Networks and Hierarchies
By Niall Ferguson
Published June 9, 2014 in The American Interest
Has political hierarchy in the form of the state met its match in today’s networked world?
Fritz Lang’s silent movie classic Metropolis (1927) depicts the downfall of a hierarchical megacity. Metropolis is a city of skyscrapers. At the top, in their penthouse C-suites, lives a wealthy elite led by the autocrat Joh Fredersen. Down below, in subterranean factories, the proletariat toils. After he witnesses an industrial accident, Fredersen’s playboy son is awakened to the squalor and danger of working-class life. The upshot is a violent revolution and a self-inflicted if inadvertent disaster: When the workers smash the power generators, their own living quarters are flooded because the water pumps fail. Today, Metropolis is perhaps best remembered for the iconic female robot that becomes the doppelgänger of the heroine, Maria. Yet it is better understood as a metaphor for history’s fundamental dialectic between hierarchies and networks.
Lang said the film was inspired by his first visit to New York. To his eyes, the skyscrapers of Manhattan were the perfect architectural expression of a hierarchical and unequal society. Contemporaries, notably the right-wing media magnate Alfred Hugenberg, detected a communist subtext, though Lang’s wife, who co-wrote the screenplay, was a radical German nationalist who later joined the Nazi Party. Viewed today, the film transcends the political ideologies of the mid-20th century. With its multiple religious allusions, culminating in an act of redemption, Metropolis is modernity mythologized. The central question it poses is as relevant today as it was then: How can an urbanized, technologically advanced society avoid disaster when its social consequences are profoundly anti-egalitarian?
There is, perhaps, an even more profound question in the subtext of Lang’s film: Who wins, the hierarchy or the network? The greatest threat to the hierarchical social order of Metropolis is posed not by flooding but by a clandestine conspiracy among the workers. Nothing infuriates Fredersen more than the realization that this conspiracy was hatched in the catacombs beneath the city without his knowledge.
In today’s terms, the hierarchy is not a single city but the state itself, the vertically structured super-polity that evolved out of the republics and monarchies of early modern Europe. Though not the most populous nation in the world, the United States is certainly the world’s most powerful state, despite the limits imposed by checks (to lobbyists) and balances (as in bank). Its nearest rival, the People’s Republic of China, is usually seen as a profoundly different kind of state, for while the United States has two major parties and a gaggle of tiny ones, the People’s Republic has one and only one. American government is founded on the separation of powers, not least the independence of its judiciary; the PRC subordinates law, such as it has evolved in China over the centuries, to the dictates of the Communist Party.
Yet both states are republics, with roughly comparable vertical structures of administration and not wholly dissimilar concentrations of power in the hands of the central government. Economically, the two systems are certainly converging, with China looking ever more to market signals and incentives, while the United States keeps increasing the statutory and regulatory power of government over producers and consumers. And, to an extent that disturbs civil libertarians on both Left and Right, the U.S. government exerts control and practices surveillance over its citizens in ways that are functionally closer to contemporary China than to the America of the Founding Fathers.
To all the world’s states, democratic and undemocratic alike, the new informational, commercial, and social networks of the internet age pose a profound challenge, the scale of which is only gradually becoming apparent. First email achieved a dramatic improvement in the ability of ordinary citizens to communicate with one another. Then the internet came to have an even greater impact on the ability of citizens to access information. The emergence of search engines marked a quantum leap in this process. The advent of laptops, smartphones, and other portable devices then emancipated electronic communication from the desktop. With the explosive growth of social networks came another great leap, this time in the ability of citizens to share information and ideas.
It was not immediately obvious how big a challenge all this posed to the established state. There was a great deal of cheerful talk about the ways in which the information technology revolution would promote “smart” or “joined-up” government, enhancing the state’s ability to interact with citizens. However, the efforts of Anonymous, Wikileaks and Edward Snowden to disrupt the system of official secrecy, directed mainly against the U.S. government, have changed everything. In particular, Snowden’s revelations have exposed the extent to which Washington was seeking to establish a parasitical relationship with the key firms that operate the various electronic networks, acquiring not only metadata but sometimes also the actual content of vast numbers of phone calls and messages. Techniques of big-data mining, developed initially for commercial purposes, have been adapted to the needs of the National Security Agency.
The most recent, and perhaps most important, network challenge to hierarchy comes with the advent of virtual currencies and payment systems like Bitcoin. Since ancient times, states have reaped considerable benefits from monopolizing or at least regulating the money created within their borders. It remains to be seen how big a challenge Bitcoin poses to the system of national fiat currencies that has evolved since the 1970s and, in particular, how big a challenge it poses to the “exorbitant privilege” enjoyed by the United States as the issuer of the world’s dominant reserve (and transaction) currency. But it would be unwise to assume, as some do, that it poses no challenge at all.
Clashes between hierarchies and networks are not new in history; on the contrary, there is a sense in which they are history. Indeed, the course of history can be thought of as the net result of human interactions along four axes.
The first of these is time. The arrow of time can move in only one direction, even if we have become increasingly sophisticated in our conceptualization and measurement of its flight. The second is nature: Nature means in this context the material or environmental constraints over which we still have little control, notably the laws of physics, the geography and geology of the planet, its climate and weather, the incidence of disease, our own evolution as a species, our fertility, and the bell curves of our abilities as individuals in a series of normal distributions. The third is networks. Networks are the spontaneously self-organizing, horizontal structures we form, beginning with knowledge and the various “memes” and representations we use to communicate it. These include the patterns of migration and miscegenation that have distributed our species and its DNA across the world’s surface; the markets through which we exchange goods and services; the clubs we form, as well as the myriad cults, movements, and crazes we periodically produce with minimal premeditation and leadership. And the fourth is hierarchies, vertical organizations characterized by centralized and top-down command, control, and communication. These begin with family-based clans and tribes, out of which or against which more complex hierarchical institutions evolved. They include, too, tightly regulated urban polities reliant on commerce or bigger, mostly monarchical, states based on agriculture; the centrally run cults often referred to as churches; the armies and bureaucracies within states; the autonomous corporations that, from the early modern period, sought to exploit economies of scope and scale by internalizing certain market transactions; academic corporations like universities; political parties; and the supersized transnational states that used to be called empires.
Note that the environment is not wholly a given; it can be shaped by, as well as shape, humanity. It may well be that, in the foreseeable future, our species’ impact on the earth’s climate will become the dominant driver of history, but that is not yet the case. For now, the interactions of networks and hierarchies are more important. Networks are not planned by a single authority; they are the main source of innovation but are relatively fragile. Hierarchies exist primarily because of economies of scale and scope, beginning with the imperative of self-defense. To that end, but for other reasons too, hierarchies seek to exploit the positive externalities of networks. States need networks, for no political hierarchy, no matter how powerful, can plan all the clever things that networks spontaneously generate. But if the hierarchy comes to control the networks so much as to compromise their benign self-organizing capacities, then innovation is bound to wane.
Consider some examples of history along these four axes. The population of the entire Eurasian landmass was devastated by the Black Death of the 14th century, a natural disaster transmitted along trade networks. But the impact was very different in Europe compared with Asia. The main difference between the West and the East of Eurasia after 1500 was that networks in the West were much freer from hierarchical dominance than in the East. No monolithic empire rose in the West; multiple and often weak principalities prevailed. Printing existed in China long before the 15th century, but its advent in Germany was explosive because of the network effects generated by the rapid spread of Gutenberg’s easily replicated technology. The Reformation, which was printed as much as it was preached, unleashed a wave of religious revolt against the hierarchy of the Roman Catholic Church. It was only after prolonged and bloody conflict that the monarchies were able to re-impose their hierarchical control over the new Protestant sects.
European history in the 17th, 18th, and 19th centuries was characterized by a succession of network-driven waves of innovation: the Scientific Revolution, the Enlightenment, and the Industrial Revolution. In each case, the sharing of novel ideas within networks of scholars and tinkerers produced powerful and mainly positive externalities, culminating in the decisive improvements in economic efficiency and then life expectancy experienced in the British Isles, Western Europe, and North America from the late 18th century. The network effects of trade and migration were especially powerful, as European merchants and settlers exploited falling transportation costs to export their ideas, as well as their techniques and goods, to the rest of the world. Thanks to those ideas, this was also an era of political revolutions. Ideas about liberty, equality, and fraternity crossed the Atlantic as rapidly as pirated technology from the cotton mills of Lancashire. Kings were toppled, aristocracies abolished, and churches dissolved or made to compete without the support of a state.
Yet the 19th century saw the triumph of hierarchies over the new networks. This was partly because hierarchical corporations—which began, let us remember, as state-sponsored monopolies like the East India Company—were as important in the spread of industrial capitalism as horizontally structured markets. Firms could reduce the transaction costs of the market as well as exploit economies of scale and scope. The railways, steamships, and telegraph cables that made possible the first age of globalization had owners.
The key, however, was the victory of hierarchy in the realm of politics. Why revolutionary ideologies like Jacobinism and Marxism-Leninism so quickly produced highly centralized hierarchical political structures is one of the central puzzles of the modern era, though it was an outcome more or less accurately predicted by much classical political theory. Whatever the democratic aspirations of the revolutionaries, their ideologies ended up as sources of legitimation for autocrats who were markedly more power-hungry than the monarchs of the ancien régime.
True, the energies unleashed by the overthrow of the Bourbons were (just barely) insufficient to overcome those produced by the British synthesis of monarchism and the pursuit of Mammon, which restored or revived the continental monarchies, including, temporarily, the Bourbons themselves. But the old order was only partially restored. Napoleon had taught even his most ardent enemies an unforgettable lesson, as Clausewitz understood, about how an imperial leader could wield power by commanding a people in arms.
For a time it seemed that a modus vivendi had arisen between the new networks of science and industry and the old hierarchies of hereditary rule. Half the world fell under the sway of a dozen Western empires, and much of the rest was under their economic sway. But optimists, from Norman Angell to Andrew Carnegie, felt sure that these empires would not be so foolish as to jeopardize the benefits of international exchange. After all, it was partly by taxing the fruits of the first era of globalization that the empires could finance their vast armies, navies, and bureaucracies. This proved wrong. So complete was the imperial system of command, control, and communication that when the empires resolved to go to war with one another over arcane issues like the status of Bosnia-Herzegovina or the neutrality of Belgium, they were able to mobilize in excess of seventy million men as soldiers or sailors. In France and Germany about a fifth of the prewar population ended up in uniform, bearing arms.
