The MacNeil/Lehrer NewsHour

MR. MacNeil: Good evening. Leading the news this Thursday, Iraq accused the U.S. of fabricating an excuse for new military action. The Pentagon said contingency plans were appropriate but no troops have been deployed, and the United Nations voted to allow Iraq to sell oil but put restrictions on the use of profits. We'll have the details in our News Summary in a moment. Jim.

MR. LEHRER: After the News Summary, we have the hearing testimony of two men who work with Robert Gates at the CIA and writer Midge Decter's views on why Communism didn't make it. NEWS SUMMARY

MR. MacNeil: Iraq today accused the United States of inventing a pretext for a new Gulf war. President Bush acknowledged yesterday that the Pentagon has developed contingency plans to force Iraqi compliance with the United Nations cease-fire terms. The plans involve sending an air force fighter wing to Saudi Arabia to escort U.N. helicopters on inspections of Iraqi weapons facilities. Iraq has tried to impose conditions on the helicopter flights. But today its government run newspaper called the complaints a fabrication and accused the Bush administration of banging the drums of aggression. At the Pentagon, Spokesman Pete Williams had this comment.

PETE WILLIAMS, Pentagon Spokesman: The U.S. armed forces are continually developing plans to deal with potential contingencies. Iraq's efforts to ignore the U.N. Security Council resolutions have created a situation where it was appropriate for the Department of Defense to develop relevant contingency plans. It is our longstanding Department of Defense policy that we do not discuss our contingency plans for obvious reasons. However, no orders have been issued to carry out any plan with respect to an Iraqi contingency. No troops are moving.

MR. MacNeil: The U.N. Security Council has demanded that its inspection teams be allowed to operate in the helicopters with complete freedom inside Iraq. Iraq has not yet responded. On another matter, the U.N. Security Council voted today to allow Iraq to begin selling oil again. Under the terms of the resolution, Iraq will be able to sell $1.6 billion worth over a six-month period. The income must be used for humanitarian supplies and contributions to the U.N. compensation fund for war victims. Jim.

MR. LEHRER: Sec. of State Baker and King Hussein of Jordan today urged the Palestinians to join Mideast peace talks. They spoke at a joint news conference in Amman, Jordan, after Palestinians reportedly refused to meet with Baker under pressure from the Palestine Liberation Organization. Baker and the King said the Palestinians would be making a mistake if they boycotted the proposed October peace conference.

KING HUSSEIN, Jordan: The alternative to progress, real serious progress brought about by a real genuine recognition of the fact that this opportunity may not come again ever, and that the only alternative is disaster, disaster in terms of people, disaster in terms of the region -- what other options are there?

JAMES BAKER, Secretary of State: I believe this is the best opportunity that has presented itself in a long, long time. And I also think that it's going to be a long, long time before the bus ever comes by again. And if this opportunity is missed, in my opinion, Palestinians have perhaps the most to lose, because Palestinians have perhaps the most to gain.

MR. LEHRER: Later in the day, Israeli Prime Minister Shamir accused the United States of pandering to the Arabs. He said it had triggered euphoria in the Arab world by delaying Israel's request for housing loan guarantees. President Bush wants those loan guarantees delayed until after the peace conference. A group claiming to hold Western hostages in Lebanon said today they were freezing further hostage releases. The Revolutionary Justice Organization said it wanted Israel to free another 20 Arab prisoners. Israel released 51 last week. The message -- today's message -- was accompanied by a photograph of American Joseph Cicippio, who was kidnapped in Beirut five years ago. The group also holds British hostage Jack Mann whose picture was released earlier this week. That led to speculation he was about to be freed.

MR. MacNeil: Past officials of the Central Intelligence Agency testified today on the third day of confirmation hearings for Robert Gates to be CIA Director. The focus again was what did Gates know about the Iran-Contra affair. One of the witnesses was Alan Fiers, the former chief of the CIA's Central American Task Force. He has pleaded guilty in federal court to withholding Iran-Contra information from Congress. He said he learned about the operation from Oliver North in the spring of 1986, but never told Gates about it. Fiers was asked if he thought anyone else had informed Gates, who was then the Deputy Director of Intelligence or DDI.

ALAN FIERS, Former CIA Official: No, I think that's highly unlikely at the time that I placed that event Bob Gates was still the DDI and I have no reason to suspect or believe anyone would have shared that information with him; indeed, not many knew it.

MR. MacNeil: We'll have extended excerpts from today's hearing after the News Summary.

MR. LEHRER: European foreign ministers decided today not to send peacekeeping troops to Yugoslavia. They met in emergency session in the Netherlands. In Yugoslavia, a six mile column of federal tanks and heavy artillery left the capital of Belgrade today. Crowds cheered as it passed. The convoy is headed for the rebel republic of Croatia. In an apparent show of force, Serbs and Croats continued their clashes across that republic. More than 450 people have been killed since June.

MR. MacNeil: Civil war is emerging as a possibility in the Soviet republic of Georgia. Opposition leaders there are pressing for the resignation of President Zviad Gamsakhurdia, who was elected by a landslide popular vote in May. They accuse him of trying to impose a dictatorship in the republic and have mounted daily protests against him. Today Gamsakhurdia offered new concessions to his opponents, but they were quickly rejected. Penny Marshall of Independent Television News is in Georgia and filed this report.

MS. MARSHALL: In the hills of Georgia today, rebel soldiers prepare for civil war. These men,believed to number several thousand, were until a month ago members of Gamsakhurdia's national guard. Now, angered by what they call the president's increasingly dictatorial style, they've turned against him. They're led by Gen. Tengas Gitovani, who says they won't shoot first, but his heavily armed men are growing increasingly impatient. They could enter a political confrontation that many fear will now turn violent. Outside the Georgian parliament this afternoon, other members of the national guard, also armed, also impatient, but this group loyal to the president; their role is to guard him from the increasing numbers of opposition demonstrators who daily gather to demand his resignation. He's now a virtual prisoner inside the parliament building, his latest acts to take state television and radio off the air and arrest the opposition leader.

ZVIAD GAMSAKHURDIA, President, Republic of Georgia: This is no democracy; it is not democracy. It's hooligans; it's crime, criminal.

MS. MARSHALL: Some of Gunsahoda's opponents like the former prime minister, Tenga Sigua have joined the soldiers in the hills, evidence that the lines are being drawn for conflict, conflict that may become dangerous because of the combination here of fervent nationalism and the belief that political arguments can be settled with a gun.

MR. MacNeil: Russian President Boris Yeltsin cancelled public appearances for a second day. He left work yesterday after what his spokesman described as a minor heart attack. The spokesman said today that Yeltsin was only slightly ill and would be able to make a planned visit to the republic of Azerbaijan this weekend.

MR. LEHRER: The U.S. trade deficit grew sharply in July. The Commerce Department said today the July difference between U.S. imports and exports was $5.9 billion. It was the largest deficit since January and was mainly due to a surge in imports of cars, clothing, and other consumer goods.

MR. MacNeil: Federal health officials have proposed that all hospital patients be tested for AIDS. The Centers For Disease Control in Atlanta has sent a draft report of the proposal to health experts for comment. If adopted, it would serve as a voluntary guidelines for hospitals. CDC officials said the plan would affect all hospital patients but the tests would only be conducted with the consent of the patients. That's it for the News Summary. Now we move on to the Robert Gates hearings, Japanese business practices, and writer Midge Decter on the failure of Communism. FOCUS - INSIDE STORIES

MR. LEHRER: The Robert Gates hearings went on today without Robert Gates, the witnesses, instead, being former associates at the Central Intelligence Agency. Much was said about the CIA Director Nominee's past actions and attitudes. Roger Mudd again has our extended report.

MR. MUDD: It was today's witness, Alan Fiers, who first put the Gates nomination in apparent jeopardy. Last summer, Fiers, the former chief of the CIA's Central American task force acknowledged in federal court that he and other CIA officials knew about the secret diversion of funds to the Nicaraguan contras before the White House admitted it. So Fiers' testimony today was thought to be critical in determining whether Robert Gates was one of those who knew. Fiers had been granted immunity for today's appearance.

ALAN FIERS, Former CIA Official: For five years I've waited for this opportunity to speak publicly and unencumbered about Iran- Contra, and I've rehearsed this statement a thousand times in my mind in a thousand different places. Each time, it has a different tone, sometimes accusative, apologetic, aggressive, and dispassionate. I do not seek today or at any time to avoid responsibilities for action I took or didn't take. Nor do I seek to shift the blame. I accept fully responsibility for what I did and did not do. All I ask is that both sides of the story be treated equally and fairly.

MR. MUDD: Then Chairman Boren, reminding everyone that the hearing was about Robert Gates and not about Alan Fiers, began the questioning.

SEN. DAVID BOREN, Chairman, Intelligence Committee: The government's statement of facts, in your plea agreement which you consented to, states that during the early spring of 1986, Lt. Col. North told you that Israel was selling weapons to Iran and "kicking dollars into the contras' pot." Did you ever tell Robert Gates of North's revelation to you about the diversion?

MR. FIERS: I did not.

SEN. BOREN: Do you have any reason to believe that anyone else told Robert Gates of North's revelation to you?

MR. FIERS: No. I think that's highly unlikely. At the time that I place that event, Bob Gates was still the DDI and I have no reason to suspect or believe that anyone would have shared that information with him; indeed, not many knew it.

SEN. BOREN: Would you characterize for us again exactly what you hypothesize or, first, what you know Mr. Gates' knowledge was, either from your -- any conversations you had with him about Col. North's operational role -- what you know -- what you know about any of the conversations he could have had with anyone else, and then your own conclusion based upon just general knowledge of the agency, how it worked, and knowledge of Mr. Gates as to what you think it would have been -- would you walk us through each one of those so that we know exactly what you're saying to us here.

MR. FIERS: I think it's important to -- as I answer this question -- for the committee to understand that I now have the benefit of 20/20 hindsight. So there's a lot in my head that I see, and I've got to try to filter that out and place myself back in time in the context of 1986. By that point in time, it is quite clear that the -- that the legal hundred million dollar program for the Nicaraguan operation was going to be voted up. We were in serious planning for how to execute that operation and I was looking at assets that I was going to use for aerial resupply. Oliver North wanted me to buy the assets of the private benefactors. He talked with me about it. He had others talk with me about it.

SEN. BOREN: Yes.

MR. FIERS: One of those people who --

SEN. BOREN: -- Mr. Gates.

MR. FIERS: -- was Mr. Gates. And he asked me, Alan, why aren't you buying these assets, what's wrong with them; he didn't force me, he didn't say, I want you to buy them, he just asked the question. I gave him the logic, the reason. They're old; they're not the right type; they're heavy on maintenance or heavy on fuel; they don't carry the load; they don't have the range; and besides, they're of a -- I don't know their background and I don't want to taint this upcoming program with anything that's questionable. I had that conversation. The details, the specificity of it, I can't be certain of, but I'm certain that we had that exchange in, more or less, that form. Secondly, there was a conversation, one of several I had, concerning the question of whether or not Vince Canastrero, who was an agency officer on detail at the NSC, should be extended at the NSC.

SEN. BOREN: Yes.

MR. FIERS: And I was asked my views on that. And I said several times that if Vince is extended and if he takes over the Central American account, he can't have the same relationships with the private benefactors that, that Oliver North has. That would get us in a place where we don't want to be. From those two conversations, from the general ambiance that we lived in, from the -- living in the environment, at the time I concluded that along with many other people in the administration, Bob Gates understood the framework that was taking place. I have reason to believe -- in fact, I'm sure he didn't know details. I think there were few who knew the details. Indeed, I didn't know all the details that were going on.

SEN. BOREN: Let me ask you specifically, because it's important we understand what you mean by framework.

MR. FIERS: I took cautions to keep CIA, all the people that worked for me, on the right side of the line, not to cross over the Boland Amendment, not to get involved in the private operations. I took it on myself to be the buffer between my people and to the degree the agency leadership, and I decided at that point in time that if there were responsibilities that accrued to me as a result of those actions, I would accept them. I started that process in 1987. My testimony was incomplete in that I still protected people. I did that because, one, of my friendship with them; two, because I wanted to continue in the job to see it to completion because I believed in what we were doing, but I was ready then to accept responsibility for my actions. I hoped it would have never come to what it did, but I accept that responsibility now. And in the context of that, there were times -- in fact, there were most of the times I did not take things of the nature you're talking about to Bob Gates. I didn't take them to Director Casey. They stopped with Clair George and even then, not in the detail that I knew them.

SEN. BOREN: So you regarded yourself when you talked about being a buffer to some others higher in the agency, your decision not to discuss this matter in detail with Mr. Gates was partly an intentional decision as you viewed your buffer role.

MR. FIERS: There was a conversation that took place the committee needs to understand. It's been referred to, I think, obliquely in several different forum, but let me put it in its completion, in its fullness on the record here. At some point in October of 1984, I was asked to do something, and I can't remember what the something was, by Oliver North. And a dispute arose. I was brand new on the job. I was called to a meeting, called up, actually, by Dewey Claridge, to talk to him one floor above me.

SEN. BOREN: And he was what?

MR. FIERS: He was then chief of the European division. Before that, he had been chief of the Latin American division and really had been the "hands on" manager of the Central American program. Dewey essentially said to me, Alan, there are things going on that you don't know about cooperate with Ollie, the thrust of his comments. I understood what it meant, I went back down, and I told the chief of Latin American Division One, I said, this is what's happened. He said, let's go talk to Clair. We went, we talked to Clair about, I think it was the same day, it certainly was within two days, we were called to a meeting in Director Casey's office, Clair George, me, Chief Latin America One, Oliver North, the director.

SEN. BOREN: Was Mr. Gates present at that meeting?

MR. FIERS: No, Mr. Gates was in DDI. He was nowhere around this equation. And the director looked at Ollie and said, Ollie, Alan tells me you're operating in Central America, is that true? Then the director looked at me and said, Alan, tell Ollie what you told Clair and the chief of the Latin American Division One, so I, in somewhat of an awkward situation, I rounded the edges a bit, repeated the same story, feeling slightly uncomfortable with sort of that confrontation. Then the director looked and said, Ollie, are you operating, and Ollie looked at the director and said, no, sir, I'm not operating.

SEN. BOREN: You're talking about a contra.

MR. FIERS: Contra, operating in Central America. Ollie looked at the director and said, no. The director said, good, I want you to understand you're not to operate in Central America. We walked out and Clair and I went back to his office and we -- I was somewhat left incredulous. And he said, Alan, you've got to understand what happened in that meeting just there, sometime in -- and I'm quoting now -- this is -- I remember this like it was yesterday -- sometime in the dark of the night, Bill Casey said, I'll take care of Central America, just leave it to me, and what you saw go in there was a charade, and I looked at Clair, and these were my words, and, please excuse me for profanity, I said, Jesus Christ, Clair, if that's true, this will be worse than Watergate if it ever comes out in the open. And Clair just said -- shook his head and he said, essentially, that's not a problem. From that point forward, I knew my universe.

MR. MUDD: Fiers fascinated the committee with his quick glimpses of the William Casey style.

MR. FIERS: He called me on the secure line and he said, Alan, and I said, yeah. He said, don't worry, everything's going to be okay, we haven't done anything illegal, you understand that? And I said, I never called him Bill and I never called him Director, I called him Boss. I said, yeah, Boss, I understand that. And he said, good, now remember that we haven't done anything illegal. And he hung up and I hung up the telephone, and I -- my wife asked me as we drove back through my native Ohio and my wife's home in Indiana, and she said, Alan, why are you so quiet? And I said, you just don't understand what the next six years are going to be like.

MR. MUDD: So spellbinding, so effective was Alan Fiers' testimony about Iran-contra and about William Casey that at times the committee seemed to forget all about the nominee, Robert Gates. In addition, Fiers was so forthcoming that the committee also tended to forget that he's pleaded guilty to two misdemeanor charges of withholding information from the Congress.

SEN. JOHN WARNER, [R] Virginia: I hope this hearing has provided you with a measure of satisfaction for yourself and, equally important, for your wife, your parents, and your family, because those of us who've had the privilege of being in government service recognize that they bear the full brunt of all consequences, be it favorable or unfavorable. And I hope that they view this proceeding as being somewhat helpful to the burden they've carried these many years.

MR. FIERS: Thank you very much.

SEN. ERNEST HOLLINGS, [D] South Carolina: People down in the vineyards like yourself shouldn't be taking these raps. Anybody with any sense knew that this magnificent lieutenant colonel did not operate on his own. He could not have operated through all of those departments on his own, but we've done our darndest to withhold the fact that the President of the United States knew about this operation.

MR. MUDD: From time to time, the committee would remember that the hearing was on confirming Robert Gates, and some of the members would ask about his qualifications.

SEN. WARREN RUDMAN, [R] New Hampshire: Describe for the committee his competence, his method of operation, his very being.

MR. FIERS: I would say that he has a keen intellect to understand and analyze problems. He is a dispassionate manager who understands the rhythm and flows of what has to happen and within those rhythm and the flows of situations with which he's dealing and within those situations makes, makes responsible decisions and implements them effectively.

SEN. WARREN RUDMAN: We all know he's bright. We all know he's very analytical and thorough. Is he intellectually tough?

MR. FIERS: That's a -- that's --

SEN. RUDMAN: If you know.

MR. FIERS: I don't know the answer. I don't honestly know the answer to that question and I must be in continuation of being absolutely honest and frank to the committee, that's a question in my mind.

SEN. DENNIS DeCONCINI, [D] Arizona: You've provided the committee with some great insight on Bob Gates, his role and his knowledge in the Iran-contra scandal, at least from what you've told the committee, I believe Mr. Gates new very little about what was going on, is that a fair summary?

MR. FIERS: Once again, I really can't make conclusions. I've stated the facts and understanding, my impressions. I've even speculated about it to the best of my ability and I would think you'll have to make the conclusion.

SEN. DeCONCINI: Well, no, I'd like to get -- I'd like to get -- I'd like to have you refine, if you can, what is a little from, you know, one to ten -- did he know one? Did he know anything?

MR. FIERS: Well, he clearly --

SEN. DeCONCINI: I gather, I gather he knew something, in your judgment.

MR. FIERS: In my judgment, and to the best of my recollection, he knew something, he had a base line of knowledge.

SEN. DeCONCINI: Okay.

MR. FIERS: If you could define some points along one to ten, I might hazard a guess. If you could define what three means and five, seven and nine --

SEN. DeCONCINI: Okay.

MR. FIERS: I put my -- for example, let me help you with that a little bit. I put myself at in October of 1986, at, uh, maybe 6.5 or 7.

SEN. DeCONCINI: Okay. Okay. And you knew quite a bit, in my judgment, about it. And my only point is, is to try to establish did Mr. Gates know anything about it, and you --

MR. FIERS: The answer is he knew something about it.

SEN. DeCONCINI: I think that's clear, that he knew something about it, in your judgment.

MR. FIERS: Yes, in my judgment.

SEN. DeCONCINI: The quantity and how much, you don't know.

MR. FIERS: I couldn't quantify it.

SEN. DeCONCINI: As of October 1986.

MR. FIERS: That's right.

SEN. DeCONCINI: Because you don't what was in his mind and you don't know what other people told him.

MR. FIERS: That's right. I can't quantify that.

SEN. DeCONCINI: All right.

MR. MUDD: But the hearings never stayed on Gates very long. Gathering tidbits about the inner workings of the CIA proved more appetizing.

SEN. DeCONCINI: The New York Times reported that there were intelligence reports on members of Congress and their aides, for that matter, who opposed aid to contras. Former Congressman Mike Barnes of Maryland says that Bill Casey used the reports to try to force Barnes to back down on his opposition to such aid. Now based on what you told us here, as to Mr. Case and as to Mr. Gates, did you know anything about these reports, or ever hear anything about these reports?

MR. FIERS: Yes, sir, I knew a lot about those reports.

SEN. DeCONCINI: You knew about them. And is that a fair characterizationthat the New York Times said?

MR. FIERS: Their characterization of --

SEN. DeCONCINI: That there were reports that Mr. Casey did have them and that he did perhaps use them on Mr. Barnes or with Mr. Barnes, or other members, or with staff?

MR. FIERS: I discussed and was directly involved in the meeting with Mr. Barnes.

SEN. BOREN: Could you say that a little more loudly.

MR. FIERS: I was a party to the discussions leading up to and may have been the causative factor in the meetings with Mr. Barnes. I read the report. I said they were outrageous. I --

SEN. DeCONCINI: You said the report about Mr. Barnes --

MR. FIERS: No, about the staff director of the committee to which Mr. Barnes -- the subcommittee to which Mr. Barnes was chairman - - I read that report.

SEN. DeCONCINI: And what was outrageous?

MR. FIERS: We felt that there was a contact between a member of congressional staff and the Sandinistas that was inappropriate information that was inappropriate to be transmitted to Sandinistas, this may, in fact, be transmitted and it was an attempt to stop that. And I think I probably caused that meeting to take place because I, I drew that report to the attention of folks and urged that within the context of reconciliation we try to stop this. That was when I was sort of a little bit naive.

SEN. DeCONCINI: Did Bob Gates know of these reports?

MR. FIERS: Probably.

SEN. DeCONCINI: Were there reports on other members of Congress that you're aware of?

MR. FIERS: Yes.

SEN. DeCONCINI: And are you aware that Mr. Casey or Mr. Gates - - well let's say Mr. Casey first -- approached members of Congress regarding these reports?

MR. FIERS: I do not think he did. Let me add a very important point here, because we're into a very, very sensitive topic, these reports that we're talking about were the product of intelligence operations focused on the Sandinista government and their deliberations. In the course of those events from time to time we collected information which gave us glimpses into the insight, into ongoing relationships that, in my view, were questionable, and I must say had an impact on me.

MR. MacNeil: Tomorrow the Gates hearings go into executive session. Still ahead on the NewsHour, the Japanese way of doing business, and Midge Decter on why Communism failed. FOCUS - KEIRETSU

MR. LEHRER: Next, a Japanese way of doing business, a way that causes some U.S. businessmen and government officials to complain about the very structure of corporate life in Japan. Our business correspondent, Paul Solman, of public station WGBH-Boston, has our report.

MR. SOLMAN: In his own PR film, takeover pioneer, Boone Pickens, is America's rugged individualist, champion of the shareholder and the American free market system.

ANNOUNCER: [Promotional Video] Most recently, the Japanese learned how tough Boone Pickens can be. He became the largest shareholder of a Tokyo-based manufacturing company and sought representation on the board. When the Koito management fought to exclude him, Boone pressed his case at the annual stockholders meeting.

T. BOONE PICKENS, Financier: In this case, it was so blatantly unfair in Japan -- the way you're treated -- they call you all kinds of names -- and I finally concluded the last time I went last year was they yelled at me and said, remember Pearl Harbor.

MR. SOLMAN: Boone and Wife Bea have given up the fight at Koito, a major auto parts manufacturer, claiming they've been unfairly excluded by something called a "Keiretsu." And the charge has struck a nerve in both Japan and theU.S. The current trade talk between the two countries is focused, as usual, on opening Japan's markets. But Keiretsu has become a new bone of contention. "Keiretsu" -- in Japan, the term suggests a system of alliances -- in our context an alliance of companies. We can give you an example that's pretty close to home. And this is, in fact, my home and these are the family cars. The Plymouth Voyager made by America's Chrysler, and a Japanese Toyota Wagon, older with more mileage; now, the Chrysler's pretty reliable, but the Toyota, unbelievable, never breaks down, every part seems to mesh perfectly with every other part. That may be a result of the Keiretsu. You see, Chrysler's parts are made largely by Chrysler, itself, or independent suppliers. Toyota's parts are made by members of the Toyota Keiretsu. Take the lighting, for example. If you look very closely, you can see it's made by Koito Manufacturing, Boone Pickens' old company. Koito owns shares in Toyota, which in turn owns 19 percent of Koito. Rubber from Toyoda Gosay, Toyota owns 41.4 percent, muffler down there from Fubata International, Toyota owns 14 percent, and so it goes throughout the entire car. In other words, suppliers and the main manufacturer have a locked in, long- term commitment to each other and the success of the product. It certainly seems to pay off for me, the American consumer. But if I were an American auto parts manufacturer, I might feel differently -- as does Lynn Williams, who says America's manufacturers are excluded by Keiretsu.

LYNN WILLIAMS, Former U.S. Trade Negotiator: It hurts us because it keeps our businesses out. For example, if you have Keiretsu, you have an exclusionary buying practice, which means that somebody who makes a good product can't get in. That means my companies can't get in.

MR. PICKENS: Keiretsu is nothing more than a cartel. It's not the free enterprise system. It's not a free market system.

MR. SOLMAN: MIT Professor Charles Ferguson has written extensively about Keiretsu.

CHARLES FERGUSON, MIT: What we see is that a very small set of extremely large, powerful companies with strong linkages to each other in Japan are coming to control certain critical components of the world electronics industry. And if that process continues, there will be a concentration of economic, political, and perhaps even military power in Japan ten to twenty years from now that I think many of us would find very distressing.

MR. SOLMAN: Powerful computers run on semiconductors or chips. According to Ferguson, the Japanese chip makers that dominate the market cut down on supply, drove up the price, and left U.S. companies at their mercy.

MR. SOLMAN: And how important is that?

CHARLES FERGUSON: Well, it depends on how important you think it is, for example, if the United States continue to have access to extremely good computers, better than those used, for example, by Iraq or a variety of other nations. If you think it's important for the United States to continue to have access to leading edge technology for its economy and for its military security, then you have to get concerned.

MR. SOLMAN: In every walk of life in Japan, from high-tech to low, there are Keiretsu. Makers of everything from detergents and dishwashers to oil drills and derricks belong to interlocking webs of companies that look out for and do business mainly with each other. The darker side of such buddy buddy relationships is at the heart of the current stock market scandal. Japanese brokerage firms covered the losses of their largest long-term customers. Now there is another side to this story. To begin with, until 1945, the power of big Japanese business was even more concentrated than it is now. That was before Gen. Douglas McArthur took over.

GEN. McARTHUR: Sign the instrument of surrender at the places indicated.

MR. SOLMAN: Early on, McArthur forced Japan to break up the giant combines of that era, the Zaibatsu.

ANNOUNCER: [PROMOTIONAL FILM] From the time of Japan's entry into the Pacific War, these groups monopolized heavy industries such as aircraft, ship building, and mining under their corporate umbrellas.

MR. SOLMAN: Mitsubishi, Sumitomo, Mitsui; under the U.S. occupation, their leaders were ousted and they were split into smaller firms. Their enormous power was considered a hindrance to democracy. But says Business Professor Yoshi Tsurumi, the old allegiances survived, helping build the current Keiretsu system.

PROFESSOR YOSHI TSURUMI, Baruch College: After 1950s, and so forth, they started regrouping into much loosely, far more loosely bound, inter-dependent what I call strategical alliance form, that's Keiretsu.

MR. SOLMAN: The point Tsurumi thinks is that in post war Japan, these strategic alliance forms have been key to Japan's economic growth. Young men on the go brought new energy to the economy, whose major firms were now run by young men with new ideas, who could still trade on old corporate ties. Forty years later, the success is striking. Those Keiretsu firms that made the auto parts for my trusty Toyota also collaborate on new car models, sharing what American firms would consider design secrets. The fact of Japanese cross-ownership seems to strengthen commitment to an effort. Japanese firms take considerably less time than U.S. firms to develop a new model. Given the increasing complexity of modern business, Keiretsu-like linkages could be the wave of the future.

PROFESSOR TSURUMI: No company self-sufficient has to be dependent on many things supply as customer services. Now if your survival depends on those other people, including stockholders, then you would like to develop lasting, mutually supporting relationships, sharing, sharing risk, as well as benefit.

MR. SOLMAN: A recent series of Chrysler commercials suggest that some Americans have a different view of the value of sharing.

CHRYSLER COMMERCIAL ANNOUNCER: This good boy shares what he has with the rest of his class; this bad boy doesn't.

PROFESSOR TSURUMI: I'm not surprised that Chrysler has been running that kind of silly advertisement. To many Americans, unfortunately, sharing is a bad notion, a dirty word. And I think that's a problem with the United States. President Coolidge said the business of America is business, but the business of Japan is a relationship.

MR. SOLMAN: The question is what do when these relationships exclude outsiders like Americans.

CHARLES FERGUSON, MIT: When an opponent or a competitor is using a particularly strong and distasteful tactic, you may have to use it too.

MR. SOLMAN: In a recent issue of the Harvard Business Review, Charles Ferguson called on U.S. computer firms to adopt a Keiretsu- like approach, to hang together or hang separately. He urged them to pool research efforts, to share new designs, to buy from and invest in American suppliers.

SPOKESMAN: Right now, IBM is going beyond conventional computing in very unconventional ways.

MR. SOLMAN: IBM has just gone beyond conventional American business practice, teaming up with Apple Computer, once a key rival. They have long-term plans to work jointly on new products. IBM has also forged linkswith the German firm Seamans for semiconductors, Lang Labs for imaging, Sears for personal computer software, and Diebold for automated teller machines. To Yoshi Tsurumi all this is long overdue.

YOSHI TSURUMI, Baruch College: American companies will be doomed unless they really just start forming their own international as well as domestic alliances.

MR. SOLMAN: But to Lynn Williams, business alliances can threaten open competition and free trade.

LYNN WILLIAMS, Former U.S. Trade Negotiator: Anyone who says that a Keiretsu system is good is looking at it from the standpoint of a taker, somebody who's benefiting from it. Those who are outside the system do not benefit from it at all and can compete with it only in their Keiretsu system. So what you end up with is little pockets of groups of companies. I don't think that's good. That's not the system I would set up.

MR. SOLMAN: That's why the U.S. urges Japan to follow the American example and open its markets and system to foreign competition.

LYNN WILLIAMS: My bottom line is if the Japanese want to be major league players in world trade, as they do and are, then they have to play along with the rest of us, and that means imports. and the fact that this system is good for them because it was built up at a time when they could exclude the rest of us doesn't answer our problems at all.

MR. SOLMAN: Thus, the administration's desire to dismantle the barriers that Keiretsu represent, it's been a key issue between President Bush and Prime Minister Kaifu and continues to be a major irritant in the U.S.-Japan relationship.

MR. LEHRER: Trade deficit figures released today show that the trade balance -- imbalance increased dramatically in July. One major reason was the purchase of foreign autos and auto parts mostly imported from Japan. SERIES - THE LIGHT THAT FAILED

MR. MacNeil: Finally tonight we have another in our series of conversations The Light That Failed. Former Harpers Magazine editor and writer Midge Decter was the executive director of the Committee for the Free World, a 20 year old organization of anti-Communist intellectuals. The Committee dissolved last year, with Ms. Decter declaring it's time to say we've won, good-bye. She's now a distinguished fellow with the Institute on Religion and Public Life in New York City. I spoke with her earlier this week.

MR. MacNeil: Ms. Decter, thank you for joining us. What is your explanation of why Communism failed?

MS. DECTER: Of course, an enormous phenomenon like that has many explanations, I suppose, but there are two major causes of the collapse of Communism now in our time. One of them is, of course, all those brave Russian dissidents, Soviet dissidents, who -- given the slightest bit of daylight, went for it, and I know these people, they are extremely brave, and once they took their opening, they were never ever going to let it shut again, and they deserve the most credit. And then next is that terrible, bad old thing called the arms race. You remember the arms race? Well, the arms race was a very important factor in this, particularly the declaration of Ronald Reagan's intention to start with Star Wars. That really threw the Soviets into a panic, also the emplacement of the missiles in Europe, all those terrible old things, and if you talked to Russians, ordinary Russians, now and asked them what or who was responsible, you always get one answer -- Ronald Reagan.

MR. MacNeil: Are you saying that the argument of the right for a long time that spending more on arms would force the Russians to follow suit andwould bankrupt them before it would bankrupt us turned out to be the right argument?

MS. DECTER: Yes, that did turn out to be the right argument, that plus the fact that we had a technological edge which it seemed to us very important to exploit. And so we did. The Soviets were technologically very advanced, but not as advanced as we. And in general, our argument was that we have the edge on them and we should force them into oblivion, where their own population wanted them to be, where all the peoples in the world who had any contact with them wanted them to be, and where we had every reason to want them to be. That was our argument and I think again if you ask ordinary people and if you ask the dissidents in the Soviet Union, they will tell you that Ronald Reagan ran the rearmament of the United States and for their own part, Ronald Reagan's declaration that the Soviet Union was an evil empire, it's very hard for people in this country to understand.

MR. MacNeil: For whose own part, the Soviet dissidents?

MS. DECTER: Yes.

MR. MacNeil: For their part?

MS. DECTER: For their part.

MR. MacNeil: This declaration was what?

MS. DECTER: Was the most enlivening and encouraging thing they'd heard. It was like there was a voice over there who understood their condition and that silly little thing which caused such a terrible stir in the press and which caused him to be accused of, what was it, simplemindedness and so was very, very important to them, because, of course, simple things are always much more important than complicated ones.

MR. MacNeil: What do you suppose -- and more devastating sometimes -- what do you suppose would have happened if Ronald Reagan hadn't come along in the 1980 election with his campaign to increase arms, the arms build-up a great deal, and without the ideological fervor to call the Soviet Union an evil empire? Suppose George Bush had been elected in 1980, instead of Ronald Reagan?

MS. DECTER: Well, we don't know what George Bush would have been in 1980. We only know what everybody said he would have been, so I'd rather not speculate about that.

MR. MacNeil: But suppose it had gone along without the Reagan - -

MS. DECTER: Suppose it had been Jimmy Carter re-elected or something like that, well, then what would have happened would have been a kind of not only the collapse of the Soviet Union but a kind of all around collapse of Western Europe, the demoralization of the world perhaps, because the United States was, itself, in a fairly demoralized condition, not anything like the Soviet Union, but also demoralized, and the Europeans were hanging in the balance.

MR. MacNeil: Mr. Gorbachev and his economic or his early group of economic advisers like Mr. Abin Begin in, in describing the economic situation they found when they took over in 1985 said that long before the new phase of the arms race, the Soviet economy was going to hell. I mean, the only way they were creating apparent growth was by pulling new resources out of the earth or putting new human resources in, and that the whole thing was a shambles. Would that not have worked itself out anyway without the, the new sort of burst of the arms race?

MS. DECTER: Well, it might have worked itself out, but it -- the question is: How would it have worked itself out? Countries can collapse in a really ugly, nasty way. The real issue is: What would have happened to the Soviet peoples? The fact that the system collapsed wouldn't -- was collapsing didn't seem to make that much difference to the people who were sitting on top of it. There were only those others who were suffering, and as we know, human suffering can become practically endless. So it wasn't simply that the Soviet system should collapse, but how it should collapse.

MR. MacNeil: Since opposing the role of opposing Communism and the world role that that forced the United States to adopt has been so much American self-definition for a couple of generations now, how can this nation easily redefine itself or define itself without that threat and without Communism there and the need to oppose it?

MS. DECTER: Well, that is, of course, a very difficult question. The country now has to decide what it's going to be about now that it's lost its very clear purpose.

MR. MacNeil: After all, that was the high octane fuel of a lot of American politics for a long time.

MS. DECTER: That was the high octane fuel and obviously, other things are -- it's going to have to get redefined. And there's an argument going on right now among my friends as to whether the United States should be the force for democracy in the world, or whether it should now pull back and perfect itself as the ideal society.

MR. MacNeil: An argument one saw in miniature and specifically enduring the debate over whether to go to war in the Gulf.

MS. DECTER: Yes, although that was quite silly because it was - - we had a perfectly clear national interest in going to war in the Gulf.

MR. MacNeil: But elaborate on this -- how -- in other words, after two generations of spending -- coming out of the Second World War -- of spending a great deal of its budget and having a tremendous influence on so many aspects of American life, how is this country going to revert to something like a norm, if you call -- peacetime norm, if you like, and where in its history does it look back to define that norm?

MS. DECTER: Well, it --

MR. MacNeil: Without Communism as this great thing here.

MS. DECTER: Well, look, there are all these peoples over there now. They've, they're tasting freedom for the first time in -- many of them in 74 years and some of them in 50 years. It's going to be very, very difficult. The world is going to be a very difficult and complicated place and the United States with a lot of self-confidence and serenity can be of great help to those people. And I don't mean writing checks. I mean moral help -- simply by standing for ourselves and saying to these people, come on in, the water's fine, it's hard, but it's good, and it's worth it. If there were -- if there were voices, if the voice of the United States -- and it's beginning to be that way -- were a voice of confidence in the possibilities of democracy and in the - - in the end the great benefits of liberty, there are a lot of people around in this country who make very light of liberty, and that's because they have it and it's time to cut that out now. We have a cultural role to play in the world. And it's very important, and it doesn't mean going to every single country in the world and saying, you have to be a democracy, but it means being prepared to say it's okay, what we have is a desirable thing to have, and it's worth the struggles and the fear and the anxiety and, and the shaking and the unknown, uncertainties you're going through now. That's the role we can play. It sounds very vague but it's not in the least bit vague, and as we should, in my opinion, have been delighted by the prospect that the Soviet Union was collapsing and it should have been America's role to celebrate that collapse and do everything in our power that was prudent to further the process, and we didn't. We held back.

MR. MacNeil: Why do you think we didn't?

MS. DECTER: Because fear of the unknown and because of this lack of belief in ourselves. We are constantly -- we are a nation unlike any other nation in the world -- we are a nation which is constantly on television that we are on now and in our literature and in our films and everywhere, we are constantly harping on how really truly bad this society is and how really truly difficult and unfair are the lot of all the people living here. It's a joke. But it's a very -- it's a very nasty joke now, because there are people who need us.

MR. MacNeil: Well, Ms. Decter, thank you very much for joining us. ESSAY - IMAGE CONTROL

MR. LEHRER: Finally tonight essayist Clarence Page, columnist for the Chicago Tribune, has some thoughts about the legacy of Malcolm X.

MR. PAGE: Last year's Bart Simpson T-shirts have been replaced by a new face on many chests this summer. Malcolm X T-shirts, as well as baseball caps designed to publicize Spike Lee's upcoming movie are symbolic of the way Malcolm X is finding a new audience 26 years after his death even among those who are too young to remember the man or the era in which he lived. We're wearing him, reading about him, and in some cases fighting over him. Celebrated filmmaker Spike Lee is making a movie about Malcolm X and celebrated writer Amari Baraka, among others, is trying to stop him. Baraka says Lee can't be trusted to portray the true Malcolm, which brings up an interesting question: Who is the true Malcolm and why is he so important to so many people in the '90s? His life offers ample material for legends. Born Malcolm Little 1925, father reportedly killed by klansmen, became a pimp and a street hustler, went to prison, where he converted to the Black Muslim religion of Elijah Mohammed, expelled by Mohammed in 1963, after he said the Kennedy assassination was an example of chickens coming home to roost. He went to Mecca, discovered orthodox Islam, founded a new multinational black unity movement, assassinated in 1965 in a Harlem theater, three followers of Elijah Mohammed were convicted.

MALCOLM X: The white man is the oppressor!

MR. PAGE: Malcolm X was the man the establishment loved to hate, an angry alternative to the non-violence of Martin Luther King, yet, he has been admired by supporters as diverse as the Rap Group Public Enemy and President Bush's conservative Supreme Court Nominee Clarence Thomas. His legacy remains a visible part of the American scene. When we say black or African-American instead of Negro or colored, when we see Cashes Clay give up his slave name to become Mohammed Ali, or Lou Alsindor become Kareem Abdul Jabar - -

SPOKESPERSON: Make that dream your reality!

MR. PAGE: -- when we hear community leaders talk about black pride, self-defense, pooling resources, and building strong families, we are hearing the legacy of Malcolm X, old ideas, but he gave new force, a new energy, and a new angry style.

SPOKESPERSON: We are America! This is our rock! This is our home!

MR. PAGE: After he broke with Elijah Mohammed, Malcolm moderated his philosophy from separatism to self- sufficiency, a subtle but distinct change that lies at the center of the dispute between Spike Lee and Baraka. Will Malcolm be portrayed at his angriest, or will a kinder, gentler Malcolm be remembered? One can only wonder what Malcolm, himself, would think of the tug of war over his legacy. He probably would be pleased that Spike Lee owns his own production company, that he's creating jobs, including new union jobs for blacks who never had them before. And he probably would be pleased that Amari Baraka gave up his slave name for Leroy Jones and was keeping up the old fight. But would he be pleased that some of his followers have used his anger to justify demagoguery, like the racial hatred recently exploded in Brooklyn between blacks and Jews after a traffic accident? Malcolm always distinguished attitudes that were pro- black from those that were anti-white. A hero's death frees his or her followers to make of their legacy what they want it to be. If any part of Malcolm's legacy should not be lost, it is the need he stressed for positive action, not racial hatred. One can only imagine what he might say today about how so many of this people are still enslaved by poverty, drugs, crime and unemployment. More of us than ever before are calling ourselves black and African- American, he might remark, but we cannot yet call ourselves free, not until we all are free. I'm Clarence Page. RECAP

MR. LEHRER: Again, the major stories of this Thursday, Iraq's government run newspaper accused the United States of looking for excuses to launch a new military operation. Pentagon Spokesman Pete Williams said Iraq's violations of the U.N. cease-fire agreement had made it appropriate for the United States to develop military contingency plans, but he said no troops have been deployed. And the United Nations voted to allow Iraq to again sell its oil, but profits would be controlled by the U.N. Good night, Robin.

MR. MacNeil: Good night, Jim. That's the NewsHour tonight. We'll be back tomorrow night with Gergen & Shields and Paul Robson, Jr. on why Communism failed. I'm Robert MacNeil. Good night.