During the 1960s the term underground acquired a new meaning in that it referred to members of the so-called counterculture, i.e. those people who did not necessarily conform to the mainstream of human experience such as e.g. hippies, Punks, and Mods .
Terry Anderson describes the early 1970s high point of the utopia of counterculture in his book The Movement and The Sixties:
"Liberal cities turned exotic as freaks and ethnics created a hip cultural renaissance. Street art flourished; color flooded the nation. Chicanos painted murals at high schools and 'walls of fire' on buildings. Black men wore jumbo Afros and the women sported vivid African dress. Young men with shaved heads and robes beat tambourines and chanted on corners, 'Krishna, Krishna, Hare Krishna.' Hip capitalists invaded the streets, setting up shops: Artisans wearing bandanas and bellbottom sold jewelry, bells, and leather, as sunlight streamed through cut glass. Communards in ragged bib overalls sold loaves of whole-wheat bread at co-ops and organically grown vegetables at farmers' markets. Freak flags flew, curling, waving across America. Carpenters wearing ponytails moved into decaying neighborhoods, paint and lumber in hand, and began urban homesteading. Longhairs blew bubbles or lofted frisbees in the park. Tribes of young men and women skinny-dipped at beaches and hippie hollows. A New America, or something new, was emerging." (Anderson 1995, p. 357)
Applied to the arts, the term underground typically means artists that are not corporately sponsored and don't generally want to be.
Underground can also mean that something is really groundbreaking and therefore is not mainstream.
Perhaps the best way to define it is a quote by Frank Zappa:
"The mainstream comes to you, but you have to go to the underground."
An alternate usage of the term "underground" is in reference to something that is illegal or so controversial that it would be dangerous for it to be publicized. Or it's so controversial (as in, offensive to societal norms) that it will never be mainstream. Some authors/artists use this as a badge of pride.
Examples: An underground club might have illicit drugs readily available. A movie is banned because people might imitate the actions of the characters.
In Economics, the term underground culture refers more or less to the parallel market (underground market) and the orthodox of the individuals who sell good and services and consume those goods and services.
eg. Prostitution markets or illegal drug trading
Tulsa Counterculture of the 70s (http://tulsaTVmemories.com/counterc.html)
The inspiration for CounterCulture first came about in the jungles of Central America, where a young surfer from California possessed independent and creative ideas about fashion, which developed from a lifestyle he loved.
CounterCulture is building a team of individuals with enthusiastic and innovative ideas that are helping to form the future of retail, by returning to its roots.
CounterCulture looks forward to expanding its presence in the future through the art, music and fashion intertwined in the lifestyle it envelopes.
In sociology, counterculture is a term used to describe a cultural group whose values and norms are at odds with those of the social mainstream, a cultural equivalent of a political opposition.
So, in the "youth culture" view of the phenomenon, every sort of outlook and political philosophy (and form of political apathy) except social conservatism might be expected to flourish: libertarianism, left-libertarianism, liberalism, socialism, anarchism, communism, materialism, mysticism, hedonism, spirituality, environmentalism, and many other basic orientations.
During the period in question, new cultural forms that were perceived as opposed to the old emerged, including the pop music of the Beatles, which rapidly evolved to shape and reflect the youth culture's emphasis on change and experimentation.
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