How it works:
There is a 4x4 module usually located behind the drivers seat, these don't fail often, but can.
The 4x4 module runs the electric shift motor on the back of the transfer case, the shift motor often stops working, a few taps with a hammer will often get it working, temporarily, again.
Inside the shift motor are several contacts that power the dash lights.
So when you push the 4x4 high button on the dash, that command goes to the 4x4 module, which then sends power to the shift motor, if the shift motor turns the transfer case shift rod to the correct location then the contacts touch and power is sent to the 4x4 high light on dash.
Same for 4x4 low.
So dash lights not working means the shift motor is not turning.
There are also a couple of fuses that power the shift motor and 4x4 module that can blow.
I don't have a 1989 wiring diagram so can't help you ID # of each fuse
Here is a read about shift motor:
http://www.therangerstation.com/tech_library/TCaseshiftmotor.shtml
4x4 module info here:
http://www.therangerstation.com/tech_library/4wd_control_module.html