The First World Cup in Africa, not the First African World Cup!

We’re all excited. Less than 50 days to go now. The first World Cup in Africa. But there is reason to ponder about the Cup’s outcome. And Bafana’s weak performance in the run-up is not the only one – although not being able to beat North Korea who’s behind us in the international ranking is alarming!

It is in fact a World Cup taking place IN Africa but not FOR Africans. FIFA is estimating that 375000 tourist will visit South Africa during June and July 2010. Only 85000 out of these 375000 are expected to come from other African countries. This is a relatively small number given the millions of Southern Africans passionate about football living close to the rainbow nation. Yet, this might have something to do with their purchasing power. FIFA expects the average tourist to stay 18 days and spend over 30000 rand. This is the equivalent of a typical South Africa household’s annual income. So even if you want to be part of the World Cup you might simply be not able to because you don’t earn enough.

Group game tickets – regarless whether it is Brazil or North Korea who are playing – cost 140 rand for South Africans. This is roughly seven times the price of a regulat league game. Prices for accommodation during the World Cup period shot up to around 1000 rand per night per person. The cheapest ticket fort he big opening concert in Soweto is 500 rand. A typical South Africa or Southern African household can’t afford to be an official part of the World Cup. Most African’s will probably stay limited to the fan parks. And as long as that is the case, 2010 will be a World Cup IN Africa but not truely African.

Iceland's revenge

Iceland has its revenge according to the FT. The tiny Scandinavian country suffered vigorously when the global financial crisis erupted in autumn 2008. All its banks had to be nationalised and the English and Dutch government demanded financial compensation after their citizens lost savings allocated in Icelandic banks that were promising higher interest rates than domestic ones (once again a too-good-to-be-true deal, which the depositors willingly accepted without asking questions).

Now Iceland strikes back and throws large parts of Western and Central Europe into chaos as airspace had to be closed and thousands of travelers are grounded because of the volcanic ash cloud. Airlines threaten with losses of USD200 billion per day, which might potentially weaken the nascent recovery governments' just managed to generate with extensive spending packages.

But losses due to the monster cloud might far exceed these levels as a friend of mine - an economist himself - suggested recently. Time is money, as we all know. People are not getting to work, deliveries are not reaching destinations on time and business deals are not signed. According to some interviews the timing couldn't be worst. Many were surprised while on Easter holidays and are now forced to extend their stay. Schools are expecting significant amounts of pupils and teachers not to be back when they reopen their doors on Monday as people are stuck somewhere abroad. Oxford University postponed exams schedule for next week as lecturers and students might not be back in time.

But are these estimates and cries of losses that will plunge us back into recession not exaggerated? Yes, they are since someone's loss is someone else's gain and as an economy we might get out of it without a single scar. Alternative transport providers experience a heyday. The Eurostar train servicing the route Paris-London is fully booked for days. Car rental places are likely to profit as well. Hotels are over-run by guests as they wouldn't be normally just after the Easter holidays. Obviously, it is hard to estimate whether losses and gains balance each other out (although I would think gains might be even bigger than losses given that clever entrepreneurs offer train tickets at high prices). Nonetheless, we are not doomed! The monster cloud will not swallow the recovery.

It is a pain, yes, and believe me I feel it as much as you since I'm expecting my parents on a plane from Europe this Wednesday. For an economist, there is only one logical reason to cry over millions and millions of losses like the airlines are doing at the moment: to put pressure on authorities to re-open the airspace! Hence, the more we cry the quicker it will be over.

Dear Economists

Somehow we believe that economists have extraordinary skills in explaining economic and social events and phenomena. The weekly 'Dear economist' column in the FT weekend illustrates that people prefer explanations based on economic reasoning over common sense with regard to almost every possible matter. As a devouted reader every weekend I learn that many people think economics will help them making a decision on their eating habits, future career path and love life. But why should some asymmetric information argument or some principle-agent model be more suitable to give advise than logical reasoning and donw-to-earth common sense (which you can find in my favourite FT weekend column 'Mrs Monepenny')?

Let's be honest. You don't need to be a genius to answer the question whether Chris should marry his depressed girlfriend. No! Under no circumstances! No! It is commonly known that an economist won't give you an unambigious answer to such a question and if you ask two of them you will receive three possible options what to do. Well, Chris's girlfriend is 'beautiful, intelligent and loving, a wonderful person in every respect'. So maybe a straight forward question is indeed not readily available.

The point of this blog is to bring logical reasoning and pragmatism back into economic reasoning and observations. Hence, the economist meets Mrs. Moneypenny. Since economists like to add their five cents to pretty much everything, all matters of popular interest will be discussed! If this can attract just one devouted reader, it's a success.