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.

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Transcript: 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.