A prep course for the month-long World Cup soccer tournament, a worldwide pheno

tates and South Africa . How important is outside investment ? `` It is vital , 

'' he said . The Clinton administration has committed itself to providing $ 200 

million a year for three years in grants , loans and loan guarantees to assist i

n the process . But the real investment must come from outside government . `` T

he key to the future of our relationship will be the private sector , '' Gore sa

id . `` That 's what will create the jobs . That 's what will create the income 

. '' Commerce Secretary Ronald H. Brown says there is a short-term need for `` h

undreds of millions of dollars '' of U.S. investment . The U.S.-South Africa Con

ference on Democracy and Economic Development was the first effort to bring the 

new South African elite together with those in the United States who are in a po

sition to provide assistance without a massive commitment of government funds . 

`` If you just throw money at South Africa , you willn't necessarily create a su

ccessful economy . The South Africans don't have the skills in public administra

tion .. . that are part of a market economy , '' said a U.S. official involved i

n organizing the meeting . From the South African perspective , the objective is

 much broader . `` The battle in South Africa is to ensure we can give this hard

-won democracy some content .. . and reposition South Africa in the global econo

my , '' Manuel said last week in Washington . On the positive side , said Witney

 Schneidman , senior vice president of Samuels International Associates , an int

ernational trade and investment consulting firm , `` the prospects are quite goo

d . '' South Africa , Schneidman said , `` has a first-world infrastructure . ''

 He cited its banking network , an established system of contract law , a relati

vely open , market-based economy , and a geographical location that provides acc

ess to markets in other regions , such as the Indian Ocean rim . South Africa 's

 $ 112 billion economy is beginning to grow , after four years of recession , an

d it has major deposits of gold and platinum . ( Optional add end ) On the other

 hand , `` there are a lot of misplaced expectations , '' Schneidman said . `` M

ost people don't understand the gap between the white business Establishment and

 black business . '' The unemployment rate in South Africa is approximately 46 p

ercent , average income of blacks is one-tenth that of whites , and the black li

teracy rate is half that of whites . In fact , the upbeat tenor of the current d

iscussions may involve a considerable amount of `` blue-sky '' expectations , sa

id Walter Kansteiner , an African affairs expert who served on the National Secu

rity Council staff during the Bush administration . `` You 're not going to achi

eve reconciliation with the white community if you 're going to slap huge taxes 

on the whites and go into a budget deficit , '' Kansteiner said in an interview 

.

 The increasingly loud debate over whether the U.S. economy is overheating or in

 danger of it will increase a few decibels as a result of the Labor Department '

s employment report for May released last week . Confounding the forecasters , w

ho had expected it to remain stable , unemployment fell to six percent , down fr

om 6.4 percent April . This pushed joblessness well below what many conservative

s consider the `` natural rate of unemployment '' which they define as the point

 beyond which further improvement would cause an escalation in wage demands and 

a new inflationary spiral that can only be cured by bludgeoning the economy back

 into a recession . The thinking at the Federal Reserve Board these days is that

 the `` natural '' rate is somewhere above six percent . So the improvement in M

ay will not only be used to justify the successive interest rate increases alrea

dy put in place this year but strengthen the voice of those at the Fed who argue

d strongly that the central bank should have gone even further to apply brakes t

o the economy . The trouble with the `` natural '' rate is that it cannot be set

 with precision and indeed there are strong arguments in favor of the notion tha

t recent changes in the economic climate have driven the natural rate far lower 

than the militant inflation fighters would have you believe . Indeed , there wer

e periods in the post World War II era when six percent or 6.4 percent would hav

e been considered an abnormally high jobless rate . In the early 1950s unemploym

ent fell below three percent . In the late 1960s it stayed below four percent . 

This isn't the 50s or 60s , of course , but neither is it the 70s or 80s . The s

harp decline in union membership as a percentage of the work force and the weake

ned position of unions in pace-setting industries steel , automobiles , trucking

 come to mind argue strongly that the natural rate is significantly lower than i

t was 15 years ago . So do several other trends . Increased price competition in

 the 1990s is another factor . It has resulted from cultural changes in U.S. cor

porate management , increased foreign competition and greater consumer awareness

 of price . Whatever , it means that even with a lower unemployment rate and hig

her wage demands , corporations are finding it far more difficult to make price 

increases stick and therefore far more likely to control costs through technolog

y and innovation . But what , really , is the big difference between a six perce

nt unemployment rate and a five percent unemployment rate , especially if the hi

gher rate buys us insurance against the possibility , however remote , of a resu

rgence of inflation ? I 'll tell you what it is . Lower unemployment not only me

ans fewer families in a state of economic distress . It means thousands of worke

rs more likely to switch out of jobs they hate . It means that desperate middle-

aged victims of corporate downsizing have a far better chance at re-employment .

 It means increased opportunity in the states and regions where joblessness is s

till at recession levels despite the general improvement nationwide . It means t

hat thousands of underemployed , part-time and temporary workers will have a cha

nce for something better . These are all things that most decent people would th

ink of as both `` natural '' and desirable in a fair society .

 SHIROTORI , Japan Far from the high-tech dazzle of an economic superpower , the

 people in this small seaside village still labor by hand and worry that their l

ivelihoods may become obsolete . One of the most prominent local industries glov

e-making is struggling to survive amid a labor shortage , the yen 's appreciatio

n and brisk competition from China , the Philippines and other countries with lo

w-cost labor . `` Everyone is wondering , ` What shall we do ? ' ' ' lamented Ke

nji Tanaka , special assistant to the president of Urushihara Co. , a local glov

e-maker . `` No one knows what the future will bring . '' Shirotori is in Kagawa

 , the smallest prefecture on the smallest of four main islands of Japan , and i

ts quandary exemplifies the quiet struggles of Japan 's far-flung provinces . Th

ey are places that technological advancement and rapid industrial growth have in

 varying degrees by-passed . `` Most foreigners think of Japan as a high-tech co

untry , but in the provinces there are still a lot of labor-intensive industries

 , '' said Yoshihisa Goto , a planning specialist with the Ministry of Internati

onal Trade and Industry . The provinces are not taking their fate passively : Fr

om the glove-makers here on Shikoku Island to central Honshu 's textile firms , 

from Hokkaido 's fish processors to the shipping suppliers of Kyushu , the provi

nces are aiming to revamp and revitalize . Prodded by mounting cries for help , 

parliament passed a special law in 1992 establishing a 10-year program to help r

esuscitate local industry through subsidies , low-interest loans , tax breaks an

d other financial schemes . The government has also renewed a program to help sa

ve traditional industries , crafts that create such culturally unique items as l

acquerware , pottery , dolls and wooden sandals . The program , first begun in 1

974 and renewed in 1992 , grants subsidies to train young successors to the mast

er artisans and to develop new products using traditional techniques for modern-

day goods , for instance . But the challenges facing local and traditional indus

tries are formidable . Few young people want to succeed the aging artisans , who

 labor by hand in small mom-and-pop operations . In the lacquerware industry , f

or instance , an onslaught of cheap products from China and South Korea is under

selling Japanese goods . And the increasing Westernization of lifestyles here ha

s shrunk the demand for traditional items , industry officials say . Many young 

consumers would prefer to buy Tiffany crystal than Japan 's famous Wajima lacque

rware . The exquisite pieces featuring glossy black surfaces painted with gilded

 cranes and other traditional scenes command as much as $ 950 for a single sake 

cup . Overall , manufacturing output in Japan 's traditional industries has decl

ined from $ 5.3 billion in 1983 to $ 4.7 billion in 1992 . The number of workers

 has dropped from 290,000 in 1979 to 210,000 in 1992 . And as young people of th

e province are drawn to the bright lights of Tokyo and Osaka , the percentage of

 workers aged 30 and younger has declined from 28.7 percent in 1973 to just 10.3

 percent in 1992 , according to MITI figures . `` It 's a serious situation , ''

 said Ryosuke Chiba of MITI 's traditional industries division . `` Whether Japa

n likes it or not , cheap imports are coming in . There is nothing we can do but

 develop new products . '' In the provinces themselves , however , that is far e

asier said than done . Take , for instance , Japan 's lacquerware industry . Aiz

u-Wakamatsu , a town nestled in a resort area of mountains and lakes 115 miles n

orth of Tokyo , has long been known as one of Japan 's chief lacquerware centers

 . The craft came to the region more than 100 years ago when the reigning feudal

 lord sent for a Kyoto artisan to develop it locally . The painstaking process i

nvolves several steps , from mixing the pitch-black lacquer brew to shaping the 

wooden bowl or tray , to applying the lacquer and then painting it with delicate

 designs . Most craftspeople specialize in just one of the steps . But these day

s , Chamber of Commerce chief Yoshihiro Ichinose and lacquerware association hea

d Tsutae Baba see their proud heritage about to disappear . The recession of the

 last few years has pushed sales down by 20 percent . Already , the association 

has lost 16 of its members to bankruptcy . The average age of craftspeople is 60

 . Although the association is sponsoring a successor 's training school with 12

 students , that is hardly adequate to replace the imminent wave of retirees , B

aba said . `` Working conditions in the lacquerware industry don't suit today 's

 young people , '' he fretted . `` Who wants to work until the middle of the nig

ht in a small , dark room ? Young people want to work in big companies . '' ( Be

gin optional trim ) To make matters worse , the area is reeling from the impact 

of cheap Chinese lacquer , whose wholesale price is one-fourth that of the Japan

ese products . Aizu-Wakamatsu is more vulnerable to the competition than its riv

al to the south , Wajima , which has carved out a high-priced niche for itself .

 Wajima lacquer is viewed as more art than utilitarian , with an elegant workman

ship that the Chinese cannot yet match . But Aizu-Wakamatsu made a fateful decis

ion in the 1960s to downgrade its product , after the supply of cheap raw lacque

r from China was cut off in a diplomatic row . Now , more than 90 percent of its

 product uses a plastic base instead of the traditional wood ; on many items , a

 synthetic coating instead of authentic lacquer is used . The decision was smart

 at the time , as lacquered soup bowls , trays and boxes were moving into mass u

se for the first time . Exports began to boom . But now the low-end items can be

 duplicated by Japan 's Asian rivals . Already , most Japanese lacquerware artis

ans use half-completed products from Korea and China and apply the all-important

 finishings themselves . What concerns officials here is the growing number of f

inished products entering the market and the discernible improvement in quality 

. `` Lacquerware is becoming a product of developing countries , '' Haruo Fukuni

shi , the industry association president , said with a sigh . But suggest that t

he region should give up the craft , or seek to benefit from China 's competitiv

e advantage by importing more of it , and the response is sharp : `` Our intenti

on is to preserve and protect the tradition of Aizu-Wakamatsu , '' Baba said . `

` If Aizu-Wakamatsu became known only as a place that sells Chinese lacquer , ou

r name and meaning would disappear . '' Solutions , however , are elusive . The 

industry petitioned the central government for an import ban on Chinese products

 but was rejected . Now , there is talk of designing new products , but few idea

s have surfaced : lacquered nameplates or telephone cards , the use of lacquer i

n construction , such as doors or interior accents . ( End optional trim ) Over 

in Shirotori , glove-making executives and officials are less bound to preserve 

a culture and tradition . They mainly want to preserve jobs and long-established

 knitting and sewing techniques that have made the town the glove-making capital

 of Japan . As a result , rather than fight China and other Asian nations , they

 are working with them . The Swany Corp. first moved to China in 1984 and now ha

s four companies making gloves near the Shanghai area . President Etsuo Miyoshi 

's company was one of the first in Shikoku to go abroad , setting up Korean fact

ories as early as 1972 , when labor rates in Japan started to rise . `` In the p

ast 20 years , we 've moved from exporting gloves to importing them , and 90 per

cent is from China , '' he said . `` That 's a very big change . '' Other promin

ent glove-makers , such as Kazuyoshi Urushihara , plan to automate more of their

 production , investing heavily in robotics to combat both the labor shortage an

d rising labor costs . Just as young people balk at becoming traditional artisan

s , they also shun the manual labor of the glove industry . But such options are

 out of reach for most of Shikoku 's 170 glove-makers , said Eiichi Nagata , dir

ector of the Kagawa office of the Japan External Trade Organization . `` Oversea

s production , mechanization with robots and other measures require huge capital

 , and these companies can't afford to do it so easily , '' Nagata said . `` If 

I were mayor , '' said Urushihara , who doubles as chairman of the Japan Glove I

ndustries Association , `` I 'd forget about the glove industry . It does not ha

ve a bright future . ''

 PRESCOTT , Ariz . Once a brash , bawdy territorial capital where the faces of i

ts painted women rivaled the brilliant hues of its majestic Granite Mountain Wil

derness Prescott has been metamorphosed into a tranquil valley where California 

equity barons battle longtime landowners for available space . Where ranchers an

d miners once shook hands on business deals in bars decorated with cattle horns 

, an older generation of Americans has come to look on this city of 29,000 as a 

retirement mecca . They arrive by the dozens sometimes hundreds each month . Esp

ecially since Money magazine earlier this year proclaimed Prescott , with its te

mperate climate and intemperate history , the most desirable area in the country

 for those seeking affordable respite from teeming cities and soaring crime rate

s . Peggy Collins , tourism director for Prescott 's Chamber of Commerce , notes

 with satisfaction that phone inquiries are up 33 percent over 1993 and mail res

ponses have risen 240 percent . But many in what may be the last major true fron

tier city in the West do not share her good humor . There are new Prescott-ites 

, caught in an inflationary spiral that threatens their Social Security income ,

 who prefer that the spotlight on their city quickly fade . And there 's an equa

l or greater number of Prescott pioneers who share that sentiment . Founded in 1

864 as the first territorial capital of Arizona , Prescott despite its reputatio

n for hangings and gunfights has always had a softer side . The women 's Monday 

Club began collecting for a Carnegie Library that today boasts a 110,000-volume 

collection that much larger cities would envy . There are museums , concert hall

s , a community college , a liberal arts college and an aeronautical university 

. Victorian homes are restored and open to tours . College students make up the 

vast majority of Prescott 's working class earning $ 4 to $ 5 an hour at grocery

 stores , hotels and gas stations . The other end of the economic scale belongs 

to those whose fathers and grandfathers staked out the wilderness and then subdi

vided it into great wealth . Says L.W. . `` Budge '' Ruffner , whose family root

s here date to the post-Civil War days and who is a Western historian of some no

te , `` There really isn't ( much of ) a middle class . '' Those arriving add to

 the disparity . They include Californians and others with hundreds of thousands

 of equity dollars in the modern equivalent of their saddlebags . Other newcomer

s bring only fixed pensions and optimism . All are greeted by realtors known for

 elevating prices when out-of-town license plates are spotted on the curving hig

hway leading to the top of the mountains . And while Prescott 's growth is limit

ed by the mountains that encircle it , Prescott Valley ( once known more imprope

rly as Jackass Flats ) remains there for the taking . Today it is the third-fast

est-growing area in Arizona , Collins says . The 150-member Yavapai tribe , indi

genous to the Prescott area , is making its presence known by licensing a giant 

shopping center and hotel complete with gambling on its reservation . But Presco

tt will see little if any tax revenue from the shoppers and gamblers because the

 center sits on federal land . Prescott 's antecedents are a glossary of things 

as varied as the landscape itself : The Samuel Hill Hardware store is supposedly

 the source of the old expression , `` What the Sam Hill ? '' a phrase that was 

a tribute to Hill 's floor-to-ceiling inventory of almost everything imaginable 

. Barry Goldwater thought of Prescott as his good-luck city and launched his pol

itical campaigns there . Fiorello LaGuardia spent many of his high school years 

in Prescott , where his Army officer father was stationed as the local military 

bandmaster . He and Ruffner 's father became friends , and Ruffner fought for ye

ars to build a lasting monument to the former New York mayor . Today there rises

 above Granite Creek a bridge named in his honor . Sinclair Lewis also would hav

e loved Prescott ; there is a tribe of Babbitts entwined in the city 's past who

se descendants include Interior Secretary Bruce Babbitt . So Prescott sits poise

d between its past where tour groups today are told that the old whorehouse abov

e the Palace Bar ( opened in 1901 ) was a `` hotel , '' and its present where it

s reputation as a mecca for retirees threatens to push its average age to a stat

istic rivaling the elevation of the mountains . So if you wish to help those who

 pine for the past , forget you read this . But if you promise not to tell , it 

still is a city where people actually turn around when your car burglar alarm go

es off .

 PANAMA CITY You would think Jasmine Nelson , a Panamanian law student , would h

ave more reasons than most people to want to see an end to 90 years of U.S. domi

nation of her country . After all , U.S. firepower destroyed her neighborhood du

ring the 1989 invasion that ousted Gen. Manuel A . Noriega. She spent her format

ive years schooled in the anti-imperialist rhetoric of the 1980s . She believes 

that the Panama Canal ought to be run by Panamanians and that U.S. military inst

allations that control her country 's midsection are an affront to national sove

reignty . But she says she wants to be realistic . `` If the gringos go , there 

goes our economic stability , '' she says . `` Without the dollar , we are nothi

ng . We don't want the gringos to go . '' For years , Panamanians dreamed of the

 day they would take charge of the canal and the acres of U.S.-controlled real e

state attached to it . As the deadline for the hand-over inches closer , however

 , they are racked with doubts and fears about whether they are ready and whethe

r perhaps they are losing more than they are gaining . The election last month o

f a president whose government will handle most of the transition has focused ne

w attention on Panama 's spotty preparations to receive the canal and the networ

k of U.S. military bases built along it . President-elect Ernesto Perez Balladar

es promises a smooth transfer at century 's close . But his words have yet to ca

lm the uncertainty , which in many ways highlights the longstanding ambivalence 

Panamanians have felt toward the United States and toward their own sense of nat

ional identity . Created as a nation so the canal could be built , Panama faces 

daunting questions about whether it can operate the waterway efficiently and pro

perly develop the accompanying 500 square miles of land . And the departure of U

.S. troops attached to the Panama-based U.S. . Southern Command will mean a huge

 loss of income and jobs . Under 1977 treaties , the United States must hand ove

r the canal and all property ; all troops which until last week numbered close t

o 10,000 must leave by Dec. 31 , 1999 . Governments until now have done little t

o get Panama ready . Although the date for concluding the transfer may seem far 

off , the prerequisite changes are monumental . Only recently has the pace of bo