Washington Squares: folk at the Rat; Picasso at Fogg; songs of city life

What do new wave and folk have in common? Probably very little - except for the Washington Squares. This popular New York-based group, which played last Saturday at the Rathskeller in Kenmore Square, has hit upon a fascinating mixture of the activist lyrics of folk and the deadpan of new wave. This surprising hybrid not only makes for good music, but also links two sets of music lovers who have little in common.

This three-member group, Tom Goodkind, Bruce Paskow, and Laura Agnelli, wear full beatnik regalia: berets, sunglasses, and - for the men - goatees. Miss Agnelli's short black-and-white-striped dress adds a touch of new wave. They all play acoustic guitar (with bass and banjo thrown in) and are backed up by Jeff Berman on bongos.

They get off to a rousing start with ''There's a Meetin' Here Tonight'' and continue with other folk favorites, ''If I Had a Hammer'' and ''You Were on My Mind.'' Interspersed is a hefty selection of their own folk songs - the mournful , haunting ''Walls,'' written in (and smuggled out of) Poland - as well as parodies of recent hits: ''Footloose'' becomes ''Loose Shoes.''

Their harmony is tight, their voices strong and true (Miss Agnelli's voice pierces through the men's in the same way Mary Travers's does with Peter and Paul), and the pace is urgent.

Their underlying message is unapologet-ically '60s: On ''New Generation,'' they sing: Freedom is a birthright, For all women and men, Every generation has to win it again.

Tom Goodkind said backstage, however, that the group is not out to draw the over-35 folk crowd; ''they've had all this before, and better. We want to draw the youth.'' And they did, in the end - the audience at the Rat was young, and a bit bewildered at first. (The Washington Squares are the first folk group to play this new-wave, punk, heavy-metal club.) But The Squares know how to appeal to their TV-raised audience and opened their show with a video of a Weavers reunion and clips of folk acts on television in the last 20 years. It seemed to work: At the end one young woman was overheard saying dazedly, ''This really is the greatest thing.''