The MacNeil/Lehrer NewsHour

Intro

JIM LEHRER: Good evening. Leading the news this Thursday, the Soviets released another prominent dissident leader. An American won the Nobel Prize for economics. And an Israeli jet was downed during a bombing raid in Southern Lebanon. We will have the details in our news summary in a moment. Robin?

ROBERT MacNEIL: After the news summary, three of the world's leading businessmen, the heads of GM, Sony and Fiat, discuss the sluggish U.S. economy. That's followed by a newsmaker interview with the latest American economist to win the Nobel Prize, James Buchanan. Then a top geneticist explains the significance of the latest discoveries in muscular dystrophy and cancer. And essayist Roger Rosenblatt has some closing words about the crackdown on organized crime.News Summary

MacNEIL: The Soviet Union let a dissident scientist leave for the United States today, following a personal appeal by his son at the Iceland summit. Geneticist David Goldfarb, virtually blind and ill with diabetes, landed at Newark Airport this evening, after leaving Moscow earlier in the day on a plane owned by U.S. industrialist Armand Hammer. Goldfarb's son Alexander, who teaches at New York's Columbia University, said that in 1984 Goldfarb's exit visa was cancelled after he refused to hand incriminating documents to Nicholas Daniloff, the correspondent for U.S. News & World Report recently imprisoned and then freed after being arrested on trumped up spy charges. The State Department welcomed Goldfarb's release, but couldn't directly connect it to the Iceland summit, where human rights issues were discussed.

The post-summit clarifications continued today in Moscow. The Soviet foreign ministry said the Kremlin is willing to discuss medium range missiles separately at the Geneva talks, but it will not sign an agreement that does not settle the dispute over Star Wars, or SDI -- the dispute that broke up the summit. Soviet and American negotiators met in Geneva in sessions described as routine.

In this country, a large nuclear weapon was exploded at the Nevada test site. It was delayed 25 minutes, because a helicopter patrol spotted and evacuated an anti-nuclear protestor close enough to ground zero to be in danger. Jim?

LEHRER: There were two major Americaneconomic stories today, one involving a number, the other a person. The number was .1%, the amount of the increase in September in the production of the nation's mines, utilities and factories. The figure came from the Federal Reserve Board and means the economy is growing at a very slow pace. The person news concerns James McGill Buchanan, a professor at George Mason University in Fairfax, Virginia. He was awarded the Nobel Prize for economics today. The Nobel Committee in Stockholm praised his work on the relationship between political and economic decision making, or how politicians make economic decisions.

JAMES BUCHANAN, Nobel Prize winner: Just look at the pressure on an elected congressman, for example. He enjoys going back to his constituents in his district and telling them, "Look, I voted to bring a particular project to this district. So I voted for this spending program." He does not enjoy going back to his district and saying, "I voted to raise your taxes." So the natural proclivity of a politician is to say -- to approve all spending programs and to disprove -- I mean -- and to reject a taxing program. And unless you have some constraint, some rule -- whether this be a moral rule or whether it be a formal, constitutional limit -- to prevent the politician from doing that, he is going to create deficits. And that's exactly what we observe.

LEHRER: The Nobel Prize for literature was awarded today to Nigerian writer Wole Soyinka. He is the first black and the first African to win the award. Soyinka is 52 years old. His work includes from than a dozen plays and two novels, mostly set in Nigeria.

MacNEIL: Israel lost its first warplane in three years today when Israeli jets attacked Palestinian bases near Sidon, Lebanon. A U.S.-made F4E Phantom exploded after it was hit with a Soviet-made missile fired from a shoulder launcher. One of two crewmen was later rescued by Israeli soldiers helicoptered in. The other airman is still missing and may have died. The plane was one of twelve jets that strafed and rocketed suspected guerrilla camps on the outskirts of Sidon. The raids came as Israeli mourners were burying the one man killed in yesterday's grenade attack near Jerusalem's Wailing Wall. Sixtynine others, most of them members of an elite infantry unit, were injured in the attack, for which the PLO took responsibility. Israeli police questioned more than 100 Palestinians in connection with the incident, and 20 of them are still being held.

LEHRER: The United States imposed a 15% penalty duty on some Canadian lumber imports today. The Commerce Department made the decision, agreeing with the U.S. industry charge that provincial governments in Canada were illegally subsidyzing their soft wood lumber producers.

Also on the diplomatic front, Secretary of State Shultz spent four hours in El Salvador today. He toured areas devasted by last week's earthquake, which killed 982 people and injured 8,000 others. Shultz told El Salvador President Jose Napoleon Duarte the United States would provide $50 million in emergency aid with more to come if Congress approves.

MacNEIL: The Senate today began but did not finish its work on the immigration reform bill. President Reagan gave his qualified support to the legislation, which passed the House yesterday. Some senators had threatened to filibuster the bill, although most vote counts had it eventually passing. Debate got underway this afternoon on the Senate floor, but then was stopped while other legislation was considered. Some supporters fear the bill faces a Presidential veto. But at a White House meeting today, the chief sponsor heard encouraging words.

Sen. ALAN SIMPSON (R) Wyoming: The President has been my principal ally on immigration reform since I started this. I would run into problems with people in the administration or in the White House. He was always very gracious. I'd go in and plead my case. He stuck with me. This is a good bill. He's pleased with it. And I'm sure he's going to be right there with pen in hand if we finish our work in the Senate.

LEHRER: Finally in the news today, for the first time, there is hope for a treatment for the most deadly kind of muscular dystrophy.A research team in Boston said it discovered the particular gene responsible for the disease. Details of the research were explained today at a news conference. Correspondent June Massell reports.

JUNE MASSELL [voice-over]: There are several forms of muscular dystrophy, but Duchenne's is the most common form. It strikes mostly young boys. Two hundred and fifty thousand currently suffer from the disease, which causes overall musclar degeneration. Most patients are confined to wheelchairs by age 12. Few live beyond their early 20s. There has never been a treatment or a cure for muscular dystrophy, and this breakthrough doesn't guarantee one. But the discovery made by this Harvard research team is crucial. At last, a gene has been identified that, when defective, causes the disorder.

DONALD WOOD, Muscular Dystrophy Association: This particular gene normally makes a protein -- contains like a recipe, and it's supposed to make a protein that is obviously necessary for a muscle cell to live. And because that protein is either not made or is made in a faulty way, the muscle cell dies.

MASSELL [voice-over]: When muscle cells die, the result is paralysis. But if doctors can isolate the protein that's missing and then manufacture it, they can administer it to patients. Then the muscle cells would not die, and the disease would be stopped in its tracks.

JERRY LEWIS: Yeah, give me a tympani. Yeah. Turn it. Oh yeah.

MASSELL [voice-over]: Every year for the last 36 years, the Muscular Dystrophy Association has held a national telethon hosted by Jerry Lewis. It's brought the disease to the attention of the American public and raised over $900 million. Much of that money has gone into research which led to today's news.

Mr. LEWIS: I didn't, very honestly, believe at the very beginning that we would see this kind of progress in my lifetime. For that matter, I was told by the medical community and the scientific community that I was knocking on a dead door years ago. To see this breakthrough tells me that, indeed, in my lifetime, I'm going to see my kids better than they are today.

MacNEIL: That's the news summary. Coming up, the U.S. economy with three world industrial leaders and the latest Nobel economist. The latest genetic discoveries in cancer and muscular dystrophy. And an essay on the mafia crackdown. How's Business?

MacNEIL: First tonight, an unusual perspective on the state of the U.S. economy from three of the world's leading industrial figures -- the heads of GM, Fiat and Sony. As we reported, there were less than thrilling figures out today on industrial growth. In September, as in August, industrial production rose only one tenth of one percent, or barely rose at all. With us are Roger Smith, chairman of General Motors, who joins us from public station WTVS, Detroit. In New York, Giovanni Agnelli, chairman of Fiat, whose $20 billion company makes cars, trucks, telecommunications equipment, robots and aerospace components. Also, Akio Morita, the chairman and co-founder of the Sony Corporation, with $7 billion a year in sales. All three men run corporations with worldwide interests whose decisions influence the world economy.

Gentlemen, the United States Federal Reserve Board reported today, as we showed at the beginning of the program, that for the second month in a row -- September after August -- United States industrial production grew -- almost didn't grow at all. It grew by one tenth of one percent. Starting with you, Roger Smith, what do you see as the main reasons for the sluggish growth or lack of growth in the U.S. Economy now?

ROGER SMITH, Chairman, General Motors: Well, I think the problem, when you look behind the figures, is the fact that the consumer demand is up, which is very good. It's the industrial production -- the manufacturing part -- that was down, which is due, of course, in some part of the strong imports we've had.

MacNEIL: I see. Mr. Morita, what do you and Sony see as the principle reason for the sluggish performance of the U.S. economy?

AKIO MORITA, Chairman, Sony: I'm not an expert in U.S. economy, but generally, I see it as slowdown economy in this country. I'm very much concerned about the future.

MacNEIL: But do you agree with Mr. Smith that what is holding down the U.S. economy is the volume of imports -- presumably some of your products included?

Mr. MORITA: Yes. Actually, even our dollar exchange rate has changed substantially for the last three months. Still American imports will continue. But dollar-wise, Japan exports are increasing, but quantity-wise, our export is decreasing.

MacNEIL: Because of the lowered value of the U.S. dollar and the higher --

Mr. MORITA: Higher price of --

MacNEIL: Mr. Agnelli, what do you see as the principle reason why the U.S. economy is -- which is the engine that drives, to some extent, the Italian economy and to some extent then influences the Japanese economy -- what do you see as the chief reason for its --

GIOVANNI AGNELLI, Chairman, Fiat: Well, I don't feel responsible, the way Mr. Morita feels, for exporting a lot in the United States.

MacNEIL: Because Fiat has stopped exporting --

Mr. AGNELLI: We've stopped exporting, except 1,000 Ferraris a year, which are a very special market -- a sort of jewelry market that goes to the States. But I would say this: I think with the rate of exchange -- terms of trade of the dollar at the moment -- you should be slowing down imports and increasing exports. But this happens rather slowly. And at that moment, you will have a pickup of industrial production. Because, as Mr. Smith said, you do have request of products, but a lot of those imported, instead of using the American capacity of production.

MacNEIL: Now, why is that, Mr. Smith? Why is -- why are -- is so much American consumer demand being satisfied by imported product?

Mr. SMITH: Well, I think, of course, it stems back from the time when the dollar was very strong, and foreign imports were quite a bargain. And, as Mr. Agnelli said, you don't turn that around on a dime, so to speak. It will take a while for this trend to reverse itself. And I think we're seeing a little overlap in that now. I am looking forward to seeing the effect of the dollar being lower to boost the U.S. exports, but we haven't seen that quite yet.

MacNEIL: Is that going to happen? For instance, in Japan, are American companies being any more successful selling things in Japan because the dollar value has gone down by about a third in the last 18 months?

Mr. MORITA: Of course, already we see American export is increasing. American business to Japan is increasing. But on the other hand, I see lots more American industry are buying Japanese product. Even Mr. Smith's company is buying Japanese automobile. So I hope that American auto industry or other industry take a much stronger step to sell your product in Japan, taking advantage of cheap dollar.

MacNEIL: How about that, Mr. Smith? As Mr. Morita points out, GM has deals with the Japanese to have cars made in Japan and then market it here under the GM mark.Or made here on Japanese technology.

Mr. SMITH: Well, our real problem, of course, is the fact that we have the non-tariff fares for not only cars, but for other products that we're trying to sell into Japan. And that's one of my big worries is how we're going to handle that. You see, the U.S. trade problem has grown so large, it can't be ignored. And I'm very concerned that some nations are ignoring the fact of what havoc that's wreaking here. And we get some very bad trade legislation unless a lot of countries start and turn around and open their borders, just as the United States has opened its borders. It's a very, very serious trade problem.

MacNEIL: And how do you see that, from a Japanese point of view? I mean, Japan is often accused in this country by those who want protectionist legislation of not opening its markets.

Mr. MORITA: American industries see this, looking at it is a Japanese problem -- barriers. Actually, for example, Mr. Smith's business, the automobile, we don't have anybody yet. And actually, the European car -- especially German car -- increasing their sales in Japan.

MacNEIL: So why aren't American cars selling there?

Mr. MORITA: So that's what I'm asking.

MacNeil: No, but you tell my why they aren't selling.

Mr. MORITA: I think that they didn't take a real, real strong effort to promote their car.

MacNEIL: Is that so, Mr. Smith? You haven't taken a real effort to promote your cars in Japan?

Mr. SMITH: We're promoting them, but the the non-tariff barriers -- I'm not talking about tariffs -- but the non-tariff barriers are very strict, and they make it virtually impossible.That's why there aren't many -- not only U.S. -- there arent't many European, there aren't many Italian, there aren't many other world cars sold in Japan, because of the non-tariff barriers.

MacNEIL: How does Fiat see the market in Japan? Are you able to penetrate the Japanese market and sell cars there?

Mr. AGNELLI: The Italian-Japanese situation is very, very special. I don't know if Mr. Morita knows, but the motorcar situation is a very special situation. In 1957, Japan was afraid of the Italian competition and at that moment worked out a quota system that's still working now. I think imports from Japan to Italy and from Italy to Japan are in the order of 100,000 or 200,000 cars a year.

MacNEIL: So that's a controlled market.

Mr. AGNELLI: It's going to stick that way until '92. And I know when our prime minister was in Tokyo at the last Tokyo summit, he did a very generous gesture and said you will double the quota into Italy -- the quote from one to two thousand cars.

MacNEIL: I see. Which is, in car terms, insignificant.

Mr. AGNELLI: Totally insignificant. This will go on until '92. After '92, it will be re-regulated, and I suppose we'll be like all other countries.

MacNEIL: Well, what do you, Mr. Agnelli, see as the answer to the U.S. trade deficit with the world which Mr. Smith says is too large now to be ignored?

Mr. AGNELLI: My impression is that, after the Plaza meeting and after this 31, 32% decline of the dollar, compared to the other currencies in terms of trade, it will take time before exports to the United States will slow down.I know exports in Italy are mainly fashion, shoes, style, wine. And these people have created themselves a little market niche. Before they were making a big profit a year and a half ago. The profits have been slowly going down. Now I don't know if they're hardly breaking even or --

MacNEIL: So they may have --

Mr. AGNELLI: It takes time before they drop that part of the market they created.

MacNEIL: So in other words, they may be holding onto their market share, as it's called here, but profitability --

Mr. AGNELLI: The profitability is surely decreasing rapidly.

MacNEIL: Now, do you see that happening with Japanese goods here -- with your goods?

Mr. MORITA: Of course, you know, there are in more than 50%.

MacNEIL: Fifty percent.

Mr. MORITA: For the last 12 months. And naturally, we can not raise the price here 50%. But because of Taiwan and Korea, their currency is all tied up to the dollar. So they're not going to raise the price.

MacNEIL: No, because the dollar has not been devalued against the Taiwan and Korean currencies the way it has against the yen. But do you see, as Mr. Agnelli does, that as far as Japanese goods are concerned, that this huge deficit is -- that the effect of lowering the value of the dollar is going to start to cure this deficit, just in itself.

Mr. MORITA: I think that already in this big change it starts to make an effect on the trade imbalance.

MacNEIL: Do you see that among your Japanese competitors, Mr. Smith? Is it beginning to have an effect now?

Mr. SMITH: Well, the Japanese car prices have jumped anywhere up to 20%. But that's not going to be enough. The true answer is to get the Japanese, the -- all the rest of the world to trade free and to trade fair. That's the -- they've got to open their borders. Just the decline in the value of the dollar won't be enough to solve $140 billion deficit, and that's what we're talking about.

MacNEIL: Do you consider Italy one of the countries that isn't playing fair now?

Mr. SMITH: Well, I think Italy is all right. Most of their trade things. There are problems all over the world. And I'm going into the field of agricultural products, going into Europe. All the products. And the United States is the only open market in the world. And we could do that when we were the big kid on the block. But we're not that way anymore, and we can't afford to carry some of these excesses like we did before.

MacNEIL: Besides conspiring in, if that's the word, or collaborating in the lowering of the value of the dollar, the U.S. administration -- the Reagan administration -- has been urging European countries like yours and Japan to stimulate their economies to get more growth going to help sop up more U.S. exports. What -- why can't or why doesn't Italy stimulate its economy more, and can it?

Mr. AGNELLI: I think when you talk about the Italian acceleration, we are going to be the fastest growth this year in Europe. It's going to be 3.5% growth. And that might be dangerous in a country like Italy. Where you might try and ask a little more effort is from Germany, which obviously is a much bigger economy and they're much more doubtful.

MacNEIL: That is one of the principal targets.

Mr. AGNELLI: One of the principal targets. I mean, in Italy we've got, obviously, high unemployment, big growth, declining inflation. I mean, all those general figures are what you need and what you call for in the accelerating world economy. Inasmuch as our size is.

MacNEIL: What about Japan, Mr. Morita? One of the main targets of the American effort is to get your country to stimulate its economy to buy more.

Mr. MORIATA: The Japanese industrialists would like to get our economy stimulated. And the Japanese governments wants to do it. That's why the Japanese government decided to send 3 trillion yen special budget to stimulate our economy.

MacNEIL: How much is 3 trillion yen in our currency?

Mr. MORITA: It's very difficult to count, but 150 yen is about a dollar. But that is quite a substantial amount for us. I'm sure that will have an effect. But I can argue another point that, you know, if the Japanese economy will be stimulated, maybe Japanese industry will spend our money investing domestically. So then money for world decrease -- money from Japan to U.S. will decrease. Then if might affect American dollar cash flow programs. Because now we have a big deficit, but a substantial amount of money is going back to the United States.

MacNEIL: Is being invested here, and financing the American deficit to some extent. What about that, Mr. Smith? If the Japanese, for one, stimulated their economy, Mr. Morita says that would -- the industrialists would be investing it there and not sending it back here.

Mr. SMITH: Well, I believe there's enough to go around to handle that. But I would say Mr. Morita's right on one point that worries me the most. If we keep on with these enormous deficits, the only way we can finance them is by having foreign investors hold U.S. dollars. And to the extent we're not successful in increasing our exports, foreign investors simply won't want to hold U.S. dollars, which could bring back high interest rates, inflation, all the bad things we've been through in the past. And I say our country just can't afford to go through that again.

MacNEIL: And the answer is?

Mr. SMITH: Well, the answer is that we have to lower that trade deficit, and we have to get our budget deficit in hand down there. Now, that can be done, I believe, through all the things we said -- stimulating the economy. The way we don't want to do it is to get a ridiculous trade bill enacted in the House and the Senate, and then we'll have total war, which would be very bad.

MacNEIL: besides lowering the value of the dollar, getting your countries to stimulate their economies more to the extent they could, what do you think U.S. industry like Mr. Smith's needs to do to make products more competitive? Perhaps not cars only, but other things. What is your view of that?

Mr. AGNELLI: Well, you know, competitivity is a consequence of the whole system. It's a system of schooling, training people, investment, use of technology, industrial environment. And I believe the United States in that is very strong.Maybe you could -- maybe investment hasn't been as fast as it could have been lately. That is the only point that could be accelerated.

MacNEIL: What is your view of that, Mr. Morita?

Mr. MORITA: For the last ten years, while the dollar was strong, many American industries moving out their production to overseas after the American industry invested in Japan. And then they produce a product, and they are bringing back that product into the United States. So I hope that this time the dollar is so weak, so American industry will take advantage to take such a production back into United States. And if production quantity increases in this country, then American industry will get competitiveness again.

MacNEIL: How do you react to that, Mr. Smith? Yours is one of the countries that has -- companies that has been moving some production overseas. How do you react to what Mr. Morita's saying?

Mr. SMITH: Well now, actually we didn't. We stayed with our U.S. supplier base. But I think that we are becoming competitive through the modern technology. I'll say there is one big item we haven't talked about.And that is that a lot of the government regulations -- safely, fuel economy, emissions, things like that that are imposed on us by our U.S. government that make us noncompetitive abroad, where the countries and the companies we're competing with don't have to worry whether a stair railing is 30 inches high or 31 inches high. I think the United States needs to reexamine all the regulations. Again, those regulations were put in at a time when we could afford them and still be competitive. But we have to go back and make sure those are all cost effective now.

MacNEIL: Do you see American industry as over-regulated on things like safety and environmental concerns?

Mr. AGNELLI: When Mr. Smith was talking about all these regulations being limitations of the market and more expensive, all these safety devices, I was really thinking that's one of the reasons why we have no one out selling to the United States anymore.

MacNEIL: Why Fiat is not sending cars.

Mr. AGNELLI: Because having to attend to all --

MacNEIL: So that's helping Mr. Smith, in a way.

Mr. AGNELLI: It has been helping, but he's got to sell here. That is, he's going -- but I mean, if you have to attend to all those regulations, it really is a useless and expensive matter. So I believe deregulation could be an enormous freewheeling for that market.

MacNEIL: But what about your regulation in your country?

Mr. AGNELLI: In our country, our regulations depend on Brussels. Brussels --

MacNEIL: The headquarters of the European Common Market.

Mr. MORITA: Extends to the European communities. Extend the regulations all over Europe, and they're not what they are, surely, in California, and not what they are in the United States. They're much milder. But I think one could have more deregulation even in Europe.

MacNEIL: Do you see that as a problem? I don't know whether your products qualify.

Mr. MORITA: I'm not that familiar with the automobile regulations, but you can see that many Japanese auto companies meet American regulations. That's why they can send out lots of product. And also, I am not arguing with Mr. Smith, but he said in Japan many non-tariff barriers exist. But --

MacNEIL: I'm sorry --

Mr. MORITA: Non-tariff barriers exist.

MacNEIL: No tariff barriers.

Mr. MORITA: No tariff barriers. But if you see German cars -- the Mercedes, BMW -- their sales are increasing, and they have met all Japanese regulations. And from their viewpoint, Japanese non-tariff barriers is very, very small.

MacNEIL: Mr. Smith, the Germans get through the Japanese tariff barriers. I think Mr. Morita is saying, why can't you?

Mr. SMITH: The answer is, they don't any better than we do. That's -- you don't see very many cars out of a 6 million market over there. You don't see two, three, twenty thousand cars imports. Again, John Dingell introduced a bill or put a rider on a bill to say, "Okay, let's have the same regulations on U.S. cars going to Japan and have the same regulations on Japan cars coming here to the United States." And I don't think the Japanese would like that one bit.

MacNEIL: Let me ask you finally, gentlemen, this question. Starting with you, Mr. Morita, where do you see the U.S. economy now? Everybody has said for a number of years it's in a period of great shifting from a production economy to a service economy. And it's gone through a lot of pain. Is it nearly through that process? Has it only begun? Is there a lot more pain to go through? What do you see?

Mr. MORITA: Of course, I see that the U.S. is moving from real industry to service industry, but I'm wondering whether this movement is okay and good for the United States. Because I'm an industrialist, and I believe industry is a real basic factor of economy. So if U.S. industry goes to much too the service industry and forgetting the production, is that all right for the United States?

MacNEIL: Let's ask Mr. Smith. Is it all right for the United States to be moving so headlong into a service economy?

Mr. SMITH: Well, it is they way we're doing it. Really, we aren't shifting from one to the other. It's just that the service industry is growing so fast. We haven't had a real serious decline in our manufacturing economy as much as we've had an enormous growth. And that reflects the prosperity of the country -- that people can afford to go out for dinner. They can go to the fast food places, and they have the money. I think that's wonderful. And I'd like to see service industries continue and prosper and grow. They buy the products from the manufacturers, so people will find jobs there. I think in many respects, it's healthy, as long as our manufacturing industry doesn't suffer.

MacNEIL: But many people would say that some of the older manufacturing industries are doing just that -- are suffering.

Mr. SMITH: Well, a lot of them are going through some enormous changes, and I believe that's good. They're modernizing their equipment, working better with their labor force -- everything we need to do to be competitive in the world.

MacNEIL: Is American industry doing everything it needs to do to be competitive, and where do you see -- I'm asking you two complicated questions at once.Let's go back to the first question first of all. Where do you see the U.S. economy -- the question I asked Mr. Morita -- in this period of transition?

Mr. SMITH: Well, I Think --

MacNEIL: I'm sorry, I'm just asking Mr. Agnelli.

Mr. SMITH: Okay.

Mr. AGNELLI: I come from a country that came out of the war with 50% of the peopley employed in agriculture and the other 50% in services and industry.Now agriculture's gone down to less than 10%. I believe in the United States the phenomenon of people growing in the services is going to go on and on still, although with the same industrial production. But I agree with Mr. Morita when he says there's no point in having only services if the industrial production is not strong and competitive.

MacNEIL: Well, that comes back to Mr. Smith's last point. He says American industry is doing everything to make itself strong and competitive -- what it needs to. Do you see, looking at it from across the Atlantic, do you think it is?

Mr. AGNELLI: Yes, I think it is.

MacNEIL: You do think so.

Mr. AGNELLI: I think they're training the people in the right way. I don't know if they're investing as much as they could or they should, but they're surely investing a lot. I think the organization of American industry is good. The industrial relations in the country are good. I think the government policy for research is good. I think they can rely on a Pentagon that gives them big contracts. They can rely on planned projects like SDI, perform [unintelligible] I think, on the whole, good industrial policy in an inefficient way.

MacNEIL: Mr. Smith, bot Mr. Agnelli and Mr. Morita have mentioned investment as something that concerns them about U.S. companies. Is the U.S. industrial base investing enough in itself?

Mr. SMITH: Well, I believe it is. Our investments at General Motors were a total of $10 billion in 1986.And all of it is devoted to modernizing our plants, moving up-scale in our technology, more automation, better products. I think beyond that, we're spending over $1 billion for research and engineering for new products. I think you will find that going on in all of the manufacturing base. Again, we could use a little help from the government with just a little less regulation, as Mr. Agnelli said, would help us an awful lot.

MacNEIL: Let me come back to where we, to conclude this, where we started. Two months of industrial production growing -- almost no growth: a tenth of a percent. What do the three of you see as when this will begin to improve in this country? When do you look for -- you all must be watching the U.S. economy -- when do you look for the upswing in the economy? Mr. Morita?

Mr. MORITA: It's a really difficult question for me, because I am not an expert on the economy. But I think that basically America is a very strong industrial country. So I am optimistic. Maybe for a while you have a problem, but I have no reason American industry will come take back the strings.

MacNEIL: When -- how do you see -- how long do you -- what time do you put on that problem that it has for a while, you're saying?

Mr. MORITA: It's very difficult for me to answer.

MacNEIL: When do you see that upswing in the economy?

Mr. AGNELLI: It's not difficult for me. I just won't give an answer.

MacNEIL: You won't give an answer.

Mr. AGNELLI: No. I think that economists' forecasts are more or less as accurate as meteorologists forecasts. I don't --

MacNEIL: So you don't know whether it's going to rain tomorrow or when it's going to stop raining or anything. Okay. Mr. Smith, what is your fearless forecast of when we're going to see some industrial growth?

Mr. SMITH: Well, I'm a little more optimistic. I believe you'll see the growth continue at the level it is now, and then pick up again as we get into the spring. But I think again, the big question lies down in Washington. If they handle the budget deficit properly, if they handle the trade deficit properly, and if the new tax reform works like we all hope it will, I see three to five years of good growth for the United States and the world.

MacNEIL: Well, Roger Smith in Detroit, Giovanni Agnelli in New York and Akio Morita in New York, thank you all for joining us.

LEHRER: There is a theory about why and how the government makes the kind of decisions Mr. Smith was just talking about. It's called the public choice theory, and its major proponent is a professor at George Mason University, a Virginia State school in the Washington suburb of Fairfax. His name is James McGill Buchanan, a very famous name from this day forward, because he was selected today as the 1986 winner of the Nobel Prize in economic science. He is with us now for a newsmaker interview.

Congratulations, first.

Mr. BUCHANAN: Thank you very much.

LEHRER: Professor Buchanan, appreciate your being with us. Did this come as a compete surprise and shock to you, or did you have a smell it might be coming?

Mr. BUCHANAN: It was a total surprise. And therefore, it was quite a shock. There had been rumors that my name was on the nomination list in '84. But when that didn't come through, I have heard absolutely nothing since then. So it was a total shock and surprise this year.

LEHRER: You didn't even know you were on the list for this year?

Mr. BUCHANAN: No, I'd heard nothing. Nothing whatsoever.

LEHRER: How does the grapevine work in the economic area? I mean, how did you find out, for instance, in '84 that you were on the list?

Mr. BUCHANAN: Well, there are rumors that go around. I really don't know, but names get dropped. They may be purely -- may be nothing in these names. But you hear -- well, I hear that this man is being considered and this man has been nominated. And then some people will, in fact, want to call you and tell you that they nominated you, as a matter of fact. And so you get inklings, and then these rumors sort of gel around two or three people. But certainly nothing of that happened this year within my knowledge.

LEHRER: Did you hear any rumors that somebody else was going to get it, or --

Mr. BUCHANAN: No.

LEHRER: You just didn't hear any at all.

Mr. BUCHANAN: None this year. None this year.

LEHRER: How did you get notified? How did it happen today?

Mr. BUCHANAN: Well, the academy representative from Stockholm called me this morning about 6:32 and told me --

LEHRER: About 6:32.

Mr. BUCHANAN: Six thirty-two, yes.

LEHRER: Right. And what did he say?

Mr. BUCHANAN: Well, he just read me the statement of the award and told me that I had been awarded it and that there would be follow-up materials coming along.

LEHRER: Explain to me your theory in simplest terms. The public choice theory of economics.

Mr. BUCHANAN: Well, it's really the public choice theory of politics.

LEHRER: Okay.

Mr. BUCHANAN: What we do in the best way to explain it is to say that we simply take the tools and methods and approaches of economics and apply it to the public sector. See, most economists spend most of their time trying to explain how the private sector works. And yet, we've had this burgeoning, in this century in particular, this burgeoning public sector. We just simply take those same basic methods of human behavior and extend them over into this huge realm of politics.

LEHRER: Like what? Give me an example. Let's take -- take anything. Take Gramm-Rudman, for instance. That was a piece of legislation that I read today that some people followed your theory, in fact, to create Gramm-Rudman.

Mr. BUCHANAN: Well, I think the whole understanding of our budget deficit is the best simple and single example of the approach, which is very simple. You just take an ordinary politician -- a congressman going back to his district or his state -- and he loves to go back and say to his constituents, "I voted for this project. I voted for this bill that will bring you something in this district." He does not enjoy going back and saying, "I voted to raise your taxes." And therefore, unless there's some constraints onhis behavior, he will go -- he will naturally create deficits. There's a natural proclivity to create deficits, unless he is held down by some moral or constitutional constraint.

LEHRER: In other words, you're saying the system doesn't work.

Mr. BUCHANAN: The system doesn't work. The incentive structure is wrong.

LEHRER: Well now --

Mr. BUCHANAN: That's what we concentrate on.

LEHRER: All right. And your theory does what? Your theory says let's change it or --

Mr. BUCHANAN: Well, first of all, the first aspect of the theory is understanding it -- understanding why it happens.

LEHRER: That people operate under self-interest and self-interest only?

Mr. BUCHANAN: Not necessarily only, but that it's an important explanatory insight. It doesn't explain all behavior. It doesn't explain all behavior in the private sector either. It's the economist's model applied to the public sector, just like we applied it to the private sector. We first need to understand what we see -- what we can observe.Once we understand it, then we can begin to look at the structure and to see how we might modify the structure so as to get some reforms.

LEHRER: In other words, it's absolutely foolish to appeal to a political figure to vote, say, to reduce the federal deficit unless you can prove to that figure it is in his or her political self-interest to do so?

Mr. BUCHANAN: That's basically right. Now, maybe not absolutely foolish. There may be some value in these moral appeals.

LEHRER: Waste of time.

Mr. BUCHANAN: Maybe not total, but it's not likely to be very effective.

LEHRER: Well, where does the theory then take you? I mean, how do you -- for instance, in Gramm-Rudman, the folks that understood your theory and followed it then based their arguments in getting that enacted on -- strictly on self-interest grounds, and that's the reason we now have Gramm-Rudman?

Mr. BUCHANAN: Well, I wouldn't put it quite that way. I think the Gramm-Rudman-Hollings legislation does reflect a recognition on the part of Congress itself that their procedures weren't working, that there was this natural proclivity to generate deficits. And therefore, they needed to have some precommitments or some restraints put on their behavior. And so that is what Gramm-Rudman represents. I am somewhat ambivalent on Gramm-Rudman. It has worked better than I anticipated it might work. Because I think that because it's legislative constraints, another Conress can come through next year and simply violate those constraints. I would prefer to have a constitutional constraint.

LEHRER: Well, look about -- let's take tax reform. Much was made about the passing of tax reform -- that here the Congress of the United States rose above self-interest and worked for the public interest, reformed the tax system for the good of us all. No, you're saying, they didn't do that at all?

Mr. BUCHANAN: I think the tax reform is very interesting in this respect. You can explain it as an exception to where the Congress is simply responding to various pressures for tax shelters and so forth. And maybe these just got out of hand, and Congress said, "We better get our house in order." This can sometimes happen. And you can explain the sort of low rate reduction base broadening in terms of a very salutary move on the part of the Congress, which was quite contrary to what would be normally explained by our approach.On the other hand, if you're much more skeptical and take a very skeptical hardnose view -- that I don't necessarily take, but some of my colleagues certainly would take -- a hardnose view, you'd say that the Congress recognized that by broadening the base, that would give them an opportunity next year to come back and raise the rates, and only a few points increase in the rates with a very broad base will generate a great deal of revenue. And that may be the way they're headed to get out of the budget deficit. As a matter of fact --

LEHRER: It's been suggested by some.

Mr. BUCHANAN: Congressman Rostenkowski has practically suggested this. And another way you can look at that, if you're hardnosed about it, is to say that Congress has at one fell swoop wiped out a lot of capital values built up in terms of the shelters, so next year they'll start selling these shelters again.

LEHRER: You expect becoming a Nobel laureate to change your life?

Mr. BUCHANAN: I hope not.

LEHRER: You don't want it changed?

Mr. BUCHANAN: I don't want to change it, no.

LEHRER: You liked it already the way it was.

Mr. BUCHANAN: Yeah.

LEHRER: Well again, congratulations, Mr. Buchanan.

Mr. BUCHANAN: Thank you very much. Gene Breakthrough

MacNEIL: Earlier, we reported an important breakthrough in the search for the cause of muscular distrophy. That was one of two genetic discoveries announced today. The other involves cancer. Charlayne Hunter-Gault has more details. Charlayne?

CHARLAYNE HUNTER-GAULT: Robin, it's really being called a monumental breakthrough, and scientists have said they have isolated the genes underlying two inherited diseases. One is the gene that causes the most common form of muscular distrophy, called Duchenne's. It wastes muscles and is almost always fatal. It is estimated to strike hundreds of thousands of young boys throughout the world. The other gene discovered governs a potentially life threatening form of hereditary eye cancer in children. It is called retinoblastoma. This marks the first time that a gene governing a hereditary human cancer has been isolated. The two discoveries, published today in the science journalNature, were the work of researchers at Harvard and MIT. Some members of both teams work at Children's Hospital in Boston under the direction of Dr. David Nathan, physician in chief at Children's and professor of pediatrics at Harvard Medical School. He joins us tonight from public station WGBH in Boston.

Dr. Nathan, why is the discovery of the muscular distrophy gene such a monumental breakthrough?

Dr. DAVID NATHAN, Children's Hospital: Well, of course, it's a marvellous occasion in medicine when a disorder for which there was really no information at all is finally defined at a molecular level. The breakthrough which we hope will come as a result of this discovery is to put it to good use in the eventual treatment of the patient and certainly in diagnosis of carriers and actually fetuses affected.

HUNTER-GAULT: So in --

Dr. NATHAN: So that it's a marvellous event in an unknown area.

HUNTER-GAULT: So in the simplest terms, tell me exactly what it will do. I mean, it's not a cure, right? It's just the first step.

Dr. NATHAN: It's a very important step, because up 'til this time, really, the disorder has been so poorly understood. There was no hope of treating it effectively or benefiting the patient in a very significant way, because one simply didn't know where to start. Now, will there be rapid cures from this? No. Because the first think one has to do is to get that gene out in a way such that it can be handled in the laboratory and be certain, by the way, that what one is handling in the laboratory is truly the missing piece. Then make sure that one can express it and get a lot of the product. Give that product to patients. And hope -- and this a very important point -- that that product will be taken up into the affected cells. So there are many, many steps to go through before this very important discovery is put to use in patient care.

HUNTER-GAULT: All right, let's start at the step now, which is the discovery of the gene. What does that tell us, in terms that I can understand?

Dr. NATHAN: What does the discovery of the gene tell us?

HUNTER-GAULT: Yes.

Dr. NATHAN: Well, as a matter of fact, right now this is the, though this is a remarkable breakthrough, it's really the first approach to define that gene, really, in all of its complexity. Dr Kunkel's group has shown that this is simply an enormous gene, which must have many, many pieces to it. And as he's pointed out, therefore, many opportunites to have trouble.

HUNTER-GAULT: Dr. Kunkel is the --

Dr. NATHAN: And there are undoubtedly going to be many trouble spots in this huge gene. And therefore, many different actual molecular causes of muscular dystrophy. And all of that's going to have to be sorted out.

HUNTER-GAULT: Dr. Kunkel is the scientist who actually made the discovery.

Dr. NATHAN: Yes. I must say that it's important -- first of all, I think it was stated in the beginning that in some way Dr. Kunkel and the others work under my direction. They certainly don't. They are in my department, and I'm very proud of them. I didn't direct this research. This is Dr. Kunkel's. And furthermore, I think everybody should understand that this has been a large international and national effort. An extremely important contribution to this work has come from other laboratories that have provided samples to Dr. Kunkel that made it possible for him to do the work.

HUNTER-GAULT: All right, Dr. --

Dr. NATHAN: The critical thing to understand is that, due to the very careful study of patients and patient samples in a number of centers and the cooperation of a number of scientists, this discovery has occurred.

HUNTER-GAULT: Can you just tell us a little bit about the gene itself?

Dr. NATHAN: Well, what I'd like to tell you about is the cleverness with which Kunkel and his group approached the problem of getting the gene. I thought I'd try to illustrate that with a very homely model. [plastic knives] This is a normal chromosone here, which has a normal gene on it. And here's one broken off that is missing the gene. And this missing one was given to Dr. Kunkel's group. And he did a very clever thing. He simply stuck the two together. And now you can see that the normal gene that governs the growth of muscle cells normally is sticking out here in the air. And all he did in the laboratory was take and stick them together and then break it right there. And now he's got the gene in his hand. Now he has to trim that piece very, very carefully, and that's a lot of work. But that was the fundamental approach that he used to isolate the gene, and it was a very clever approach.

HUNTER-GAULT: But of course, that took years.

Dr. NATHAN: That took a long time, and it also took some very important samples from patients who were missing the gene in question.

HUNTER-GAULT: Is there any way that this is going to affect the current victims of muscular dystrophy?

Dr. NATHAN: I think there is a good chance of that. I can only say that, from my own experience -- I happen to be a hematologist -- I have seen already this year the molecular cloning of the genes that control blood cell production. Many of them have now been cloned. And we have already given the products of those genes to experimental animals, and they are making enormous amounts of blood. And I believe that that -- infusions of those growth factors are going to help patients who are making blood poorly. And I think patients will get benefit from that in a few months. Now, in muscular dystrophy it's going to be much slower. We have to get the product out from the gene and get it isolated and expressed. And then we have to make sure that, in fact, that product given to patients will be taken up into the cells in question. So I think it's going to take much longer to get that work done. But I would have never believed I would have had in my hand the blood cell growth factors. And now I have them.

HUNTER-GAULT: Can you just tell me a little bit about the significance of the eye cancer gene that was discovered?

Dr. NATHAN: Yes. That's an extremely important finding. Again, it's the product of work in a number of centers put together in a very smart way. Now, the cancer in question, retinoblastoma, is an eye cancer that was already known to have some very interesting characteristics. The retinoblast that cause this cancer multiply -- as is true in any cancer -- multiply very rapidly. And the question has come up about that tumor and others, why do cancer cells multiply so quickly? And there are really two reasons for that. If you compare it to a highway with cars going to fast, they either go too fast because one is giving them too much gas, or they're going too fast because there's no policemen around to stop them. Well, what the discovery about retinoblastoma was that it was not due to too much gas -- too much growth factor being produced -- but rather, the lack of a policeman. And that is a major discovery. Because if cancer is due to the lack of something, again, one might be able to replace it and stop the cancer. So it has tremendous significance.

HUNTER-GAULT: What about -- I mean, I see the significance you say for the eye cancer. Does that tell you things about other cancers that might be --

Dr. NATHAN: Oh, possibly. This may be a very broad, general rule, particularly in the cancers of childhood. Now, we already know that this same kind of physiology occurs in a kidney cancer of children to a considerable extent. And it may also occur in certain bone cancers of children. So it doesn't necessarily have to -- this kind of mechanism doesn't necessarily have to be inherited. It may occur during the development of the fetus in the womb and make the subsequent baby susceptible to a second event that, in fact, causes a complete lack of policemen. Now, that's a concept that may have broad applicability, as I say, particularly in the childhood cancers.

HUNTER-GAULT: How soon do you think we'll be able to see results in that direction? I mean, is this a step -- a process like the muscular dystrophy discovery that is going to take a long time?

Dr. NATHAN: Well, actually I think that the -- we may see information on the actual policeman protein in the retinoblastoma even a little faster than in the muscular dystrophy. I don't know that for a fact, but it's possible.

HUNTER-GAULT: Is it just --

Dr. NATHAN: And then I don't know. Again, I want to caution you that making these substances -- even having them in one'shand -- one has to have a situation in which one can give it and get it into the cell. And that may be tricky.

HUNTER-GAULT: I see.

Dr. NATHAN: We have to find out.

HUNTER-GAULT: Is it just a coincidence that both these discoveries have been announced on the same day, or does this tell us something about where we are in genetic research?

Dr. NATHAN: Well, I think the editors of Nature are not stupid, and they certainly like to bring attention to their journal. But the facts are, what you're seeing here is a remarkable product of the recombinant DNA explosion. You may remember -- I'm sure you've had on this program -- many debates about whether we were going to get into this whole line of research. Was it dangerous?

HUNTER-GAULT: Genetic engineering.

Dr. NATHAN: Those of us who care for patients are very conscious of that debate and are very worried about it. Because you can see right away what's happening. This marvellous devlopment is helping patients now. So I, as a person who's responsible for the care of a lot of patients, am overjoyed by this development. We're seeing things happening now that were inconceivable to me only five years ago.

HUNTER-GAULT: We reported earlier the muscular dystrophy -- about the Muscular Dystrophy Association's reaction to these discoveries today. They have, of course, been raising money for years for this kind of research. Is it very expensive, and how much has their effort helped in this kind of research?

Dr. NATHAN: Well, I think the Muscular Dystrophy Association has performed magnificently. They are part of a complex in this country that one has to understand. We have in this country a remarkable union -- a cooperative, if you will -- of private foundations and individual benefactors, the National Institutes of Health and our great universities.And that partnership is producing some remarkable information. And folks like the officers of the Muscular Dystrophy Association understand one very fundamental principle. And that is that if you study patients hard enough and well enough and really stick with it, you can help patients down the line that couldn't be helped before. And as a result of the studies, learn some very fundamental biological principles.And that's what I think is the great lesson from today's news.

HUNTER-GAULT: Well, Dr. Nathan, thank you very much for being with us.

Dr. NATHAN: Thank you very much.

MacNEIL: Finally, a look at tonight's top stories again.Soviet dissident David Goldfarb arrived in the United States this evening. An American, James Buchanan, won the Nobel Prize for economics. And an Israeli jet was downed during a bombing raid in Southern Lebanon, but Israeli troops helicoptered in and rescued at least one of the two crewmen. Jim?

LEHRER: Good night, Robin. We'll see you tomorrow night. I'm Jim Lehrer. Thank you and good night.