If you want to understand what a truly hierarchical political system looks like, just look at Joseph Stalin’s Soviet Union, says historian Niall Ferguson. Stalin wanted to be all-powerful and omnipresent; he tapped phones, policed relationships and spied on everything—he was totally paranoid, says Ferguson, and for good reason. Social networks are lethal to top-down hierarchies and dictatorships, which is what makes this model of governance so unsustainable. But there is an exception that has stunned observers, Niall Ferguson included: China. Under leader Xi Jinping, China’s economy has soared over the last 30 years, but it is now vexed with the largest middle class in history. Can this system endure through the 21st century? That’s a huge question for China’s leaders, and for the world. Niall Ferguson is the author of The Square and the Tower: Networks and Power, from the Freemasons to Facebook.

Niall Ferguson: When I am trying to explain to some young person what a truly hierarchical system looks like, I talk about Stalin. Joseph Stalin ran the Soviet Union with—as is well known—an iron grip.

But it wasn’t just his ruthlessness that was remarkable, it was the way in which he structured governance so that it was almost impossible for any two Soviet citizens to have a private relationship that was not in some sense known to and subject to Stalin.

So he was the node through which all other nodes had to go to communicate and Stalin, who was famously paranoid, was suspicious about any interaction between the Soviet citizens, and especially between a Soviet citizen and a foreigner, that he didn’t know about. Because even having a conversation, and it was an un-political conversation about art and literature, without, as it were, the permission of the Soviet regime was a crime.

So the problem of Soviet society under Stalin was that he was all-controlling and aspired to be omniscient, tapping the relatively rudimentary telephone network of the Soviet Union on a routine basis to find out what people were saying. And technically speaking, a hierarchy like this is just a weird kind of network, in which one node has the maximum possible centrality and other nodes have minimal contact with one another other than indirectly through the central node.

We shouldn’t, I think, suggest a false dichotomy. It’s not as if there are networks here and hierarchies here; it is a continuum and technically they are all different kinds of network. A distributed network is a highly decentralized one; a hierarchical network is the one like the Soviet Union where a single node aspires to know everything and control all communications.
If you want to see the advantages of a hierarchical system of government, take a trip to China and you will see a system which is extraordinarily hierarchical. Xi Jinping is the top man and there’s a kind of pyramid of power that stretches down beneath him all the way down to a base of Communist Party members, who may be no more than the people who keep an eye on their apartment block.

This system is good at doing engineering projects. If this system decides on building high-speed rail networks around China, it can do it with astonishing speed. If the system decides that it’s going to build cities in the expectation that there will be a population to inhabit them, it can do that.

And so one of the most impressive aspects of the last 30 years of human history has been the spectacular growth of the Chinese economy. And that has been, in large measure, the result of a highly effective hierarchical system of planning.

Now, that wasn’t really supposed to happen because in 1989 Francis Fukuyama proclaimed the "end of history" and communism was supposed to be scrapped and we were all going to live in liberal-capitalist systems. The Chinese didn’t get that memorandum—they must not have translated 'The End of History' into Chinese—and they decided that they would revitalize the notion of democratic centralism of the Lenin-ist party and use it to modernize the Chinese economy.

Of course, you would be naïve if you went to China today and didn’t see some of the problems with doing that. The problems of pollution have been a characteristic feature of modern Chinese life, there’s been really large-scale environmental damage done—not just to air-quality—by the extraordinary pace of industrialization in China and the vast investments that there have been often in rather dirty, industrial capacity.

There’s also the problem of corruption. This is an everyday topic of conversation in China; a one-party hierarchical system of government isn’t accountable, it’s above the law, and officials have routinely skimmed off huge sums of money to line their own pockets.

None of this comes as any news to people who read Hayek’s great book 'The Road to Serfdom'. Since the mid-20th-century, classical liberal scholars have said that the planned economy is bound to be inefficient and it’s bound to lead to corruption and other abuses of power. I think most people who think that way—and I include myself in that group—were taken by surprise by the success of China’s economic growth strategy. 

Can this system endure through the 21st century? That is a huge question for China’s leaders, and indeed for the world. If you are, like me, skeptical about that level of political centralization you’re kind of sitting waiting for something to go wrong, because the defect of hierarchical system of government tends to be that it’s not responsive to signals from down below, that top-down governance tends to be somewhat deaf. Not only does it not necessarily get market signals, it may miss out on political dissidents, political discontent.

Or to put it differently, you’ve created, through rapid industrialization, the biggest middle class in all of history, the biggest bourgeoisie in history. And if Karl Marx were here sitting next to me I think he’d agree that that was very hard to reconcile with the system devised by Mao Zedong to centralize power in the hands of a single party. Marx would expect the bourgeoisie in China to do what the European bourgeoisie did in the 19th century: demand property rights and therefore the rule of law to protect property rights—and therefore some elements of representation in government. So even from a Marxist perspective something has to change.

So hierarchical systems of government over time tend at some point to suffer a loss of legitimacy, a challenge from below, and we saw it in the history of the Soviet Union, but we’ve seen it elsewhere in much less sophisticated hierarchical systems like the military regimes of Latin America or the presidential regimes of the Middle East, which came to grief, in some cases, well before the Soviet Union did.

A really interesting feature of hierarchy that doesn’t get understood, I think, nearly well enough is that if you are a hierarchical ruler you are right to be paranoid. And it’s not just that paranoid people tend to become dictators, it’s more that if you’re a dictator you need to be paranoid, because the real threat to a hierarchy is a successfully organized social network.

A social network independent of the hierarchy of the big guy is the real threat. One saw that, for example, in Poland. Why did Poland, of all the communist regimes, get into trouble first? Because there was a really well-organized civil society, all voluntary associations—some religious, some not—that formed a network, even before the Solidarity Trade Union came along.

That’s lethal to a hierarchical system, which is why Stalin was right, if you want to put it this way, to be paranoid about social networking that he didn’t control or didn’t know about.

He understood that it doesn’t take too many additional edges in the network to destroy the dominance of that central node. So one way of thinking about this is: imagine a pyramidal structure, imagine something kind of like a Christmas tree, and there’s the big guy like the fairy on top of the Christmas tree. But imagine that on this Christmas tree the lights are just connected to the fairy, they’re not connected to one another, and therefore the fairy decides if the lights go on or off. It’s a peculiar kind of Christmas tree. That’s essentially a hierarchical network.

It wouldn’t take too many connections, as it were—lateral or horizontal connections—between the lights to reduce the centrality of the fairy on the tree, and ultimately you could end up illuminating the tree without needing the fairy altogether.

So I think that’s why dictators, hierarchs, need to be paranoid. Read the plays of Shakespeare. The suspicion that always seems to haunt any of Shakespeare’s kings is that there is some kind of plot, some cabal, some conspiracy going on. And if you read the history of European monarchy very often those suspicions were well-founded.

What we call social networks looked like conspiracies to absolute rulers, and that’s why very often in history the term seems to overlap. What looks like a social network to you and me, if we’re in it, looks like a plot to the king.