Poor But Sexy

Berlin's coolest new club, Kubik, hides behind an unmarked gate across from a crumbling house full of squatters in a derelict downtown lot on the river Spree. It's built entirely from refashioned industrial containers emanating a translucent green light. If they seem to be almost alive, it's no accident; thanks to an edgy software interface, they pulsate to DJ Bobby Fröhlich's smooth post-techno beats. Amid the occasional sweet scent of cannabis, crowds of twentysomethings party until dawn. Sic transit Gloria Mundi . This weekend the cubes will be taken down and, poof, Kubik will be no more.

Quirky, creative and outrageously cheap--the cover charge is but a single euro, and beers cost €2--Kubik is a perfect metaphor for the new Berlin. Remember all that post-unification speculation that the city, as a rising Germany's new capital, would metamorphose from a gritty outpost of the cold war into yet another homogenized, prosperous Eurotropolis? Forget it. The post-unity boom has fizzled--and most Berliners are perfectly happy about it.

Once again, their city is both Germany's undisputed lifestyle capital--and worst economic laggard. Judging by the bustling cafés, thriving art galleries and ubiquitous club scene (think Kubik, squared), you'd never know that Berlin suffers from nearly 20 percent unemployment. Per capita income is the lowest of any major German city. The economy has shrunk by 10 percent over the last decade, and the city's public debt, amounting to some €80 billion, is more than that of Peru, Ecuador and Guatemala combined. Kubik is a symbol of all this, too. After all, the lot on which it stands, free of charge, has been on the market for nearly 15 years--prime downtown riverside real estate that can't find takers at one fifth what it would cost in London.

All this would be a cause of outrage in most world cities. Yet Berliners are at ease. Most were tickled when Klaus Wowereit, their popular partygoing mayor, dubbed the town "poor but sexy" late last year. A Social Democrat governing in coalition with the communists, the openly gay 52-year-old is a shoo-in to win Berlin's Sept. 17 election. His opponent, a sober-suited conservative, gets zero traction. Why? Because Wowi, as he's called, has managed to finesse the mess. Though nearly bankrupt, the city has kept budget cutbacks small enough to avoid angering voters. That's important, given that a whopping 41 percent of Berliners live off government subsidies--pensions, welfare, unemployment--and that the city's 200,000 civil servants make up one of the municipality's biggest voting blocs. And so what if that Kafkaesque bureaucracy is infamous for harassing entrepreneurs and stifling development? In this, Berlin reflects Germany's broader electoral and economic conundrum: how to reform when a growing majority of voters directly benefit from the old yet unsustainable order?

As most Berliners see it, Wowereit has done well merely by keeping things from getting worse. And in time, it may well be that Berlin's poor-but-sexy cachet turns out to be an advantage. Tourist numbers are up 22 percent this year--driven, officials say, mainly by young Europeans coming to play in the city's ever-cool club scene. The dearth of other economic activity, and the accompanying lack of free-spending business travelers, means hotels are dirt cheap. A room in a four- or five-star hotel (the only category for which comparative numbers are available) costs an average of €127, versus €277 in London and €294 in Milan. As a result, Berlin has outpaced Barcelona and Rome as a tourist destination and is now second in Europe only to Paris and London. The city's raffish edge, in fact, is part of its drawing power--not unlike Berlin in its Weimar heyday. Recently the official tourist board added an "adults only" section to its Web site, promoting, among other venues, the legendary Kit Kat, a techno club where "guests act out their sexual fantasies."

Unsurprisingly, creative industries like music, fashion and design are thriving in the new Berlin. They profit not only from low operating costs and cheap rents but also from a steady influx of artists and counterculture types arriving from elsewhere. Fashion designer Carolin Sinemus, whose Sisi Wasabi brand turns out traditional German Trachten with a 21st-century twist, says she knows of no other city where start-up costs are so ridiculously low. She's part of a burgeoning industry of more than 800 small, independent fashion labels, most of them only a few years old.

They've been joined, since 1998, by more than 300 new film and TV production start-ups and an equal number of new music labels, according to Tanja Mühlhans of Berlin's Economics Ministry. Tim Renner, CEO of record label Motor Music, says, "Berlin is like New York in the early 1980s--bankrupt but incredibly creative. Since it costs nothing, you can afford to make fewer compromises and be more radical." That would include Super700, a band of three Albanian sisters his label has produced. Berlin's newest poster child of sexy chic is Graft, an interior-design team that has raked in awards for the futuristic organic shapes that grace the new Fix restaurant at the Bellagio in Las Vegas, as well as Berlin's ultrastylish Hotel Q, recently voted the world's best designed hotel by Travel & Leisure magazine.

The experimental has, of course, always been a hallmark of Berlin. Back in '89--as a half-forgotten outpost of the cold war, surviving on subsidies handed out to citizens and companies merely for staying--it was an oasis where artists, nonconformists and revolutionaries could rub elbows, secure in their tatterdemalion chic. Today, Berlin feels a bit the same way, this time removed from much of the rat race of globalization. Sure, the city has huge, unsolved problems--from dysfunctional schools to hundreds of thousands of missing jobs. And now, as then, Berlin is hopelessly dependent on payments from Germany's richer regions, lavish flows that create very little incentive for Wowereit's government to cut costs or promote business growth and boost tax revenues. But as long as their city stays cheap, cool and livable, most Berliners (and of course their visitors) don't seem to mind.