Strange Rebels

1

Malaise

The 1970s have long been overshadowed by the decade that came before them. For the countries of the West, the 1960s were a period of intense social change and grand political theater, of revolutions practiced and proclaimed. By comparison, the years that followed looked—at least superficially—more like an era of transition, a muddled in-between time of dead ends and thwarted utopias, of disillusionment and drift. (One of the first histories of the 1970s, published just two years after the end of the decade, was appropriately entitled It Seemed Like Nothing Happened.) For Americans, the 1970s evoke the scandal of Watergate and the defeat in Vietnam. For Western Europeans, the period conjures up an ebbing of ideological passions that saw so many disappointed sixties radicals turn their backs on revolutionary politics, while a far smaller minority embraced the quixotic life of “urban guerrillas” (as the left-wing terrorists in Germany or Italy were sometimes called).

With the passage of time, though, the 1970s begin to appear less like a sideshow and more like the main event. In the United States, a recent surge of interest in the period has brought a fundamental reappraisal of its impact. In one (conservative) view, it was only in the 1970s that the radical notions advanced by the 1960s cultural and political elites translated into a broad social upheaval. The antiauthoritarianism of the sixties activists translated into a pervasive loss of faith in leaders, institutions, and ideals across classes. Watergate and the lost war in Vietnam fueled an unprecedented political cynicism. Drug use proliferated, crime rates soared, and racial tensions intensified. The lofty aspirations of John Kennedy’s Camelot and Lyndon Johnson’s Great Society gave way to a debilitating sense of chaos and disorder.¹

Other students of the period focus on the collapse of economic expectations. For much of the West, the 1970s marked the end of a long period of extraordinary economic growth. Virtually all the countries of Western Europe as well as the United States experienced an enormous surge in prosperity for the first thirty years after the end of World War II. (The French, indeed, refer to this period as les trente glorieuses, “the glorious three decades.”) Americans, in particular, watched productivity increase steadily from year to year, as did wages and consumption. Everyone benefited: factory workers saw their standard of living rise just as precipitously as that of their bosses. For the first time, even manual laborers could afford washing machines, vacations to faraway places, or college educations for their kids. This upward trajectory of wealth and opportunity continued through the 1960s and just beyond. It was in the seventies that this “Age of Compression”—so named for the steady increase in income equality that was one of its features—finally ground to a halt.²

There was one particular event that contributed to this revision of economic expectations. In 1973 the Arab-dominated Organization of Petroleum Exporting Countries (OPEC) responded to Washington’s decision to supply the Israeli forces in the Yom Kippur war by cutting off oil exports to the United States and other Western countries viewed as supporters of the Jewish state; the resulting surge in prices affected even the countries that were not directly targeted by the embargo. The result was the deepest economic slump since the Great Depression. Long lines formed at gasoline stations throughout the developed world. Officials in the United States beseeched consumers to go without Christmas lights over the holiday season; gas rationing was introduced. Suddenly, those optimistic assumptions about enduring growth no longer seemed to apply.

The energy crisis had a devastating economic effect, but perhaps its most enduring impact was psychological. Macroeconomic orthodoxy held that inflation tended to stimulate economic activity, so slow growth and high unemployment were assumed to be at odds with high price levels. Central banks in the United States, Europe, and Japan jointly cut interest rates, desperately hoping to stimulate a recovery. But nothing happened. Investment and employment failed to respond—yet inflation, already high before the “oil shock,” now began to climb. “Stagflation,” as this new phenomenon was called, defied all expert prognoses. The experts in Washington, and in the other capitals of the Western world, no longer appeared as the guarantors of prosperity.

In some ways, the first energy crisis merely exacerbated shifts that were already under way. The impact of the Arab oil embargo on the economies of the West was so devastating in part because the rules that had governed the postwar order were already in flux. At the end of World War II, the Americans and their allies had collaborated to create the Bretton Woods system, which laid out a framework for the global economy in the form of a system of loosely fixed exchange rates. Bretton Woods remained in place for thirty-six years. It established the US dollar as the pole around which everything revolved. By 1971, however, the United States faced a looming balance-of-payments crisis brought on by the costs of the Vietnam War and by its growing trade deficits with rising economic powerhouses like West Germany and Japan. The Nixon administration attacked the problem by announcing that the dollar would no longer be directly convertible to gold. The system of stable exchange rates was over, and the world economy would never be quite so predictable again. It is no coincidence that the seventies became the moment for the first anguished ruminations on what was then called “interdependence.” (The word globalization, which soon replaced it, earned its first mention in an article in the New York Times in 1974.)³

Other less visible forces were pushing the world toward interconnectedness. The Americans and the Western Europeans had long benefited from their privileged positions as the pioneers of advanced technological know-how and management; throughout the twentieth century, steady industrialization offered big productivity gains as labor shifted from agriculture to factories. But by the 1970s, these advantages were gradually eroded by the spread of manufacturing expertise around the world.⁴ It was in the seventies, arguably, that the West first began to realize that it had no monopoly on the fruits of development. The astonishing postwar success of Japan set the path for the newly industrializing “tigers” of East Asia (Taiwan, Singapore, South Korea, and Hong Kong). The two biggest Latin American economies, Brazil and Mexico, posted tigerlike annual growth rates of 7·5 percent during the 1970s. Growth in all of these countries built on their success as exporters, especially in manufacturing. By 1979, these six countries—the four East Asians plus the two Latin American giants—were supplying 40 percent of the West’s clothing imports; some of them were already moving into consumer electronics and shipbuilding. All this demonstrated that new players were perfectly capable of challenging the economic primacy of the established capitalist countries.⁵

Technology played a crucial role in these transformations, too. American sociologist Daniel Bell coined the term postindustrial society in the 1960s, but his readers had to wait a few years to appreciate what he meant by it. The seventies brought a forward leap in the development of semiconductors and microprocessors and ushered in an era that would see computers move from the preserve of governments and big corporations to small businesses and even individuals. The cost of satellite communications now dropped to a level that enabled widespread use—with dramatic effects on the spread of news and the speed of global financial transactions. Consider the extent to which the twenty-first century remains in the thrall of technological innovations that were born in the 1970s: e-mail, the bar code, the MRI, the pocket calculator, and the personal computer.

Apple and Microsoft were both founded in the 1970s. In the years before, most people had thought of computers as monstrous machines affordable only by big bureaucratic organizations. The seventies changed all that for good. From then on, it was no longer the belching smokestacks of the huge Ford factories in Michigan’s River Rouge that symbolized industrial prowess. The world that was coming into being would be a messier, more volatile place, one in which an elegant idea could end up counting for more than an army of assembly-line workers. In the new US economy, corporations could easily relocate factories to lower-cost venues overseas, services and finance played an increasingly prominent role, and the once-enormous political power of unions was beginning to flag. This shift in the balance of economic forces meant, among other things, that the rewards of economic progress would no longer be spread quite so widely as before. The year 1979 marked the moment when income inequality in the United States began to increase for the first time since 1945—the beginning of a trend that has continued to the present day.

Of all the Western economies that were buffeted by these trends, none of them suffered quite so badly as Great Britain. The OPEC oil embargo dented growth figures everywhere, but the United Kingdom proved especially vulnerable.

Some of the problems had their roots in the political and economic system that Britain had built in the wake of World War II. In the general election of 1945, British voters had given overwhelming approval to the Labour Party’s ambitious plans for the creation of a far-reaching welfare state. Under Prime Minister Clement Attlee, the Labourites soon made good on their word. They established the National Health Service and comprehensive systems for pensions and unemployment insurance. They also nationalized key sectors of the economy, from coal to railroads, and firmly embraced Keynesian macroeconomic policies. Even when the Labour government lost power in 1951, the new Conservative government made no challenge to the reforms implemented by its predecessor, thus attesting to their enduring popularity with the public. Thus was born what came to be known as the “postwar consensus,” the bedrock of British politics until the end of the 1970s.

The postwar consensus endured because it worked—at least for the first few decades. The British economy grew steadily through the 1950s and 1960s, widely spreading the benefits of expanding national wealth. But by the 1970s, the bloom was off. Rising global competition had revealed the structural rigidities of Britain’s social-democratic system. The oil shock hit at a moment when traditional British manufacturing industries were already affected by painful decline. Once-proud working-class cities had turned into landscapes of blight, factory ruins defaced with graffiti. In the 1970s, the British economy tottered from one crisis to another. In 1974, in the wake of the Arab oil embargo, Conservative prime minister Edward Heath was forced to introduce electricity rationing and a three-day workweek. Unemployment surged and productivity sagged. British business seemed to have lost its way. Entrepreneurs fled punishing tax rates for more hospitable climes. Strikes punctuated the national news with benumbing regularity; the trade unions repeatedly demonstrated their enormous political power, contributing mightily to the fall of Heath’s government in 1974.

These were the problems that confronted James Callaghan as he assumed the office of prime minister two years later. His Labour Party had won the 1974 election under the leadership of the aged Harold Wilson, who returned to Number Ten Downing Street after an earlier stint as prime minister. But Labour’s margin of victory in the election was narrow, and the best that Wilson could do was to form a minority government with his party in the lead. His administration soon foundered as it struggled to deal with the aftereffects of the energy crisis and the intensifying demands from the unions, his party’s most powerful constituency. By the time Callaghan stepped in to take the beleaguered Wilson’s place, inflation had reached a staggering 25 percent. Outside investors lost confidence that the British government would ever regain control over its finances, and the pound became so anemic that London found itself facing a full-blown balance-of-payments crisis. Put simply, the British state had run out of the foreign exchange it needed to pay for imports. Bills were coming due that the United Kingdom was not in a position to pay.

To his credit, Callaghan did not soft-pedal the causes. He inherited stewardship of the economy at a moment when the old sureties were crumbling. His chancellor of the Exchequer, Denis Healey, declared that Britain couldn’t go on spending its way out of crises. Callaghan’s son-in-law, an influential journalist and politician by the name of Peter Jay, had even become a convert to the economic school known as “monetarism,” which deemed strict control of the money supply to be the only remedy for inflation. This flew in the face of the Keynesian principles of Britain’s postwar consensus, which placed a premium on combating unemployment through government spending. The speech that Callaghan gave at the 1976 Labour Party conference, authored by Jay, turned into something of a eulogy for Britain’s postwar economic system:

            For too long this country—all of us, yes this conference too—has been ready to settle for borrowing money abroad to maintain our standards of life, instead of grappling with the fundamental problems of British industry. . . . [T]he cozy world we were told would go on forever, where full employment would be guaranteed . . . that cozy world is now gone. . . . We used to think we could spend our way out of a recession and increase employment by cutting taxes and boosting government spending. I tell you in all candor that that option no longer exists, and that insofar as it ever did exist, it only worked on each occasion since the war by injecting a bigger dose of inflation into the economy followed by a higher level of unemployment as the next step.⁶

Finally, in November 1976, the United Kingdom was forced to ask the International Monetary Fund (IMF) for a $3.9 billion loan to tide it over through the crisis. The conditions included brutal spending cuts and across-the-board austerity measures.⁷ Back in 1945, the United Kingdom had been America’s partner in creating the international economic system that had brought the IMF to life. Now London was calling on the fund for help in an existential crisis. It was the first time that one of the world’s developed countries had ever asked for IMF support. (Nothing comparable would happen again until 2008, when Iceland was forced to follow suit during the global financial crisis.)⁸

This was a humiliation of epochal proportions. A country that had been at the heart of the Western economic and political system found itself reduced to the status of a banana republic. Callaghan diagnosed the problems but was unable to come up with a remedy. Something always seemed to get in the way: the resistance of the unions, the global economic climate, the accustomed way of doing things. The old ideas no longer worked—that much was clear. But where were the new ones? Britain was waiting for something to give.

There were, of course, countries that benefited from the oil shock. First and foremost among them was the Imperial State of Iran, one of America’s key Cold War allies in the Middle East. Nevertheless, the shah of Iran, Mohammad Reza Pahlavi, welcomed the cash that poured into his coffers as a result of the OPEC embargo. He had ambitious plans for the remaking of Iranian society, and changes on the scale he envisioned certainly did not come cheap.

Ten years earlier, in 1963, he had inaugurated the grand reform scheme that he called the “White Revolution.” The idea of a revolution led by a reigning monarch might have seemed odd, but there was a certain logic to it under Iranian conditions. The shah knew that his country urgently needed modernization, but it had to be pursued without endangering his own rule. And the main threat to that rule, as he saw it, came from the Left. In 1953, an American-assisted coup had saved his throne by toppling Mohammed Mossadeq, a leftist-nationalist prime minister who had achieved immense popularity among Iranians through his efforts to nationalize the British-controlled oil industry. The shah knew that Far Left ideas enjoyed broad currency among Iran’s intensely politicized intellectuals and that the country’s deep class divides and entrenched poverty made it vulnerable to the lure of revolution. Though he had banned the powerful communist party, the Tudeh, in 1949, it was still enough of a force to lend vital support to Mossadeq in his nationalization campaign in the years that followed. After Mossadeq’s arrest, the shah responded by cracking down even harder on the communists. Thousands of their activists vanished behind bars, and the party never quite regained its former strength.

The White Revolution represented the other major component of the shah’s response to the communist challenge. Having crushed their organization, he would now selectively steal their ideas. On paper, at least, the shah’s program sounded as though it had been lifted from a Marxist-Leninist manifesto: sweeping land reform, state-sponsored literacy campaigns, nationalization of forests, the awarding of company shares to the workers. In practice, of course, many of these positive-sounding measures were undermined by corruption, nepotism, and bad planning—in other words, by the very nature of the regime they were supposed to be changing for the better.

Yet the White Revolution, fueled by rising oil revenues, did succeed on many fronts. By the beginning of the 1970s, Iran boasted an educational system that was the envy of its neighbors, a broad array of showcase industries, and the most powerful military in the Middle East. Many countries in the nonaligned world regarded it as a model of successful authoritarian development—something like China in the early twenty-first century. (Iran’s economic growth rates at the time were similarly dazzling.) Still, the achievements of the shah’s rush to modernity brought a whole host of new problems. The reforms jolted Iranian society. Migrants lured by the promise of factory jobs poured from the countryside into sprawling urban shanty-towns. Accelerated economic change undermined the positions of traditional elites like the once-powerful bazaar merchants. And the proliferation of educational opportunity, as positive as it was, raised unfulfillable expectations: the system produced graduates faster than the economy created jobs.

The shah’s policies were also calculated to anger one particularly influential interest group: the Shiite religious establishment. For hundreds of years, these scholars and clerics had proudly cultivated a sense of independence from the state. This didn’t stop them from doing business with it, or even accepting its favors, but they were careful to maintain control over their own institutions—above all the hawza, the prestigious Shiite seminaries, and the wealthy religious foundations. Whereas the shah’s father, the strong-willed Reza Shah, had railed against the clergy, and had once even physically attacked seminarians, his son had generally left the Shiite establishment to itself, muting resistance to his policies.

The White Revolution, however, was hardly calculated to meet with their approbation. Its embrace of Western ways posed a threat to the religious elite. The expansion of modern schools and universities offered overpowering competition to traditional educational institutions dominated by the clergy. Secular courts grew more important than those based on Islamic law. Reforms encouraged women to study, to work, and to scorn the veil.

The most prominent critic of these policies was an outspoken Shiite legal scholar named Ruhollah Khomeini, who denounced the launch of the White Revolution for measures that he deemed un-Islamic, such as its extension of suffrage to women in 1963. He was particularly incensed by the shah’s dependence on the United States and his closeness to Israel, which Khomeini regarded as the foremost enemy of Islam. Khomeini persuaded other senior religious scholars to join him in urging voters to boycott a referendum on the shah’s modernization plans. The shah responded by ordering Khomeini’s arrest in the seminary town of Qom, triggering three days of rioting by thousands of seminarians. The security forces quelled the protests at the cost of dozens of lives. Khomeini was later released, but after delivering another jeremiad against the regime in 1964, he was finally deported. The shah and his entourage presumed that this would put a stop to Khomeini’s influence within Iran.

They were wrong. In 1971, when the shah staged a lavish celebration to commemorate the twenty-five-hundredth anniversary of the founding of the Iranian monarchy, Khomeini issued a blistering condemnation of the shah’s extravagance from his exile in Iraq. Based in the Shiite holy city of An Najaf, Khomeini received a steady stream of zealous young clerics-in-waiting eager to absorb his message that a return to Islam was the only solution for what ailed their country. Some of these clerics later found themselves under arrest as well—but prison, as is so often the case, proved to be a productive learning experience in its own right. The shah had continued his crackdown on leftist dissidents, and imprisonment brought the men of religion together with them on equal terms. Their Marxist cell mates engaged the Shiite clerics in vigorous polemics, debates that would prove unexpectedly useful in the context of subsequent events.

Meanwhile, a new generation of Iranian thinkers was exploring ways to counter the onslaught of Westernization and to assert a distinctly Iranian political identity. A writer named Jalal Al-e Ahmad chastised his compatriots for their humiliating desire to ape the ways of the West and urged them to find a way back to their own culture. Politician Mehdi Bazargan and religious scholar Ayatollah Mahmoud Taleqani speculated about how to bring economic policy in harmony with the teachings of the Quran. Sociologist Ali Shariati devised an idiosyncratic fusion of Marxist economics and the Islamic concern for social justice. He succeeded in melding his passion for revolution with what he saw as the original militant mission of the Prophet.

Neither the shah nor his opponents on the Far Left recognized just how potent these new ideological explorations would prove. Pahlavi and the communists were united in their failure to understand the reactive power of Islam scorned.

The masters of the Kremlin had little reason to worry about the obscure maneuverings of Shiite scholars. The global geopolitical situation in the seventies offered Moscow many opportunities, and Soviet leaders were eager to seize them. The same oil-price hikes that hit the Western economies so hard were a boon for the USSR, one of the world’s leading petroleum producers. At a time when the West was deeply demoralized by its declining economic fortunes, the Soviets moved to press their advantage. Their greatest successes came in the developing world, where the process of postwar decolonization was approaching its climax.

The epochal American defeat in Vietnam was the high-water mark of Soviet global ambitions. The North Vietnamese capture of Saigon in 1975 conclusively established Moscow’s presence in Southeast Asia. The new pan-Vietnamese communist government immediately granted the USSR full basing rights at Cam Ranh Bay, the superb deepwater port that the Americans had turned into a state-of-the-art logistics terminal. The Kremlin had already established a key strategic foothold in South Yemen, right at the entrance of the all-important Persian Gulf, after a Marxist government had seized power there at the beginning of the decade. Moscow was cultivating close relations with the regimes in Iraq and Algeria. In Ethiopia, a communist military junta called the Derg seized power in 1974, anchoring Soviet power in the Horn of Africa. The Kremlin and its Cuban allies supported a Marxist-Leninist revolutionary party in the bitter civil war in Angola. The USSR maintained a close alliance with South Africa’s African National Congress and a host of other revolutionary movements around the continent. Moscow also supported many leftist groups in Latin America.

But despite this upward trend, the Soviets did suffer just enough setbacks to keep them nervous. The Kremlin offered ample support to Chile’s Marxist president Salvador Allende, but he was toppled by an American-supported right-wing coup three years after he came to power—one of the few clear strategic setbacks suffered by the Soviets during the 1970s. Another was the decision by Egyptian president Anwar Sadat to switch allegiance to the Americans after years of receiving Soviet assistance. The memory of that betrayal would haunt the Politburo in Moscow for years to come.

The Sadat precedent had particularly far-reaching consequences in Afghanistan. Throughout the 1960s, Kabul found itself the object of the two superpowers’ intense rivalry. Afghanistan occupied a geopolitical crossroads, right on the USSR’s southern border and north of the Persian Gulf, home to the energy resources that kept Western economies humming. Afghanistan was flanked by two important US allies, Iran and Pakistan, yet it had close historical ties to the Soviet Union, which had been the first country to recognize its independence in 1919. All this made it a focus of Cold War competition—something that the Afghans were able to leverage to their own benefit, at least for a while. The Americans and the Soviets spent hundreds of millions of dollars in their efforts to vie for influence. Washington sent in countless Peace Corps volunteers to offer assistance with agriculture or to teach in schools. Moscow built factories and roads and brought thousands of Afghans to the Soviet Union to learn engineering or medicine. And Afghanistan needed as much of this aid as it could get. It was one of the poorest countries in the region, hampered, among other things, by a weak state that had never managed to overcome the ethnic and geographic rifts that fragmented the country.

By the early 1970s, though, Moscow could begin to feel satisfied with its efforts. The Americans already had stronger regional allies in Iran and Pakistan, and policy makers in Washington were throttling back their assistance to Kabul. As American efforts waned, the Russians stepped up their own efforts to gain well-placed friends among the Afghan elite. The number of Afghan notables who had studied in the USSR or otherwise directly benefited from Kremlin largesse increased. Most important, the Soviets brought thousands of Afghan soldiers to train in the USSR. The Afghan military was probably the most powerful institution in the country, and one of the very few with national reach. Many of the trainees returned home convinced that Moscow’s way, with its radical creed of social reorganization, offered the best path for overcoming their own country’s backwardness.