Flat World Economics

If anyone has any doubts about how quickly the world is flattening and what the implications are, two recent news items demonstrate the point well. First is the laying off 14,500 HP employees, after the thousands that were already laid off under Carly. This is a new CEO’s desperate response to dealing with a flat world and the implications for the company, the employees, and the industry are devastating (and this is after the announcement of IBM selling its ThinkPad business to China’s Lenovo...). Not sure there is a viable role for the venerable HP in the flattened world, and, if so, it surely won’t look anything like the respected industry leader of the past.

The other article in the San Jose Mercury News today was about “Our society’s middle is shrinking from view.” In the last three years, the number of families in Santa Clara County (read Silicon Valley) earning below $15K rose 30% and the number earning $15-35K has grown by 25%. The number of families earning $35-50K has stagnated and the number earning $50-100K has declined by 9%--while the number earning over $100K increased by 4%. The economic implications are pretty clear—low wage, low skill service jobs are on the rise, middle class jobs are on the decline (through outsourcing, off-shoring, reductions in force due to increases in productivity, etc.), and those at the top will continue to do better.

As Friedman warns in Chapter 8 of The World Is Flat, “This is not a test.”