The paradox that is South Africa

The past week has laid bare the stark contrasts between South Africa's ambition and reality, progress and failures.

On February 21, tickets went on sale for the 2010 World Cup. ZA is the first African country to host the tournament. Its winning bid came to symbolize not just the country's post-apartheid progress, but a sense that the entire continent's development was turning a corner as well. While ZA is still racing to complete the massive infrastructure projects associated with the event, the dream many doubted would ever be realized seems all but assured. The importance of this event to a football-mad continent should not be underestimated.

If only the country's economic outlook was so hopeful. South Africa's post-apartheid economic progress is evident. But it's only part of the story. While the emergence of a growing black middle class has been one of its greatest measures of progress, it thinly veils a broader failure to bring economic empowerment to the millions of residents of townships from Soweto to Langa. The percentage of South Africans living with HIV has been estimated at 20%; in fact, life expectancy has fallen by 10 years since the end of apartheid. Crime is truly epidemic. Oh yeah, and there are the tricky issues of Jacob Zuma, the ANC civil war and rising political violence.

One would expect these persistent problems to only worsen now that the economy appears to be falling of a cliff. The government reported today that the economy contracted in Q4 2008, ending the country's longest economic expansion on record. Thousands of jobs are being shed by foreign mining firms. Manufacturing output has slumped to a 40-year low. Even gold production, in which South Africa was the world's leader until 2007, plummeted to its lowest level in 86 years. This is troubling for a sector that accounts for 2.5% of GDP.

I know- quite the pessimistic outlook for a country that has been hailed as a model for post-conflict reconciliation and economic development. But South Africa faces a difficult year, all the while preparing for a remarkable one in 2010. Like other emerging market stars, South Africa represents a bright future. But there are dark days ahead.

Trains, planes, and homes?

Every morning it seems oil hits a new record high. The economic and political results are reverberating throughout the world: corporations are restructuring their supply chains, car sales are shifting, subsidies are being slashed and politicians are posturing about "gas tax" holidays and suing OPEC governments. The stakes of this oil spike are as high as prices.

Much verbiage has been spewed about our addiction to oil and its coming end. Americans don't seem to realize that while this will most certainly be painful, proper policy may ensure the economy can gain some benefits from the necessary and unavoidable restructuring. The obvious changes will be in the energy industry, manufacturing and shipping. But the words oil, housing, and unemployment are rarely mentioned together.

Whether or not this is "peak oil", the American government must act swiftly and drastically to buoy the economy. As the housing market slumps with no indication of quick resurgence, unemployment is also on the rise. Proper policy would encourage restructuring that promotes long term growth while limiting short term losses. There is no doubt moving our country away from oil dependence will be expensive and painful. But there is no reason the end result has to leave us worse off. So what to do?

Tax, tax, tax. The sooner gasoline reflects the true price of oil (or ideally, more) we will begin to see the housing and labor markets, which are imperative to proper reconstruction, bottom out as workers move from "exurbs" and more homes are foreclosed. The spike will be a painful, short term symptom with a more efficient and fluid housing and labor market as the end result.

The process will most certainly hurt but knowing the true extent of the housing crisis quicker will help the financial industry glean their sheets honestly and encourage labor mobility - benchmarks for a "new economy".