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 we examine what the Russians face and fear in '92. We hear from the deputy mayor of Moscow, then ask what kind of man is the new leader of Russia, Boris Yeltsin. Then the problems that are arriving along with the Japanese developers in Hawaii. NEWS SUMMARY

MR. LEHRER: The Commerce Department reported today the Index of Leading Economic Indicators was down .3 percent last month. Seven of the eleven factors that make up the index were down. Consumer confidence was cited as the biggest negative factor. In a separate report, the Commerce Department said new home sales remained steady last month after rising 4 percent in October. President Bush arrived in Australia today in time to ring in the New Year there. The trip will also take him to Japan, Singapore, and Korea. Mr. Bush has said he hopes to improve the U.S. trade position in the region. He said he will press Japan in particular to open its markets to U.S. products. Robin.

MR. MacNeil: North and South Korea today approved a plan to make their divided peninsula nuclear free. The agreement forbids both sides to manufacture, test, possess, or use nuclear weapons. It also allows each side to inspect the other's weapons facilities. The accord will be formally signed next month. A South Korean spokesman said the agreement paves the way for new cooperation between the two Koreas.

MR. LEHRER: Russians lined up today for food and other consumer products. They were stocking up on items that will cost much more by Thursday when price controls are lifted. Basic items like bread, milk, baby food, sugar, meat, vodka and oil will be three to five times higher. Everything else will be allowed to rise as much as the market will bear. Russian Vice President Alexander Ridgkoy criticized President Yeltsin today. He told a German magazine the Russian people had lost confidence in the Yeltsin government. He predicted it would soon collapse. Ridgkoy was named vice president by Yeltsin in June, but lately the two have been feuding.

MR. MacNeil: In Yugoslavia, U.N. Envoy Cyrus Vance again presented the federal government with a plan to send peacekeeping troops to the region. We have a report narrated by David Simmons of Worldwide Television News.

MR. SIMMONS: Yet again Cyrus Vance called on the Serbian President, pushing the U.N. peacekeeping plan to Croatia. It was his fifth visit to Belgrade since October. This time Slobodan Milosovich and the three other Serbians left on the federal presidency accepted the plan. But that acceptance falls short of what Vance is after. First, there must be a peace to keep.

CYRUS VANCE, U.N. Envoy: And I think some of the problem areas that we've run into are getting cleared up with respect to our peacekeeping operation proposal, and I must come back to this every time, I have said many, many times until we have a durable ceasefire we cannot go forward with a peacekeeping operation. And that is not happening. Indeed, the fighting even seems more severe than the last time that I was here.

MR. SIMMONS: In the town of Darovar in the Western Slovonian region of Croatia, there was grim evidence of the truth of Vance's words. Federal air force jets dropped two powerful bombs on the town and followed them up with rocket attacks. As Vance observed, a truce to end months of fighting that's killed thousands seems as elusive as ever.

MR. MacNeil: El Salvador's government and rebels are reported to be nearing a cease-fire agreement that would end their 12-year civil war. United Nations Secretary General Javier Perez DeCuellar said an agreement could be reached tonight. It would serve as a final achievement for Perez DeCuellar, whose term expires at midnight. He had planned to leave the U.N. this evening, but now says he will stay on to try to complete the negotiations. The war has claimed more than 75,000 lives since it began in October, 1979.

MR. LEHRER: And that's it for the News Summary tonight. Now it's on again to what used to be called the Soviet Union and Japanese investment in Hawaii. FOCUS - COPING WITH FREEDOM

MR. MacNeil: Our lead focus tonight is the situation in the former Soviet Union and the man who has the power to do something about it, Boris Yeltsin. By all accounts, no one is looking forward to the new year in the Russian republic because that's when Yeltsin's radical economic reform plan goes into effect. Yeltsin, himself, says that will make a bad situation worse but there's no alternative. And yesterday one of his key supporters painted a grim picture of what may lie ahead. He talked with Correspondent Charles Krause.

MR. KRAUSE: Sergei Stankievich is deputy mayor of Moscow and also one of Boris Yeltsin's top political advisors. His official title is state counselor. His duties include government relations with trade unions, political parties, and other mass organizations in the new Russian Federation. For the past several months, Stankievich has been deeply involved, trying to win political acceptance for economic reform. To begin our interview, we asked Stankievich to describe the philosophy behind Yeltsin's new economic program.

MR. STANKIEVICH: The philosophy of radical economic reforms which Mr. Yeltsin is going to implement cannot astonish anybody in the Western world. To liberalize prices and to balance mass of money and mass of goods it is absolutely necessary first step because first of all we should create money that everybody want to have, to earn. At the same time, Mr. Yeltsin is going to accelerate privatization, starting with retail trade, service sector, and then expanding privatization to big industrial plants. The other field is a liberalization of international trade. They are ready to be open for international flow of goods and they are ready to open opportunities for our internal producers, to export as much as possible.

MR. KRAUSE: On the issue of prices, which was a very sensitive issue, to what extent will some goods be protected?

MR. STANKIEVICH: We have two groups of goods that should be controlled in terms of prices. First group is energy resources, mineral resources that can provoke uncontrolled inflation for the rest of the economy. It is oil and oil products first of all. And the other group is socially sensitive items of goods, bread, milk, and salt and some types of medical drugs. They also should be controlled. The prices will be raised, but they will be fixed. All the rest is a result of interplay of market forces.

MR. KRAUSE: What kind of increases do you anticipate this week?

MR. STANKIEVICH: We anticipate the raise from three times to five times. It is very substantial raise and it is a main source of troubles now for our government. Unfortunately, we have to implement such serious and very painful reforms at a time when potential of social patience in our population is almost exhausted. We already are on the eve of social explosion, and it will be a very difficult to preserve necessary level of political stability.

MR. KRAUSE: Are you saying then that you expect unrest in this country?

MR. STANKIEVICH: I'm afraid, yes. I'm afraid, yes. And, first of all, in major industrial cities in Russia. And I think that it is natural field for cooperation with international community. I think that in this critical moment international community, first of all G-7 nation group can prepare and implement some emergency program just simply to provide with everyday meal, limited group of major industrial cities in Russia. If it is done, hoping that we can, we can pass through this period successfully, I at the same time, at the same time if there is no such kind of international program, I'm afraid that the risk is too high.

MR. KRAUSE: To be very clear, can these reforms succeed without aid from the West?

MR. STANKIEVICH: They will succeed, but the problem is social price for their success. If the success of these reforms will cost thousands and thousands of personal and family tragedies, I'm not sure about the final result. Of course, we shall have some kind of economy, some kind of a market-oriented economy, but if we have to pay so great social price in terms of people's lives, in terms of personal and family tragedies for these reforms, there will be great risk that our society can be torn into some form of totalitarian regime, maybe post Communist regime still armed with nuclear arms and still capable to restore its military might, and it is not only our problem. It also international problem.

MR. KRAUSE: Mr. Yeltsin, himself, has warned that things are going to get worse before they get better toward the end of the year. Do you think that's a realistic scenario, and do you think people here have enough patience to last through the year?

MR. STANKIEVICH: I think that our people now have to accept quite simple rule. It is very difficult with Yeltsin, but without him, it will be much more difficult to survive. This government will do its work for at least several months. Of course, it is in very risky position, because they have to take responsibility for very painful measures and some changes in the government could be possible, but it cannot be all thrown right now.

MR. KRAUSE: How do you respond to those who say that merging the KGB with the interior ministry means that the government is planning to use repression to keep itself in power?

MR. STANKIEVICH: I think that this decision to merge two very serious branches of government is not final decision. Maybe after very careful examination, it should be revised slightly. Of course, it is necessary to concentrate on all possibilities of the government to react to emergency situation in the country, but at the same time it's quite dangerous to concentrate too much power in one branch of the government. We know for sure from our historic experience that such over-concentration can bring undesirable results. So I think that certain checks and balances should be preserved even within the executive branch and maybe some safeguards will be built in these repressive institutions.

MR. KRAUSE: But it does reflect the determination by the government to concentrate power in order to protect itself.

MR. STANKIEVICH: Exactly. It is a strategic choice for the government to concentrate its force and to be prepared to react for any term in our internal political situation.

MR. KRAUSE: Thank you very much.

MR. LEHRER: Now to some straightforward questions about the man who has to cope with all these problems, Boris Yeltsin, the President of the Russian republic, the man of the hour in the new world of the old Soviet Union. We begin with a basic profile reported by Roger Mudd.

MR. MUDD: The first President of Russia, the last leader of the Soviet Union, the two men have had a complicated relationship, with Boris Yeltsin playing a double role, first as Mikhail Gorbachev's chief disciple, and then as his archrival. Yeltsin, who is 60 years old, is an earthy but flamboyant Siberian. He worked his way up in the local Communist Party ranks, eventually becoming party boss in his native Swerdlosk. In 1985, Gorbachev picked Yeltsin as Moscow Party boss, putting him in charge of running the new reform program, perestroika, in Moscow. As a bonus, Yeltsin was also elevated to the politburo. But unlike most in the Communist elite, Yeltsin had a popular style that won him a wide following. He rode buses more often than the familiar limousine. He visited food stores to hear customer complaints. He used his power to take on the bureaucracy, firing hundreds of corrupt officials. But when he took on his mentor, he got in trouble. With his growing complaints about the slow pace of Gorbachev's reforms, Yeltsin was becoming a public nuisance and a scold. In 1987, Soviet television announced that Yeltsin had been fired from his Moscow job and had been purged from the politburo. Yeltsin was disgraced, but almost overnight he became a folk hero as the rebel who stood up to the hated Communist Party. Once he was on the outside, Yeltsin became free to champion reform far more radical than Gorbachev had envisioned and to plot his return from political oblivion. His comeback began with the March 1989 elections for a new parliament, the first in which the Soviet people were given a choice between competing candidates. Yeltsin ran for the Moscow seat against a party regular, and he won a landslide victory. He then turned the heat up on his criticism of Gorbachev, warning not only that perestroika was going too slowly, but also that Gorbachev was becoming too powerful. His views now seem prescient. Yeltsin was interviewed on the NewsHour in September 1989 on his first visit to the United States.

BORIS YELTSIN: [Speaking through Interpreter] [September 1989] We have to do everything very carefully and cautiously, but people are very impatient. They have been waiting for four years and they can't wait another year.

MR. LEHRER: They cannot wait another year, something has to be done within a year?

BORIS YELTSIN: [Speaking through Interpreter] Yes.

MR. LEHRER: If not, then what happens?

MR. YELTSIN: [Speaking through Interpreter] A revolution from below will begin.

MR. LEHRER: An armed revolution?

MR. YELTSIN: [Speaking through Interpreter] No. Of course, I prefer it to be bloodless without a civil war, a peaceful revolution, but from below the movement has already started.

MR. LEHRER: Who will end up running the Soviet Union when it's over with?

MR. YELTSIN: [Speaking through Interpreter] People will rule the country.

MR. LEHRER: In a non-political, non-ideological way? What do they want? What would they want out of their government?

MR. YELTSIN: [Speaking through Interpreter] From the government they would like a lot of things, but the government should not monopolize everything. Decentralize politics, economics, social spheres, and so on.

MR. LEHRER: If they were to have free open elections for President of the Soviet Union, would you run against Gorbachev?

MR. YELTSIN: [Speaking through Interpreter] The way the people will decide that's the way I will act. There are no changes in the standard of their living.

MR. LEHRER: If they were to have free, open elections for President of the Soviet Union, would you run against Gorbachev?

MR. YELTSIN: [Speaking through Interpreter] The way the people will decide that's the way I will act.

MR. MUDD: Gorbachev tried too block Yeltsin's growing mandate, but he resolutely refused to test his own power by popular vote. In the spring of 1990, over the objections of aides who favored a popular election, Gorbachev had the People's Congress of Deputies elect him President of the Soviet Union. Meanwhile, over the objections of Gorbachev, Yeltsin was elected chairman of the Russian legislature, which became the focus of opposition to the Communist regime. Then in a dramatic gesture, Yeltsin resigned from the Communist Party. And while Gorbachev continued to court an international audience, Yeltsin turned inward toward Mother Russia. In June of this year, he became the first freely-elected president of the Russian federation in its thousand year history. On a four-day victory tour through the United States, Yeltsin spoke out against Gorbachev on the question of keeping the Baltic states in the Soviet Union.

BORIS YELTSIN: [June] If the Baltic republics would like to withdraw from the Union, we should not resist it. We should not try to hold the Union together with chains. Our Union can only continue as a voluntary Union of states, not at gunpoint, not cemented by the force of tanks and personnel carriers and paratroopers.

MR. MUDD: Two months later, Yeltsin was atop a tank facing down the plotters of a military coup. The plotters blinked. The plotters lost heart. Yeltsin rescued Gorbachev from house arrest at his vacation home and brought him back to Moscow, where he reinstated but then humiliated his former mentor in the legislature. With the blessing of the people and emboldened by the political mandate, Yeltsin moved to dismantle the Soviet empire. Making deals with colleagues and rivals, he brokered the establishment of the commonwealth of independent states. In the new order, Russia, by far the largest and most powerful of the former Soviet republics, took over most Soviet ministries, grabbed the Soviet seat on the U.N. Security Council, and claimed ultimate control of Soviet nuclear weapons. Last week, closing out the chapter on his rivalry with Gorbachev, Yeltsin took over the Kremlin, itself, including Gorbachev's office staff and even his hard currency. The only scrap of authority left to Gorbachev was the timing of his resignation. In one astonishing year, with a combination of luck and political shrewdness, Yeltsin had transformed his image from a discounted maverick to an historic figure.

MR. LEHRER: Now to the questions about Yeltsin. They will be asked of four people, George Mirsky, former head of an international studies program in Moscow, now a visiting fellow at the U.S. Institute of Peace in Washington, Adrian Karatnycky, special assistant to AFL-CIO President Lane Kirkland for foreign affairs who has worked closely with Yeltsin's democratic reform movement in Russian, Madeleine Albright, former National Security Council staff member in the Carter administration, now a professor at Georgetown University, president of the Center for National Policy, and Leon Aron, a fellow at the Heritage Foundation, the author of a forthcoming biography of Boris Yeltsin. Mr. Aron, is Boris Yeltsin in addition to all the things that Roger Mudd just recounted and everything that's been said about him, is he capable of leading the new Russia through these problems of the next several months and years?

MR. ARON: Well, that's the question that Yeltsin, himself, I don't think will be able to respond to.

MR. LEHRER: What do you think?

MR. ARON: Well, I think that to the extent that any politician's record in opposition is a clue to how they behave in power. I think Yeltsin is perfectly capable of doing it. As Sergei Stankievich said, that it's bad with Yeltsin, but without Yeltsin, it would be even worse.

MR. LEHRER: Why?

MR. ARON: Because it's been clear to us for I think a couple of years, it's been clear to the Russians for almost four years, that if there is any person among the leaders of perestroika and glasnost who have enough people's trust to carry them through this extremely difficult period of economic hardship, it would be Yeltsin. There is nobody else in the current leadership whom people trust enough to go through the hardship when he tells them stick with me and things will be better.

MR. LEHRER: Mr. Mirsky, do you agree with that, it's either Yeltsin or nobody?

MR. MIRSKY: Yes. I think it's absolutely true that the only person who enjoys trust and confidence of our people now is Yeltsin. And three months ago, when I was going out of the Soviet Union, departing for America, I heard from everybody that Yeltsin is our best chance and Yeltsin maybe is our last chance. I will tell you that while it's not only because -- now the question is otherwise. Well, why do people believe that Yeltsin will help them out of their predicament? Why do people have this trust and confidence in Yeltsin? I believe that to a certain extent it is explained away not only by his luck and shrewdness, of course, he's got both luck on his side and he is a shrewd and astute politician, sure, but also, you know, he has this power, this strength of character. I would, you know, compare him to a bulldozer maybe or I would like to compare him with a sturdy horse that would carry you through the bank of the river by sheer weight, by sheer force, and it's not by accident that it includes a lot of very progressive people, very interesting people, Yakovlev, Shevardnadze, but it's quite natural precisely for Yeltsin now to become head of the new entity which has been set up from the ruins of the former Soviet Union. It's precisely Yeltsin that has a sense of character and I have often been asked why do people prefer Yeltsin to Gorbachev, for instance, why do they vote for Yeltsin and they curse Gorbachev. Well, to a certain extent, I would like to tell you it is explained by the fact that Gorbachev, of course, is a dynamic personality, in certain respects is a much more sophisticated personality than Yeltsin, flexible, dynamic, energetic, but he lacks the inner strength, you know, and people instinctively feel his strength of will, strength of character, so they believe in Yeltsin, first, and second, they believe in him because he was the only man in the establishment who dared to stand up to Gorbachev, to speak up for underprivileged and so on. That's the point.

MR. LEHRER: Mr. Karatnycky, do you agree that what Yeltsin really has going for him at this moment is strength of character?

MR. KARATNYCKY: Well, no one can deny his strength of character. On the other hand, I think he has two other things going for him. The first is that he has a democratic mandate and a democratically- elected -- he is democratically elected. People feel he is accountable to them and answerable to them and to a parliament. And I think that that gives him a honeymoon in which he can introduce a certain measure of reform. The second thing he has going --

MR. LEHRER: Excuse me. Does he feel that commitment back to them, do you believe?

MR. KARATNYCKY: Yes. I think that in his speech, his acceptance speech after the inauguration, in effect, in June or July, he made it very clear that it's the consent of the government is the basis of his power and that government serves the people. And he made that and it was a keynote of his future governance and I think he believes that very clearly.

MR. LEHRER: What makes you believe he believes it?

MR. KARATNYCKY: Well, I think he, they had a period where he was out in the wilderness, in the political wilderness, and at some point he realized that there was another way to come back into power and to favor, to have influence, but also base your activities on the consent of the government. And I think that the March elections where he led this coalition against great odds for the Russian parliament in 1989, in 1990, rather, also in 1989 when he was elected to the Soviet parliament against overwhelming odds, and the people supported him, he recognized that that, rather than membership in the Communist Party or membership in the nomenclature was the source of authority and power. The other source that I think makes his administration potentially resilient to being buffeted around by economic transformation is his understanding of the liberating power of a democratic patriotism. He is on a mission to create a sense of Russianness, to reawaken the sense of being a citizen of a new entity of Russia, something that has not really properly existed in Soviet history because the Russian nation has had a kind of an identity crisis, whether it's this fast transcontinental imperial power or whether it's a nation that looks out after it. And I think that Yeltsin and certainly the advisers around him understood that Russians in particular are looking to turn inward to put their own house in order. And he fashioned a policy aimed at awakening and playing to those feelings.

MR. LEHRER: And that will help him through the difficult times too.

MR. KARATNYCKY: I think so. I think that we're going to see that helping people in Baltic states, where, you know, Lithuanians and Latvians and others who are going through wrenching economic changes, they have a sense that they're fashioning some new entity. It's a common project. It's a kind of a sense of historical destiny and commonality. And I think he's playing to that and I think it'll help many of these republics.

MR. LEHRER: Madeleine Albright, there are some people at least in this country, who have some concerns as they watch Boris Yeltsin and had them from the very beginning, that he's a flawed man, that he drinks too much, and all these kinds of things, that he isn't the sophisticated man as Mr. Mirsky has said, that he is a man that goes more on emotion. What else would you put on the list, and how do you analyze that?

MS. ALBRIGHT: Well, I think that people did have a very strange view of him when he first emerged on the scene. He looked very different, acted very differently from Gorbachev, and I think the description that Mr. Mirsky uses about bull dozer is something that you have the sense of raw power from him, very different from kind of the controlled politician, which is what Gorbachev presented to the scene. I think the question becomes one really for all of us as Americans to look at is whether this person that was so brilliant in opposition is, in fact, a person that can then lead a nation through what is clearly a revolution. And as Mr. Aron said, you look at his in terms of how somebody acted as an opposition leader for signs of character or action, but the truth is that it takes a very, very different kind of skill. And the man who stands on the tank and really kind of says, come at me, is very different from the kind of person that needs to pull things together.

MR. LEHRER: Well, let's run through some difficult questions. Mr. Aron, what, based on -- nobody knows what would happen -- but just based on your knowledge of Boris Yeltsin, if there are, in fact, food riots in Russia, if there's violence as a result of getting through these next several months, is Boris Yeltsin a man who would, in fact, use the Russian army to shoot other Russian citizens?

MR. ARON: I doubt it very strongly. And, again, you know, it's, it's only a guess. And it's only -- I hope we will never test that proposition, but as Adrian just said, you know, the people trust Yeltsin because he of all the people who started perestroika, he is the first one who put his career, if not life, at personal risk, and people know that. You know, later on there were other elite establishment perestroikas, you know, and all kinds of people who joined perestroika, but he did it when it was dangerous to do in 1987, he criticized Gorbachev. Alone among the leaders of perestroika, he flew to the Baltics on the cold, rainy morning of January 13, after the Vilnius massacre where, you know, the troops, Soviet troops, shot their way in. Again, he was alone. That was a very dangerous move. It was not popular politically because it went against the Russian nationalism, and yet, Yeltsin flew to Talin and signed the declaration with the leaders of the Baltic states. These are the sort of things that show that Yeltsin tries to derive his authority from acting on what he feels is the right thing to do and the people's idea of doing things.

MR. LEHRER: But is he a law and order man?

MR. ARON: No, no, I don't think so. I think he has yet to learn it is true, having said that, it is true that he has yet to learn the limit that democracy puts on a leader in power. In the Chechin crisis, the October, end of October, November, when Yeltsin's first impulse was to send in troops to deliver law and order was a mistake. He admitted that it was a mistake and he did not resist when the Russian parliament told him essentially forget it and withdraw the troops. I think he has learned from that mistake. He is a unique self-teaching machine, as one his colleagues in the inter-regional group called him.

MR. LEHRER: Mr. Mirsky, what's your reading of his, how he might deal with violence and disorder, if it, in fact, comes this winter and beyond?

MR. MIRSKY: You know, my feeling is that he is the kind of man who will try first of all to personally interfere, to go out, to speak to the people, to try to persuade them, you know, to refrain from violence and so he is the kind of man that will come out and speak directly to the people. But, on the other hand, I have no doubt that if the worst comes to the worst, he will be resolute enough and tough enough first try to split the people who are angry over the situation and then, of course, to try to suppress any kind of rebellion, because basically he is an authoritarian type of leader, not dictator, not total dictate. I mean, I believe he would like to be compared rather to DeGaulle, you know, to those kind of people who are being --

MR. LEHRER: Tough guy.

MR. MIRSKY: Tough, yes, authoritarian, but not suppressing freedom of speech, not suppressing opposition. It's a very powerful combination, you know, because in that end, everybody understands it in our country. Now, you simply got to have a strong executive power. You've got to have a popular leader, a tough leader, a strong man. But, on the other hand, if he starts to suppress freedom of press and he starts to suppress opposition, then, of course, those traits, those features in his character that are more or less favorable to a transformation to a dictator will start developing. I only hope that it doesn't occur.

MR. LEHRER: Mr. Karatnycky, what's your view of that? If the country begins to disintegrate for any reason over these next several months, what is his instinct, what does his record show you as to how he might -- would he, in fact -- Mr. Mirsky believes he would not impose restrictions on freedom of expression, freedom of the press, all of that, what's your view of it all?

MR. KARATNYCKY: Well, there is no record that would suggest that he would. There is a kind of a give and take, for example. There have been some criticisms by newspapers of the Russian press ministry, of speaking out about certain kinds of articles that might have fomented ethnic hatreds and the like, but the press has been very resilient in defending itself. And Yeltsin has never intervened against the interest. He just vetoed, for example, a law that would have required reporters to reveal sources andcollaborate with the police and interior security. He vetoed that law, sent it back to parliament, but parliament redrafted a much more liberal version. So I think there is a track record there that he understands. There is a division of power. There is a restraint on the part of those who rule. But I'd like to say that the scenarios of rapid disintegration and violence ought to also factor in the countervailing trend. We didn't see a mob around the Russian parliament. We saw crowds of people. We saw citizens. And I think that --

MR. LEHRER: Actually, comparatively speaking, very few people, 20,000 --

MR. KARATNYCKY: Twenty fifty.

MR. LEHRER: Yes, exactly.

MR. KARATNYCKY: But they were orderly people.

MR. LEHRER: Right.

MR. KARATNYCKY: These were people who risked their lives but this was not a mob that wanted vengeance afterwards. We have not seen in recent weeks or in recent months anything resembling campaigns against former party officials who may have backed the coup, et cetera, et cetera. The crowds, the people have been, you know, have been behaving in a democratic and rather open way. I should say, however, that this is in part because of the rise of civil society. I think what we're seeing in the Soviet Union among the miners, among various workers' organizations, environmental groups and so on is, of course, a rise of independent public groups. And those give people a sense that there is an alternative way of pressuring government, of pressing for redress and trying to deal with one's frustrations and discontents. So Yeltsin has encouraged those kind of strings in political life. He has played to them. Those have been his allies and I think he's very likely to try to accelerate the building of these rudimentary institutions.

MR. LEHRER: Madeleine Albright, how do you read him on the additional thing about just how much power he wants Russia to have? In other words, does he want, does his vision of what the new Russia is to be, is it another super power, another Soviet Union, on a democratic one? Does he want to sit down at the table with the biggies of the world and have influence throughout the world, or is it too early to say?

MS. ALBRIGHT: Well, I think there are certain signs that he does, in fact, want to see a powerful Russia, and some of the mistakes that he's made, and I think some of them are shooting from the hip, which is part I think of his character that we haven't really touched on is kind of a great Russian. One of the first things he did after the coup was talk about rectifying the borders of Russia. He then said that he didn't mean that. And, in effect, he walked that one back the way he did the Chitchen issue also, so that he does have this tendency to kind of overreact. But he was very quick to say that Russia was the one that should succeed the Soviet seed of the United Nations.

MR. LEHRER: It wasn't a new flag. It was a Russian flag.

MS. ALBRIGHT: A Russian flag. And he has, he's recently been talking about a Russian guard where everybody would be the same size and where the same uniforms. I mean, there are certain tendencies here of wanting to have a large state. On the other hand, I think and I think we need --

MR. LEHRER: Large meaning size or large meaning power?

MS. ALBRIGHT: Both I think frankly, and I think --

MR. LEHRER: Military included?

MS. ALBRIGHT: To some extent, although one of the things that's going on now, literally as we speak, is trying to figure out how they're going to divide the Soviet army and what various national armies will exist out of that, but I think that he does envision himself as a major player on the world scene. And I think one thing we've got to keep in mind is there is a very personal thing going on here between him and Gorbachev. And since Gorbachev was a major player on the world scene, won a Nobel prize, and clearly as we saw from the profile that Yeltsin felt humiliated by Gorbachev, I am sure that he wants to cast as large a shadow on the world scene as his predecessor.

MR. LEHRER: That brings me to the final question, Mr. Aron. Gorbachev at the end, he was seen at the beginning, was seen as a great man, who did all these wonderful things, and at the end, just the other day, he was seen as a -- people said, well, he's a transition figure.

MR. ARON: But what a transition.

MR. LEHRER: But what a transition, exactly. Is Boris Yeltsin another transition figure, or is he a man we're going to be sitting around television studios talking about for years and years and years?

MR. ARON: Well, Yeltsin has five more years to go, five more years in his presidential term. He is 60 years old.

MR. LEHRER: We know that that doesn't necessarily mean very much.

MR. ARON: Right. In a sense, however, they're both transitional figures, but as I said, what a transition. Gorbachev's biggest achievement is that he managed to navigate not just a change of a regime, but the leap from one political universe to another without major violence. But, in essence, he took the Russians to the ABC's of democracy, teaching them tolerance, dignity, and most of all I think he taught them not to fear the state. Yeltsin is going to take them through the high school of democracy. That's what I hope for. Now, that's also transition. Whether he'll take them to college, we don't know, but I think both of them are essentially founding, the founding fathers of Russian democracy.

MR. LEHRER: Do you agree, Mr. Mirsky, that Yeltsin will always be remembered as a founding father of Russian democracy?

MR. MIRSKY: Well, I don't know about democracy, but, you know, comparing him to Gorbachev, I would say Gorbachev without wanting it will enter history as a man who destroyed the Soviet power, the mighty Soviet power. So basically his main job, his main task was a destructive one. At the same time, what is Yeltsin up to now and the task now which stands before him is a gigantic constructive task. Both of them are founders of, well, I am reluctant to use the word democracy here, well, freedom, if you want, freedom, and liberation from the Communist yolk, and all this kind of thing, both of them, but now the task that faces Yeltsin is much, much more difficult because he has a task not destructive but constructive, to build a new society. Well, of course, he is a transitional figure. Of course, but the transition in our country can take such a lot of years, the transition may be very, very long.

MR. LEHRER: All right. Mr. Mirsky, thank you very much. Madeleine Albright, gentlemen, thank you. FOCUS - PARADISE LOST?

MR. MacNeil: We turn now to an American economic story. Since 1985, Japanese investors have poured enormous amounts of money into Hawaii, so much money that some people there are concerned that the 50th state is rapidly becoming a Japanese colony. But as Correspondent Tom Bearden reports, the Japanese are running into some big problems.

MR. BEARDEN: This is one result of Japanese investment in Hawaii, the Grand Hyatt Wailai on Maui, a $600 million pleasure palace where the rooms start at $400 a night. This is the view from the balcony of the presidential suite. That'll cost you 8,000 a night. Japanese money has been instrumental in the transformation of Honolulu from a sleepy resort town to a skyline filled with glass walled towers. Japanese investors own all but one of the hotels on Waikiki Beach. They take yen at the Chanel Store on Alamawana Boulevard, something most mainland retailers would never do. The reason is simple. Japanese tourists spend a lot more money than anybody else because their currency is more valuable, much the same position Americans find themselves in in Mexico. Woolworth's caters to that monetary power with a sushi bar next to the regular lunch counter, while several major hamburger chain outlets are owned by Japanese. Japanese money has so far kept the economy healthier than the mainland and unemployment is low. This is another result of Japanese investment, Jenny Olinger's five year battle against a Japanese investor's golf course project that would have forced her to leave the house she's lived in since 1954.

JENNY OLINGER: Why are the Japanese coming here from Japan and taking our culture land away? Sooner or later we won't have no culture land. We cannot even have bananas, tea leaves. I cannot go over any golf ball. What good is golf ball? It's only good for people who like to golf out there. They're going to spend big money but what about us people?

MR. BEARDEN: In the midst of all this development, Jenny Olinger and her neighbors are trying to hold onto their way of life.

JENNY OLINGER: We're trying so hard to fight to keep the home in peace and this is what we need, Dear Lord. We need peace in this valley.

MR. BEARDEN: The valley has been anything but peaceful since the land was sold to developer Yasuo Yasuta. One condition of Yasuta's city permit to build the golf course required the farmers be relocated. He made several offers. Some accepted, but others refused to move. The development company began eviction proceedings. Lawyer Tony Locricchio volunteered to represent the farmers. He filed a barrage of lawsuits against the developer, including a federal racketeering suit. Locricchio says he was trying to preserve a traditional Hawaiian lifestyle.

TONY LOCRICCHIO, Lawyer: Ironically, we're fighting for tourism, we're fighting to keep Hawaii alive. People save a whole lifetime to come here for two weeks. They don't come here to see high rises, golf course upon golf course upon golf course, stripped lands. They come to see Hawaii. If we lose this battle, Hawaii will lose everything.

MR. BEARDEN: Ruth Ann Becker is a spokesperson for Yasuto's company. She says the accusations were part of a sophisticated anti-development media campaign that was thinly disguised Japan bashing.

RUTH ANN BECKER, Developer's Spokeswoman: He has, in fact, orchestrated a very strong campaign against the property owner using all kinds of tactics that really are not fair play and for some time was using the media rather well to play against the developer and I think it's really unfair. You know, I'm a tried and true American and all that, but I don't have this fear of the Japanese that seems to have built up over the last few years.

MR. BEARDEN: Becker says Yasuto was simply trying to follow Hawaii's rules and develop his property. She points out that all the leases had expired and that the tenants had never had any property rights. Honolulu Mayor Frank Fasi announced the settlement between the developer and the farmers in early December. The golf course will be built and the farmers, including Olinger, will be allowed to stay. All the lawsuits were dropped and some of those who were evicted, began moving back in.

LORRAINE DILAY: I'm happy. I want to cry right now. I'm really happy. We're happy to be home and I pray this doesn't happen to anybody else, because it's awful.

MR. BEARDEN: Golf course development continues all over the state. Private memberships in these clubs will sell for up to $1/4 million dollars in Japan. Mayor Fasi is worried that all of this means Americans are losing control of their economic future.

MAYOR FRANK FASI, Honolulu, Hawaii: Back in 1970, the per capita income in this state was 21 percent above the national average. Cost of living was 18 percent above the national average. We had a 3 percent cushion. Cost of living today is 35 percent above the national average. Per capita income is 5 percent below the national average. So you can say cost of living is 40 percent higher. Where is it going to stop? Who's benefiting?

MR. BEARDEN: Ironically, the flood of Japanese investment came about as a result of a plan that was supposed to benefit Americans. In 1985, the U.S. signed a treaty to make American exports more attractive to the Japanese by making them cheaper. The value of the yen was almost doubled against the dollar. The unexpected result was to make American real estate from a Japanese perspective 50 percent cheaper literally overnight. The result was a frenzy of new construction, new jobs, and explosive growth in the price of real estate and the cost of living.

RICHARD ISHIMOTO: About 35 years ago when I moved in here, I had a perfect view here, ocean view, and now they build these huge foreign investment homes.

MR. BEARDEN: Richard Ishimoto certainly doesn't think he's benefited. Japanese investors bought out his neighbors, demolished the old houses, and built beach front mansions that blocked his view. And to add insult to injury, property values went up so much that he has to come out of retirement and take on part-time work to pay his taxes. How much did you pay for the house?

MR. ISHIMOTO: Thirty thousand.

MR. BEARDEN: How much is it worth today?

MR. ISHIMOTO: Over a million.

MR. BEARDEN: What's happened to your property taxes?

MR. ISHIMOTO: Well, that's where I have the problem because in two years went up 100 percent and I'm having a very difficult time.

MR. BEARDEN: One of those jobs is acting as a caretaker for those mansions, something that bothers this American World War II veteran.

MR. ISHIMOTO: I'm forced to do this work like this. I'm forced to do, regardless, we won the war, but we basically we won the economic war so I have to take it as this.

MR. BEARDEN: The fact that most of these beach front homes are only occupied for a couple of weeks a year galls many Hawaiians. The state has long has a shortage of affordable housing. There were a lot of hard feelings when this man, Genshiro Kawamoto, reportedly drove around in a stretch limousine pointing out the houses he wanted to buy at prices far above the current market value, driving up the price for everybody. Another Japanese investor, Katsuo Shimizu, says it isn't fair to blame Japanese, who are simply taking advantage of a bargain.

KATSUO SHIMIZU, Investor: They just wants to buy that house and because they cannot get that kind of house in Japan and also pricing. When they compare that the price in Japan and over here is really different, so they don't expect the house with a pool in Japan, so only a few people they can make the dream, that's why when they come here, oh, they can purchase the house. Why not? They're going to buy.

WALLACE FUJIYAMA, Lawyer: You blame the high prices on the Japanese. I don't think that's fair because it's your neighbor and my neighbor that sold it and walked off with a bundle of cash. Now, if he didn't sell it, nobody put a gun to his head, this problem would have never arisen.

MR. BEARDEN: Wallace Fujiyama is a prominent Honolulu attorney who represents a number of Japanese investors, including Shamizu and Testu Ico. Fujiyama says these two longtime investors are getting tarred with the same brush as the newcomer speculators. Shamizu works for Haseiko Corporation. The company is now trying to develop a marina on this stretch of beach at Ava, down the coast from Honolulu. Haseiko has lobbied community groups intensively throughout the process and has gained the support of most of them, a far cry from the firestorm of opposition they ran into while promoting another project on a different island.

MR. SHIMIZU: We try to use our experience, she didn't make a second mistake, and that we started to talk with committee and as much as we can to hear what they want and what we can give them.

MR. BEARDEN: There is no question that Japanese developers, sensitive and insensitive, have changed Hawaii. It now appears that the Hawaiian marketplace is in the process of changing them as well. The bottom dropped out of the boom after recession hit both the U.S. and Japanese economies. One example: The Hyatt Regency Waikaloa on the big island of Hawaii, one of dozens of luxury hotels built with the surge of Japanese money after 1985, the owners closed half of it down in November for lack of business. Another example: The $3 billion Ko Olina Development west of Honolulu, only one of its projected eight hotels is under construction. This luxury condominium project hasn't gotten beyond the concrete footing stage and everything else has been put on "hold." Japanese investment money has dried up. Part of the reason has to do with the way Japanese banks have financed projects in the past. Financial consultant Ko Isayama says the Japanese banks were willing to lend huge amounts of money at very low interest rates because real estate appreciation guaranteed a project could always be sold for a profit. He says they are now learning that U.S. real estate doesn't always appreciate, particularly when the investor paid far too much to begin with.

KO ISAYAMA, Financial Consultant: Some of the hotels or some of the real estate properties, they don't generate enough cash to repay the loan, not only the principle, but some banks even the interest.

MR. BEARDEN: Could you put a percentage on the number of projects that are in that kind of problem?

KO ISAYAMA: It is hard to say but perhaps maybe half of them.

MR. BEARDEN: Half?

KO ISAYAMA: Half of them may be in that category.

MR. BEARDEN: Isayama says the Japanese banks are changing the way they do business. For the first time, they're taking cash flow into consideration before striking a deal. Isayama says the situation is now so bad that some of the banks have sent their own officers to help run some of the hotels. David Ramsour is chief economist at the Bank of Hawaii. He says the Japanese banks will also have to take a hard look at whether some of the projects will ever make money. He points to the brand new Grand Hyatt Walai. The traditional yardstick for hotel room rates is that one should charge 1 percent of what it cost to build each room. If this 787 room hotel cost $600 million -- and some say it cost a lot more than that -- then the average room rate ought to be nearly $800 a night. Ramsour isn't convinced the hotel can ever show a profit.

DAVID RAMSOUR, Economist: I don't think it ever will. It may eventually, but at the price per room of 850 or so dollars a room, it will be well into the next century before the revenues or the rooms rates are high enough to cover that cost.

MR. BEARDEN: Owner Takeshi Sekiguchi insists there is a market for such an expensive hotel and says he has the financial resources to wait for it to come to him.

TAKESHI SEKIGUCHI, Owner, Grand Hyatt Hotel: [Speaking through Interpreter] Since I base my plans and projects on the worst possible condition, which might be today in many people's mind, so I have only way up from here and I'm not at all worried. And about two or three years' time I'm sure economy will pick up again, and if so, then because I base on the so-called "worst of today" I can only go up.

MR. BEARDEN: One thing most Hawaiians agree on, there is no going back. Japanese money is here to stay and so are the tourists. Most also agree that isn't a bad thing because tourism is the state's No. 1 business and the only one projected to grow substantially. The ironies are striking. [WEDDING CEREMONY]

MR. BEARDEN: The bride and groom didn't understand much of the vows they were rehearsing. They came here because a traditional wedding in Japan can cost fifty to eighty thousand dollars. It's a lot cheaper to get married in Hawaii. It also provides one more source of income for Richard Ishumoto. Coordinating Japanese weddings is another of his part-time jobs that allow him to keep up with the ever rising taxes on his home in paradise. RECAP

MR. LEHRER: Again, the major stories of this New Year's Eve, the Index of Leading Indicators, the government's main gauge of future economic activity, was down .3 percent in November, North and South Korea reached an agreement on a plan to make their divided land a nuclear free zone, and Russians stood in long lines to buy items that will cost much more by Thursday when price controls come off. Good night and Happy New Year, Robin.

MR. MacNeil: Happy New Year, Jim. That's the NewsHour for tonight. We'll be back tomorrow night with a look back at this tumultuous year. I'm Robert MacNeil. Have a happy and safe New Year's Eve.