Software city starts to find major bugs in reality

SEATTLE IS not a city much used to adversity. Since the rise of Microsoft, the hi-tech industry and the invention of Pacific North-west cafe lattes, it has gone from boom to boom, adding an exhilarating cosmopolitanism to its pleasantly understated prosperity.

So when Boeing, still the Seattle area's largest employer, announced this week that it was laying off 48,000 workers in the next two years, it came as the kind of shock the city had almost forgotten existed.

Almost all the job cuts are expected to hit the string of Boeing factories and assembly plants around Puget Sound, the large natural harbour dotted with islands that surrounds Seattle. The cause is a sharp drop-off in orders from Asia, compounded by a chain of over-enthusiastic expansion decisions in the past two years.

In addition, Boeing - which merged two years ago with McDonnell Douglas to form an aircraft-producing behemoth - has got caught in a price war with its thriving European rival, Airbus Industrie, cutting its profit margins to the bone in a declining market. The company's workforce has yo-yoed from 110,000 in the early 1990s, to about 230,000 now, and is set to fall to around 180,000 by the start of the next millennium.

This is not a crisis on the scale of the early 1970s, when Seattle was virtually a one-company town and someone put up a sign - since much copied - asking whether the last person to leave could please turn out the lights.

But it is nevertheless the largest single job cut in living memory - a cut that is likely to be compounded by the fact that every Boeing job generates two or three others in the local economy. The Asian crisis is particularly bad news for a city that built the foundations of its present affluence on trade with the East in the 1980s, and relied on it to survive the last, much smaller slump at Boeing in the early 1990s.

"In 1991-93 the state economy held up pretty well, because of other areas - obviously the high-tech area - but also timber and agriculture," said Charles Hill, a professor at the University of Washington's business school. "The problem now, of course, is that timber and agriculture are Asian- dependent. Go figure."

So, does the news from Boeing spell recession in boom- town Seattle? Not exactly. Microsoft and the computer industry (which includes the local software retailer amazon.com) are planning to add employees by the thousands in the next few years, as is the building industry. The housing market is going through the roof, with hi-tech workers building monster homes in the suburbs and along the shorelines of Puget Sound and the Olympic Peninsula - a trend that shows no signs of slowing down.

The real danger is that Seattle will lose its working class. The friendly, diverse, endlessly tolerant city that attracted so many people in the past few years risks turning into a haven for yuppies and Microsofties to the exclusion of all others - following much the same pattern as San Francisco.

Already, the middle-class housing boom has encroached on suburbs such as Renton and Everett, which traditionally belonged to employees of the aircraft industry.

With the rise of Microsoft, the friendly small-town manners of Seattle have been given a jolt by the aggressive, competitive ethos of the world's fastest-growing economic sector. The resentment has been as palpable as it has been unavoidable.

As David Brewster, a local columnist, wrote in the Seattle Times recently: "This form of hyper-capitalism, with its exaggerated emphasis on homo economicus, is bound to have a transformative effect on our region."

The Boeing job cuts are only going to exacerbate that trend. In all probability, many of the laid-off workers will find new employment in construction. Local economists predict a slowing in the economy but certainly not a recession. But Seattle will lose what is left of its innocence - the innocence that allowed it to profit from windfalls such as the Alaska gold rush or the military construction boom of the Second World War while enjoying a pleasant sense of provincial detachment from the sources of its revenue. The Boeing cuts won't make Seattle a nicer place; they will drag it reluctantly into the hard, real world.