The MacNeil/Lehrer NewsHour

MR. LEHRER: Good evening. I'm Jim Lehrer in Washington.

MR. MacNeil: And I'm Robert MacNeil in New York. After tonight's News Summary, four Middle East experts analyze the peace breakthrough between Israel and the PLO. Then a report from Geneva on the Bosnian peace talks and from Belgrade, a look at the bite of economic sanctions on Serbia. We close with a report by Jeffrey Kaye on farm workers after the death of their leader, Cesar Chavez. NEWS SUMMARY

MR. MacNeil: President Clinton warned today that the option of western air strikes in Bosnia remained very much alive. He said he was hopeful that yesterday's collapse of Bosnian peace talks in Geneva was only temporary. Sec. of State Christopher echoed that statement and called on the Serbs and Croats to give in to Muslim demands for more territory. The President made it clear that in the interim the western allies would be closely following the situation on the ground in Bosnia. He spoke during a photo opportunity in the White House Rose Garden.

PRESIDENT CLINTON: The United States will do everything we can in the next few days to get the parties to resume the talks in good faith. Secondly, if while the talks are in abeyance there is abuse by those who would seek to, to interfere with humanitarian aid, attack the protected areas, and resume the sustained shelling of Sarajevo, for example, then first I would remind you that the NATO military option is very much alive. And secondly, I would say, as you know, I have always favored lifting the arms embargo. I think the policy of the United Nations as it applies to that government is wrong, but I am in the minority.

MR. MacNeil: The peace conference ended when Serbs and Croats refused a Muslim demand for more territory than was allocated to them in the latest peace proposal. Today, all sides said they were willing to continue talking, but none discussed the possible date or venue. The Serbian leader said his forces would try to maintain a cease-fire, but U.N. officials said they were afraid fighting would flare again between Croats and Muslims. We'll have more on this story later in the program. Jim.

MR. LEHRER: Israeli and Syrian negotiators reported progress today in their bilateral talks at the State Department in Washington. Syria's chief negotiator said there could be an outline agreement by the end of next week. Meanwhile, Israeli and PLO officials said they could conclude their deal for mutual recognition and Palestinian self-rule in the occupied territories within the next few days. The World Bank has offered $4.3 billion in economic aid to residents of the West Bank and Gaza Strip. It would be distributed over the next eight to ten years to develop roads, electricity, housing, and water systems, among other things. We'll have more on the Middle East peace story right after this News Summary.

MR. MacNeil: Jon Demjanjuk's detention in Israel was today extended for a fifth time. His release was delayed to give an Israeli Supreme Court judge more time to consider requests for a new trial on Nazi war crime charges. Five weeks ago, the Supreme Court threw out a verdict that Demjanjuk was the Trablinka Death Camp guard Ivan the Terrible. But the justices said there was convincing evidence he worked at another death camp. The U.S. Justice Department yesterday said it would not block his return to this country if he's freed by Israel.

MR. LEHRER: President Clinton's health care plan would provide coverage for all Americans by 1998. That pledge was in a written statement issued at the White House today. It said the system would be phased in beginning in 1995, and the vast majority of Americans would have coverage by the following year. Mr. Clinton is expected to announce the full plan to a joint session of Congress in three weeks. The statement said he was likely to propose a cigarette tax to help pay for it. Reporters asked Mr. Clinton if the ideaof price controls on the health industry was now dead. He responded during that Rose Garden photo session.

PRESIDENT CLINTON: Well, they never were alive. I never embraced them. They had been discussed. What I think you have to acknowledge is that the pharmaceutical companies and the industry as a whole and other statements of the health care provider have voluntarily offered during the course of this debate to keep their prices within inflation for a year or two as we get up and get going with a health care reform package. And I think they should be given the opportunity to adhere to the commitments that they've made.

MR. LEHRER: In economic news, orders to U.S. factories fell 2.1 percent in July. A Commerce Department report today said drops in orders for aircraft and communications equipment were the main reasons.

MR. MacNeil: The United Nations reported today that the dam burst in China has claimed more than 1200 lives, triple the initial reports. The 200-foot dam in a remote region about nine hundred miles northwest of Beijing gave way last Friday. More than 30,000 people in downstream villages have been evacuated and some 3,000 homes were destroyed. That's it for the News Summary tonight. Now it's on to Middle East peace, sanctions in Belgrade, and farm workers after Chavez. FOCUS - BUILDING PEACE

MR. LEHRER: The dramatic new drive for peace in the Middle East is our lead story tonight. Our coverage begins with this report narrated by Vera Frankl of Worldwide Television News.

MS. FRANKL: As if the deal with the PLO was already sealed, Shimon Peres was chasing European cash in return for a stake in his vision of the new Middle East.

SHIMON PERES, Foreign Minister, Israel: I don't think it is a matter just of money. It's a matter of constructing a new economic region, a new economic system, where you're a paying community and play a major role.

MS. FRANKL: Support was forthcoming with EC Commission President Jacque DeLors pledging as yet unspecified financial and political aid. But stopping in Greece, en route to Brussels, Peres tempered his confidence that the deal would be signed quickly.

SHIMON PERES: It can happen overnight. It can take months. It depends entirely upon the PLO. If the PLO will decide to become a political organ instead of remaining an organization that has elements of terrorism in it, there is no reason why Israel should not sign it.

MS. FRANKL: Whether or not leaders sign the plan for interim Palestinian self-rule, its success depends on public goodwill. On the streets, skepticism and hostility are growing. In Damascus, leaders of 10 Palestinian factions wanted no part of the plan. They said PLO Chief Yasser Arafat had gone behind their backs,and they feared the only winner would be Israel. And in Jordan, King Hussein was also clearly miffed that Aman, partner to the Palestinians and the protracted Washington peace talks, had been left out of the secret Israeli-PLO negotiations. King Hussein called for an Arab summit to discuss the proposed peace pact, but any such meeting is likely to come too late to influence the outcome.

MR. LEHRER: Now, four views of the hows and whats that lie behind and ahead this sudden move toward peace. Hisham Sharabi is a professor of history at Georgetown University and editor of the Journal of Palestine Studies. Robert Satloff is executive director of the Washington Institute for Near East Policy, which monitors Israeli policy and opinion. Bill Quandt was a Middle East specialist on the National Security staffs of the Nixon and Carter administrations. He's now a senior fellow at the Brookings Institution. Rita Hauser is a New York City attorney active in the Americans for Peace Now Organization and other Middle East peace efforts. Ms. Hauser, what, in your opinion, were the circumstances that came together right now to cause this to happen?

MS. HAUSER: The single most important fact was that the last round of the peace talks in Washington, the 10th round, ended so badly. Many people thought that the talks were all but finished as a result. And I think all the parties, but particularly the Israelis and the Palestinians, came to appreciate that they had to do something dramatic for this to go forward. A great deal of the credit goes to Shimon Peres, the foreign minister of Israel, who pushed ahead with a vision that was not there necessarily with all of his colleagues in Israel, but he managed to get a dialogue going. It started at a lower level, and then escalated just a few weeks ago, and led to the breakthrough that we know today, which should lead in just within hours or days, I hope, to a, an agreed upon text for a mutual recognition of the PLO of Israel and Israel of the PLO.

MR. LEHRER: Mr. Satloff, do you agree with that, there was just a mutual realization that a dead end was there, and if something wasn't done quickly and dramatically, it was going to be all over?

MR. SATLOFF: I think in many ways that's true. The Israelis recognize that their notion of dealing only with Palestinians from inside of the territories -- after 22 months -- they recognized that that wasn't going to work. And given the options of dealing with the PLO on the one hand, while being faced only with Islamic extremists on the other, Yitzhak Rabin and Shimon Peres made a choice to deal with the PLO.

MR. LEHRER: Mr. Sharabi, what was the realization that came to the PLO and the Palestinians to cause it to happen from their point of view?

MR. SHARABI: It seems to me that two factors were crucial in this last push. The first is the realization that the Clinton administration was probably the most pro-Israeli administration to come to power and that no help will be coming from the United States in the negotiations. And two, the feeling that has been rising within the Palestinian constituency and the PLO that unless something dramatic takes place in the negotiations to bring about a turning point, the PLO was going under the opposition which has the fundamentalist and the rejections, opposition. And perhaps we can add to that the fact that coincidentally, there seems to have been a willingness, a change of heart, if you wish, in the Israeli camp, which I think may be phrased this way. I think this cabinet, this government, must have decided that in order to have security and a future for Israel, the Palestinians must be recognized in some way as an entity and given their minimum rights. I think this is what brought about the persistence in the secret negotiations.

MR. LEHRER: Bill Quant, what's your analysis of the magic moment?

MR. QUANDT: Well, I would agree with virtually everything that's been said, but maybe just underscore that this was a very painful stalemate, particularly for Israelis and Palestinians. They weren't happy. And in some sense, the Syrian front could go on the way it is for months and years, and nobody would feel the pain of that particularly, but Palestinians and Israelis were not happy with the existing situation. And I think their political leaders understood that if they couldn't find a solution through politics, through negotiations, that opposition movements were going to gain ground. That was true both in Israel and in the Palestinian constituency. And I think there we now know that this secret channel has been going really since the beginning of the year. Early on in this year, there must have been a determination made in both the Palestinian and Israeli camps to try to make 1993 the year of a breakthrough. And what comes through, in looking at the document, is this is a very seriously negotiated text. This wasn't just cobbled together in the last few weeks. It shows the signs of a lot of serious negotiating give and take and sensitivity to each other's positions. That's an interesting development, because Israelis and Palestinians have somehow learned to read each other's minimum political needs.

MR. LEHRER: And, Ms. Hauser, this happened without the grand gesture of before. I mean, there was no Sadat going to Israel, none of that, and it was worked out very slowly and deliberately, was it not?

MS. HAUSER: Yes. The discussions started in the early spring at a very low level, looking at maps and dealing with autonomy questions, and then it gradually escalated, as I said earlier. The entre into the discussions of Shimon Peres for Israel and Abu Masan for the PLO brought it to the highest level. They are struggling as we speak in language that has not been fully agreed upon and in declaration of mutual recognition. And they are hung up on some words with respect to the renunciation of the Palestinian covenant. I hope that they will resolve it over the course of the next day or two, but at the very moment, they have not reached an agreement on those particular words. The PLO is not able to renounce the covenant, the charter, without calling a meeting of the Palestine National Council, which would take weeks to do. So in lieu of that for the moment, they're looking for language that is strong enough to satisfy the Israelis but would not blow apart the Palestinian constituency that Arafat has to hold together.

MR. LEHRER: Mr. Sharabi, is that your understanding too of the problem?

MR. SHARABI: Right. And it is very difficult, very iffy that Mr. Arafat could at this stage call for a meeting of the National Council or the Central National Council, which is a smaller council. It is out of the larger parliament. I think this issue - - I hope this issue would be overcome by some modality whereby this technicality could be superseded so that a mutual recognition on the part of the Israeli government and the PLO could take this soon.

MR. LEHRER: Well, Mr. Satloff, this covenant is a very important issue to Israelis, is it not?

MR. SATLOFF: It is. And it really goes to the heart of, from Israel's perspective, what their major concession in this deal is. For Israel, the major concession is dealing with the PLO. That is what they gave. The Palestinians, in return, accepted the lion's share of Israel's notion of self-government or autonomy. For Israel to actually close the deal to the, to the lion's share of the Israeli public, the skeptical middle, that floating middle, they would need some sort of statement that in a public way formally ended the arms struggle.

MR. LEHRER: Okay. Look, there are still some, as has been widely reported, and we all understand, there are many people in both camps who seem negative about this deal. Ms. Hauser, from your perspective, what are the negatives for this deal as seen by the Israelis and the Palestinians that have to be overcome from a public relations standpoint by their leaders, if nobody else?

MS. HAUSER: Well, I think first and foremost is this breakthrough notion that the PLO and Israel will usually recognize one another so that, in fact, they are dealing in an entirely new ambiance, i.e., one where they are bona fiding, face to face, working out their problems. And they've shown that they're capable of doing that. That's a sea change, and in my view is the single most important element. I found it interesting that yesterday Prime Minister Rabin said to the schoolchildren he was addressing, we must deal with our enemies, because it is with our enemies that we make peace. This is something the peace camp has been urging for years and which Rabin and others rejected and have now come around to. Similarly, the Palestinians are going to have to accept the notion of autonomy that will then start in Gaza and Jericho and gradually lead to the rest of the territory. There are many, many details to be worked out, hundreds of them, and I think there are populations skeptical on both sides that the details will work. The most important fear that all have is that there will be a spate of terrible violence, attempted assassinations, perhaps on the Palestinian side, violent demonstrations by the settlers on the Israeli side. And that has to be overcome.

MR. LEHRER: So this could still be shut down one way or another, Mr. Sharabi, do you agree?

MR. SHARABI: There's a great deal of danger in that. Anyone reading this document would see that one side is the superior side, and the other side is the one who has been, who did not win. Israel has not in this document given up any concessions on any major policy that it has held over the years.

MR. LEHRER: What about their not recognizing the PLO?

MR. SHARABI: Except for, except for -- you're right -- deciding to enter into serious negotiations with the PLO and to recognize the PLO in doing so. This, this is the only radical change. For the Palestinians, you know, when you read this sophisticated document that really covers all the problems that separate the two, you see what is missing. When you are thinking in terms of Palestinian national rights, in terms of self- determination, in terms of a state, all the things that Israel has, but at the same time, there's a great, great deal of realism now in Palestinian thinking. This wide opposition in the mainstream, not in the core, fundamentalist ideological position, is the result of an ambivalence, a faithfulness, a caution as to where this will be, whether it will really stop here, stop at Gaza and Jericho, or would lead into what many people accept, a West Bank, a Gaza Strip under Palestinian hegemony one day confederated.

MR. LEHRER: Bill Quandt, what's your analysis of where this thing could still come apart, and where the work, the hard work is still to be done?

MR. QUANDT: Well, I think it is important to get this off to a good and quick start. There's nothing like building momentum to help get this going. There is a lot of skepticism, but I think a lot of that can be overcome when people see that this is for real. It's not just a piece of paper, that things begin to happen.

MR. LEHRER: Like what?

MR. QUANDT: Well, like the signing of the agreement, the mutual recognition, and then the schedule for initial withdrawal from Gaza and Jericho. That would be something tangible. People's lives would immediately be affected. And then the next challenge is to get the negotiations on the broader concept of self-government with the rest of the West Bank moving toward elections, which would be then five months further down the road. That's a time schedule that ought to be met. The other thing that I think is extremely important not to lose sight of is that there are other Arab parties, states, particularly Syria and Jordan, who are rather ticked off that this is happening.

MR. LEHRER: We reported it a moment ago.

MR. QUANDT: That they should not feel left out of the process that's underway. It's very important that they overcome their temporary irritation at not knowing what was going on. None of us knew what was going on. So what? It's happened. Now we have to help find a way to get them into the game, because it's very important to just not just stop at Gaza and Jericho.

MR. LEHRER: Is that going to be -- do you think that's going to be difficult as a practical matter, won't they come aboard?

MR. QUANDT: Well, I don't think it's difficult between Jordan and Israel, your basic outline of some kind of a declaration is even there, but the Syrian-Israeli front is still a complicated one. They've made enough progress so that we can see the general outline of what they might agree on, but my impression is the hard political decisions haven't been made, and there, the secret channel probably doesn't exist. And Mr. Christopher ought to think about getting on a plane pretty soon to go out and help and do the deal.

MR. LEHRER: Mr. Satloff, in Israel, of course, there is like amounts of deep skepticism and concern about this deal. Analyze that for us in some way as to how deep it is and how important it is and where it could -- does it have a possibility of derailing this?

MR. SATLOFF: There are three main things that the Israelis gave up in the deal. And that's why there is opposition in Israel. One is talking to the PLO. Two is a reference to Jerusalem. The Israelis for the first time promise that when final status talks begin in five years -- in three years rather -- Jerusalem will be on the table. That is a concession that's open-ended. Rabin has said that there won't be any compromise on Jerusalem, but to admit that it will be on the table has raised the ire of the Lekud opposition, as well as the settlers. The third notion that has gotten people up in arms is the term "withdrawal." For the first time, Israelis commit themselves not just to a redeployment of forces but to a withdrawal from territories, a withdrawal from Gaza and from Jericho. The settlers have already begun demonstrations. But next week, there will be a parliamentary vote. My sources tell me that Rabin is doing an excellent job of not only maintaining his own support but of reaching out to religious parties, perhaps even religious parties like the Aguda that aren't in the government. I expect him to be able to carry the Israelis, but there will still be a significant amount of people that over the next nine months will be opposed to seeing how this plays out.

MR. LEHRER: What is the basic message that Rabin and the others who are pushing this are carrying to the people of Israel?

MR. SATLOFF: 80 percent of the people of Israel are delighted with giving up Gaza. And they will say Rabin will argue talking with the PLO was worth giving up Gaza. That was the deal. That is what his argument will be. Jericho, in the final status, he'll have to finesse that, but the main deal will be over giving up Gaza and relieving the Israeli army and relieving the Israeli people of the burden of that.

MR. LEHRER: Ms. Hauser, is there a counterpart to Bill Quandt's thing, that something must be done quickly to establish confidence on behalf of the Palestinians in the world? Do you think there is something that should be done quickly to also allay some of the fears of the Israelis as well?

MS. HAUSER: Oh, yes, I think it's a mutual phenomenon, and the most important thing that's going to happen, assuming the mutual recognition and the agreement on a declaration, within two months they are supposed to come up with the modalities of the withdrawal from Gaza and Jericho and another three to four months to accomplish it. What happens after the Israeli army withdraws from Gaza? Will the PLO, in fact, be able to police it effectively? Will there be a spate of violence that they can't control? The great question mark is: What would happen then? Would the Israelis have to come back? If that were to occur, I think it would defeat anything that could occur beyond that. So a lot of things on the ground have to take place in addition to the agreement on the words and the terms.

MR. LEHRER: In other words, you think we may be talking about this again some time?

MS. HAUSER: Yes, indeed.

MR. LEHRER: All right. Ms. Hauser, gentlemen, thank you very much.

MR. MacNeil: Still ahead on the NewsHour, the Bosnian peace talks, the effect of sanctions in Belgrade, and farm workers after Chavez. FOCUS - BREAKDOWN

MR. MacNeil: Next tonight, two updates on the former Yugoslavia. Negotiations to end the Bosnian war and divide Bosnia into ethnic states for Serbs, Croats and Muslims, have ground to a halt. Bosnia's President Izetbegovic is traveling to Turkey and the United Nations to try to rally support for his claim for more territory for the Muslim state. That claim has been endorsed by the Clinton administration. Nik Gowing of Independent Television News reports on the diplomatic developments from Geneva.

NIK GOWING: For officials in the Bosnian delegation, somber faces and fatigue at their hotel before leaving for Turkey, the challenge yet again how to pick up the pieces of negotiating failure when expectations have been for success. The picture emerging today is of negotiations which expected too much, too soon, but are not as dead as it first seemed, confusion too as to whether the peace settlement tabled 13 days ago could, indeed, be modified as the Bosnians and the Americans claim, or had to stand virtually unaltered, as the Serbs and the Croats claim. Prof. Mohammed Filipovic, the Bosnians' map expert, wonders, like all his colleagues, how they could have been expected to accept the peace settlement which they see as ambiguous and open to abuse, especially on the issue of precise territorial details. These three maps are virtually all that the peace document, itself, contains.

MOHAMMED FILIPOVIC, Bosnian Delegation: When you read that document, you cannot see how it can be implemented, how it can work.

NIK GOWING: You mean there's not enough detail?

MOHAMMED FILIPOVIC: Not enough details, and also the document confuses everyone. No one knows how it could be put into life.

HARIS SILAJDZIC, Bosnian Foreign Minister: Those documents are vague. Those documents are only, you know, declarations. That's fine. We have the principle that you cannot take other people's property, that it's not allowed to kill people, keep them out of their homes, that's all.

MR. GOWING: President Izetbegovic, having rejected the peace document last night, left Geneva saying it was still on the table.

MR. GOWING: Can you bridge the differences?

ALIJA IZETBEGOVIC, Bosnian President: Just now I did not. We ask for a minimum for our people. They refused us. They have to ask for a support of all the world, from the East and from the West.

MR. GOWING: When the warring factions next return to the negotiating table here in the Salon Francais can only be a matter of speculation. Diplomats are tonight saying this is not a time for pessimism, more for reflection. Negotiations have stalled. They are not dead.

CHARLES REDMAN, US Ambassador to Negotiations: Actually I remain optimistic that the parties will reflect for a few days, perhaps a little longer, and that then they're going to all recognize that the only way out of this impasse in Bosnia is through a negotiated solution.

MR. GOWING: But as the Bosnian Serb Leader Karadzic made clear there remained bitter emotional conflicts over many pockets of land, especially in eastern Bosnian, which the Bosnians say must be theirs, because they are predominantly Muslim, but which the Serbs say are historically theirs.

RADOVAN KARADZIC, President, Bosnian Serbs: The fact is that we have new realities that came out of this war. Many, many thousands of Serbs from central Bosnia have moved out of their own areas and settled eastern Bosnia, many more than Muslims from eastern Bosnia that entered central Bosnia. This is new reality, and nobody can, can order those Serbs and the Muslim regime. We would have to force them again to go out of their own homes, and it isn't possible.

MR. GOWING: Yesterday, just along the corridor, that Bosnian-Serb position led to what diplomats today called a heated row between Dr. Karadzic and the Serb President Slobodan Milosevic, who before he left last night, had made clear he believes the differences on the territory issue were now holding up the chances of getting sanctions against Serbia lifted.

SLOBODAN MILOSEVIC, Serbian President: Is it moral prolongation of sanctions against Serbs on a basis of Muslims' leadership rejection of peace plans?

MR. GOWING: But sources say Belgrade is irritated with the increasingly independent line taken by Dr. Karadzic, who today proudly showed off the new emblem of the republic of Serbska, of which he is now to be called president. President Karadzic said Serbska would now only surrender land to Muslims on the basis of exchange outside the U.N. plan, as the vice president confirmed.

NIKOLA KOLJEVIC, Vice President, Bosnian Serbs: This concept of exchange wasn't undertaken. They asked in our offering then, okay, the changes we were giving gave new concessions without getting them.

MR. GOWING: The Bosnians, desperate for land, reject such exchanges. As President Karadzic left, he kept emphasizing a commitment to peace. But privately, diplomatic sources fear here that some military leaders and warlords will use the collapse in negotiations to fight on and thereby risk renewed threats of western air strikes. FOCUS - COSTLY WAR

MR. MacNeil: As Correspondent Gowing noted, the Serbs are pushing for a Bosnian settlement in hopes of ending the international economic boycott of Serbia. The embargo and the cost of the war in Bosnia have been taking a heavy toll, particularly on the nation's currency, which has been eroded by hyperinflation. David Sells, who has covered eastern Europe for many years for the BBC, filed this personal report from Belgrade.

MR. SELLS: Serbs smoke like chimneys. They need the weed. Tobacco eases the pain of daily survival in an economic madhouse. Serbia is gripped by a galloping inflation the like of which the world has rarely seen. Belgrade market prices change by the day, often during the day. A kilo of coffee costs 900 million dinars, which is half the average month's pay. Two hundred cigarettes, usually black market and smuggled, are 700 million. But tobacco, from friendly Montenegro, is 1500 million dinars per kilo. You roll your own. Smoking at this price is sweet sorrow, indeed. Petrol costs the earth, so market gardeners don't go home, overnighting in their vans until produce is sold. A farmer from Subotiso with a load of tomatoes bemoaned the destruction of Tito's Yugoslavia. So much for the joys of nationalism.

MISKO BILBLIJA: You can't do any work, whether you want to work. You cannot earn the money for your future. You cannot make family, because you cannot support your child. Those are the big things. You are watching your parents getting poorer every day. They cannot buy enough food for themselves. That's, that's horrible. That's really hell.

MR. SELLS: Last week, in Belgrade, I revisited a family, a mother and two daughters, that I first met a year ago. Dusanka Visnjic is an architect, divorced. Her daughters are students. Their plight is typical. They have by hook and by crook already collected wood for winter heating beginning back in May. Their total income is worth just over 20 Deutsche marks a month, two pounds a week. They're having to sell personal possessions, bags and shoes, to raise money. Every penny goes on basic foods. President Milosevic blames international sanctions for the mess. More and more Serbs blame President Milosevic.

NATASHA VISNJIC: Well, we don't talk any more about books. We don't talk about movies, you know, about when we go this summer, where should we go this summer on summer holidays? We talk only about Milosevic, opposition, what are we going to do now? Where are you going to take bread, to take a meal?

DUSANKA VISNJIC: [speaking through interpreter] Milosevic is dangerous. He's like a fox, a monster. He loves power so much that it is unbelievable. But he is making a mistake, and his mistake is that he's allowing industry to collapse faster and faster every day, and that is why he will fall.

MR. SELLS: In a joint press conference in Belgrade last week, the prime ministers of Serbia, Montenegro, and the Yugoslav Federation twittered complacently about cutting inflation even as a one billion dinar note was being heralded, and the mint was working night and day to churn out more of Serbia's worthless currency. And how did this trio plan to cope with the travails of winter?

NIKOLA SAJNOVIC, Prime Minister, Serbia: We are asking the world to be, to be more realistic, to look about next winter and next energy situation in this country. If they can understand, the situation will be better. If they not, it will be more difficult, but they will manage that.

MR. SELLS: Belgrade's inflation-crazed taxi drivers are barely in business. Already, they have six norts tacked on to their meters. Fuel is hugely expensive and difficult to find. A short journey cost me ten marks or four pounds, a fortune for most Serbs, so few can afford a taxi. I was being driven norts and all to Belgrade's money market, where computers record inter-bank dealings in dinars and foreign currency, recording inflation and interest rates. Daily inflation was almost 6 percent, monthly for August 414, the annualized projection was quite horrid, 44 billion percent. One of a new Thatcherite breed of Serbian economists says that only a root and branch reform will stem the wild inflation.

DR. BRANKO LJUTIC, Finance Professor, Belgrade University: There's such a high rate of inflation, of a hundred, hundred and fifty percent a week, it does not allow you to compare anything, so you do not know what are the real values, what are the real terms of trade, what are the relations between different goods and services, because you could not do any comparison.

MR. SELLS: Would you change the currency? Would you change the name of the currency do you think, start again?

DR. BRANKLO LJUTIC: I think -- that's very good suggestion, because I think very big monetary reform is necessary, and you can't introduce monetary reform in one country by changing the government during the night, introducing new people who are not familiar with general political opinion, changing the name of the currency, and changing all the, all the necessary set- ins that could give you the foundation to introduce a stable economy and stable monetary unit.

MR. SELLS: Petrol is now 10 pounds a gallon, and petrol stations are increasingly in criminal hands. Sanctions and inflation breed corruption. They're also de-humanizing. A polite, well spoken, middle aged customer was involved in a row while queueing for petrol in Belgrade a fortnight ago, so the pump attendant called in his minder. Minder says to polite, well-mannered customer, on your knees and kiss my feet. Customer says, excuse me, but I was talking to the attendant. The minder hits him in the face, and he falls to the ground. Polite, well-mannered, middle aged citizen then gets up, goes to his car, and comes back, pistol in hand, and shoots the minder dead, something absolutely unthinkable in Belgrade of two, three, four, five years ago. Serbia's first private detective looks back with pride to his 10 years with a force which he now sees as corrupted by events. When policemen's earnings are down to eight pounds a month, corruption, he says, follows as night follows day, crime going hand in hand with inflation and the collapsed economy.

MLADEN LOJOVIC, Private Investigator: [speaking through interpreter] The state has to be involved in crime in order to survive. It needs money. It must finance the war as well as keep its traditional services going. The state has to have hard cash, and there is less and less of that about, because there is no legal trade, only illegal trade through smuggling because of the U.N. sanctions, so the state can only become part of this corrupt game which it, itself, allowed to happen.

MR. SELLS: Money changers lurk everywhere. Black market and German marks seems hardly a crime given the murky waywardness of the Serbian regime, itself, when it comes to money. It is the flashier cars you see on the streets today, standing out because the humble of Belgrade cannot afford to buy Petrol. And there are expensive shops still with expensive customers. One notorious criminal, we were told, has them all in is grip. War in Bosnia, mass unemployment, raging inflation, and chronic shortages have crudely polarized Serbian society. A handful of criminals and profiteers are minting money.

DR. BRANKO LJUTIC: If I say 1 percent would be rich, 99 percent would be poor, that would not even closely resemble the real situation. I could say that let's say between 500 and a hundred and fifteen hundred very rich people who could buy at the end of this year Rolls Royces, so I think the Rolls Royce factory was open their outlets in Belgrade to sell like in Moscow, and most of the people would be poor.

[RADIO MUSIC]

MR. SELLS: B-92 is a local radio station, Belgrade-based and Belgrade-heard, iron barred for safety, for it is deeply critical of the Milosevic regime. It has been deprived of its license and nominally of its frequency, but soldiers aren't abashed in modest circumstances, proclaiming its independence and reflecting the deepening misery of the city's Serbs.

MISKO BILBLIJA: Is a big pressure and some people are cracking because of that pressure, so there is, because of that, a lot of criminal, criminals going around the town and a lot of, you know, killings are happening, a lot of -- it's not so safe to be like before to be in Belgrade.

MLADEN LOJOVIC: Nowhere in the world is there such an atmosphere so suited to a boom in organized crime. What with the inflation we have now, a large quantity of readily available arms, we're probably after Beirut the best armed people in the world. But the stress among the ordinary people and the massive frustration with the war, all this is coming to a head, and it must erupt.

MR. MacNeil: The prediction of Correspondent Sells that food rationing was imminent has been borne out. The Belgrade government today announced a food rationing program, the first since World War II. FOCUS - AFTER CHAVEZ

MR. LEHRER: Finally tonight, a documentary report on the United Farm Workers Union five months after the death of its co-founder and leader, Cesar Chavez. Jeffrey Kaye of public station KCET-Los Angeles is the correspondent.

MR. KAYE: Last April, 35,000 mourners came to central California to pay tribute to the leader of the United Farm Workers Union, Cesar Chavez. For workers and celebrities gathered at his funeral, Chavez's struggle for the rights of farm workers placed him on a pedestal next to Martin Luther King and Mahatma Gandhi.

REP. JOSEPH KENNEDY, [D] Massachusetts: When Cesar Chavez stood up for the rights of the poor, he did it in a way that demonstrated the essential honor and decency of the lowest income and voiceless of America.

MR. KAYE: The movement Chavez helped create won farm workers the right to organize. They are now eligible for Social Security and Workers Compensation. Drinking water and bathrooms are now requirements in the fields of California. At unionized farms like Monterey Mushrooms near San Jose, workers say they appreciate the benefits of a UFW labor contract.

FRANCISCA ESQUIVEL, UFW Member: [speaking through interpreter] What's the difference between people who don't have a union and we that have a union is that we do have insurance. We have better benefits. They can lay them out whenever they want. They can fire them whenever they want. And us, it's different.

MR. KAYE: Here, workers average $7.75 an hour, but Monterey Mushrooms is the exception. Most farm workers have no union representation, no contracts, and earn lower wages, with few benefits, if any. Despite the gains of the '70s and the achievements of Cesar Chavez, life for farm workers still often resembles the Grapes of Wrath. Many farm workers and their advocates say conditions today are as bad as they've ever been. In June, officials in northern California found 600 migrant farm workers and their children working and living in a rain-soaked cherry orchard. Many hadn't been paid in days. They were waiting for the farm labor contractor who hired them to bring their paychecks, their only sanitary facilities a filthy toilet and one hose to shower and drink with. "We barely make enough to live on," this worker said. "We sleep here in our camper with our two kids and our newborn baby." Some of the workers here earned as little as $2.50 an hour. State Labor Inspector Charlie Atilano said he was horrified by what he saw.

CHARLIE ATILANO, Deputy Labor Commissioner: Some of the kids were working out in the fields and helping their parents to pick. There were two-year-old children out there, kids that were just walking around in their bare feet. The conditions were deplorable at that, at that site.

MR. KAYE: State officials imposed fines for violations of housing, health, wage, and child labor laws. But investigators say conditions like these are all too common. They complain they lack the resources to adequately police the fields. At a farm labor camp in Madeira, California, workers are up before the sun. These men have no union representation and no benefits. They live six to a room.

SPOKESMAN: They are lucky. They have a mattress. But some places they don't have any, you know, mattress. They stay on the floor.

MR. KAYE: Farm labor advocate Luis Magana said the camp is owned by a labor contractor. Increasingly, farmers are using contractors to supply workers. The contractors often take the costs of housing, food, and transportation out of the employees' paychecks, incomes which frequently amount to less than the minimum wage. Nineteen- year-old Filadelfo Vasquez, a garlic picker, has worked in the fields since he was sixteen. "Right now, it's not very good," said Vasquez. He makes $2 for each basket he feels. On this day he expected to make just over $3 an hour. His story is a familiar one to Don Villarejo, a former UFW activist who now heads the California Institute for Rural Studies. Villarejo says the state's estimated 900,000 farm workers have less spending power today than they did 15 years ago.

DON VILLAREJO, California Institute for Rural Studies: There's no question in my mind that conditions have gotten worse. Real wages have declined over the past 15 years, significantly declined, perhaps 15 to 18 percent decline in that period.

MR. KAYE: Villarejo estimates that the average farm worker earns about $6500 a year. He says one reason conditions have worsened is there's been a growing influx of migrant laborers. Increasing numbers of them are Indians fleeing poverty in Mexico and Central America.

DON VILLAREJO: Today the sheer numbers of people are being used to advantage by employers. If there's a hundred people competing for every job, then clearly the employer can say, well, I'll pay less. And anybody who takes that will get the job. And somebody will be desperate enough to take it. So wages are being bid down. Working conditions are deteriorating as a result of this process.

MR. KAYE: But what about the UFW? By many accounts, the union is no longer the aggressive labor organizer it once was. Critics say, in general, it is less active in the fields, in particular, according to Luis Magana, it's failed to address the plight of the new migrants, the Indians from Latin America.

LUIS MAGANA, Organization of Agricultural Workers: They have to change. They have to prove that they are able to include these new groups. I don't know how they can do it, but they have to do it.

MR. KAYE: Are they doing it?

LUIS MAGANA: They are not doing it.

MR. KAYE: Labor Inspector Atilano, himself a former UFW organizer, agrees the union has greatly reduced its activism.

MR. ATILANO: There hasn't been anything going on in terms of organizing. When organizing was taking place, the minimum wage for farm workers was substantially higher.

SPOKESMAN: We haven't stopped organizing. We've never stopped organizing.

MR. KAYE: Arturo Rodriguez is the new president of the UFW. Rodriguez, who is Cesar Chavez' son-in-law, says the union continues to organize aggressively and has not ignored the new migrants. He operates from the UFW's longtime headquarters in California's Tahachabee Mountains. The complex, called La Paz, which means peace, was once the site of a tuberculosis sanitarium. This is where Chavez workedand lived and where he is now buried. Rodriguez says the UFW is carrying on in the tradition of Chavez, yet, he admits the union's strength has declined. He says the UFW has difficulty obtaining contracts.

ARTURO RODRIGUEZ, President, United Farm Workers: You see, the issue with farm workers is not organizing, not organizing for elections, but it's getting contracts. And if you can't get a contract, then there's no sense in organizing for an election, because all you've done to those workers, you've exposed them, you've identified for that grower who the leadership is at that particular ranch, and in most cases they're going to either be fired, and once they're fired, they're blacklisted from the industry.

MR. KAYE: Although UFW organizers are still active in the fields, they say they've been hampered by political changes. In the late '70s, during the UFW's heyday, its organizing was supported by helpful state regulators. But since 1980, a succession of Republican administrations cut back on labor law enforcement. At the same time, internal dissension weakened the union's leadership. A measure of the UFW's decline is the fact that many farmers no longer consider the union a potent adversary. The number of UFW contracts has dwindled dramatically. Today the union says it has 60 bargaining agreements. At its height in the late '70s, the UFW claimed hundreds of contracts.

DON VILLAREJO: They had about a hundred thousand workers under contract. Today, I think there are probably fewer than 10,000 workers under contract, maybe as few as 4,000.

MR. KAYE: Villarejo says union leadership is partly to blame for the decline.

DON VILLAREJO: I think they've basically retreated significantly from the fields in the face of the anti-labor sentiment predominant in Sacramento and in Washington for most of the '80s, in the face of the influx of new immigrant workers, and in the face of a decision that they made to go to the boycott as a response to that political development.

MR. KAYE: The UFW's renewed consumer boycott of grapes is a central thrust of an overall strategy, one that has de-emphasized bargaining agreements. A UFW-produced film warns of the dangers of pesticides for consumers as well as farm workers. But grape growers insist the union's boycott is having little impact on sales and is unnecessary. Most of these grape pickers are at Kovacevich and Sons near Bakersfield, California, make $5.40 an hour, plus 28 cents a box. They average 60 dollars a day. Co-owners Michael and John Kovacevich say they provide decent wages and health benefits, even though their employees are non-union.

MICHAEL KOVACEVICH, Grape Grower: Well, we're a family farm, and we take pride in the ongoing relationship with the workers.

JOHN KOVACEVICH, Grape Grower: They get paid every Friday. If there's a problem with their check, it's taken care of right away, and like I talked about earlier, we're paying a comparable wage to everyone else in the area.

MICHAEL KOVACEVICH: The chemicals, you asked what chemicals we used, there's a lot of them, but they're used to keep the fruit clean and the American public out there can rest assured that the only poison coming out of these vineyards is the rumor, not the poison, itself.

MR. KAYE: The growers are not the only critics of the boycott. Many farm labor advocates contend the UFW would be more effective if it focused less on the boycott and more on the fields.

LUIS MAGANA: The boycott, itself, is a large expenditure for the UFW, their nationwide boycott, spending a lot of money that could be spent I think in organizing.

MR. KAYE: Pete Materino is president of a rival union, the 1200 member Independent Union of Agricultural Workers. In July, members of Materino's union, mushroom pickers in Watsonville, California, met after their employer imposed a pay cut. They voted to strike. The ranks of small unions like these are growing. Increasingly, farm workers are signing up to be represented by unions other than the UFW. In response, the UFW is attempting to recoup its losses. In addition to the grape boycott, it has launched a membership drive, and it is pressuring farmers to improve wages and working conditions even without bargaining agreements.

ARTURO RODRIGUEZ: Workers are living under vines. They're living under trees, because there's not enough money to pay for rent, there's not enough housing available for them. That's why they're out here protesting today.

MR. KAYE: Last year, UFW leaders organized hundreds of southern California grape workers to walk off their jobs. These workers hadn't had raises in over seven years. Although the UFW didn't win any new contracts as a result of the walkouts, it was able to pressure growers into providing workers a wage increase from $5.25 to $5.40 an hour. The impact of the protest was felt in vineyards throughout the state. Non-union grape workers at Kovacevich & Sons also got a raise.

MIKE KOVACEVICH: It wasn't so much that we were running scared. It's just that we followed the industry. Now, the UFW might say we forced wages up, and they might be correct. But I don't really feel as though that they might not have gone up anyway, because we were due for an increase.

MR. KAYE: The UFW is also trying to build strength by recruiting farm workers without contracts. At offices like this one in Salinas, new members can obtain health insurance, legal advice, and financial service. By signing up new members, UFW President Rodriguez hopes to expand the union's power base.

MR. RODRIGUEZ: At that point when you have a certain percentage, for example, organized at a certain ranch that are now numbers, and they want to take that risk. They want to go after and challenge their employer and so forth. And they feel that they're strong enough to do it. They have a base to do it.

MR. KAYE: Rodriguez admits the UF is facing an uphill. While he holds out the promise of improved conditions, many farm workers are hoping things don't continue to deteriorate. RECAP

MR. MacNeil: Again the major stories of this Thursday, President Clinton said the threat of air strikes in Bosnia were still very much alive. He also denied he was considering price controls on health care. The White House issued a statement saying it was likely to propose a new tax on cigarettes to help pay for health reform, which it claims would cover all Americans by 1998. Good night, Jim.

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