl, who has gone on to become a international movie star.

The Ossis missed the certitudes of socialism, the “cradle to the grave” care the state offered and the camaraderie that was part of the socialist system – something they share with all the peoples from the former socialist block to varying degrees. The point is that not everything in East Germany was bad and there were many things that the Ossis missed, despite being materially better off now.

Vladimir Kaminer, a Jewish Russian author, became famous in Germany with his short stories written in German about his life in Russia, the most famous being “Russendisko” about the chaos of the reunification. He moved to East Berlin before the fall and now runs the Burger Bar (Burger means citizen in German and has nothing to do with hamburgers) that has been a smash hit with Berlin's cool youth, playing crappy Russian pop music and serving cheap vodka.

“East Berlin was full of dissidents in those days who were pissed off with the system, but for me coming from Russia, East Berlin was like a paradise,” Kaminer told bne IntelliNews in an interview at the Burger Bar. “The shops were full of fresh produce we could only dream about in Russia. It was like the social model worked in East Germany and no where else in the Soviet Union.”

Of course the quality and variety of the goods on offer to West Germans were vastly superior, but they had to be paid for. Everything had to be paid for. And many of the things people desired (a nice car above all else) were expensive. As time wore on a disillusionment appeared as the promise of the west remained a promise unless you made a lot of money. And not everyone made a lot of money. Most just got by.

The concept of democracy came to mean something slightly different to the Ossis. To westerners, democracy means the right to vote, a free press and control over your life choices. The hard work and competitive nature of capitalism is taken as a given, but for East Germans it was new and after a decade many of them decided they didn't really like it.

In the noughties this was manifest by the rise of the left-wing parties such as Die Linke and Party of Democratic Socialism (PDS), which became more popular in the eastern part of the country. Today the same disillusionment is fuelling the rise of the Alternative for Germany (AfD) right-wing nationalist party that is also popular in the east and poorer parts of the country, although the return of neo-fascist politics is a lot more complicated than just the problems associated with the unification of Germany.

As bne IntelliNews recently reported in a piece “Decline of the west and rise of the rest”, disillusionment with the capitalist model has now spread to the west as the perpetual economic growth promise at the base of this model has proven to be impossible to deliver on, as the world runs up against its climatic and social limitations. Average incomes amongst the middle class stopped growing at the end of the 70s and have been in decline since, as inequalities across the developed world get wider. The rich are getting richer and the poor, poorer, not just in the emerging markets of Eastern Europe, but everywhere.

“We need to shift from pursuing GDP growth and affluence toward sustaining ecosystems, improving human well-being and reducing inequality,” tweeted Guardian journalist Jason Hickel, commenting on the conclusion of a scientific conference of 11,000 academics warning of a imminent climatic emergency.

The same phenomena can be seen in many of the countries of Central Europe that followed East Germany into the European Union (EU) in 2004 but didn't have the benefit of being totally amalgamated into a highly efficient and wealthy sister country. Although the Central European accession countries benefited from Brussels' largess in the form of structural transformation grants that ran into the billions of euros, they were largely left to manage the transition on their own.

The increasingly obvious problems with the capitalist model are now manifesting themselves across Europe in the former communist states, which are suffering from a profound crisis of trust in democracy and a rejection of liberal values that replaced communism. That spurred rising populism, as bne IntelliNews’ Denitsa Koseva in Bulgaria reported this week.

The need for a more inclusive economic model that goes beyond measuring the increase in GDP per capita is becoming increasingly obvious and is driving change. The Swedish climate activist Greta Thunberg has brought the spotlight to the issue, but even in Russia the leading bluechip raw material producers have suddenly put environmental, social and governance (ESG) as a core part of their development and are beginning to make sustainability a core part of their business model. But a political equivalent is still missing. Even Germany’s pioneering Green party, which in parallel to the AfD has risen to become the most popular party in Germany in a poll for the first time ever this autumn, has found its role usurped by the Climate Revolutionaries.

The resentments go both ways. Amongst my West German friends there are some that remain unhappy at the solidarity tax and the massive subsides spent on bringing the east up to par and then having to accommodate the sometimes profoundly different points of view in national politics. At root of these tensions is the Ossis and Wessis don't have an identical set of values and the necessary compromises in German domestic politics have been larger as a result.

It's taken two generations but these divisions have started to fade as the next generation, the children of “mixed” couples, are growing up. Berlin itself is symptomatic of the process. In the 90s the city was still divided by its schizophrenic nature. The state’s push to remake the physical infrastructure was manifest in Potsdamer Platz – where the world’s first ever traffic light was installed to deal with the world’s first ever traffic jams – bifurcated by the wall but transformed by a sea of cranes that built a symbolic centre of modernity. Today the ultramodern Sony Centre, a hive of shops, cinemas and restaurants, has filled what was no-mans land, crowned with a glass and steel tower that is the HQ of Die Bahn, Germany’s national railway company.

More tellingly Kollwitz Platz is the keystone of the ultra trendy Prenzlauer Berg that was invaded by the young following the fall of the wall. In the 90s run-down buildings in this relatively central district but in the former East Berlin were simply abandoned and then taken over by young people who turned them into bars, clubs, restaurants and other small businesses. One of bne’s editors at the time had a side business where he set up a ping pong bar that only sold bottled beer and pulled the punters in with free ping pong tables and DJ kit that was open to anyone who wanted to use it.

But those young people quickly settled down and started doing up the houses. Germany is suffering from a deep demographic crisis with a replacement rate of 1.2 children per pair (you need a rate of 2.1 to keep a population size stable). However, the small park in the centre of Kollwitz Platz was famous for the number of small children that came there every day to play. The area around Kollwitz Platz was not only the most fertile in Germany, it had the highest birth-rate of anywhere in Europe at its peak.

In general the stark differences between the run-down but edgy nature of Prenzlauer Berg in East Berlin and the chic neighbourhoods in the west like Charlottenberg have diminished. The architecture in East Berlin will still be very familiar to anyone who has spent any time in Eastern Europe, especially the massive apartment blocks along Karl Marx Allee, just off Alexander Platz, the heart of East Berlin, that look like they have been transplanted from Moscow, but the general dilapidation and lack of public services of the socialist system has disappeared.

The amalgamation of the two Germanys has had other consequences. As a result of this process, Germany is in a unique position to deal with the bad boy of European politics – Russia. German Chancellor Angela Merkel is an Ossi and like most of her generation studied Russian in school. Indeed, the German foreign ministry has a large share of Ossis working for it and its embassy in Moscow must be unique amongst those of the EU there for the large share of ordinary diplomats that speak fluent Russian. That favours Germany’s relations with Russia and has promoted business ties between the two countries. Germany has literally ten times more businesses registered in Russia than any other European country and last year recorded record levels of foreign direct investment (FDI) that topped €3bn for the first time.

The German unification process has taught many lessons. The first is that simply pouring all the money needed to modernise basic infrastructure – something that Russia is embarking on and other countries like Ukraine are trying to organise – is not in itself enough to create a prosperous modern society.

Another lesson is that values systems are deeply engrained and simply offering more material goods is not enough to transform a society. This ties back into the problems with the current capitalist model. To simplify the problem, following the failure of the socialist experiment and the “victory” of capitalism the predominate model became just “more capitalism” as epitomised in Francis Fukiyama’s “End of History” and US President Donald Trump’s “transactional” politics. In the meantime these ideas have been debunked, but what is supposed to replace them remains elusive.

And your starting point makes a difference. East Germany was well behind West Germany, but it was well ahead of everyone else in the eastern bloc. However, as soon as it joined the rest of Germany the bar was raised and there was a lingering resentment that life for western Germans was still better than for easterners. That created friction. The accession countries suffered much less from this as everyone in the country was in the same boat and they could only dream of enjoying a German standard of living, which remains the gold standard for most of the East European population.

But having said all of this, some big positives have come out of the change too. The only really successful transitional model has proven to be “join the EU” as every country that did join has seen standards of living and prosperity soar. The ready-made functioning institutions are at the core of this success, even though the governments of several new EU members, like Hungary and Poland, are working hard to undo the power of these institutions. While the likes of Czechia and Slovenia had to build copies of these EU institutions as part of their accession process, the East Germans were simply plugged into the existing system.

The countries further east that have not joined the EU and never will have been left to cope with their ingrained bureaucrat-client system that is based on corruption – even supposedly progressive Eastern European states like Ukraine. This system is deeply entrenched and not easily abandoned. Former president Petro Poroshenko simultaneously espoused Ukraine’s “turn to the west” and yet vigorously blocked every attempt to implement the anti-graft reforms being imposed on him by the International Monetary Fund (IMF) and the other donors. In the rest of the Commonwealth of Independent States (CIS), as bne IntelliNews has argued elsewhere, corruption is the system and it will take several generations for these countries to work their way through this stage.

This is the final article in bne IntelliNews’ series marking the 30th anniversary of the fall of the Berlin Wall. Find more articles from the series here: 

Corruption, racism and intolerance in Bulgaria

“I was 30” commercial stirs controversy in Romania

The Czech Republic divided by freedom since 1989

Poland at a crossroads

Central European automakers prepare for an electric future

A profound crisis of trust in democracy

Gabor Szeles, a self-made Hungarian success story

CEE makes enormous progress but held back by governance issues