Critical theory is a school of thought associated with 20th-century Marxism leading to the "New Left" political movement that applied communist theory to culture, psychology, and society, as well as to economics. Developed in the "Frankfurt School" in Germany in the 1920s, it claimed to be an interdisciplinary application of Karl Marx's dialectic to all aspects of modern life. It was inherently atheistic and radical, hence its own self-identification as "critical" of everything in existing society. Its attack on all structures of order and authority (in the traditional family, community, church, government, and business) led to the radical feminist, student, workers, gay/lesbian/transsexual, and modern art and theater movements of the 20th century. Sometimes call Humanist Marxism, it was equally critical of Soviet or "orthodox" communism for its overemphasis on economics and its authoritarian politics. Critical theory appealed to intellectuals rather than proletarian workers and influenced many Western academics, giving the European and American university its radical character after World War II.

Associated with the philosophers Max Horkheimer, Theodor Adorno, Herbert Marcuse, and Walter Benjamin, the critical theory school came to the United States in the 1930s when the Frankfurt Institute for Social Research was closed in 1935.

Critical theory focused on the "domination" of all societies (liberal capitalist, communist, and fascist) and claimed to have a program of "liberation" through dialectical reason, sexual experimentation, and alternative economics. The "new morality" of sexual liberation, challenging traditional gender roles and the Christian family, led relatively quickly into abortion on demand and gay/ lesbian/transsexual movements. The rejection of historical Western religions led to such alternative spiritual movements as New Age, occult, and Zen Buddhism in Europe and America.

Although critical theory was not a large-scale political movement (except possibly for the radical counterculture student movements in France and America in the 1960s), it influenced various Leftist and liberal wings of major political parties (such as the Labour Party in Britain, the Green Party in Germany, and the Democratic Party in the United States).

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