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The major difference between the hippies and the beatniks is that the hippies were more aggressively political and public than the beatniks were.
The beatniks were a smaller group that was centered around art and artists. They were typified by poets such as Jack Kerouac and Allen Ginsberg. They did reject the values of contemporary society, but they did so mainly in a sober, quiet way. They did things like wearing black clothes and withdrawing from society in a relatively individual and solitary way.
By contrast, the hippies were "in your face." They wore bright clothes and had a very clear public presence. When they withdrew from society, they did it in communes and groups. Unlike the beats, they were very explicitly political. They felt that they could change the world through their actions in a way that the beats did not.
Beatniks, named by Herb Caen in the S.F. Examiner as a parody of Sputnik, were artistic figures living in San Francisco’s North Beach district (they flourished in New York’s Greenwich Village also). Mainly poets and essayists, they were tied together by “Beatitudes” (the origin of the name, Beat Generation), by a non-combative, nonjudgmental attitude, fueled in large part by Eastern religions and philosophies, made available by Allen Watts’ translations of important Eastern literature, by such works as Zen in the Art of Archery and The Kybalion and Kahlil Gibran’s The Prophet . The movement manifested in alternative living as well as in literature; coffee houses (such as the Co-Existent Bagel Shop) and of course book stores (City Lights is still flourishing) were the centers for intellectual debates and introductions to new literature, where chess was played and impromptu speeches were given. Political concerns (this was during the Nixon era) were mainly about international relations, anti-war and anti-nuclear stockpiling, etc. Hippies, on the other hand, were reacting to parental control, sexual freedoms, music (especially the British Invasion), and the dread of a military conscription. They were a half-generation younger that Beatniks, and a decade later, and invaded San Francisco en masse—they were not a product of San Francisco’s artistic ambience, museums, art galleries, etc, but, like a flock of resting birds, found a temporary haven in the community—the Beatniks by then had moved to Eastern and Indian countries. No significant literary or artistic accomplishments are attributed to hippies (unless you count tie-dyed t-shirts.)
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