The 1970s: When Small Fought Back
The notion that it was good to have vast concentrations of political power in the state, economic power in large corporations and social power in religious and civil bodies dominated the greater part of the Twentieth Century. This ‘big consensus’ was forged in the late 1800s, grew in influence during the first two decades of the twentieth century and then fundamentally shaped government, business and society from the thirties onwards.
During the 1970s tiny cracks in this consensus began to open up. Thinkers who had been questioning big power for years began to get noticed and small groups of entrepreneurs and campaigners challenged social conformity and pushed back against the dominance of corporations and government.
This was not a unified movement by any means. These ‘smallists’ knew little of each other and would have disagreed on a great deal had they met but in their own spheres they were striking blows against the big consensus in ways which were to have great consequences for the revival of a small outlook in the Twenty-first century.
The Chief Economist’s Dream
As a symbol of the last Century’s love of big business and big government, you could not do much better than the UK’s National Coal Board (NCB). Created in 1946, it merged 850 private mining companies into one massive corporation owned entirely by the British state. At its height the NCB controlled over 1,600 mines, possessed more than a million acres of land and employed 700,000 people. Much of Britain’s industry relied on coal, so the NCB and hence the Government were at the very heart of the country’s economy. In terms of scale, importance and (literally) power, the NCB was big. Very big.
But in 1960, the NCB’s chief economist started to have a strange recurring dream. He would be sitting in the boardroom with all the organisation’s directors (as he had done regularly for the last ten years) discussing matters of grave importance to the coal industry and the wider economy. The directors would intone seriously about a problem before identifying a solution after which one of the members of the Board would walk over to a large telephone switchboard and start plugging wires purposefully into various holes to implement the decision. After a while, the chief economist would feel compelled out of curiosity to explore this device. What he always found was that the machine was connected to nothing at all.
These surreal imaginings might be dismissed as little more than a vaguely interesting anecdote from the depths of British industrial history, were it not for the fact that the economist in question was a German émigré called E.F.Schumacher, the author of a book read by millions including student radicals, academics, business leaders, and presidents in the mid-1970s. The work was called Small is Beautiful.
For much of his life Schumacher followed an intellectual road travelled by very many economists in the Twentieth Century. As a young man he had been schooled in and largely accepted the conventions of technical and conservative mainstream economics. During the 1930s, however, he fell increasingly under the spell of John Maynard Keynes.
Schumacher came to believe that the state had a central role to play in directing and planning a nation’s economy. Like many of those we have already met, Schumacher was convinced that such planning would address the instability and inequality of capitalism while also using the vast concentration of resources and power available to governments to deliver a more efficient and innovative economy. With such convictions Schumacher was perfectly placed to take on the chief economist role at the NCB.
However, around the time he started having that dream, Schumacher broke with the script. To the utter bewilderment of his colleagues and friends, this man brimming with intellectual self-confidence began to question the very principles around which he had built his career and which underpinned the economic policy and business practice of the time. As in his dream, Schumacher was discovering that the great things promised by big government and big corporations amounted to far less in reality. When he finally summarised all of his thoughts in Small is Beautiful in 1973, he found a world enormously receptive to his ideas.
The book sold rapidly, was translated into many different languages and Fritz Schumacher was quickly booked up two years in advance for speaking engagements across the world. He was showered with honorary degrees and awards. Maybe most poignantly, for a German who had been interned in Britain during the War (despite his hatred of Hitler), he was given a prestigious official honour and was invited to meet and discuss his ideas with the Queen and the Duke of Edinburgh. Technology was the central issue for Schumacher. He was passionately concerned that in its furious pursuit of all things big, businesses and governments were placing creative and meaningful work beyond the grasp of ordinary people. Because politicians and business leaders had become so enamoured by the power and profits that resulted from huge concentrations of resources, a giant technology had been created to satisfy that desire. Massive factories contained enormous, complex machines and processes that churned out millions of standardised products. Humans had become the slaves of these machines working to the remorseless rhythm of the factory.
Establishing a small scale business which a worker could run on their own terms and employing their unique creativity had become impossible because the investment required to purchase the technology used by big business was way beyond the means of the ordinary person. Maybe most worryingly, these huge factories had a ceaseless appetite for the fossil fuels that Schumacher recognised, well before others, were environmentally damaging and politically unreliable. It was no coincidence that Schumacher became an acclaimed seer just as Middle Eastern countries started using oil as a political weapon to devastating effect.
Schumacher was unclear what could be done to save the advanced economies from themselves now they had travelled so far down the road of big power but the developing world, he argued, had time to choose a different route. As a result, he spent much of his later life travelling the world trying to persuade the governments of Africa, Asia and Latin America to adopt what he called an ‘intermediate technology’ approach. Rather than mimic the mass production economies of the capitalist west and Soviet east which pulled millions of workers off the land into dehumanising and destructive work, developing nations should adopt a different technology that would allow the masses to set up their own small businesses and workshops in their own communities. This technology would aim to be more productive and geared to a modern economy than the spinning wheels and anvils that had been around for centuries but it would not replicate the giant, complex machines and processes so beloved of the West. Schumacher was fond of quoting Gandhi’s maxim: “not mass production but production by the masses”.
Hugely overworked through endless travel, lectures and meetings with the powerful, Fritz Schumacher died suddenly on a train travelling through Switzerland on yet another speaking tour. He was 66 and it was just three years since the publication of his masterpiece.
Maybe he should have slowed down a little not just for the sake of his health but also to take stock of what was actually happening in the most advanced economy on the planet. Small is Beautiful was wildly popular in America where Schumacher’s lectures attracted thousands of young people looking for new answers to the questions posed by the rebellions of the 1960s. He even earned a personal audience with President Carter. But Schumacher was unaware that it was values very similar to his own that were inspiring a small band of Californians to create the intermediate technology that the economist thought he was more likely to find in the rice plantations of Burma and the backstreets of Delhi.
The Homebrew Revolution
During the 1960s the mass production model of which Schumacher was so critical had taken a new turn. It had become computerised. The enormous complexity of managing the vast administration, production, marketing and distribution efforts of the biggest companies the world had ever seen required an ability to control information which was beyond the capacity of mere humans. Computing firms like IBM and Honeywell came to the rescue. They rapidly became highly successful companies themselves providing the superior information management corporations now required. They also found eager customers in government which needed similar levels of data control to manage the enormous military, welfare, health and other functions now delivered by the state.
As Schumacher recognised, organisations built around great concentrations of power and resource would demand technologies designed to suit their big model. True to form the technology developed and deployed by IBM and others was built around a vast computer which did all the memory and processing work for an organisation. This computer could be accessed and manipulated by terminals which had no major processing power of their own. This was computing mimicking and reinforcing the big consensus: it was expensive, centralised and complex.
However, in January 1975, a magazine called Popular Electronics carried a front cover story about a new computer called the Altair 8800. It was a remarkable machine. It used the most advanced microprocessing chip on the market and was priced at only $397 – the result of an incredible feat of supply chain negotiation. The Intel chip itself retailed for $360.
Most importantly, however, it was a home terminal: it could be used without being attached to a massive mainframe computer.
The computer was designed and manufactured by a company called MITS and its CEO, Ed Roberts, was praying that the publicity generated by Popular Electronics would lead to at least 200 sales and save his company from the bankruptcy it was facing. Roberts’ prayers were answered many times over – within a few weeks the company had 4,000 orders.
But there was something hollow about the Altair 8800; literally in the case of the model displayed on the front of Popular Electronics. By January 1975, MITS had only managed to produce one working model and that had got lost in transit to the magazine: what appeared on the cover was nothing more than a metal box. Staff worked frantically to meet the orders but still customers had to wait months for their computer.
The Altair was also strictly for tech fanatics. It took days to piece together, hours to programme and then could only do the most basic tasks such as flash red lights in a certain order. And, with no memory, the results of any programmer’s efforts were immediately wiped as soon as the machine was turned off.
As a sustainable product, the Altair was hopeless and MITS was gone within four years but it did act as a catalyst for one of the most important blows against the big consensus. This was the rise of home computing which created the infrastructure for the development of the technology which, more than any other would make the twenty-first century an era of small: the internet.
Although the early home computing pioneers could not foresee the internet, they did understand very clearly that their mission was a revolution against big power. Lee Felsenstein was a case in point. Lee would go on to be a central figure in the chaotic world of 1970s computing centred in the Bay area of California but before then he had been inspired by the radical politics of the 1960s.
Introverted, short-haired and with no interest in drugs, he was an unlikely student revolutionary. He was enough of a leading activist, however, for the defence attorney in a notorious trial against the organisers of a Stop the Draft demonstration to have called for Lee to be on the stand instead of his clients.
For most of his revolutionary comrades, computers were part of the problem: incomprehensible machines that were used by corporations, the military and government to enhance their control over information and bulwark their power. But Lee didn’t agree. Computers were indeed used by big power for their own ends but he had the knowledge, being an electronics engineer, and the vision to realise that computers could be used to free people if only those people could get access in the first place. Lee Felsenstein was not alone. Although, the intersection of the Venn diagram sets labelled student revolutionary and computer geek was not large, it was big enough for some of its members to find each other. After placing an advert in the back of a radical newspaper, Lee soon found himself working with a handful of like-minded people calling themselves Resource One. To Lee’s frustration, the group did little more than talk.
But that was before Ted Nelson wrote and self-published Computer Lib in 1974. Here was a manifesto, a call to arms that sent a jolt of electricity through the rarefied and niche world of tech revolutionaries. Nelson proclaimed “cybercrud” as the enemy: the false ideology that keeps the use of computing power restricted to a powerful elite working for big corporations and big government:
Knowledge is power and so it tends to be hoarded. Experts in any field rarely want people to understand what they do, and generally enjoy putting people down. Thus if we say that the use of computers is dominated by a priesthood, people who spatter you with unintelligible answers and seem unwilling to give you straight ones, it is not that they are different in this respect from any other profession. Doctors, lawyers and construction engineers are the same way. But computers are very special, and we have to deal with them everywhere, and this effectively gives the computer priesthood a stranglehold on the operation of all large organizations, of government bureaux, and everything else that they run ... It is imperative for many reasons that the appalling gap between public and computer insider be closed. As the saying goes, war is too important to be left to the generals. Guardianship of the computer can no longer be left to a priesthood.
Fired up, Lee took Nelson’s call to deliver “Computer Power to the People” very literally. Abandoning Resource One, he worked with a new group called Community Memory to develop terminals that would be placed in public spaces for use by anyone.
The most successful effort was outside a hip record store in Berkeley called Leopold’s. As Community Memory explained in a handout, the "Model 33" was an attempt to create "a communication system which allows people to make contact with each other on the basis of mutually expressed interests without having to cede judgement to third parties”.
The terminal was immediately popular.
Many people searched for basic information: the addresses of health clinics in Berkeley, advice on good places to eat, contact details for plumbers. All the results printed out on paper as monitors were still in development at this time. But then visitors to the record store started leaving random messages for others to see: "U.S. get out of Washington", "Let a smile be your umbrella", "1984 will find you".
Users also began to have more detailed conversations about government domination often stimulated by the long, slightly paranoid entries by a mysterious figure calling himself Dr. Benway.
One user wanted to know where the best New York style bagels could be bought in the Bay area. It got four responses. Three gave addresses of bakeries. The fourth came from someone called Michael who had a radical suggestion: give him a call and he'd show the inquirer how to make their own bagels.
So primitive forms of data searching, tweeting, blogging and peer-to-peer creativity were already underway within a few days of the public's first exposure to an accessible computer. The tools of a small revolution were being forged. And Community Memory was not alone, across the US but particularly in California, a growing number of individuals and informal groups inspired by Ted Nelson were taking action to drag computers away from big power and give them to ‘the people’.
It was into this dynamic world of experiment that the Altair 8800 was launched and it explains why, despite its many flaws, it was received with such unexpected eagerness. The Altair was not just a machine. It wasn’t even simply a new and exciting generation of existing technology. It was regarded as an instrument of liberation: the first step on a road that would lead to a completely different world where big power had lost control of the flow and generation of information.
The machine was studied intently at the very first meeting of one of those informal groups that were springing up: the Homebrew Computer Club. Without the Altair, the club may never have got past the thirty-two people who attended that meeting in a Menlo Park garage but with it a fire was lit. Suddenly there was focus to their activity: building new hardware and writing software to make the Altair into something vaguely useful. And when the severe limitations of the Altair and MITS became clear, there was an even more stimulating goal: building a better machine.
Within weeks Homebrew was attracting hundreds. It became clear that something significant was happening. Revolutionary ideas about society combined with revolutionary ideas about technology at just the right moment to bring together, as one member put it: “the damned finest collection of engineers and technicians that you could possibly get under one roof”. And there was little doubt (or modesty) about the likely impact according to the same Homebrewer: this was the “equivalent of the industrial revolution but profoundly more important to the human race”.
And, of course, Lee Felsenstein was at the heart of it. Although he had not helped found Homebrew, he was soon its convenor and master of ceremonies. It was the making of the man. The introverted technician who had the reputation amongst his 1960s comrades for never laughing became a skilled, engaging and witty facilitator of what could well claim to be the most important hobbyists’ club in history.
Lee shaped the burgeoning group to be a mix of informal and formal interaction with opportunities at every meeting to share information, ask technical questions, view presentations on new developments and then, maybe most importantly, network like mad. Homebrew directly inspired and supported people at the earliest stages of their careers who were to become central figures in the home computing industry. It spawned a variety of companies and initiatives some of which went on to success but many of which provided vital lessons in how not to do things in this new world.
Maybe most importantly it became the context within which the fertile mind of a computing engineer called Steve Wozniak was stimulated. Inspired and informed by the Altair and the discussions at Homebrew, Wozniak was determined to create the best home computer he could: not one for geeks but one that could be used by anyone whether they understood how it worked or whether they couldn’t care less if it was powered by a microchip or a potato chip.
Wozniak soon teamed up with Steve Jobs – a man with far more business than computing sense. The result was the production of the first genuinely reliable home computer that could be used by anyone. This was the Apple II. It was launched in 1977. Within a few years Apple was a multi-million dollar business with tens of thousands of their computers populating offices, schools and homes. The big computers for big organisations model was dead. This was Fritz Schumacher’s ‘intermediate technology’ happening for real. The small revolution was underway.
Out and Proud
It was not just the big economic and technological consensus that began to face challenges in the 1970s. This was the decade in which the big culture of social conformity was assaulted as never before. The ‘family values’ that had been so rigorously encouraged and enforced in the post-war period finally met their match.
But the origins of this social aspect of the small revolution arose not solely out of frustration with the politicians and organisations that demanded adherence to the big culture but out of anger towards the very people who claimed to be challenging that culture in the previous decade. As many discovered those big culture values were so deep they were enforced as much by the young radicals of the 1960s as they were by their parents.
A large number of young women were involved in the radical politics of the 1960s taking part in occupations, campaigning for civil rights and marching against the Vietnam War. But many of them discovered that their own demands to be treated as equals within these radical movements were barely given a second thought by the confident young men leading the campaigns. As one activist put it women were at best seen as “worker ant type people” there to paint the banners, make the coffee and soothe the egos of their brave street-fighting men. At worst, they were ridiculed and abused when they tried to challenge such attitudes.
The emerging leader of a new generation of civil rights campaigners, Stokeley Carmichael, summed up the attitude of many radical young men when he was asked what the position of women should be in the movement: “prone” he replied. Supposed hotbeds of alternative thought and action such as the Students for a Democratic Society group showed the limits of their radicalism when women calling for a focus on their rights and concerns at a conference were pelted with food, verbally abused and driven from the stage. Similar attempts to block discussion or progress on women’s’ rights were repeated in organisations across the world wherever the student radical movement had taken hold.
For gay men involved in the radical movements of the 1960s the challenge was more subtle but no less problematic. While women fighting for rights and recognition faced hostility and ridicule, gay men faced a wall of indifference. Gay rights were simply not seen as a significant issue. These movements were fighting for ‘important’ things like an end to imperial aggression or working class revolution not the right to express yourself sexually. (Unless you were a heterosexual man, of course, in which case free love was a deeply revolutionary act.)
Part of the reason for the indifference was that gay men themselves largely accepted this point of view. Until the Stonewall riot (about which more below) gay sexuality was simply not seen as a political issue. It was something to be kept private. But that didn’t stop a growing sense that something was wrong here. As one British activist put it there was a strengthening feeling that gay men were being left out of all the “love-in-the-mud” fun. Despite their commitment to the campaigns of the 1960s there was a part of the gay campaigner that had to remain hidden if they were to maintain the respect of their comrades and friends.
Maybe if gay men had been as vocal as women about their demands they may have faced the same opposition. That was certainly the experience of gay women. When a group of lesbians demanded that the National Organisation of Women take up their concerns they met a very frosty response. Betty Friedan, the formidable President of NOW, rejected lesbianism as a “lavender menace” that would destroy the credibility of the women’s movement and made it her goal to expel lesbian activists from the organisation.
What women, gay men and lesbians were discovering was that the big culture emphasis on conventional ‘family’ values was not just an invention of the 1940s and 1950s. The message may have intensified in those decades but it was built on prejudices and taboos stretching back millennia. It would require far more challenging and bolder movements to break that big culture and allow diversity and personal choice to flourish than could be provided by the 1960s radicals. It was this insight that made the twelve months of 1970 the beginning of the end for the era of big culture. In that year, radical movements for women’s and gay people’s freedom burst into action and public prominence.
On 26th August, the fiftieth anniversary of the women’s suffrage amendment, a Women’s Strike for Equality Day was held with marches across the US. For many Americans it was their first exposure to a new, forthright movement called ‘feminism’. It kick-started a sudden explosion of interest in and support for women’s rights and freedoms: the National Organisation of Women saw their membership grow from 4,000 in 1970 to 20,000 in 1973 and then 125,000 by the end of the decade. And this was despite that fact NOW finally accepted lesbian campaigners into their ranks after Betty Friedan stepped down. The more informal and radical Women’s Equity Action League which had grown out of the younger radical generation expanded rapidly to forty state chapters.
In the UK, women campaigners decided to do something somewhat more eye-catching. In November the annual Miss World beauty contest was being held in London. Established in 1951 when big culture conformity was at its height, Miss World was televised live across the globe on major television networks securing audiences in the hundreds of millions.
What the organisers did not know was that a group of campaigners had bought tickets for the show. When the compere, the well-known comic Bob Hope began his opening monologue, the women began blowing whistles, running down the aisles and onto the stage shouting “we’re not beautiful, we’re not ugly, we’re angry”. The protestors explained afterwards that they simply wanted the freedom to develop their own identity without being judged, literally in the case of Miss World, by men.
The publicity around the stunt, the trial of five of the protestors and a large follow-up demonstration grabbed the attention of thousands of women who set up at least eighty local women’s groups across the UK by the end of 1971.
This campaigning activity was accompanied by an explosion of publishing with new magazines, newspapers and books aimed directly at the women’s movement suddenly appearing. In 1970 alone three classic feminist texts were published and devoured enthusiastically by women joining this new movement: Sisterhood is Powerful edited by Robin Morgan, The Dialectic of Sex: The Case for a Feminist Revolution by Shulamith Firestone and Sexual Politics by Kate Millett.
A similar explosion of activity seized gay campaigners as well. On 28th June 1970, gay men and women congregated to hold a rally in New York demanding their rights and freedom. Other demonstrations had been held before but this was different. Thousands rather than dozens attended and this time it was angry. The reason was simple – the rally took place on the street where a year ago hundreds of gay people had rioted after their patience had finally snapped following yet another police raid on the Stonewall bar.
The riot had tripped something in the minds of thousands of young gay men and women across America who felt alienated not just by the attitude of mainstream society but also the radical political movements in which many had been involved. Two new organisations sprang up in the weeks immediately after the riot – the Gay Liberation Front and the Gay Activists’ Alliance – and rapidly attracted supporters across the country. The 1970 demonstration launched this new movement to the attention of the world and the world reacted. In the UK, two students at the London School of Economics – which had been at the epicentre of 1960s student rebellion in the UK – decided to set up their own Gay Liberation Front in October. The first meeting attracted twenty people. Within weeks hundreds were attending.
This explosion of radicalism in 1970 was not the first time campaigns had been launched for women’s and gay rights. In fact, many brave people had been striving since the mid-1950s to challenge the ingrained prejudice that restricted the freedom of choice of women and gay people. But these campaigns were conducted in very polite terms as though the campaigners feared upsetting those they were trying to influence. The Homosexual Law Reform Society in the UK which had been working since 1958 to legalise gay sex, for example, always had heterosexuals speak on its behalf to ensure it maintained credibility.
But after a decade of social and political rebellion, women and gay people no longer felt the need to secure the respect of those who enforced the big cultural values of the post-war period. A deliberate decision was taken by this new generation of activists to simply behave as they wanted.
For those caught up in this period, the most liberating feature of the time was not campaigns for complex legal changes but the sudden freedom to be who you wanted to be alongside others who felt the same. For many young gay men and women, the most revolutionary aspect of the new movement was the organisation of discos where gay people could gather together openly and proudly. No more furtive, dingy bars or, worse, lives lived out in denial of one’s own real sexuality. This is why ‘coming out’ rapidly became such an important part of the movement and has been central to gay people’s lives ever since.
For women, the attendance at women’s groups was also a liberation in itself. For the first time many discovered that the frustration and anger they felt at being trapped in a certain role determined by those in authority was not something peculiar to them. Other women, and many of them, felt exactly the same way. The slogan ‘the personal is political’ caught on in the women’s movement because so many women were discovering that their frustration was not the result of personal failings on their part, as the big post-war culture had implied, but because a certain set of social and political values had forced them into roles they found frustrating and demeaning.
This was a very practical and immediate way of dismantling the post-war culture and encouraging, in its place, a world where individuals were free to make decisions about their lives for themselves. And the impact spread rapidly beyond the realms of politically motivated campaigners. A survey of American female college students in 1971 found that only 23% saw the main purpose of their college course as career development. No less than 18% believed that college was primarily about getting ready for marriage and family life. Only nine years later, 40% were at college to prepare for careers while just 1% saw it as preparation for marriage.
A big conformist vision where everyone lived similar lives bounded by a narrow set of accepted behaviours began to collapse into a world of small culture where people set their own rules and determined their own behaviours without reference to a big controlling body. The rebellion of the 1960s certainly played a role in this but it was the liberation movements of the 1970s that went to the very heart of that big culture built around traditional notions of strong, dominant masculinity and blew it apart by proudly asserting the freedom to choose for women and gay people.
The radicalism of the 1960s both encouraged and provoked the challenges to big culture in the 1970s. It also played a major role in stimulating the huge popularity of Schumacher’s message and in inspiring the tech entrepreneurs of California. However, another aspect of the revival of small that emerged in the seventies operated in a very different context inspired not by the radicalism of the left but of the right.
The Obscure Austrian
At exactly the time, Fritz Schumacher was having his strange recurring dream, Fritz Hayek was getting used to obscurity.
Better known as F.A.Hayek, the austere, tall, snuff-taking Austrian economist had trod a very different path to his German namesake. Unlike Schumacher, Friedrich Hayek had never been seduced by the ideas of John Maynard Keynes. Quite the opposite. For a brief period in the 1930s, just as the big consensus was taking hold, Hayek led the intellectual opposition to the emerging emphasis on state intervention in the economy.
With Hayek based at the London School of Economics and Keynes at Cambridge University, a rather ill-tempered and often highly technical row broke out between the two institutions. For a few years, it seemed an even match but Keynes’ influence in government, enormous international standing and, some might contend, greater skill with complex economic analysis won out.
An academic colleague, Ludwig Lachmann, explained ruefully that when he arrived at the LSE in the early 1930s “everybody was a Hayekian; at the end of the decade there were only two of us: Hayek and myself”. All the others had defected to the Cambridge perspective. Keynes, Of course, was also far more in tune with the strengthening big consensus. Hayek looked, sounded and thought like a relic from another age.
Hayek, however, burst back with a vengeance in 1944. His fearsome attack on the love of state power and control exhibited by the extremes of both left and right – The Road to Serfdom – was a rapid and unexpected worldwide bestseller. It hit the right note just as fear of fascism was being replaced by fear of a new totalitarian menace in the form of the Soviet empire across Eastern Europe.
But the book also carried a much more controversial message. Hayek claimed that the growing trend towards economic planning in the West – inspired by his old Cambridge adversary – had within it the seeds of the very totalitarianism that Britain, the US and their allies had just shed much blood defeating. In the end, it was this unpalatable and frankly exaggerated claim which ensured that Hayek’s fame was short-lived. The popularity of social democratic parties across Europe and state intervention in the US during the 1940s showed that the fears of The Road to Serfdom were not widely shared by voters. For a second time, Hayek had flirted briefly with influence and fame but had then faded.
Hayek’s opposition to the big government vision of Keynes and his supporters was rooted in the fundamental principles developed by a group of economists based in Vienna where Hayek had studied as a young man before coming to London. For this Austrian School of Economics, an economy was fundamentally about the generation of value – the production of things which had worth. But this begged the question which had obsessed economists throughout the nineteenth century: what exactly gave a commodity value? Many economists of the time such as David Ricardo and Karl Marx felt it was the human labour expended to produce it.
The Austrian School, however, had a very different answer: value is whatever a consumer judges it to be. This so-called ‘subjectivist’ position essentially meant the value of a product was unknowable until it was offered for sale. Before a product’s value became clear, millions of consumers had to make their own complex and highly individual assessments not just about the product but about the product relative to all other products that might take their fancy. Ultimately, the outcome of all those assessments would be revealed through the price they were willing to pay.
For Hayek and his dwindling band of allies this was what Keynes with his big government mind-set overlooked. The economy was unimaginably complex, essentially unknowable in its day-to-day details and, most importantly, all the more successful because of that. Price was an astoundingly effective way for millions of consumers to tell producers what they valued at any particular time. The result was an economy that was far from perfect but one that did ensure things got made and were distributed to the right people at the right time and in the right quantities. To believe that such a spontaneous, complex and efficient system could be bettered by the planning of a small group of intellectuals and bureaucrats was a “fatal conceit” as Hayek entitled his very last book.
However, Hayek’s analysis was not simply a counter to the big state vision that so seized the world in the 1930s. His approach was an impassioned plea to let the small decisions and value judgements of millions of individuals flourish without interference from above by concentrated forms of power. Indeed, as time passed and Hayek continued to labour in the wilderness, he turned away from technical economics and developed into a philosopher who tirelessly developed his core belief that spontaneous social organisation that emerges from the small decisions of millions of individuals are not only more respectful of human dignity and freedom than big centrally planned systems but are also more efficient.
Hayek was no anarchist or radical libertarian. He believed that the freedom and efficiency that arises from spontaneity only does so because everyone follows clear and universal rules about how they interact. These are the rules which ensure people trade fairly and openly and respect each other’s private property. They needed to be constantly adapted to changing circumstances by elected lawmakers. They also needed to be enforced by the state. But importantly they were decidedly not laws designed to restructure society or shape the details of human behaviour in a way decided by politicians. They were simply the clear rules of a game that provided great freedom for the players to make their own decisions and interact in diverse ways.
Hayek hoped that his monumental study of these rules – The Constitution of Liberty – would prove to be his masterpiece and a worthy successor to The Road to Serfdom when it was published in 1960. However, despite some good reviews, the book did not sell particularly well nor did it generate any public interest. It looked as though both Hayek and his ideas had been defeated by the tide of history. Soon, the Austrian professor succumbed to a decade of ill-health and depression in which he wrote little.
In 1974, however, something expected by no-one, least of all Hayek himself, happened: he won the Nobel Prize for economics. It was a surprising decision by the Nobel Committee. Hayek had been more of a political and social philosopher than economist for over three decades and had been relegated to obscurity for almost as long. It was also a decision which left many mainstream economists – schooled of course in the Keynesian big consensus – annoyed that such a high profile prize had been awarded to someone whose work they felt had been resoundingly disproved by their guru in the 1930s.
The impact of the prize was huge. Hayek was not only personally reinvigorated but interest in his work and his views suddenly reached levels he had not experienced since the 1940s. The excitement many felt at the rediscovery of a long-lost thinker was helped enormously by the fact that the shine was rapidly coming off the Keynesian consensus. For the first time in thirty years the twin threats of inflation and unemployment stalked western economies despite the widespread claims that state-led economic planning had banished these problems for good.
The UK was hit particularly hard. Strikes and demonstrations became weekly events, power-cuts disrupted homes and businesses and politicians seemed increasingly helpless. At one stage electricity was rationed to three days a week to conserve power due to strikes by coal miners. In three short decades, the UK had gone from imperial powerhouse and world war victor to economic basket-case. Increasing numbers began to blame this mess on the Keynesian consensus that had dominated economic policy-making since the War. The belief that governments knew how to produce goods better than millions of businesses and their customers was taking a fatal blow to its intellectual credibility.
Ultimately the popular frustration turned into a political earthquake when two determined politicians – Ronald Reagan and Margaret Thatcher – seized the initiative and decided to overturn everything the big consensus had said about the benefits of large-scale government. They were both clear about the intellectual debt they owed to Hayek. Famously, Mrs. Thatcher while bring briefed in the mid-seventies by a Conservative staffer on the Party’s Keynesian-lite policies took out a copy of The Constitution of Liberty slammed it on the table in front of her and declared with typical steel “this is what we believe”.
Hayek remained an influential figure for the rest of his life despite his advancing years. Maybe most satisfyingly for him, he lived just long enough to see the collapse of communism in the Soviet Union and Eastern Europe. Thinking perhaps of the decades he spent in intellectual obscurity, he told a friend that he “hardly expected to live to experience this”. He died in March 1992 just before his ninety-third birthday.
The Small Legacy of the 1970s
The beginnings of the small revolution in the 1970s were complex and confused. In their own way each of the thinkers and movements detailed here were striking a blow against the big consensus. Schumacher took on big business and the big technology that sustained it. The Homebrew Computer Club actually created the smaller technology needed to undermine the power of big business. The women’s and gay liberation movements struck at the heart of big culture. And Hayek was the intellectual leader of a political shift against big government.
But no-one, at the time, joined the dots. These developments happened largely in isolation of each other. There was no shared sense that a small ethic was emerging to take on every aspect of the big. That meant there were great inconsistencies within the movements themselves.
Many of those who fought for women’s and gay liberation in the 1970s still clung to a socialist obsession with the beneficial power of the big state. The political figures who took up Hayek’s call for small government also led the big culture backlash of the 1980s against greater choice and freedom for women and gay people. Their policies also provided a boom for the giant corporations established in the first half of the twentieth century. While many of the Homebrewers went on to create just the sort of giant computing conglomerates that they themselves had hoped to destroy.
The result is that even today most ideologies, parties and movements fail to fully embrace a consistently small agenda: one that combines small government, small culture and small business even though one of the most significant trends of the last forty years has been the dismantling of the big consensus of the twentieth century in each of those areas.
The benefits of a consistent and forthright small agenda will be explained in the rest of the book but before that let’s explore how the big consensus was weakened even further following the breakthrough of the 1970s.
Further Reading and Sources:
Kathleen C. Berkeley The Women’s Liberation Movement in America
Vicki L. Eaklor Queer America: A People’s GLBT History of the United States
Alan Ebenstein Friedrich Hayek: A Biography
Paul Freiberger & Michael Swaine Fire in the Valley: The Making of the Personal Computer
F.A.Hayek The Road to Serfdom
F.A.Hayek The Constitution of Liberty
Adam Lent British Social Movements Since 1945: Sex, Colour, Peace and Power
Steven Levy Hackers: Heroes of the Computer Revolution
Arthur Marwick The Sixties: Cultural Revolution in Britain, France, Italy and the US
E.F.Schumacher Small is Beautiful: Economics as if People Mattered
Jesus Huerta de Soto The Austrian School: Market Order and Entrepreneurial Creativity
Barbara Wood E.F.Schumacher: His Life and Thought