Rebellion without a cause

By Niall Ferguson

I have been trying to explain 1968 to 2008. It has not been easy – and not just because I was barely four years old in May 1968. Students today seem, to put it mildly, bemused by the 40th anniversary of les evenements de soixante-huit. “I was here in ’68,” enthused a parent who sat in on my lecture on the subject at Harvard a couple of weeks ago. “I remember the occupation of University Hall.” His daughter gave him the look my teenage daughter gives me when I try to explain the impact the Sex Pistols had on me when I was her age.

Harvard was not, of course, one of the epicentres of the higher-education earthquake of 1968, such as Berkeley, Columbia, Nanterre or Berlin’s Free University. But it was not without its seismic tremors. As at many universities, there was a branch of Students for a Democratic Society (SDS), and in 1968, having already organised successful demonstrations against campus visits by the secretary of defense, Robert McNamara, and a recruiter for the napalm manufacturer Dow Chemical, the group turned its fire against the Reserve Officers’ Training Corps, then an integral part of the university (ROTC instructors had the status of faculty members). The culmination came in April 1969, when members of the Worker-Student Alliance occupied the university’s main administrative building, evicted the deans working there and renamed it “Che Guevara Hall”.

With The Beatles’ “Revolution” blaring from their own headquarters, the university’s administration saw no alternative but to call in the police. But the violence of the “bust” had the unintended effect of triggering a strike by a much larger number of students. The Faculty of Arts and Sciences, already a distinctly liberal body, urged a more conciliatory line. Punishments for the protesters were reduced. The ROTC was effectively kicked out of Harvard. New courses sprang up with titles such as “Radical Perspectives on Social Change”, to which students flocked in their hundreds. And, in what one disgusted professor called “an academic Munich”, the Faculty agreed to give black students a say in the hiring and tenure decisions of the new department of Afro-American Studies.

Harvard was thus a microcosm of 1968 as it is conventionally understood by historians, not to mention the many journalists, filmmakers and others who are currently commemorating the baby boomers’ annus mirabilis. At its heart was the student New Left, a minority of agitators who delighted in forming revolutionary associations (at Berkeley, for example, these included the Free Speech Movement, the Congress on Racial Equality, the Vietnam Day Committee, the Black Panther Party and the Student Nonviolent Coordinating Committee). There was, unquestionably, a strain of Marxism in the movement. Particularly in Germany, student leaders such as Rudi Dutschke had read their Herbert Marcuse and talked of opening “the third front” in the war against capitalism by causing “upheaval in the centres of imperialism”. Yet their specific demands were for changes within the system of higher education, not least the rules governing dormitory visits by members of the opposite sex.

Today’s students can see that there was a certain glamour to all this, hard though it may be to take seriously those old photographs of Dad with giant sideburns and a clenched fist. Yet – partly because they take for granted the changes to campus life that came about because of 1968 – the present generation struggles to see what exactly it was all for. Weren’t their predecessors worried about their grade-point averages when they went on strike? At a recent visit to Boston University, the former firebrand of Nanterre, Daniel Cohn-Bendit (now a 63-year-old Green Euro MP), was almost apologetic. “You have always to keep in mind that in the 1960s we were students,” he said. “We weren’t afraid of unemployment. We didn’t know Aids. Climate change, we didn’t know it. The social and ecological disasters of globalisation, we didn’t know them.”

So if they weren’t trying to save the planet, what were the 68ers aiming to achieve? One part of the answer is readily intelligible today. They were protesting against an unpopular overseas war. It is worth reminding today’s students, however, that this was a much bigger conflict than the Iraq war (to which the majority of them are strongly opposed). By the end of 1968, 30,844 US service personnel had been killed in action in Vietnam, 180,730 had been wounded and 368 were missing – almost 10 times more American fatalities than have occurred in Iraq. It is also worth noting that popular support for the war had already dropped below 40 per cent in 1968, so that by opposing the war, students were not wholly out of step with public opinion.

On the other hand, the Vietnam war wasn’t the worst conflict that the cold war could have produced. To my mind, the puzzling thing is that Vietnam managed to arouse so much more student outrage than the nuclear conflict that had come so close to happening just six years before over Cuba. At that time President John F. Kennedy had been forced to imagine death tolls in the hundreds of millions, not tens of thousands. Yet the Campaign for Nuclear Disarmament was at a low ebb in the later 1960s.

Looked at more closely, then, 1968 was about much more than opposition to Vietnam. For one thing, the upheavals of that year were by no means confined to a few American and west European campuses. As the historian Jeremi Suri has shown in his excellent book, Power and Protest, there were also revolutionary events in eastern Europe and in China that clearly had nothing to do with Vietnam. In Prague, dissident intellectuals such as Ludvik Vaculik and Vaclav Havel had a brief taste of free speech as Alexander Dubcek replaced the Stalinist Antonin Novotný and ushered in the Prague Spring. In China, meanwhile, the cultural revolution reached its crisis point as Mao suddenly took fright at the anarchic generational war he had unleashed. In both cases, military force had to be used to bring youthful protest under control. As the Red Army tanks rolled into Czechoslovakia and as the People’s Army fought a mini civil war with the Red Guards, the student Left in the west was confronted with a horrible reality: the regimes that espoused Marxist ideology were far more brutally repressive than the governments of the capitalist world.

That would have been a fatal blow if 1968 had been primarily about Marx or, for that matter, Mao. But it clearly was not. Far more important than Suri’s disjointed and doomed ”global revolution” was the cultural ”great disruption” of the late 1960s. This disruption involved fundamental shifts in the roles of, and attitudes towards, three groups: youths, black people and women.

The soixante-huitards really were “talkin’ ’bout their generation”: the postwar baby-boom generation, more numerous and more prosperous than the young had been for many years. The change was especially pronounced in the US, where the proportion of the population aged between 16 and 24 surged from 11.5 per cent in 1957 to a peak of 17.2 per cent in 1978. Elsewhere, the increase was smaller, but the peak share of the young in population was even higher. In South America by the end of the 1970s, more than a fifth of the population was aged 15-24.

The effects of the postwar baby boom were amplified by the expansion of higher education. Before the second world war, only a tiny elite of young people had attended university, even in the US, where students in higher education accounted for just under one per cent of the entire population. In Europe, the shares ranged downwards from 0.29 per cent in Austria to 0.07 per cent in Portugal. By 1968 these proportions had increased by factors of between 2.5 and 12.8. In the US there were now nearly 6.7 million students, equivalent to 3.3 per cent of the population.

The expansion of higher education significantly increased the presence at universities of two groups who had previously been discriminated against: African-Americans and women (whose share in the US student population had been significantly reduced by the 1944 GI Bill, which guaranteed veterans a college or vocational education). This helps explain why the “great disruption” ended up being as much about black civil rights and about women’s liberation as it was about Vietnam. Of course, the conditions that produced race riots in Watts, Memphis and Washington could scarcely have been less like those on Ivy League campuses. Yet it was typical of the way genuinely popular protest influenced elite protest that the promotion of Afro-American studies became a key item of the Harvard radicals’ agenda.

. . .

Women’s rights mattered even more, considering that already by 1968 the female proportion of the student body had risen back to 40 per cent (compared with 29 per cent 20 years before). And perhaps, on reflection, that was the most important component of the great disruption. For surely nothing changed more radically in the lifetimes of the baby boomers than the role of women. Economic discrimination was reduced, divorce made more equitable, contraception and abortion made (in most countries) legal.

Published two years after 1968, Germaine Greer’s The Female Eunuch still strikes me as the indispensable document of that era, not least for its memorably fierce denunciation of the “enemies” of “the revolutionary woman”: “the doctors, psychiatrists, health visitors, priests, marriage counsellors, policemen, magistrates and genteel reformers”. Women, Greer urged, must “stop loving the victors in violent encounters ... Women must not marry ... Women must reject their role as the principal consumers in the capitalist state ... They should use cosmetics strictly for fun ... and form household co-operatives.”

Characteristically for the times, Greer also held out the hope that feminism would make it possible to skip the less appealing coercive phases in the Marxist model of revolutionary progress. “Women’s liberation, if it abolishes the patriarchal family,” she argued, “will abolish a necessary substructure of the authoritarian state, and once that withers away Marx will have come true willy-nilly.” Greer’s “fantasy” was that “it may be possible to leap the steps of revolution and arrive somehow at liberty and communism without strategy or revolutionary discipline.” That one sentence says it all about 1968.

They wanted a revolution. But they wanted a mixed-sex party – a really big one – even more. And that reminds us that the quintessence of the late 1960s was not the barricades in Paris, effective though those were in hastening the downfall of General de Gaulle. Barricades were old hat, a tired re-enactment of 1789, 1830, 1848 and 1871. A far more original historical contribution was the open-air rock festival, epitomised by Woodstock. Though it was held a year later, in August 1969, Woodstock was the defining moment for the 68ers. And the climax of it all was, without question, Jimi Hendrix’s searing, distorted solo version of “The Star-Spangled Banner”. There he was, 26 years old, black, the son of divorced parents, the only one of five siblings not taken into care, a high-school dropout, a convicted car thief, a failed soldier, the father of at least one illegitimate child, a musical genius doomed to die a year later, drowned in his own vomit. As Hendrix tortured the American national anthem with all the feedback and tremolo his Fender could produce, the frustrations of a generation were made deafeningly audible.

This was protest, not revolution. To see the distinction, take a closer look at the lyrics of the two most overtly political songs produced in 1968 by the era’s two most important pop groups, the Rolling Stones’ “Street Fighting Man” and The Beatles’ “Revolution”:

Well then what can a poor boy do
Except to sing for a rock’n’roll band?
Cause in sleepy London town,
There’s just no place for a street fighting man.

But if you go carrying pictures of Chairman Mao
You ain’t going to make it with anyone anyhow
Don’t you know it’s gonna be all right …

Hardly clarion calls to arm the proletariat. On the contrary, Jagger and Lennon were spelling out their own deep ambivalence towards both street protest and Leftist politics.

And that, we can now see, was wise of them. For if the generation of 1968 had an Achilles heel it was precisely the implausibility of their claim to be in some way aligned with the working class. “Why aren’t you millionaires’ kids in Vietnam?” shouted hecklers at some of the early anti-war demonstrations in Cambridge, Massachusetts. It was a good question. Unlike in the second world war, the educated elite was under-represented, if not quite wholly absent, from the officer class in Vietnam. For most working-class Americans, it was staringly obvious who was doing the more noble work.

And that, surely, explains what seems to me to be the key to 1968 – the principal reason why the revolutionary energies of the student radicals were so easily contained. The recently released film Chicago 10 brilliantly re-edits archive footage of the battles between protesters and police that raged in Chicago’s Lincoln Park during the Democratic party’s 1968 National Convention. The most impressive thing is the obvious relish of the riot police and National Guardsmen as they whack the hippies into submission. Everywhere, from Berkeley to Berlin, from Prague to Peking (as we then called it), the story was the same: the plebeian police always sided with authority against the students, their despised social superiors. To be further reminded of the loathing felt by blue-collar and redneck Americans for the hippie heroes of 1968, replay the final scene of Easy Rider (1969), when Louisiana rednecks gratuitously shoot Dennis Hopper and Peter Fonda.

It’s easy to forget, as the soixante-huitards exploit their still dominant place in the western media to romanticise their youthful antics, that the year 1968 ended with Richard Nixon’s election as president – a victory that owed much to the segregationist George Wallace’s candidacy, which took nearly 10 million votes and five southern states from the Democrats. To be sure, Nixon duly embarked on “Vietnamisation” of the war, drawing down US troops and pursuing a negotiated peace with Hanoi. Yet his methods were anathema to the college baby boomers.

Far from ushering in a new era of “liberty and communism”, as Germaine Greer had hoped, 1968 was the prelude to a profound political shift, most noticeable in the English-speaking world, which saw conservatism gradually reconstitute itself as a political ideology and the rise to power of conservative leaders who took positive pleasure in denouncing the excesses of the 1960s. Just one symptom of the backlash in the US was the upsurge in arrests and imprisonments (especially of young black men) in the late 1960s and 1970s – a trend that has yet to be reversed. The great disruption had not been to everybody’s taste, it turned out.

And there is a moral there for own time, too. Today’s American students are disproportionately Democrats. They strongly incline towards Barack Obama, a candidate who proudly boasts that he was “too young for the formative period of the 1960s – civil rights, sexual revolution, Vietnam war”. That has led some commentators to predict a “youthquake” in November’s US elections. If 1968 has a lesson for 2008, however, it should be to treat such predictions with caution. Considering the deep unpopularity of his own party at the moment, the man who spent 1968 in a North Vietnamese prison is polling very strongly indeed.

Inflation and the lessons of the 1970s

By Wolfgang Münchau

Inflation is rising and it seems the world’s central banks have critically misjudged the situation. Until a few months ago, most commentators worried about a repeat of the Great Depression. But the 1930s have virtually no relevance to our situation – except that some paranoid economists remain obsessed with this period. The only historical period that bears any resemblance to what is happening today is the 1970s.

Then, and now, an oil price shock turned into a rise in the general price level. Both then and today, central banks largely accommodated this price rise, which was a mistake then and is a mistake now.

According to a calculation by Joachim Fels, managing director of Morgan Stanley, the global weighted average inflation rate will be 5.4 per cent this year, while the global money market interest rate is currently only 4.3 per cent. This means that global short-term real interest rates are negative – at a time when inflation is rapidly accelerating. As monetary policy has been excessively accommodating for more than a decade, inflationary pressures have built up in the global economy. This was concealed initially by a series of asset price bubbles. But when too much money finally stopped chasing too many assets, it started chasing too many goods.

As the central banks remain complacent, inflation will continue to go up. In the US, a survey-based measure of inflationary expectations recently showed an increase to more than 5 per cent. I would estimate there are now several hundred basis points of difference between the current Fed funds rate and an interest rate that would be consistent with price stability in the medium term. This is the 1970s Arthur Burns Federal Reserve all over again. The European Central Bank is also off-target, though not quite as badly.

The main difference between the situation in the 1970s and now is today’s absence of wage inflation, which explains why absolute inflation rates are a little more moderate. I guess this is probably because of some combination of deregulated labour markets and globalisation. But the lack of wage-push inflation is not necessarily good news. Falling real wages mean falling disposable income and tighter credit conditions mean less borrowing for consumption. Both factors coincided in Germany in the early part of this decade and I recall well what a depressing period that was. It is now happening elsewhere, and it could be a lot worse, given the precarious state of the global financial system. When purchasing power and credit lines fall, less will be purchased. As private sector consumption is the biggest component of gross domestic product, a long buyers’ strike will be the biggest coolant of world economic growth for several years to come.

In such a situation, we should expect to see more global trade protection and this would further reduce global economic growth. There is no inevitability to this. It is a policy choice. There was never a question that globalisation would produce losers. But the number of losers is getting larger and their ability to form effective political coalitions is improving. I would expect the anti-globalisation crowd to protect their interests eventually. In this respect, our situation could be worse than during the 1970s, a period when global trade was progressively liberalised.

The readjustment of the global economy is occurring under a regime of stagflation and possibly rising protectionism – hardly ideal circumstances. Inflation will also have huge implications for global capital flows. Contrary to what economic theory suggests, current account surplus countries were net exporters of capital during the boom years. But as inflation in the US rises, these countries will find it hard to maintain their currency pegs to the dollar. The end of the system known as Bretton Woods II will eventually lead to a reduction in foreign capital flows into the US and a rise in real US interest rates. As neither the US nor Europe is in a position to play the role of consumer of last resort, the entire scheme ceases to function. The higher the rate of inflation, the harder the adjustment will turn out to be.

Of course, there are still people out there who believe that deflation is a bigger threat than inflation. They say a US recession will automatically take care of the inflation problem. These same commentators predicted that the US economic slowdown would lead to a fall in global demand for oil and other commodities. This is consistent with another view, according to which the financial crisis is an isolated freak event – brought on by bad regulation, for example – and that the best policy response would be to support growth.

I have a very different view of this crisis. I have always believed that the global economic readjustment and the financial crisis are one and the same thing. An extreme degree of monetary expansion for more than a decade fuelled unsustainable consumption in the US, unsustainable rates of investment in emerging economies and a string of asset price bubbles – in property, in credit, in equities and now in commodities. The bursting of these bubbles triggered a financial crisis, to which monetary policy overreacted, thus producing even more inflation, on top of the pressure that was already in the system.

All crises eventually end. But in this one, adjustment will be unnecessarily long and painful. In the end I would expect that our policy response to this crisis will have caused more damage than the crisis itself.

Preserving the open economy at times of stress

By Martin Wolf

Is the spread of prosperity in the interests of citizens of today’s high-income countries? Is globalisation of their economies in their interest?

These distinct questions are raised in my mind by two important columns from Lawrence Summers (“America needs to make a new case for trade” on April 27 and “A strategy to promote healthy globalisation” on May 4). In these, Mr Summers argues that the international economic policies of the US need to be coupled more closely to the interests of its workers. Many Europeans will concur.

This is not to argue that the interests of citizens of high-income countries are more important than those of others. On the contrary, the view that increases in incomes of the poor offset equivalent losses for the rich is morally compelling. But politics is national. Unless or until a global political community emerges, politics will respond only to perceptions of national interest.

So is the rising prosperity of China, India and other emerging economies in the interests of today’s high-income countries? The correct answer to this is: not necessarily. It would be absurd to pretend otherwise.

The big advantages of the spread of prosperity include a wider distribution of innovation and bigger opportunities for profitable exchange. The rise of the US brought such benefits to the UK. Also valuable (though not certain) is greater political stability in previously impoverished countries.

The big disadvantage is greater competition for scarce resources. Power is a scarce resource: if country A has more, country B has less. Resources are also limited. If commodity prices rise, the terms of trade (the relative prices of exports and imports) of net importers will deteriorate: countries have to sell more exports to obtain given imports.

Since the end of 2001, US terms of trade have deteriorated by an eighth, as commodity prices have soared and the currency devalued. This has turned an 18 per cent increase in real gross domestic product between the last quarter of 2001 and the fourth quarter of 2008 into a 16.4 per cent increase in real national income. The difference is not huge. But it is worth some $220bn in today’s dollars. So countries may indeed be harmed by the prosperity of others. (See charts.)

The answer to this is: so what? As Willem Buiter has pointed out (Economic Internationalism 101, Maverecon, May 5), nothing can be done to halt the diffusion of “knowledge, skills, technology, management systems” and so forth.* Or at least nothing rational or decent can be done. Of course, the US could launch an unprovoked blockade or even war against China or India. To mention such ideas is to reveal their strategic and moral bankruptcy.

The US could, it is true, try to halt the flow of ideas. The UK tried to halt the spread of technology to the US in the early 19th century: it failed. The Chinese empire once made it a capital crime to export silkworms: that failed, too. Similarly, protectionism against the emerging countries might slow their growth, but would not halt it. Yet it would guarantee a breakdown in international relations that threatened hopes of a peaceful future.

To repeat, nothing can be done about the rise of emerging countries, as they follow the lead of the west. What cannot be helped must be accepted. This takes us to my second question. Given the rise of the emerging world, should the developed world limit the globalisation of its own economies? Of course, so long as high-income countries depend on imports of commodities, trade will be essential. Self-sufficiency is a mirage. It is a question rather of how much openness to trade and movement of capital and labour there should be.

One issue has been the huge current account deficits of the US. Yet these are at last contracting, as export growth explodes (see chart).

On trade more narrowly, the basic point is well known: free trade is in the interests of the country adopting the policy, unless it has monopoly power. But – an important “but” – the benefits and costs are likely to be unevenly distributed. The latter is particularly likely for trade between rich and poor countries. Free movement of capital or labour may also harm important interest groups within a country even if it raises aggregate incomes. The freer movement becomes, the harder it may also be to impose taxes and regulations on those able to move.

As Mr Summers argues, it is hard for a democracy to proceed with policies that a large minority believes are against their interests. If the fall-back position is not to be protectionism, itself no more than an inefficient tax and subsidy programme, more creative options must be chosen. The most obvious point, at least for the US, is the need to shift the provision of security from employers to the state. Corporate welfare states are unsustainable in a dynamic and open economy.

Yet if the US is to have a more generous welfare state, including universal health provision, as in every other high-income country, taxes will have to be raised. Indeed, they will have to be raised even to meet existing commitments. Mr Summers argues, in response, for international action against harmful tax competition. He argues, too, for greater international agreement on regulation. In some areas, notably finance, the latter makes sense. But the view that the US must obtain such agreements if it is to raise some of the lowest levels of taxation and weakest regulation in the advanced world is unpersuasive. If Sweden’s taxes can be 56 per cent of GDP, it is not tax competition that keeps the US at just 34 per cent. The mobility of capital and people is an excuse, not a justification, for low US tax levels.

What is desperately needed is an honest debate about these issues. Such a debate would, I believe, reach four fundamental conclusions. First, whether or not citizens of the US (or other high-income countries) welcome it, the global spread of economic development is ineluctable. Second, protection against imports is a costly and ineffective way of dealing with the consequences. Third, parties of the centre-left should argue for redistributing the spoils of globalisation, not sacrificing them. Finally, a necessary condition is higher taxation of the winners. But the chief obstacle to that is a lack of domestic political will. Globalisation is not a reason for low taxes, but an excuse. It should be discarded.

Everybody should remember, above all, that the opening of the world economy is the west’s greatest economic policy achievement. It would be a tragedy if it were to turn its back on the world when the rest of humanity is at last turning towards it.