RETURNING TO THE STATES this fall after a year at a London university -- landing back here in the middle of the presidential election campaign -- one of the first questions people asked was: are European students as conservative as students here?

I thought of students in Paris barricading streets, protesting socialist plans to limit the number of people allowed into medical school -- and thus allowed into lucrative jobs. I thought of the Oxford debating society reversing its decades-old resolution avowing pacifism. But mostly I thought of the race horse.

The race horse came to symbolize for me the growing conservatism among students at the London School of Economics, an institution that once boasted of being the training ground in the ideals of British socialism for Third World economists. The race horse was one of those wacky campus issues that takes on a life of its own -- a proposal from campus Tories to divert several thousand pounds from a day-care center to buy a purebred race horse.

It came down to a vote, with several hundred students packed into two floors of an aging auditorium in an aging building. When the votes were counted, thanks to some selective arithmetic by the Labor Party chairwoman, the day care center beat the race horse. It was a victory for the political left, but a sort of pyrrhic one that left Labor club members numbed. The race horse lost, but it almost won. At the London School of Economics! From which, in the '20s, '30s and '40s, the British Labor Party can trace its ideals about the welfare state.

Today the LSE's student left -- which once could call for sit-ins and mass demonstrations in an instant -- has been reduced to battling for votes on a range of conservative-inspired issues: Whether to buy a race horse or fund a day-care center. Whether to ban a leader of the neo- fascist National Front Party from speaking. Whether to condemn the U.S. invasion of Grenada. Whether to call a student sit-in protest in support of striking hospital workers. These were all issues which, during my year there, tested the student body's once die-hard liberal resolve.

My frame of reference about whether students are more conservative today comes from three perspectives: First, I was a student on the campus of a the University of Michigan at Ann Arbor at the tail end of the baby boom. Second, for the last 12 months I became a student again, this time at the London School of Economics. And while there, I was a reader in French politics, and took some interest in the French left, the roots of its success and the sobering effects of power on its rose-colored ideology.

It Michigan, my peers and I were the targets of a conservative rebellion. I was a detached observer of British conservatism. I took a casual interest in that of the French.

Born in 1958, my four years in college by chance coincided with the four years of the Carter administration, the new textbook example of a failed presidency.

From September 1976 until graduation in May 1980, I watched the Carter years begin with hope among students -- engendered by his early human-rights stands and symbolized by his quoting Bob Dylan at his convention acceptance speech -- only to sink into the final days of defeatism and despair, epitomized by the hostages in Iran.

I watched this all at a campus that, in the 1960s, gave us Tom Hayden and the Students for a Democratic Society. This was Ann Arbor, the birthplace of the Socialist Human Rights Party that once controlled the city council and the place where to this day, smoking marijuana on a public street nets just a $5 ticket, like a parking fine.

In Ann Arbor, with a history of building takeovers and sit-in strikes, a rally for U.S. divestment from South Africa in 1976 and 1977 drew only a handful of students -- far fewer than the hundreds who packed the center of campus for a rally to burn the Ayatollah Khomeini in effigy during my senior year.

When I was a college senior in 1980, and editorial-page director of the student-run daily newspaper, "liberalism" was the status quo. For my older predecessors in the baby boom, the "authority" they were reacting against was the military establishment that brought us the Vietnam War, and the Nixon establishment that gave us Watergate. Being a campus leftist was, in the 1960s, to be the advocate of an alternative to the established power structure.

But that changed, as "liberalism" became institutionalized, and some would argue, bankrupt of ideas. During my four years, from 1976 to 1980, to be liberal was no longer to be the alternative. Rather, liberalism was the establishment.

On the Michigan Daily, staff members were assumed to subscribe to a litany of leftist positions -- for divestment from South Africa, for affirmative action for blacks and minorities, for the ERA, against the shah of Iran and the Central Intelligence Agency.

My class, the 1976 freshmen, picked up that laundry list of liberal causes as our own. We were uncritical and unquestioning because our baby-boom elders, tempered in the 1960s, subscribed to it -- and my age group saw the 1960s as our frame of reference. The only president of whom we had firsthand knowledge (besides the short-lived Gerald Ford) was Richard Nixon, which reinforced our liberalism.

Because we had so blindly accepted the list, we were totally unprepared to respond to the critical questions that came from our younger successors, who we assumed would also blindly follow. When they asked us why divestment was preferable to staying in South Africa and working for change, we couldn't answer because we never really had to think about it. We could only accuse them of being pro-apartheid. When they asked us about the reverse-discriminatory effects of affirmative action, we had no other answer but to call them racists. When they told us that perhaps there was a legitimate argument for a Central Intelligence Agency, we called them imperialists and reactionaries.

The point is, the younger students were not racists or fascists or reactionaries. They were intellectually critical and questioning, like any good student should be. We were at fault for being ill-prepared to respond.

The intellectual dilemma was underscored in the opposing persons of the shah of Iran and the Ayatollah Khomeini. For two years, we had editorialized against the shah, calling him (in the strident terms that you can only get away with in college newspapers) a facist, a butcher, a murderer, akin to Hitler, etc.

When the shah's successor, Khomeini, began the summary executions of suspected counter-revolutionaries, we expressed some mild concern. When Kissinger persuaded Carter to let the shah into the United States, we expressed outrage. When the Iranian militants took hostages, we editorialized that "we understood their frustrations," and that the United States should send back the shah. We even thought it was humorous (though never in print) when Iranian zealots offered a free trip to Mecca for anyone who would assassinate the shah.

The truth is, we were in an intellectual dilemma. For years we had editorialized that the shah was so bad, anything would be better. When Khomeini emerged, we said the Iranian people were finally exercising their right to self-determination. When the hostages were seized, we realized it was an outlaw act, but we couldn't reconcile our leftist sympathy for the Iranian revolution with the requisite patriotic outrage. That gave the conservatives the intellectual high ground, and put them more in tune with the rising patriotism on the campus.

So, are students more conservative than they used to be? Clearly so, but it is not so much an embrace of conservatism as it is a continuation of the traditional cycle of youth rebellion against basic assumptions -- and it just so happens that the assumptions now being challenged are the foundations of the welfare state.

The rightwards shift among students bodes ill for the parties of the left, quite obviously because of the electoral arithmetic, but, more importantly, because the campuses have long been the intellectual breeding grounds of leftist political thought and ideals. Lose the students, and you lose the source of new ideas and the underpinnings of thought and theory that have long given the left its claim to hold the intellectual higher ground.

Oxford University's Dr. Vincent Wright, an editor of the journal West European Politics and a leading British scholar of French politics, was speaking of France, but could have just as easily been referring to Britain or this country, when he told me: "Students are much less interested in political activism and tend to be swinging to the right. The kind of agitation activity which reached its peak in 1968 tends to be evaporating. It is undeniably a shift to the right."

He added, perhaps prophetically, "It will have a dramatic impact on the intellectual rejuvenation of the left."

To be sure, British and European students are still not as conservative as their American counterparts, as evidenced from student leadership in the anti-nuclear movements from London to Paris to Bonn. Yet there is a new driving force for all students on both sides of the Atlantic, replacing the desire to affect public policy. And that, pure and simple, is a need for jobs. The social reformers of the LSE have been replaced by the tweedy would-be bankers and actuaries.

In each of these university systems, there has been a shift of sorts to a new era of economic uncertainty, where a college degree is no longer a guarantee of a job. But more than that, there has been a general rebellion against the basic tenets of the left. It is a rebellion to which the left has proven woefully unprepared to respond.

For example, students at the London School of Economics recently debated whether an organizer for the far-right National Front party should be allowed to speak on the campus. The left won on numbers but the conservatives won the debate, arguing articulately and rationally for the right to free speech for even ones whose views are widely despised. The left wing, again, was reduced to shouting "racist" and "fascist" without an intellectual underpinning for its position.

Yet there are suggestions that students' intellectual flight from traditional liberalism does not necessarily translate into gains for the parties of the right.

Last spring, there was the annual election of student officers at the LSE. In Britian, student political parties are units of national political parties and mirror them faithfully. One of the themes of the student election was breaking the Labor Party's stranglehold on power. This goal was met. Yet it was not the Tories who won, but the new Social Democratic Party (SDP), whose policies have been described as "Thatcherism with a heart." In those spring elections, the SDP allied with the liberals swept all the open offices.

That election was instructive, suggesting that these new, critical students -- and I hesitate to call them conservatives -- are not automatically finding a natural home with the Tories of Prime Minister Thatcher.

In France, meanwhile, there is new required reading among Paris' socialist elite. It is a report from the National Institute of Statistics called; "The Invisible and Elusive Tertiary Sector." It warns of a new, nebulous kind of ill-defined grouping, highly volatile in voting patterns and fragmented in political beliefs, which is vaguely centrist and is threatening to break down traditional assumptions of class and bloc voting.

This "tertiary sector" might in Britain be called the Social Democratic Party. What remains to be seen is whether a similar "tertiary sector" is in the making in the United States, defying political labels while threatening to break the traditional party structures.

We may have already seen its stirrings in what we now mislabel as a "new conservatism" on college campuses. We may have seen its birthpains in the failed campaigns of John Anderson and Gary Hart.