The MacNeil/Lehrer NewsHour

MR. LEHRER: Good evening. Leading the news this Friday, China's senior leader, Deng Xiaoping, reappeared and praised the army for crushing the student protest. This came as police began rounding up leaders of the pro democracy movement. And in this country, wholesale prices rose sharply last month. We'll have the details in our News Summary in a moment. Judy Woodruff is in Washington tonight. Judy.

MS. WOODRUFF: After the News Summary, we again make China our lead focus. We get an assessment of the latest developments from former U.S. Ambassador to China Winston Lord and Professor Lee Feigon, a China expert from Colby College. Then a documentary report of a journalist's return to South Africa, what has changed and what hasn't over the last decade. Next, former Interior Secretary James Watt testifies before Congress about his role in an alleged federal housing fraud scheme, and finally, our regular Friday political analysts, David Gergen and Mark Shields.NEWS SUMMARY

MR. LEHRER: There was another important photo opportunity in China today. The country's senior leader, Deng Xiaoping, appeared on national television for the first time in three weeks. In a speech to army officers, he praised their efforts to crush the pro democracy movement. He told them the protesters wanted to do away with Communism and establish a capitalistic republic. Also, on Chinese television, viewers were shown troops arresting leaders of the student protests in Beijing. But in China's largest city, the demonstrations continued. Peter Newport of Independent Television News has this report from Shanghai.

PETER NEWPORT, ITN: Shortly after dawn, it became clear that the local government in Shanghai was not going to pull any punches in getting people back to work and restoring order. Police in full uniform were paraded through the streets together with five truckloads of hired workers. The conscripts were to be used to clear the streets of vehicles and demonstrators if normal traffic was in any way held up. But by mid morning, students on the campus of Jao Tong University were massing for a march on People's Square. It was to be a memorial march to mourn the deaths of students shot dead by troops in Beijing. Many students from this university had traveled to the capital to join the students' protest. But of 200 that made that trip, less than 50 returned. Over 3,000 students left the university for the 10 mile march to the center of Shanghai, but it was obvious that they could not avoid blocking traffic. The city's mayor had said on television the previous evening that this would not be tolerated. A large group of government conscripts moved across the route of the march just outside the American embassy. It looked as though a confrontation was unavoidable. But eventually the students were allowed to pass this point unhindered.

MR. LEHRER: In Washington, at the White House, Spokesman Marlin Fitzwater denounced calls by Chinese officials for reprisals against the students. He said relations with China will not soon return to normal. In New York's China Town, thousands of people braved a driving rainstorm to hold a memorial service for those killed in Tiananmen Square. The marchers carried a replica of the goddess of democracy, a statue erected by the Beijing students. The crowd, which grew in size to 20,000, moved on to the United Nations to protest the crackdown. Many of the demonstrators chanted, "Freedom will survive.". Judy.

MS. WOODRUFF: The Soviet Union's main spokesman said today the Kremlin was extremely dismayed by the brutality of China's crackdown last weekend. Foreign Ministry Spokesman Genardi Gerasimov told a reporter that Soviet authorities were surprised by the force Chinese leaders used to suppress the demonstrators. Gerasimov also said that Soviet officials had not been able to reach Chinese leaders by telephone since the events of last weekend. Also in Moscow today, President Mikhail Gorbachev denied he was hungry for power. He also told members of a new congress that he is in no danger of being removed from office or assassinated. Gorbachev was reacting to criticism and persistent rumors he said he had heard from deputies.

MR. LEHRER: Soviet ethnic unrest continued today in the Southern Republic of Uzbekistan. More than 9,000 troops have been sent to quell the violence and another 500 arrived today. The official Soviet media reported thousands of people armed with guns attacked police stations and other official buildings. The violence in the area began last weekend between native Uzbeks and a rival Turkish minority. Eighty people have died, more than eight hundred have been injured. Also, hundreds of homes have been set on fire.

MS. WOODRUFF: Back in this country former Interior Secretary James Watt admitted to a congressional committee today that he was paid $289,000 to use his connections in the Reagan cabinet to win federal consideration of three housing projects. Watt insisted his participation in the deal was legal and moral and he denied any wrongdoing.

JAMES WATT, Former Secretary of the Interior: Since the money paid to me came out of the developer's pockets, not the government's, not the tenants, not HUD's, nor from the taxpayer's pockets, but out of the developer's potential profit, they are the ones who need to be satisfied with my services, and they are.

MS. WOODRUFF: In economic news, the Labor Department said that wholesale prices jumped a sharp .9 percent last month after a two month lull. Much of the rise came from higher prices for cars, gasoline and fresh vegetables. So far this year, wholesale prices are running at more than twice the 1988 race.

MR. LEHRER: South Africa's three year old state of emergency was renewed for another year today. A decision by P.W. Botha was condemned by some businessmen as well as church and union leaders. It was praised by Frederick DeClercque, who will succeed Botha in September. Under the emergency rules, thousands of people have been retained without trial. There are also restrictions on public demonstrations and press freedom.

MS. WOODRUFF: In the United Nations Security Council today, the United States vetoed a resolution condemning Israeli actions in the occupied territories. The resolution was supported by the other 14 members of the council. U.S. Ambassador to the United Nations Thomas Pickering said the resolution was unbalanced. He said it condemned Israel without any reference to violence on the other side.

MR. LEHRER: A cabinet minister was assassinated today in El Salvador. Seventy year old Jose Rodriguez was the chief of staff to the country's new right wing president, Alfredo Cristiani. He was gunned down outside his home. Nobody has claimed responsibility but a military spokesman blamed leftist rebels. In neighboring Nicaragua today, Reuters News Agency said U.S.-backed Contra rebels attacked the country's main hydroelectric plant. The plant was unable to generate electricity for several hours. There was no word on possible casualties.

MS. WOODRUFF: That ends our summary of the top stories. Just ahead on the Newshour, developments in China, reporters return to South Africa, excerpts of a hearing on influence peddling of the Department of Housing & Urban Development, plus analysis from Gergen & Shields. FOCUS - CHINA IN CRISIS

MR. LEHRER: The reappearance of Deng Xiaoping is the lead story of this day. The major leader of China showed up on national television for the first time since the turmoil began there three weeks ago. We begin our look at what it may mean with the opinions and analysis of David Smith of Britain's Independent News in Beijing.

DAVID SMITH, ITN: At the end of the most traumatic and important week in China's history since the cultural revolution, we were presented tonight with conclusive evidence at last that the old leadership has survived. Deng Xiaoping, 84 years old, and in better health than we'd led to believe appeared on television with the politicians and generals who ordered the blood bath last weekend. Absent almost inevitably was Zhao Ziyang, the man who advocated compromise and reform. His fate is unknown but these pictures symbolize his defeat and the defeat of millions of ordinary people who believe that they could shake the system and make China a democracy. Deng's speech could have been written by Mao. Only a handful of people had opposed the government, he said, and they were capitalists trying to overthrow Communism. The very life of the state had been in danger, he claimed. The army had saved it. Every soldier had been a brother to the people. There was a hint though of the price Deng will have to pay if he's to survive. We have to rectify our mistakes, he said. But Deng insisted China would pursue economic reform and its policy of an open door to the world. State television then took us where no Western correspondent can go, Tiananmen Square, home of the Great Hall of the People, the national shrine that six days ago became a killing ground in the place where the hopes of millions were buried. It was if that had never happened as the army marched on parade. No matter that some generals apparently are going to be court martialed and probably executed for refusing to turn their guns on the people here. The army seems to now be towing the line. As for the massacre last Saturday night, that was history rewritten. We saw the army moving in on the square that night, but the only murders committed in this version of events were those of soldiers by demonstrators. There was no cover-up of the extent of the fighting or damage done, but we were led to believe tonight that the only bodies on the ground were soldiers, and that all casualties were military. No mention then of the hundreds, maybe thousands, maybe we'll never know just how many were slaughtered here. In conclusion, we were shown Beijing today, or at least what state television and the army had most likely orchestrated, people, for example, applauding the troops, the army, the saviors, the Great Wall of China in the words of the commentary, distributing supplies of food, and in turn, receiving gifts and even cups of tea from ordinary people. We've been out on the streets of Beijing as well today under the kind of restrictions that make firsthand reporting dangerous, and we've a very different story to tell. In the past 24 hours, there have been persistent reports of students being rounded up here on the campuses of Beijing. Many of those who led the protest demonstrations in Tiananmen Square have already gone underground. And now large numbers of ordinary students are fleeing the capital. Even earlier this week, we were able to get inside the university and talk freely. No more. And today most students were simply too frightened to say publicly what's going on here. But the picture we put together from listening to them this morning suggests a purge has begun. By all accounts, the public security service, the secret police, had been in overnight, looking for ring leaders and activists. Many had been arrested. One young man though did want to talk. He insisted that his message that all was not lost, that the spirit of Tiananmen Square would not die did get out to people abroad.

STUDENT: Most of the but of the Pekingese does want to take up the event, but they have no gun, they have no fire, so they just sit here and do something else, because what we face is the government troops and we have no gun.

MR. SMITH: What is the atmosphere like on campus?

STUDENT: The patrolman is coming here, so you must go as soon as possible. Thank you. Go away. The patrolman is coming here so go away as soon as possible, please, please.

MR. SMITH: At the end of this momentous week, there's an ominous pattern to the extraordinary events that have rocked China, and you don't have to be a student of the country's modern history, to sense that there could now be a replay of sorts of the cultural revolution, with wide scale repression and terror, not on the same scale maybe, but with similar tactics. Tonight the Chinese aren't looking so much at the future as back at the past and remembering what happened then. Things here will never be quite the same again after the past few weeks. The people found their voices, but the stark reality is that their leaders show no signs of listening. David Smith, ITN, Beijing.

MR. LEHRER: We get two more analytical views of Deng's reappearance and other events from Winston Lord, who was the U.S. Ambassador to China from 1985 until earlier this year, and Lee Feigon, Director of East Asian Studies and Professor of Chinese History at Colby College in Waterville, Maine. He returned from China in mid May. He joins us tonight from Chicago. Amb. Lord, how do you read the coming out of Deng Xiaoping?

WINSTON LORD, Former Ambassador to China: Well, it confirms that he's been involved in the repressive actions. It's still conceivable that he has been misled by false information and he has sort of been a remote chairman of the board rather than chief executive officer, but no only has he come out but all the elders are with him. This is a coup by the elders, in effect, the reformers in economic policy, as well as political policy, were not present in that picture. So we're seeing a clear consolidation of the hard-line both in that television footage of Deng and what was said there, secondly, in the big lie we're seeing on state- controlled media, and thirdly, in the reports of arrests and round- ups and the clear fear of the citizenry. So it's an ominous day, indeed.

MR. LEHRER: An ominous day, indeed, Prof. Feigon?

LEE FEIGON, Colby College: I agree. I think it's a very ominous day. One of the interesting things about Deng Xiaoping's appearance right now is that I think in a way George Bush smoked him out last night. In his press conference last night, there were two very interesting statements from Pres. Bush. On the one hand, he appealed to Deng Xiaoping's vanity. He said that Deng Xiaoping was a very forward looking leader and implied that, in effect, the United States could continue to conduct business as usual with a man like Deng Xiaoping. And then he spoke about that phone call. He mentioned that he tried to make a phone call to Deng Xiaoping and that not only had Deng Xiaoping not come to the phone, but nobody had answered at his office at all. And the effect of that was to say well, who was to say is anybody in charge of the Chinese Government, and today we saw Deng Xiaoping coming out to say here I am, in fact, I am in charge of the Chinese Government, and identifying with what had gone on.

MR. LEHRER: But Pres. Bush also, at least you could read he also came to Deng Xiaoping's defense in a way. He said, don't jump to any conclusions about whether or not this man, Deng Xiaoping, who has been a forward leader, has actually been calling the shots. Now what -- you're saying, Ambassador Lord, that that scenario doesn't hold up.

AMB. LORD: Well, I would hope that Deng Xiaoping hasn't been calling the shots, literally I might add, because I've admired many of the things he's done in the last 10 years, but his instinct to suppress democracy, his past statements on the need to maintain control, and his appearance today and his apparent good health, and the mental agility that I saw just a few months ago suggest that he knew what was going on. So I think the President was correct to try to give him the benefit of the doubt as long as we could and we still don't know whether he's been somewhat manipulated. It's interesting that in his comments he tried to reaffirm the opening to outside and reforms. That's going to be very difficult. First of all, the key people for that are the ones getting rounded up in many cases, or at least rumored to be rounded up. But secondly, their constellation of leaders is very conservative.

MR. LEHRER: They're all in their 80s.

AMB. LORD: And it's a strange alliance, because, for example, one of the people, their key person is Peng Jen, who was head of the National People's Congress before. He was the first one to go down in the culture revolution and guess who attacked him during the cultural revolution? Deng Xiaoping. So each of these person had their personal networks. Their only common agenda is opposition to the students and the broad popular support for the students. And most of these people that he's brought out, the elders, were ones that he pushed aside recently so that he could get along with economic reforms. So he may sincerely wish to continue reforms in the opening, but the team he's got in that television picture isn't the right thing to do it, and that alliance could fall apart as some die off and as tremendous economic pressures build up not only because of dislocation that is happening, but because of the subsidies that are going to be needed to take care of the cities by the end of the year and a non-productive economy, and, therefore, they'll probably print money, have inflation. This game is not over yet in my opinion in terms of the pressures on their government and on their fragile strange alliance that we saw on the screen tonight.

MR. LEHRER: Yeah. Prof. Feigon, let's go back to the short run first to you. How culpable do you think Deng Xiaoping is in all of this?

LEE FEIGON, Colby College: I think he's very culpable. We saw him there as Amb. Lord just said, as a man very firmly in charge, who seemed to be in full command of his powers. You know, there's an old game that Deng Xiaoping has played, and he's played it a number of times and he seemed to be tryingto play it again today, and that game is to try to be the man in the middle, to wait till everything's about to fall apart, or seems to be falling apart, and then to come in as the, in effect, reverse Humpty Dumpty of Chinese politics, a man who can put everything together, who can appeal to both sides, who can deal with the hard-liners on the one hand, but can also be the one who can talk to his friend, for instance, George Bush, and appeal to the outside world. I don't think it's going to work this time.

MR. LEHRER: Do you agree with Amb. Lord that his calls for continued reform and all of that have kind of an unreal quality to them?

PROF. FEIGON: I think he's, in effect, destroyed the movement for political and economic reform. As Amb. Lord said, the people that are supposed to implement this movement, are now the people who were purged or are being purged. The people that Deng Xiaoping has had to depend upon are the people who to a great extent opposed this movement. Moreover, what we see being instituted is a highly authoritarian bureaucracy. When I was in China a couple of weeks ago, the students told me that one of the things they were afraid of was the Brezhnevization of China, and I think what we see is, in effect, the Stalinization of China. And the people who are supposed to make the economic decisions, the people who are going to be talking to, for instance, foreign businessmen, are going to be very very careful now about anything they say, any deals they make. Foreign businessmen have in the past complained about the level of bureaucratization of Chinese society. Can you imagine what it's going to be like now? They're going to have to wait for everybody on the upper levels to come to a decision before they make even the smallest decision to move forward with anything.

MR. LEHRER: Why would Deng Xiaoping, Prof. Feigon, turn his back on his own reform movement? He's the man who's credited at least for starting all of this in many ways. Why would he suddenly now at 84 years old turn his back on it and go back to the old way?

PROF. FEIGON: I think that he doesn't realize how much he's turned his back on his reform movement. I think he is, after all, an 84 year old man, he's played this game for a very very long time, and he doesn't realize how much Chinese society has changed. I think that he feels that he can still play it the old way, that he can appeal to the old guard, but that he can also appeal, again to go back to this, to people like George Bush and keep China open and keep the economic reforms going.

MR. LEHRER: I was just going to ask Amb. Lord. Is there an element of power for power's sake at play here for Deng Xiaoping? He's more interested in being in charge than he is in what --

AMB. LORD: I think you have to at least acknowledge that he would like to continue the reforms in the opening but I agree with what the professor has just said. He's out of touch. He sacrificed Hu Yaobang. Now he sacrificed Zhao Ziyang. He does put a great premium on stability, as he defines it. He's scared of chaos. He, himself, suffered from the chaos of the culture revolution. Because of his age, and perhaps some false information he's out of touch with the situation. So he feels he can crack down, get stability again and then move forward with reforms in the opening. I agree with the professor. I don't think it's going to work both because the objective consequences and the psychological consequences of what happened, and because of the strange alliance that I described before, and the fact that all the key people, many of the key people in the economic, cultural, scientific areas, are precisely the ones that supported the students, are now either going to be rounded up, or are going to be sullen and angry, or are going to be intimidated and scared.

MR. LEHRER: David, do you agree with David Smith, the ITN reporter's analysis that widespread terror should be expected over the next few days and weeks?

AMB. LORD: The signs are ominous. Say you have, put these telephone numbers on the screen, say phone in and turn in a friend or a neighbor, maybe a relative, and get extra points, this is extremely ominous, the language of counter rebellion that goes back to the '60s, I hope it's not true. And I'm pleased to see the White House and State Department spokes people today warning against it and being very concerned about it. I think that has to be our near- term effort is to try to stave off this ominous possibility, because I'm very concerned both in human terms and in terms, of course, the future of China and Sino-American relations.

MR. LEHRER: But as a practical matter, Prof. Feigon, all we can do is watch on television as long as Deng Xiaoping and the leaders allow us to watch on television, is that right? Is there anything else we can do? If a widespread terror does begin, he starts rounding up people, and they start killing people, so what?

PROF. FEIGON: I think we could begin to speak out more forcefully about what's happening. I think we can begin to cut off more, for instance, technology to China, maybe take some symbolic steps. And one of the things that the Chinese leaders like to do is ride around in Mercedes Benzes. Well, the United States doesn't export Mercedes, but maybe we can try to cut off some of those luxury goods that the high leaders of China like to use themselves, but, in effect, I agree with what you said. The sad truth of the matter is that all we can do is remember what they've done. We have very little effect on what's going to happen inside of China, itself.

MR. LEHRER: Amb. Lord, you've dealt with Deng Xiaoping.

AMB. LORD: I've known him for 15 years.

MR. LEHRER: All right. Does he care what we think, what we're saying on this program tonight, what the President of the United States says at a news -- does he really care about all that?

AMB. LORD: The quick answer is no. I mean, maybe there's a 1 percent care there, but what he cares about is China, and what he feels he has to do in China. It doesn't mean we shouldn't speak up. It doesn't mean we shouldn't take the kind of actions the President took earlier this week, both for symbolic and humanitarian reasons, and for modest leverage, at least arguments for the moderates, but I think we all agree it's going to have very little effect in the short run.

MR. LEHRER: In the short run, what do the students, what do the pro democracy people do? Do they go into hiding and pray, or?

AMB. LORD: The ones who are most in dangers, the leaders and so on, have to go into hiding, it seems to me. The others --

MR. LEHRER: Is it possible to hide in China?

AMB. LORD: It's very difficult. But one different element than the culture revolution is I think people will be less willing to turn people in than they were in the '60s. They've seen this game before, and it's going to be tough because they'll be threatened them for not turning people in, but I think there will be more passive resistance by the population, trying to hide these people, more unity in that respect, and not jumping in and going with the flow as people did in the 1960s. I think you also will see some attempts at economic slowdowns and sabotage, but it's tough for the workers because not only are their jobs controlled by their work units, but health, medical care, educational care and housing, so it's going to be tough, but I still feel over the long run, the forces that we saw with such joy and admiration for weeks are going to prevail. I can't tell you how soon, but both the popular support, some divisions in the army, and the objective consequences for China's economy that are going to be very serious will all work as the leaders, the elder leaders die off, which is another factor, and others work toward a brighter future than we can see right now.

MR. LEHRER: Prof. Feigon, are you as optimistic over the long run as the ambassador is?

PROF. FEIGON: Over the very long run, I agree that probably this will end, but I think this regime, it's proved that it's willing to use brute force, it's proved that it's willing to use any kind of power necessary to enforce its rule, and I think that it can continue doing that for a very very long period of time. The other unfortunate thing that I think should be stated is that the students attempted to do this through peaceful means and they were sincere in their beliefs in democracy. I think one of the things that's going to happen is not only are the students going to go underground, but in this kind of situation, the most extreme people, the most zealous people, are those that are going to continue underground, and so what you're going to have is unfortunately even in the student move not only a turn to violence, but you're going to have people in the student movement begin to adopt the same kinds of means that the government has so brutally adopted in order to fight the government.

MR. LEHRER: All right.

AMB. LORD: The point is it was all so unnecessary, the original demands of the students, totally non-violent actions carrying them out as everyone knows were very moderate early on, and all of this could have been avoided and we could have had gradual reform, rather than the possible radicalization of both sides that the professor has just alluded to.

MR. LEHRER: But the old men said no way?

AMB. LORD: Out of touch.

MR. LEHRER: Gentlemen, thank you both very much.

MS. WOODRUFF: Coming up a return to South Africa, influence peddling at HUD, and political analysis from Gergen & Shields. FOCUS - SOUTH AFRICA - THEN AND NOW

MS. WOODRUFF: We go next to South Africa, a country that was much in the news a few years ago, but is less so now, in part because of drastic restrictions on foreign reporting and videotaping there. Those and other emergency measures aimed at anti-apartheid activity were renewed today for the fourth straight year. Recently, the BBC's diplomatic correspondent John Simpson returned to South Africa, a country he had covered a decade ago. His report is on what has changed in that country and what remains the same.

JOHN SIMPSON, BBC: Early morning in Soweto, the long business of getting to work in white Johannesburg nine miles away has begun. Soweto is a vast, featureless pool of labor which doesn't even have a real name. It's short for Southwestern townships, and it's kept at a careful distance from the city it exists to serve. Johannesburg, like South Africa as a whole, has grown rich on the cheap labor of people like these. And the extraordinary thing is how most black people accept the position without rancor. The late '70s when I was based here were the last days of what you might call classical apartheid. The government was still committed to the theory that one day blacks and whites, Indians and coloreds, would live and work in entirely separate parts of South Africa. And so places like Soweto were still regarded as temporary, a stopping off place for people who would soon be moved out anyway, even though they've been here for decades. And so with a crazy kind of logic, when I was based in South Africa, there was no electricity in Soweto, there were no shopping centers here, although in population terms, Soweto is one of the biggest cities in Africa, there were few road signs to it and it was even difficult to find on the map. Now, a decade later, the fact that there's electricity and so on here isn't just a long overdue concession to common human decency, it's also a recognition that Soweto isn't going to wither away as the theory of apartheid said it would. The worst aspect of Soweto, the heart of darkness, has always been the hostel system. Men brought in from the distant homelands lived here, separated from their families, because women and children weren't allowed to join them without permits under the hated pass system. In these conditions, dreadful things happened, drinking parties that ended in blindness or death, homosexual rapes, fights and murders. Hostels still exist, but now the influx control and pass levels have been abolished, there's no legal bar to families joining the men here. In Dobsonville, a suburb of Soweto, the council is starting to convert the hostels. So by black initiative, the work is starting to turn wage slaves into householders. The work may not be ideal, but in Dobsonville, the hostels are no longer the affront to human dignity they once were. There's still an unbridgeable gap between the third world conditions of most of Soweto and the opulence of white Johannesburg. But on the more favorable sites, new, expensive middle class estates are springing up in Soweto, and people commute to work them in Mercedes and BMWs. There have been always been a few rich blacks in Soweto, but these people are comfortably off rather than rich. The old system of laws which prevented blacks from doing jobs that could be done by whites have simply been smashed by the development of the economy. Johannesburg couldn't operate now without black managerial skills. Near the top of the Carlton Tower in the city's center, Eric Mafuna runs a firm of management consultants. He's better educated and more articulate than some members of the South African cabinet, but, of course, he doesn't have a vote here.

ERIC MAFUNA, Johannesburg Businessman: We are in the midst of change. For the ordinary person, it may not be easy to see that. For a black South African, there's still a lot of things that cause a lot of hurt and frustrations and disappointments out there. Wherever you go, you go out there with your guards up, you overcompensate, you become far too aggressive, or sometimes too nice to make sure that you get your way. The generation of black South Africans who are around today are not as, they're not as meek as the generation that was around in business say 10 years and before.

MR. SIMPSON: A well known campaigner from an older generation is more skeptical about the changes, though not in the area of business and the economy.

DR. NTHATO MOTLANA, Soweto Civic Association: That I admit, that I admit and many top managers realize, the man at the top, on the 22nd floor. The man -- the lower level managers, who almost always happen to be Afrikaners from the back woods, don't realize this. They regard blacks as a challenge to their position, as a threat, and resist change. I suppose it happens all over the world, that the lower level are going to find that kind of resistance, but blacks are coming to their own I think mainly as consumers. And this is one area where they're beginning to flex their muscles.

MR. SIMPSON: To me, coming back, that, indeed, seems a remarkable change. This is a shopping center on the edge of Soweto opened eight months ago. The people of Soweto used to have to trek all the way to the stores of white Johannesburg to do anything but the lightest shopping. Now the big stores and the small ones, owned and run by blacks, themselves, regard black people as consumers in their own right. As for the white shopping centers, something strange is happening there too. This was where my family and I used to stop, a standard Johannesburg of conspicuous expenditure and general lotus eating, but late in the afternoon now, there's a strange metamorphosis. The shops shut, the whites scurry home, and the place is left to the blacks. At 5 o'clock sharp, Rose Bank Shopping Center reverts to Africa.

ERIC MAFUNA, Johannesburg Businessman: I think what South Africa has become or is in the process of becoming, it's returning to the African fold, and we're becoming very clearly, very distinctly a third world country. For many many years we have been hovering on the fringes of a third world community where black people didn't matter, Now our hotels, our shops, our employment agencies and all those areas are very much black oriented.

MR. SIMPSON: Up to a point, this is still Fontain, one of the desolate little mining towns around Johannesburg which swung to the far right conservative party in the local elections last October. Here the old paraphernalia of apartheid has been reassembled. But the non-white community is resisting by using its economic muscle. Shopkeepers in towns like Boxberg are facing bankruptcy because their black customers are staying away. It is, of course, what the advocates of sanctions want to do against South Africa as a whole, and it's certainly working here so far. The pressure on the council to abandon apartheid and join the real world is growing. But so far in the rest of South Africa, some of the most important things remain unchanged. The law still says that only whites may live in areas like these. And although a few wealthy blacks have, indeed, moved into houses in white areas, it has to be done secretly, and they have no rights of ownership. My children went to this white state school where the government paid seven times as much for their education as it did for that of black children. Now the proportion has improved, though it still favors whites strongly. One gross injustice has been rectified. The government now pays for black children's school books just as it always has for the books of white children. So it's hard to get the balance right when you talk about change in South Africa. The government likes to give the impression that apartheid has vanished altogether. It's opponents want to keep up the pressure so they maintain that nothing has really changed here. My own feeling, for what it's worth, is that there have been some real changes, but that the most important change of all is happening not because the government particularly wants it to, but because there's nothing anyone can do to stop it. In a hall in Cape Town, preparations are beginning for a rock concert, which will be a celebration of the changes in South Africa, and of the struggle which has made them possible. The star of the show is no run of the mill rock singer. Johnny Clegg is a former university lecturer and a full member of three Zulu clans. Some of his profoundly anti-apartheid songs have been banned by South African radio, but the British Museums Union in its wisdom has expelled him for performing in his own country. JOHNNY CLEGG, Musician: Our South African culture's creaking, and I think that's got to do with the tremendous struggle that has taken place in this country since 1983. We have those activists who were killed, maimed in jail, those detainees to thank for the cultural space that has been created now just at a cultural level, let alone at an economic, a political, whatever other gains. The gains that have been made in South Africa are not gains that have been given by the government. They're gains that have been arrested from the government through struggle. That's very important. They're our victories. They're not the government's victories.

MR. SIMPSON: In the area of human rights too, there have been changes for the worse. The ferocious clampdown on the opposition which reached new heights in 1988 has brought an end to this kind of violence in the townships. But if and when it begins again, and history suggests it will, it will be illegal to film it. Nowadays in my experience, it's easier to report from the Soviet Union than from South Africa. It's not even legal for us to film the Johannesburg police headquarters. These pictures are several years old. In the late '70s, I had to report a regular series of deaths of people in custody. The people said they committed suicide. During 1987, the latest year for which there were figures, 105 people died in police custody. Back stage at the rock concert, Johnny Clegg and his band are getting ready for the evening's performance in a country where until recent years, it was illegal for blacks and whites to appear together for a mixed audience. This is one of the new cultural spaces which Clegg accepts, the government have now opened up.

JOHNNY CLEGG: They don't mind creating new spaces for people to behave in or act, but they want to limit the actors, they want to take out the actors who are going to take that space further than they want it to go, so they do create new spaces to move in, but they want to determine how that space is operated and how the people utilize the space, and basically manage from above the revolution.

MR. SIMPSON: The concert which followed was an extraordinary experience. It wasn't just the homage to opposition figures who had died in police custody that was extraordinary nor the fact that there were policemen looking on and doing nothing to stop it. It was the audience, itself, thousands of white kids whose horizons you might have expected to be limited to surfing and partying and who, instead, were mesmerized by songs in the Zulu language about a liberated and open South Africa. It would be sentimental to suggest that the ethos of a rock conference might be a guide to the country's future. No one who saw apartheid at its height would ever have thought that something like this could happen only 10 years later. FOCUS - THE PRICE OF INFLUENCE

MS. WOODRUFF: We go next tonight to the ongoing Congressional probe into allegations of wrongdoing in the Reagan administration's Department of Housing & Urban Development. A House Government Operations Subcommittee today continued its investigation of charges that the agency then headed by former Sec. Samuel Pierce allowed favoritism, insider information, and political influence peddling to affect funding decisions for the rehabilitation of moderate income housing programs. One deal that hascome under scrutiny involves a project in suburban Baltimore, Maryland. Former Reagan administration Secretary of the Interior James Watt was paid $169,000 out of a total of $300,000, a consulting fee by the developers of this project. They wanted his help to get funding from HUD. Watt was the main witness at today's hearing.

JAMES WATT, Former Secretary of the Interior: Questions have been asked about the role I played in helping to provide 312 units of low income housing in the County of Baltimore, Maryland. I did receive a fee for providing counsel and assistance to our team of business associates. How much effort and time were committed to the project? Sufficient to meet the objective of those who paid me, the developers.

REP. TOM LANTOS, [D] California: You had a contract with a developer with respect to the Essex Maryland project, for which you were to be paid $300,000, is that correct?

JAMES WATT: I was to be paid $300,000 if the project were successfully completed.

REP. TOM LANTOS: That's correct. How was the figure of $300,000 arrived at?

JAMES WATT: It was the offered amount and kind of the going rate.

REP. TOM LANTOS: The going rate of what?

JAMES WATT: The street knowledge is that if you can get these - - and it used to be higher in the late '70s, that there was a thousand to two thousand dollars a unit -- and that's what they offered. They offered $300,000 and that was the way it was settled. It seemed like a lot of money to me.

REP. TOM LANTOS: Well, it certainly seems like a lot of money to the people who live in those subsidized public housing projects, because those people may be making $10,000 a year and in a lifetime they don't make this money.

JAMES WATT: They're very grateful to have a home. They're grateful that we were successful in bringing this project to fruition.

REP. TOM LANTOS: No. Mr. Watt, I already explained to you they are grateful to the people who prevented the program from being totally destroyed by Pierce and people who agreed with Pierce, who is on the record saying that that's what he intended to do.

JAMES WATT: I'm not contesting anything you've said on that, Mr. Chairman.

REP. TOM LANTOS: So let's leave the attitude aspect out of it, because I don't think that deals with --

JAMES WATT: I understand why you say that, of course.

REP. TOM LANTOS: Of course, you do.

JAMES WATT: But it's hard not to focus on it when you see the facility and you see the people and you realize that that project may not have come into existence.

REP. TOM LANTOS: That's right. A more worthy project may have come into existence. That's one of our concerns.

JAMES WATT: I don't know about that.

REP. TOM LANTOS: This project came into existence because of influence peddling by you. A much more worthy and desirable and necessary project, where they didn't have the good judgment to hire you because you knew Pierce didn't come into being. So this thing does not appear in isolation. I think you understand this every bit as well as we do. So let's put the great pride aside. The fact with respect to the pride remains that there was an attempt to kill the program, and it couldn't be killed entirely. What was retained was being taken advantage of.

REP. BARNEY FRANK, [D] Massachusetts: We don't claim that you did anything illegal to get these fees, but the fact that those fees were necessary inevitably detracts from our ability efficiently to provide programs. That's what we have to look at. And the second question I have is that I just want to get to what you did to earn the fees. Before you let the Interior Department, in your pre Secretary of the Interior days, did you do much housing work?

JAMES WATT: No.

REP. BARNEY FRANK: So you never represented anybody before to get low income housing?

JAMES WATT: No.

REP. BARNEY FRANK: So you had no prior expertise in housing?

JAMES WATT: None at all.

REP. BARNEY FRANK: Had you ever advised anyone to strike a tax deal for low income housing or moderate income housing?

JAMES WATT: Not for housing, no.

REP. BARNEY FRANK: Leaving aside the propriety of what you did or didn't do, you took advantage of legal situations. George Washington Plunkett said, "I seen my opportunities, and I took 'em", and you did. But the result was that $300,000 was paid out for something that should have not been necessary for one meeting and that's our problem.

JAMES WATT: I think you framed it fairly, Congressman, and that is the problem that the committee needs to focus on. The program and doesn't do any good to demagogue Jim Watt, although it's fun.

REP. TED WEISS, [D] New York: Mr. Watt, as much as you dislike the term, itself, since it is a part of American language, would you give us your definition of influence peddling?

JAMES WATT: I only see it used and have only used it in a partisan attack. It's when one of, the Republican Party or Democrat Party accuses someone else of using his credibility or whatever to gain an objective.

REP. TED WEISS: And you believe that it exists, do you not, in our society?

JAMES WATT: Of course.

REP. TED WEISS: And within the context of that definition, given how you described your work, wouldn't you say that your work, in fact, fits that definition?

JAMES WATT: My credibility was used to get a result.

REP. TED WEISS: Right. Therefore you engaged in influence peddling.

JAMES WATT: If I were a Democrat, I would say that Jim Watt engaged in influence peddling.

REP. TED WEISS: And if you were an objective Republican, would you also believe that that was true?

JAMES WATT: No. I would say there's a skilled, talented man who used his credibility to accomplish an objective.

REP. TED WEISS: Morally. Morally and ethically.

JAMES WATT: That by definition is also there.

MS. WOODRUFF: The subcommittee's investigation is scheduled to continue next week. The former executive or rather executive assistant to Sec. Pierce is expected to testify. FOCUS - GERGEN & SHIELDS

MS. WOODRUFF: Next a look at the week just past with our Friday political analysis team of Gergen & Shields. That's David Gergen, Editor at Large of U.S. News & World Report, and Mark Shields, Syndicated Columnist with the Washington Post. Mark joins us tonight from Los Angeles. And, Mark, you get the first question. Pres. Bush's news conference last night, it was his first one as President in prime time. How did he do?

MARK SHIELDS, Washington Post: [Los Angeles] I thought he did well, Judy. The problem with grading people in a Presidential press conference is you have to do it on the curve. You have to compare the President, how he's done the previous performances of his own and previous Presidents. He was different than Ronald Reagan. He seemed to me to be more in charge of the government, more specific in his answers, but he lacked that Reagan ability, the uncommon ability I thought Reagan always had, to evoke who we are by whom we have been or who we have been as a people and be leader of the nation. I got more head of the government than leader of the nation out of George Bush last night.

MS. WOODRUFF: David.

DAVID GERGEN, U.S. News & World report: Well, I think Mark has those new glasses. He's seeing things fairly clearly these days. It's a good change, Mark. Generally I thought it was a success for George Bush. I very much agree with Mark on the question that Bush overall conveyed a sense of competence. I think he was an reassuring figure, a man who seemed to be in command of his material, particularly on China and on foreign affairs. I'll tell you there was less command with regard to domestic affairs, especially in regard to race relations. On the negative side, I would have to say if I were advising George Bush, I would say the next time let's go out with a message. Let's have something central we're trying to accomplish with a press conference, in addition to showing that you're competent, let's try to advance the ball so that we can build public support for a particular position or a set of programs.

MS. WOODRUFF: Why?

MR. GERGEN: Because these are rare opportunities for a President to address the whole country. It's a time when he can mobilize public support behind him, for whatever his objective was. And I think he was right to discuss with the country what's going on around the world and China, and the NATO situation and that sort of thing. But George Bush as President also has certain goals presumably that he wants to advance, and these press conferences like prime time speeches are opportunities and you only have a few of them.

MS. WOODRUFF: Mark, why does it matter whether George Bush comes across well and Presidential on television? Why does it matter?

MARK SHIELDS, Washington Post: Well, the Presidency, Judy, is above all else a wholesale job. I mean there are really two forms of politics, which is the politics that most of us know firsthand, the sort of local politics, where faithful attendants at wakes and weddings and barmitzphas and junior high school graduations translates into votes. But very few Americans have ever met a President. President Carter, for example, had never met a Democratic President before he became President, so our feeling about a President and what a President is about, where he wants to lead the nation and why is very much communicated by television. What's interesting is I think the Bush people are very sensitive to how very effective Ronald Reagan was on television and three times today I read where the Bush White House had reported that George Bush only spent one hour preparing for this appearance last night in contrast to Ronald Reagan they said used to spend two days cramming. So obviously I think it's a great concern to them and I think for good reason.

MS. WOODRUFF: You think they're comparing themselves in other words?

MR. SHIELDS: I do.

MS. WOODRUFF: David, some of the questions he got were obviously on the Lee Atwater, the Republican National Committee, this whole business of the memo that was put out that's attacking Tom Foley, the new Speaker of the House, the President stood four square behind Lee Atwater. Was that the right, was that the smart thing for him to do?

MR. GERGEN: I think the President more than standing behind Lee Atwater is trying to scramble to close the issue down. He seized upon the statement of Tom Foley that the issue was closed. Clearly, he recognizes that the Republican Party has been damaged this week. It took a blow this week. It engaged in an act it never should have, is repugnant to politics, and is now paying a heavy price. You know, in effect, the price that the Republicans are paying is that it's negated the opportunity that they had to tag the Democrats with wrongdoing. We now have Democratic wrongdoing matched by Republican dirty tricks, and from a political point of view, George Bush recognizes not only that it was wrong, but it was dumb, and it's hurt him.

MS. WOODRUFF: Is this the end of it? I mean, has the President, Mark, succeeded in closing the door on this whole thing?

MR. SHIELDS: I think the President effectively used Tom Foley, Speaker Foley's own statement, to distance himself and to try and put an end to the debate. I think David's absolutely right that the moral high ground that the Republicans have at least temporarily occupied because of the resignation of House Majority Whip Tony Coelho of California, and Speaker Jim Wright has been lost, I mean, forfeited completely. I think the Democrats made a tactical mistake by demanding Lee Atwater's resignation. That was a mistake. What they should have demanded was that Lee Atwater stand up, stand up like a man, and admit his role in this. Lee Atwater and Mark Goodin were a matched pair. They had worked together in campaign after campaign where Mark Goodin had been chief spokesman in the Bush Presidential campaign. So instead of enabling Mr. Atwater to distance himself from it, they should have insisted like that the good Southern cavalier that he is, he stand up and take his medicine.

MR. GERGEN: In fairness, I don't think that there's any evidence that's come forward that Lee Atwater knew about this. He said he did not; he's denounced it. The President's denounced it.

MR. SHIELDS: He did not denounce it, David. He did not denounce it.

MR. GERGEN: Mark, I would agree with this point. He did not denounce it initially, but he did after he received a call from the White House and others saying get on the stick about this. I would agree in the initial --

MS. WOODRUFF: Do you really believe that Lee Atwater didn't know what was going on in Mark Goodin's shop, his own hand picked communications director?

MR. GERGEN: Listen. I think we all know that Lee Atwater is a master of attack. His people have assured me he did not know. He told the President, as the President said last night in a news conference, he did not know. Absent any evidence, I don't know why we should believe that he did. I think that clearly Lee Atwater has been hurt, and he's been weakened by this. They have not made the case I might add. Lee Atwater or the RNC is not the only group of people who have spread this rumor around. As you well know, the Democrats sometime ago started spreading these rumors around.

MS. WOODRUFF: Where does all this leave -- you all both have begun to talk about this -- but where does this leave the whole ethics morass that we've been sort of swimming in in Washington for the last few weeks? Mark, you said you thought the President had been able to use Tom Foley's statement, but are we going to hear more from Newt Gingrich and from the Democrats? What's your perspective?

MR. SHIELDS: Well, I haven't seen any conclusive evidence, Judy, so far that negative politics hasn't worked. I haven't seen anybody pay a price for it yet. I think David's right. We'll see a lot less of Lee Atwater in Esquire Magazine and perhaps on David Letterman and the idea that he did not know that this is going on is frankly inconceivable to me. An attack on the Speaker of the House by the Republican National Committee, by the President's former campaign manager that would not be cleared is absolutely unthinkable, but that aside, that aside, I think the negative politics, the climate of it, until it's proved that it's costing somebody for that kind of negative politics, Idon't think we'll see the end of it.

MR. GERGEN: I just have two points. One, I think it is possible that there was a foul up. I think we ought to give some people occasionally the benefit of the doubt in the sense of what they say, unless there's contributing evidence. Someone told me that he had told him specifically he did not want to attack Tom Foley, he understood how dumb that was. I think I would say this. The one silver lining here may be that both parties over the last few weeks have looked into the abyss. Both parties have seen what a price they are paying for this negative campaign they've conducted against each other, the gut fighting that's gone on and perhaps out of this will come a willingness now on the Republican side as well as the Democratic side to put this aside, to begin to form some substance of agenda for the future. I again think that this is a time when George Bush can step forward, seize the initiative and forge an agenda for the rest of the year.

MS. WOODRUFF: But, Mark, you're not that optimistic?

MR. SHIELDS: I'm not that optimistic, Judy. Last week on this broadcast, David said the President has to choose between his party and his Presidency. I think that choice lies starkly before him this evening. I think Tom Foley, by contrast, has a tremendous opportunity, because he comes to office with the best wishes of the President who's identified with him, who really sought almost a form of innocence by association by invoking Foley's high reputation last evening at his press conference, and I think no one is going to go after Foley at this point on the Republican side, so I think Tom Foley has a chance to lead almost something like an inaugural.

MS. WOODRUFF: Gentlemen, we'll have to leave it there. Once again, we thank you both for being with us. Mark Shields, David Gergen, thank you. RECAP

MR. LEHRER: Again, the major stories of this Friday, in China, Deng Xiaoping appeared in public after an absence of more than three weeks. He praised the army for crushing the pro democracy demonstrations, and Chinese police started arresting the protest leaders. In this country, the wholesale price index rose .9 percent in May. Good night, Judy.

MS. WOODRUFF: Good night, Jim. That's our Newshour for tonight. We'll be back Monday night. I'm Judy Woodruff. Thank you and have a good weekend.