The MacNeil/Lehrer NewsHour

MR. MacNeil: Good evening. Leading the news this Tuesday, the U.S. urged clemency for Chinese demonstrators sentenced to death, Secretary of State Baker called for tougher sanctions against China, nearly a thousand people were saved after a Soviet cruise ship hit an iceberg. We'll have details in our News Summary in a moment. Jim.

MR. LEHRER: After the News Summary, we take another look at the events in China with a Canadian television interview with Dissident Fang Lizhi, followed by analysis from journalist Harrison Salisbury who just returned from China. Then the high stakes merger fight over Time Incorporated, with Wall Street analysts Michael Harkins and John Reidy, press analysts Ben Bagdikian and Everette Dennis. NEWS SUMMARY

MR. MacNeil: The United States has appealed for clemency for the Chinese sentenced to death for their part in pro democracy demonstrations. At least 11 people have received such sentences. White House Spokesman Marlin Fitzwater said the appeal was made at Pres. Bush's direction to the Chinese ambassador who was summoned to the State Department last night. Fitzwater said, "We believe that human rights are universal and our duty to comment on them is great.". Meanwhile, Secretary of State James Baker told the Senate Foreign Relations Committee that U.S. condemnation of China should go further.

JAMES BAKER, Secretary of State: I have recommended to the President that we suspend all political level assistant secretary and above participation in non-military exchanges between the United States and China. We will be attempting as well to do what we can to postpone consideration of loan applications in international financial institutions at least for the time being while we continue to review, as the President has said we would do the further aspects of our policy in the light of unfolding events.

MR. MacNeil: China's official media announced more arrests today while the state radio said Americans and other foreigners were behind the demonstrations. We'll have more on China, including an interview with dissident Fang Lizhi later in the program. Jim.

MR. LEHRER: There was a dramatic rescue at sea today. A Soviet cruise ship with more than 950 people on board hit an iceberg in the Greenland Sea north of Norway. It began taking on water and listing, a call for help was radioed out. A Norwegian coast guard ship responded. All passengers were rescued. There were not even any injuries. More than 100 Russian crewmen stayed aboard the ship to keep it from sinking. The rescue was helped by the 24 hour daylight in the arctic region at this time of year.

MR. MacNeil: At the Strategic Arms talks in Geneva, the U.S. negotiators said the American side was emphasizing verification to take advantage of a new Soviet approach. At a news conference, negotiator Richard Burt explained the new proposal to test verification procedures, while negotiations on a treaty are going on. Burt said, "We've noticed that the Soviets have taken a much more open and constructive approach on verification in recent years.

MR. LEHRER: The Senate Foreign Relations Committee today approved President Bush's choice for ambassador to South Korea. The Committee voted 12 to 7 to send the nomination of Donald Gregg to the Senate floor with a favorable recommendation. Gregg is a former career CIA officer who was a security aide to Mr. Bush when he was Vice President. Sen. Alan Cranston accused Gregg of lying about his knowledge of the illegal Contra supply operation run by Oliver North in 1985 and '86. Gregg denied the charge. On North, the former Reagan White House aide was to be sentenced Friday but today Judge Gerhard Gesell moved it to July 5th, in order to hear defense allegations about the misconduct of a juror. The juror allegedly withheld information in a pretrial questionnaire about criminal and other court proceedings involving family members. North was found guilty on three counts, three of twelve counts against him. The charges grew out of his involvement in the Iran-Contra affair.

MR. MacNeil: In Atlanta, a federal court found former Congress Pat Swindall guilty of nine counts of perjury. The two term Republican was convicted of lying to a federal grand jury about a money laundering scheme. In one count, the jury said Swindall lied when he claimed that he didn't know 850,000 dollars he was offered to complete his luxury home came from drug trafficking. The money was offered by an IRS agent posing as a drug money launderer. Swindall, who's 38, could receive up to five years in prison plus fines of $1/4 million on each count. His attorney said he would appeal.

MR. LEHRER: The nation's major oil companies today announced a new program to combat oil spills. The $250 million undertaking was put together under the auspice of the American Petroleum Institute following the Exxon accident in Alaska. Mobil Oil Chairman Alan Murray said a nationwide spill response organization would respond, it would be ready and able to deal quickly with a spill anywhere in U.S. waters.

MR. MacNeil: In the Israeli-occupied West Bank today there was a funeral for a Jewish settler stabbed to death over the weekend while hiking. Prime Minister Yitzhak Shamir delivered a eulogy, but hundreds of Jewish settlers tried to shout him down, calling him a traitor for not taking tougher measures to crush the Palestinian uprising. In a nearby Arab town, Israeli soldiers blew up the homes of three Palestinians who allegedly confessed to the murder, and on an Israeli highway, another group of West Bank settlers looking for revenge stoned Arab motorists, injuring two of them. In yet another incident, police arrested a Jewish settler who shot and wounded two Arab road workers. That's our News Summary. Ahead on the Newshour, Chinese dissident Fang Lizhi and veteran China watcher Harrison Salisbury, and money and journalism in the Time-Warner deal. FOCUS - CHINA IN CRISIS

MR. LEHRER: China is first tonight. We have some tough new words from Secretary of State Baker, an interview taped earlier with the country's leading political dissident Fang Lizhi, then a discussion with author/journalist Harrison Salisbury who just returned from China. First, Secretary Baker before the Senate Foreign Relations Committee, he called for further sanctions against the Chinese government. He also talked about human rights issues raised by events in China.

JAMES BAKER, Secretary of State: The administration has very clearly expressed our outrage over the brutal and unacceptable use of force against peaceful demonstrators. The President and others of us from time to time havemade it clear I think that we stand with those around the world who seek greater freedom and greater democracy. We have said, for instance, that the whole world has seen what happened in Tiananmen Square, where large numbers of peaceful demonstrators were killed by army units. We have condemned and do condemn the use of live firearms against unarmed civilians, which is what happened in Tiananmen Square. Labeling demonstrators who are seeking basic human rights "counterrevolutionaries and hooligans" as has been done, we don't think will alter the reality of what happened in Tiananmen Square on June the 3rd. We have said, and I say here now, that the persecution of people for the exercise of basic human rights such as freedom of expression, freedom of association, freedom of the press, is reprehensible and deplorable. The reports of arrests of students and workers are very disturbing. The White House announced today that the President had directed us to call in the Chinese ambassador yesterday, which we did, and appeal for clemency with respect to those who had been arrested in China. The detention or arrest of these people for exercising their basic human rights, Senator, is clearly contrary to internationally recognized standards.

MR. MacNeil: The Chinese government today stepped up its attacks on the United States and other Western countries for encouraging dissent, and particularly the country's leading dissident, the astro physicist Fang Lizhi. A government broadcast accused the U.S. and other countries of fomenting counterrevolution and specifically mentioned the visits of U.S. embassy officials and journalists to the house of Fang Lizhi before he sought refuge in the U.S. embassy in Beijing, where he remains today. One journalist who visited Fang a few days before the massacre in Tiananmen Square was Alexandra Szacka of Radio Quebec. Here is an excerpt from her interview.

ALEXANDRA SZACKA: Professor, which fundamental human rights do you ask for for China?

FANG LIZHI, Human Rights Activist: [through interpreter] I ask for the most basic civil rights, the freedom of speech, the freedom of thought, the freedom of assembly, the freedom of publications, and the freedom to demonstrate.

MS. SZACKA: How would you qualify the evolution of human rights situations since Mao's death?

FANG LIZHI: Of course, if you look up the history, the evolution of human rights from the death of Mao, there has been much progress made, particularly in terms of freedom of speech. It's become much broader than it ever was. But, on the other hand, as far as the basic principles are concerned, these principles have not changed. This makes people very afraid because there has been no change in the basic principles. There is a basic fear that at any point they could return to the same situation as when Mao was alive.

MS. SZACKA: Professor, how do you imagine the democratic China? What political system do you want for your country?

FANG LIZHI: For the long-term, I see the Chinese authority democratic, multipolar and multiparty. But for the present, all we can struggle for are the basic civil rights and the smooth development of economic, educational and a cultural -- to go toward the path of the multiparty system.

MS. SZACKA: When and why did you change your mind about the Communists?

FANG LIZHI: My departure from Communism was a gradual process. The first step has something to do with my profession, that is physics. In China, it is believed that Marxism can direct everything, including science, but this is certainly not true in my professionand that was the beginning of my disillusionment and departure from Communism.

MS. SZACKA: Professor, aren't you frightened about your security?

FANG LIZHI: I'm, of course, concerned about my own security. If you look at the past 40 years of history of China, it's been continuous class struggle in the first 30 years and a class struggle requires some kind of victim, but the recent 10 years is better. But my feeling is that the class struggle is there. My own situation is a little different from others because I have a lot of friends who care about my security, but I'm still concerned about this issue.

MS. SZACKA: Professor, you have criticized the Chinese government when they say that Chinese population is not ready to live in a democracy, but is it true that there is not a democratic tradition in China?

FANG LIZHI: This is a very complicated question. You are absolutely right. Traditionally, there is no democratic tradition but, on the other hand, it is not to say that democracy cannot take place here. Now in some part is the case of Taiwan. They have introduced many democratic measures. Of course, they are still far from a developed, mature democracy, but I feel that it is still possible for China to have democracy.

ALEXANDRA SZACKA, Radio Quebec: What about the Western world, how do you evaluate the position towards China and especially towards human rights situation in China?

FANG LIZHI: It's not really a question that the United States would do something to China. It is not a bilateral issue. But how does the actual question of human rights exist in today's world, and what international standards are to be used to measure it?

MS. SZACKA: But it seems to us evident that, for example, that American attitude towards human rights in the Soviet Union was quite different towards human rights in China. How do you explain that?

FANG LIZHI: In the article that I published before Bush's visit, I criticized the double standards in the American political circles. They choose one attitude towards the Soviet Union and one attitude towards China. I think this is incorrect.

MS. SZACKA: There is an explanation?

FANG LIZHI: I see this in terms of the motivation of the American politicians. I think that the Government of the United States at the moment cares about having a good relationship with the Chinese government, and because they care about this, they close their eyes to the human rights issues here.

MS. SZACKA: In your opinion, Professor, how long it will take before China will become a truly democratic country.

FANG LIZHI: It's really impossible to make this kind of estimate, but my feeling is that for the basic civil rights, for the freedom of speech, and freedom of publication, perhaps this can occur within 10 years, but it terms of the multiparty system, it may take a generation or more to achieve. Of course, I do not have any evidence to support that.

MS. SZACKA: Professor, don't you think sometimes about emigration? Don't you think sometimes your life will be more easier and you can practice your profession more freely outside of China?

FANG LIZHI: This question has been raised before. No doubt it's true if I immigrate to another developed country from the point of view of my profession as an astro physicist, it will give me very good conditions for continuing in my work, but, on the other hand, I care about the society and I feel that by staying here I am making a greater contribution to my country, and that's more important.

MR. MacNeil: One of the journalists in Beijing during the military crackdown was the Veteran China watcher, Harrison Salisbury, writing for the op-ed page of the New York Times. Salisbury is the author of many books on the Soviet Union and China, including "The Long March", his account of the Communist Revolution. I spoke to him yesterday in New York.

MR. MacNeil: Harrison Salisbury, Fang Lizhi says America has a double standard, it's much harder on human rights violations as it sees them in the Soviet Union and in China. Do you agree with him on that?

HARRISON SALISBURY, Journalist: Oh, yes. There's no question about it. And it's true for a very simple reason. The Soviet Union is generally regarded in the government as our number one enemy or potential enemy, and we monitor everything about the Soviet Union very very closely and we catch them up on everything, even if Mr. Gorbachev is really relaxing on human rights, we say, okay, you did that, but look, here's what you haven't done. Now with China, we don't regard China as a dangerous enemy at all. We regard China as a hopeful, not quite ally, but a little brother that we want to help along, and if they violate human rights, as they do horribly, we tend to say, well, it's just China, I mean, let's not make too much of a fuss about it, they're coming along, we want to help them, let's not embarrass them. It's just as clear as can be.

MR. MacNeil: Well, right now, with a number of Chinese demonstrators having been sentenced to death, what would the effect be if Mr. Bush were, as many are urging him to be, to demonstrate more outrage, to be more vehement, go further, impose more sanctions, what would be the effect if he got much tougher on Chinese human rights violations?

MR. SALISBURY: I don't think that it would have a great effect on the executions. I think there are going to be a whole series of them. They're going to appall us and we are, Mr. Bush, like it or not, is going to be indignant about them. I don't think it's going to stop them, but I think it would make a mark on some of the Chinese minds, and they would realize a peril in this kind of conduct. Since all of this is being done for internal reasons, as you know, and not external, they want to instill terror in the nation so that it will comply with what the old men in the army want to do. I don't think it's going to halt it, of course, but it might have some effect next time, and certainly for the benefit of those Chinese people who listen to the radio, who hear the Voice of America, BBC and all the rest of them, it would show that somebody out there is interested in keeping an eye and a tab on them.

MR. MacNeil: You said Mr. Bush like it or not. What did that mean?

MR. SALISBURY: Well that means that I think that Mr. Bush would like to play this soft. I don't think that he wants to play it hard. I think he's gone as hard as he wants to. I think he always has in mind the path back. He doesn't want to destroy the whole fabric of relations between the United States and China and I don't know whether I would agree that he should either, but that comes much farther forward in his reasoning than it does in many of us who are more emotional about the situation.

MR. MacNeil: Some are asking what is the normal in China. Is it the relative liberalization of the '80s, the opening, more free speech and so on, more market economy, or is it the savage repression and the totalitarian state reimposed, which we've seen in the last few weeks, which is normal?

MR. SALISBURY: Well, I think it's hard to say what's normal. In any event, we can say what's historical, historical record of China, going backbefore the Communists, and I do sort of like to blend that in with the Manchus and the rest of them because it hasn't changed that much. They have also used terror, force, repression, to run that enormous country. In fact, they haven't known any other way to do that. The rule of law in China is relatively new, and even though they had emperors in the past who were great legalists, it was more observed in the books than it was in the actual function, so that I don't think you have much of a traditional function of humanitarianism, you might say, in China, and indeed, that has been pointed out by Deng Pupeng, Deng Xiaoping's son, who was a victim of the cultural revolution and he, himself, has thought a great deal about this factor of violence in Chinese society and has concluded that there really isn't a tradition of compassion, of looking out for each other, except perhaps within the clan or something like that.

MR. MacNeil: In the same article where you quote him, you quote his father, Deng Xiaoping, as saying, I can't remember the exact words, well, we can afford to kill a few.

MR. SALISBURY: "We can afford to spill a little blood." That's what he said.

MR. MacNeil: Spill a little blood.

MR. SALISBURY: That's what he's quoted as saying and I think it's true. It seems to me it's consistent with his character and if you look at the bloody path of any Chinese ruler, and this certainly goes for the Communists, they have come to power with a bloody trail behind them. Certainly the Communists did. They killed and killed and killed. Even in the days of the Long March, which was a heroic and remarkable operation, and it showed great courage on the part of the Communists who carried it out, they left a trail of heads behind them. They used to chop off the landlords' heads or people whom they perceived to be enemies tack a placard on it and leave it beside the path, there weren't any roads, beside the path so others could learn by that example what happened to those who opposed them.

MR. MacNeil: If there's no tradition of humaneness, to quote Deng's son, how do you explain what looked to us like extraordinary, even extravagant tenderness displayed by the officials when those students were on hunger strike? I mean, they went much further in patting them and soothing them and reassuring them then any of our officials, with all of our tradition of humaneness would have done in a comparable situation.

MR. SALISBURY: Yes, I thought of that too, because I thought supposing this were happening on an American campus, would even the president of the campus, the university, show that kind of feeling, and I tried to analyze it. I think that perhaps some of it comes, and this is a great incompatibility, from a special feeling that the Chinese have for their students. Now you say, how can they go out and shoot them, and I can only say there's a different answer to that, but they do -- as a young Chinese said to me after the killings and all the rest of it, he said, China loves its students. And he believes that and many Chinese believe they love their students and when they went out and were showing that compassion for the students, they were on that particular track. But when the government was demonstrating force and power came from the barrel of the gun, they showed no compassion. They simply, they will deny it, but I think they wanted the killings, they had to have the killings in order to spread terror in the country and solidify a very shaky regime that they had.

MR. MacNeil: We've obviously had perhaps misguided expectations of humaneness, seeing the openness that was developing. What will teach humaneness to the Chinese? I mean, after all, it took us hundreds of years to learn it. It isn't so long in our Western past that we were not nearly as humane as we are now, especially towards political dissent and challenge.

MR. SALISBURY: That's right.

MR. MacNeil: What will teach it? Can you learn humaneness in a generation as you can learn to assemble a transistor radio or something?

MR. SALISBURY: I don't think you can. I think humaneness is part of a complex process of civilization. It's not perfect in our society and in a society which is still relatively feudal, despite all their modern changes in which the clan or the family is still the basic unit in which they do show compassion within the family and within the clan perhaps, but not beyond that. It's limited. There is a very definite limitation there. In the cultural revolution when mother and father and children all suffered, a great deal of compassion was shown within the family, the parents trying to help the children and mostly the children helping the parents who were getting it a little bit worst. Out of that, as I've known many of these families and many of the young people, they said they learned something special about their relationship between the father and son. Pufeng, himself, mentioned it in his father, his father nursing him because his back had been broken by the red guards throwing him out a window or something like that, and for the first time he saw him as a man and not as a political figure. But that is limited, as you can see. I don't think that Deng had a single qualm about sending the troops into Tiananmen Square, but he did show this emotion which his son didn't realize existed within him.

MR. MacNeil: How can we influence that? How do we, I hesitate to use the word teach, but how do we encourage humaneness in China?

MR. SALISBURY: Perhaps by encouraging it in ourselves. The Chinese find Americans singularly attractive human beings because we are warm and we are outgoing and we show love and kindness and all those emotions and I've seen them warm to that and show the same kind of emotions back. It's a hard task. It's going to take many many years. You can go back, for example, to the American missionaries who went to China. Some of them certainly didn't understand anything about China and were not humane themselves, but many of them were. They loved the Chinese; they did many many things for them. It didn't keep the Boxers, for example, from slaughtering those missionaries, but it, the memory of those Americans persists in the survivors. Today there are many people who still remember how kind and how much they were helped by these people. And they, themselves, are different people as a result of that. I would say you know time in China runs by a different clock. We would say what can we do in the next 10 years? They say, well, maybe in a hundred years we can get a little way down the track.

MR. MacNeil: Your last article makes that so clear, when you went out in the countryside and discovered that among the peasantry that rumors of what had happened were extremely vague.

MR. SALISBURY: That's right, and they couldn't really put them into context because they haven't really come into a society where there are organized demonstrations and things of that kind.

MR. MacNeil: You write in one of your articles that the firing in Tiananmen Square effectively means the end of the geriatric elite, as you call them. Do you have any instinct of what follows that?

MR. SALISBURY:I expect the army and the military to be a very strong presence in whatever regime follows the present one, which is clearly a makeshift interim regime. When any government must call in the military to reestablish its power or regain its power, the military automatically occupy a position which is supreme to the civilian government, and they know it. And I don't think the geriatrics can chop off the heads of the military. Therefore, I think that when they begin to die off, and they will very rapidly in this year and next, the military will become more and more influential. I think they are behind the scenes already the power in China.

MR. MacNeil: And is that a benign power in the long run, or --

MR. SALISBURY: I don't think so. I would like to think so, but I think that you will find that many of the military are attracted to this new doctrine of authoritarianism which they've discovered as possibly the doctrine which must be used if you're going to rule a secure and orderly China. They seem to be fascinated by what they call the South Korean model. That isn't a very benign regime, I don't think, although maybe it's getting a little more benign now.

MR. MacNeil: Harrison Salisbury, thank you for joining us.

MR. SALISBURY: Thank you.

MR. MacNeil: A reminder that I talked to Harrison Salisbury yesterday, before the sanctions, the new American sanctions on China were announced. FOCUS - TIME TAKEOVER

MR. LEHRER: We go next tonight to the battle between giants for Time. The giants are Warner Communications and Paramount Communications. The Time is Time Incorporated. Never before has there been such a fight. The winner will be the largest communications company in the world. We will look at it twice, first as a financial deal, then as a deal for the public, right after this set-up report by Kwame Holman.

KWAME HOLMAN: On March 4th, executives at Time Incorporated and Warner Communications announced they were merging the old fashioned way, with a friendly stock swap, free of both debt and taxes. It was to be a mega marriage of two media giants. Time Incorporated is America's most prominent publishing and cable television company with a stable of highly profitable magazines and two cable programming channels. Warner's big money makers are music, movies and television shows. Warner's three hot record labels, Warner Brothers, Atlantic and Electra, feature some of the biggest stars in popular music. On the Hollywood front, Warner has a long list of blockbuster hits and also is the nation's largest producer of home video cassettes. This summer's much ballyhooed film, Batman, is a Warner production, so are long running TV shows, such as Dallas and Falcon Crest. As far as profits go, Time Incorporated and Warner Communications are equals. Each makes almost $800 million a year. In joining forces, executives of the two companies saw themselves as America's defense against foreign media conglomerates which have been buying up communications companies at a rapid pace. Chris Dixon is vice president and media analyst for Kidder, Peabody.

CHRISTOPHER DIXON, Kidder, Peabody & Co.: Clearly, Time and Warner saw that they had some way to enhance the competitive ability in the international marketplace. Warner makes the case that many of their operations are overseas. They control their own distribution systems outside the United States, and they saw the opportunity to develop and distribute many of the Time products into the international marketplace. For example, you might see Home Box Office moving into the Pacific Rim. Clearly, these are the kinds of efficiencies that can be realized.

MR. HOLMAN: But while Time and Warner were getting ready to walk down the aisle, another suitor barged in to stop the ceremony. It was Paramount Communications, owner of Hollywood's most lucrative film studio and a major force in publishing and sports. On June 6th, just one day after Paramount changed its name from Gulf & Western, Chairman Martin Davis made a bid for Time Incorporated.

MARTIN DAVIS, Chairman, Paramount Communications: Combining Paramount Communications and Time Incorporated will create the foremost American communications company. We will have the strength and diversity in publishing and entertainment to compete on a global scale against foreign media giants. Under one roof, we will have Time Magazine, Sports Illustrated, People, Simon & Schuster, Prentice-Hall, Paramount Pictures, Madison Square Garden, the Nicks, the Rangers and HBO.

MR. HOLMAN: Davis offered a price of $10.7 billion for Time Incorporated, offering $175 a share, $50 higher than the stock's closing price that day. Davis argued that Time had put itself on the block by proposing to merge with Warner, but Time executives insisted their company was not for sale. They said they were stunned by Davis's sudden move which threw their friendly stock swap with Warner out the window.

RICHARD CLURMAN, Author: When they made the merger, they felt like heroes, but the Time management today says it feels like walking wounded, a very poor development for them.

MR. HOLMAN: Richard Clurman, a former Time Magazine correspondent, is writing a book about the company. He said the situation is becoming a free for all.

RICHARD CLURMAN, Author: Now you've got three companies that are like battleships driven by hurricanes and money without being able to go to any home port, and the stockholders who are 90 percent insurance companies, arbitragers and people who don't make the product, are going for a short-term game in this kind of market which is like a commodities market. It's like selling soybeans or pork bellies, except there's no futures market in it. Everyone's in it for an immediate gain.

MR. HOLMAN: Time executives attacked Paramount's hostile takeover attempt, charging the move would leave the resulting company with huge debts, wipe out earnings and lead to measures such as selling off Time assets and firing Time employees. Last Friday in a defensive maneuver, Time announced it was ready to buy Warner rather than merge with it. Time was willing to take on up to $14 billion of debt to do so. That move would create a far different Time-Warner Company.

SPOKESMAN: Under the original terms, the pooling of interests, where the two companies were to exchange shares, that meant that the new company would have a great deal of access to borrowing capacity to enhance its competitive position in the international marketplace. There's some question now as the terms have been revised as to whether or not those efficiencies actually can be realized.

MR. LEHRER: Time also refused shareholders the right to vote on whether or not the company should buy Warner. Time executives said they were doing what was best for shareholders, but many are expected to challenge that move in court, so is Paramount, which is suing Paramount to force acceptance of its bid. Robin.

MR. MacNeil: For a closer look at the business implications of this mega merger, we turn to Michael Harris, president of Levy and Harris Incorporated, a money manager, and John Reidy, senior media analyst for Drexel Burnham Lambert Incorporated, a New Yorkinvestment banking firm. Mr. Harkins, does this latest version of the deal make good business sense?

MICHAEL HARKINS, Money Manager: The latest version of the deal is a bit of insanity in that Time is bidding for Warner and the combined companies won't be able to pay the interest costs if they borrow at the usual 14 percent junk bond rates.

MR. MacNeil: What are the consequences of that, not being able to pay the interest cost?

MR. HARKINS: Well, the idea is in all these deals that they'll be able to sell assets and they'll be able to sell them fast enough and at good enough prices that they'll manage to struggle through and make the quarterly interest payments. But that's anyone's guess as to whether they can actually do it.

MR. MacNeil: Is this a good business deal?

JOHN REIDY, Media Analyst: This is a good business deal, although it isn't as good as the first business deal in terms of the surviving entity, because, as noted, it's going to end up with somewhere around 13 or 14 billion in debt. We don't think they'll have any problem paying their interest bill because the two companies next year will earn something like a billion six before taxes and the interest expense is going to be more like a billion three. But it's interesting, the new company, Time and Warner, will have a loss, no earnings per share next year, the Time-Warner that would have come from stock exchange would have earned about $7.50. But the interesting paradox is, shareholders of Time Inc. are going to have a lot more asset value with the new deal. Asset value is a calculation of figuring out what all the assets are worth if they're sold and we figure Time Inc.'s asset value is going to be about $250 a share with this deal. Under the old deal, it was going to be about $175 a share.

MR. MacNeil: Do you agree with Mr. Harkins, they're going to have to sell off a lot of the assets in order to make this work?

MR. REIDY: The principal things we see being sold off are that famous Warner stock portfolio, which includes a chunk of Atari stock, Hasbro stock and also the investment in broadcasting with Chris Craft Industries called BHC. And all of these assets alone probably will yield somewhere between a billion and a billion and a half and will knock down the debt modestly, at least in the first year.

MR. MacNeil: Mr. Reidy thinks they will be able to make the interest payments, they'll make enough profit. He gave the figures.

MR. HARKINS: Of course, that is conditioned on their profits being up 30 percent next year. In the most recent 12 months, these two companies combined earned a billion two. For them to only have a billion three in interest rates, they have to be able to borrow better at than the prime rate. After all, $13 billion at 13 or 14 percent interest rate, which I think is much closer to what they're going to have to pay, is an awful lot more than what they earn. We just saw R.J. Reynolds, which I think is a steadier business by anyone's guess, pay 14 percent interest rates to complete its takeover 2 1/2 months ago.

MR. MacNeil: So difference of opinion there whether they can make it or whether they can't.

MR. HARKINS: Every single one of these deals of course is always predicated on wonderful projections often to the future. But if you think rather more mundanely that business will just go on as it has gone on the past off current results, they cannot make their interest payments.

MR. REIDY: Well, Warner made a major acquisition at the end of last year of a company called Lorimar Telepictures which is just beginning to show the benefits from syndicating a lot of its television shows, that's selling them to the TV stations, and those are going to start to roll into profits next year. And we'll see continued strong growth in Warner's record business. It's the most profitable record company in the world. Certainly the magazine should do okay barring a recession. And cable television which Time is No. 2, Warner's No. 5, is about the steadiest growth business there is out there.

MR. MacNeil: Okay, disagreement on whether they will make enough profit to cover the interest and whether it's a good business deal on that. What about the argument which we heard being made this is what's going to give them the muscle to meet the big global competition, make them more productive, more competitive overseas, what do you say to that?

MR. HARKINS: Well, it seems to be the idea that since Rupert Murdoch has gone off and done a number of reckless things, everybody else in his industry should go and imitate him. And this has now become just rampant in American business. The most leveraged players wind up leading the pack and everyone feels that they have to up the ante. We see it in retailing, we see it airlines, now we're seeing it in record companies.

MR. MacNeil: What's the answer? Does this make them more competitive?

MR. HARKINS: No, not at all. It makes them much less competitive, of course.

MR. MacNeil: Why?

MR. HARKINS: Well, because in the future, Time will have a much harder time launching new magazines. It won't be able to put the necessary money into -- all new magazines lose money in the initial years, they won't have the staying power to do it again.

MR. MacNeil: Because they're paying those big interest bills?

MR. HARKINS: Of course, exactly. And Warner's business will be harmed similarly. They will be much less likely to bid aggressively for new artists and their record businesses because they won't be able to stand the initial losses in the initial years.

MR. MacNeil: Do you agree with that?

MR. REIDY: Well, I think the original transaction of Time and Warner merging for a stock for stock exchange gave us a far stronger company, but the resulting entity I think will have excess cash but by no means the billion dollars or so we saw generated each --

MR. MacNeil: So that argument is a lot weaker than it was in the original proposal?

MR. REIDY: Absolutely. But even if Paramount were to acquire Time, the same argument applies. These companies, when one buys the other, are by no means as strong as they would have been had they exchanged stock.

MR. MacNeil: What is motivating the main players in this do you see?

MR. HARKINS: The ability to get the credit. After all, both Warner and Time and Paramount have very similar net worth. Their equity's around a billion five to two billion for each of them. Each of these deals costs between ten and a half to fourteen billion dollars. So it's simply the willingness of the bankers to finance this that's spurring them on. Remember, nobody here is doing this with their own money.

MR. MacNeil: What do you say?

MR. REIDY: Go back to the first deal. Nobody's money was being used. It was just stock for stock and that's the way the merger began and would have created a real powerhouse entity, because we would have had the benefits minus the debt. Now we're going to have the benefits but also some of the debt. Time and Warner had been working on this merger through various discussions for nearly two years. They came up with a plan. They announced it. It was moving ahead steadily, and then Gulf & Western decided it would like to get in and play.

MR. MacNeil: Now would it have been better for everybody concerned for Time simply to have said goodbye Warner and yes Paramount?

MR. REIDY: That is a highly -- it wouldn't have been better for Warner and we don't think it would have been better for Time. There's an offer for Time from Gulf & Western -- it's hard to change the name to Paramount Industries -- for $175. The only problem is that's contingent on getting all those Time Inc. cable TV franchises transferred, and this is a process which could take up to a year and a half, and so there's no $175 anytime soon down the road. That offer is probably worth less than the Time Inc. stock is selling for now, which is $153.

MR. MacNeil: Do you have a view on that? Would they be better off accepting the Paramount deal?

MR. HARKINS: Well, they certainly would have been better off with the original deal. And the original deal didn't require tons of debt. And there's such sweet irony in this because there was Time Magazine thundering on its front cover on the RJR deal about the evils of debt, about how it was going to damage the competitive standing of RJR, about how it was going to cripple the business for years, it would hurt the prospects for the employees, and here it is not five months later and Time is proposing to do exactly the same thing to itself.

MR. MacNeil: What do you see as the public interest in this, not the content of the journalism or entertainment, we're going to get to that in a moment, but just in terms of does the public have an interest in this merger?

MR. REIDY: I think Time-Warner is a better competitor in the national marketplace being put together. The opportunity to do an HBO overseas using Warner product to market Warner products through the Time direct sales organization, there are lots of these business synergies which should help the public. And I don't think we're going to see any less new product activity out of the two companies together than we would have out of the two companies separately. And I guess I'd say that would be one of the public benefits would be to see new product coming.

MR. MacNeil: What public benefit do you see?

MR. HARKINS: Well, I think the American taxpayer is being handed an outrageously raw deal here. Time Inc. paid $250 million in taxes last year and Warner paid 150 million. If this deal goes through, neither one of them will pay a penny. All of this interest is tax deductible, so we will have lost two very large taxpayers and that assumes that the deal works nicely. Surely, there's at least a fair chance, and I happen to think it's an excellent chance, that in the years to come as the banking industry gets so over extended in these deals, the American taxpayer will then be asked again to come and bail out the banking system from the deals that go bad, so it really is a case of heads I lose, tails you win to the American taxpayer. It's terrible.

MR. MacNeil: Okay, we're going to move on. Jim.

MR. LEHRER: Now, what is the impact on the consumers of news and entertainment, the general public? We have two views, those of Ben Bagdikian, journalist, former dean of the Journalism School at the University of California-Berkeley, author of the book "The Media Monopoly", he joins us from San Francisco, and Everette Dennis, executive director of the Gannett Center for Media Studies at Columbia University in New York. He's the former dean of the School of Journalism at the University of Oregon, and he's the author of 11 books on journalism and the media. Mr. Bagdikian, to you first.Would a new largest communications company in the world no matter which ever one, whether Time ends up with Warner or ends up with Paramount, would that be bad for the American consumers of news and entertainment, in your opinion?

MR. BAGDIKIAN: I think so. I think no matter which ways it goes, the public at large loses on almost every count.

MR. LEHRER: Go through your counts.

BEN BAGDIKIAN, Media Expert: [San Francisco] Well, first of all, we have been in a trend in the last ten or fifteen years of fewer and fewer large firms getting more and more control over what the general public reads, what it sees on television, what it reads in its magazines and books, what it sees at the movies, what it sees in its video cassettes, and that in terms of communications and political power is troublesome. It loses in another way, that when you get a relatively small number of firms having market control over the media, that is to say the source of our news, information, popular ideas, entertainment. They do what all firms do when they have market control. They can control prices to a greater degree than their competitors and they can control product, and the product in this case are the basic elements of the national discourse and social values in our mass media, and when you're that big and you can control the product without as much fear of competitors and newcomers, and if you're all giant firms looking for giant audiences, you end up pretty much putting out the same kind of material. It's something we see in cable, which more and more looks like to the air television, in book publishing, as book firms have taken over, they've reduced the number of mid range books that they put out, and so on that second count, the public is the loser.

MR. LEHRER: Count No. 3.

MR. BAGDIKIAN: Well, I think too that when you're that big in the media, you get extraordinary attention in political circles, and I think what's happened is that the power of a few firms to decide what the public will see and hear about things like anti- trust policy, some of the negative consequences of mergers and acquisitions, taxes which have been arranged to reward dangerous levels of debt, and short-term development. And media institutions don't do well in short-term development. That takes time and I think that that endangers the fact that we're in such a short-term unstable kind of financial manipulation. It means that our journalistic institutions, our media institutions generally are going to become less stable and they will not develop ideas and projects for the long-term but something that must meet those quarterly earnings and the quarterly interest payments.

MR. LEHRER: All right. We have your three counts. Let's go to Mr. Dennis now and go through them. Let's start on his No. 3 and work back, Mr. Dennis. You heard what he said about what this could mean in terms of the instability it would bring to the news and the media organizations in this country.

EVERETTE DENNIS, Gannett Center For Media Studies: I think there is something to be said for the notion that the media do not generally invest a lot in long-term projects. That's true more small companies than it is for large companies. It's been the big companies in this country that have invested over the long-term, that have done research and development. It's not been the small companies or the independent voices so I really think at least to date the evidence doesn't really support that assumption.

MR. LEHRER: What about his basic point, putting counts 1 and 2 more or less together, that you're going to have too few companies, too large, controlling the information that goes to the American people?

MR. DENNIS: Well, I think if that were really to happen, then I think we'd have a great deal to worry about, but it seems to me that since about 1920 press critics have made those kinds of claims and that we really haven't seen that come to pass. There are indeed fewer companies, but there are still a great many companies controlling newspapers, magazines, broadcasting and others. I think what we've seen is journalistic enterprises following general economic trends which has poured greater concentration, fewer firms and larger concentration of activity. Does this diminish freedom of expression and reduce the number of voices? Not at all. We have more television news channels and operations today than we've ever had. We certainly have a vast number of magazine outlets and opportunities for opinion, and we have a great many newspapers while under fewer owners expressing all kinds of views on their op- ed pages and elsewhere, so I don't think to date that holds. I think the quality of journalism, the nature of the content, hasn't been affected very much. As one of the previous guests mentioned, the nature of the product, itself, even in this new deal, if it goes through, won't be affected very much in terms of the number of products being offered to the consumer.

MR. LEHRER: What about Mr. Bagdikian's point though, that there could be developing a saMeness to the content of news, news magazines, newspapers, television news, he made the example, he used the example that cable is almost identical now to through the air broadcasting.

EVERETTE DENNIS, Gannett Center For Media Studies: Well, there is some sameness and I'm not sure that's a function of ownership. It may be. I think sameness is sometimes equated with professionalism, and it seems to me that when we had a great many more voices in the country, they were much more uneven and some of them were of high quality, some of them low. It was quite a mixture of activity. This may happen. It may be more of the same, but at the same time we do have opinion magazines and other outlets which do give some diversity. Look at newspapers alone, they're very similar across the country. Television news is pretty much the same, except for tone, but there are other outlets.

MR. LEHRER: Mr. Bagdikian, is it your position that news and entertainment organizations are a special case and should be provided some kind of special protection from the marketplace of mergers and all the other great big business transactions that have affected other industries?

MR. BAGDIKIAN: I think so. On the other hand, I think it's almost inevitable that if these trends are going on in the economy generally, it's going to be very hard for big multinational media companies to be that different. But I do think that the media product as product is so essential to the way we live in a democracy that yes, there ought to be special concerns. And I think the American people, and in the past, have taken that into account. In our Communications Act, we insisted that ever radio and television station would have local studios and would present local community issues of concern and that we looked for a diversity of ownership. That has been a philosophy of our basic law and constitutional approach. And we have learned historically I think that you don't depend on a benevolent dictator to give you a spread of ideas which that person may or may not like. Some will and some won't, because the problem isn't that one corporation isevil and the other is virtuous, it's the problem of consolidating ownership so you reduce the number of voices. And I don't think it's enough to say well, there are fewer owners but they're going to be broad- minded. History tells us the opposite.

MR. LEHRER: Let me just go to Mr. Dennis to respond to that, about what history says about past performance in this particular area.

MR. DENNIS: I'm not sure that the notion is that fewer owners are going to be more broad-minded, but to go back to the earlier point, the idea that there ought to be more government intervention and regulation of broadcasting and other media industries had to do with a theory of scarcity of channels and scarcity of signals. It seems to me that cable alone changes that equation. Now how much it should change it I don't know. I'm not sure there should be total deregulation and no one should watch this. Indeed, the Congress has some responsibility and the Justice Department under anti-trust legislation to keep an eye on these activities, I don't think there should be total freedom to operate as one wants, but it seems to me that the record at this point is pretty good.

MR. LEHRER: Mr. Bagdikian, to summarize, you are not suggesting then that there could be evil people running these media giants who could get together in a room and decide like that all the information that's going to go to the American people, you just think the situation is bad in and of itself.

MR. BAGDIKIAN: Yes, although I'm not ready to reward an honor medal of virtue to every single corporate owner, but I agree with you. That's not the problem. The problem is the problem of power and concentrated power.

MR. LEHRER: Power is not a concern of yours, Mr. Dennis. You're not worried about the clout that these people could bring and exercise in the stream of ideas in this country?

MR. DENNIS: I think it's possible, but there is still enough diversity that I think that's not likely to happen. It's true, the structure in a way is a message here, and I think that as long as there's access to the media, I don't think we have that much to worry about.

MR. LEHRER: All right. Gentlemen, thank you both very much for being with us. RECAP

MR. MacNeil: Again, the major stories of this Tuesday, Pres. Bush appealed for clemency for pro democracy leaders in China, and late this afternoon, he suspended all high level U.S. Government contacts with Chinese officials. Nearly a thousand people were rescued from a Soviet cruise ship that hit an iceberg in the Greenland Sea north of Norway. Good night, Jim.

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