Networks and Hierarchies: Niall Ferguson's Historical Perspective

welcome and thank you all for coming today I hope that you had a really fabulous summer and I'm thrilled to welcome you back here to to the Seaport of the gun building and we're kicking off the year here at Sieber with quite a bit of new activity here we have a new deputy director gopi shah goda gopi where are you go B's right there so go pshaw go does our new deputy director and she's the new Greg for those of you who know Greg but Greg is still here so I'm not sure Greg where are you oh break Greg's over there okay so Greg still here and he will still be with us as well and where he's taking over the role that Greg Ralston did such an outstanding job in for 17 years we also have several new faculty fellows joining our ranks and now we have almost 90 faculty who are formally affiliated with see per we have many young scholars and others who are new to super so I hope you'll get a chance to meet some of them either today or in future visits to see per this today is our first Associates meeting of the new academic year and I think we are in for a real treat but before I get to introducing today's speaker just let me tell you a couple points about what we have coming down the pike so we have a Policy Forum next week here on Friday on housing policy and gentrification in the bay area that I think is generating a huge amount of interest those events are more geared toward students but we are excited we hope many of you will be able to attend this as well we're having people from business policy and academia two weeks from today Karen Dinan who is the chief economist at the US Department of the Treasury and the assistant secretary for economic policy will be here for our next Associates meeting and then Arthur Brooks will be visiting from the American Enterprise Institute on November first and then one month after that we'll have a state of the West Conference on December 1st and our 2017 lineup is shaping up to be extremely strong with as you may have heard we have lined up Janet Yellen to come speak in January and our summit lineup is looking extremely strong as well but today we are kicking off the fall quarter with Neil Ferguson and that is setting the bar very very high for the speakers in the weeks ahead Neil is one of the world's most eminent scholars he's a critic he's a commentator and author a columnist a maker of documentaries a husband and a father he recently moved here we are very happy to say from that institution Harvard on the East Coast and he's a senior fellow at the Hoover Institution and he's also a visiting professor at Chinua University in Beijing I did quite a bit of research about Neil in preparation for this and his expertise is so incredibly broad both across years and across geography that I can't possibly do justice to it in a couple of minutes here I did find one one I'll say a few things a profile about Neil that appeared a few years ago in The Guardian reported that he doesn't really have that many hobbies he kind of just works and the article continued to say and this is a quote whatever you make of Neil and his views it is hard not to be impressed by his dedication and this article was written in 2011 just before the publication of his book civilisation the west and the rest which explored the roots of the rise of Western power the book argues the West's rise is attributable to six killer apps we love the word app here in the Bay Area competition science property medicine consumerism and the work ethic and this is just one of the 14 books that he has authored on a broad-based set of themes including the financial history of the world and what he calls history's age of hatred so he doesn't really pick very ambitious topics to work on um Neil focuses much of his scholarship on the relationship between hierarchies and networks and that's what we're going to hear from about from him today and I think we're going to learn a huge amount from him about this important issue about the power of network to disrupt markets and to pose significant challenges to well-established seats of power and long-standing institution it's an idea that's playing out more and more in today's economy and in countries throughout the world Neil is a historian and he goes back very far in time to explore the tension between networks and hierarchies and how innovations and new ideas sprang from these frictions and so even though Neil is a historian he also has clearly many insights about the present day and I'm expecting that he may take us a bit through some of the insights that these issues the tension between networks and hierarchies have for today's world so please join me in offering a very warm welcome to Neil Ferguson to see well thank you very much indeed Marc it's a great pleasure to be here I can't tell you how thrilled I am now to be at Stanford I've been flirting with this place for years as a non-resident Hoover fellow and and we sort of tied the knot this past summer and it is a truly exciting time to come here and what I thought I would do would is really something very reckless instead of coming here with polished work on financial history I started life as an economic historian working on hyperinflation I thought I would instead I'd talk about a book that I haven't begun writing yet about a project that there's at the drawing board stage and this I hope is in the spirit of my my move to Stanford I I really want to talk about projects with my new colleagues and friends here before it's too late before all those assumptions that I brought with me from the East Coast have been unpacked and demolished so here's the is the scene that the new book is going to be called the square and the tower and those of you who follow Italian banking crises will recognize Siena at once the idea that I'm going to sketch for you this evening is that historians need to spend much more time thinking about networks and little less time thinking about hierarchies in other words they need to spend more time down in the Piazza rather than being up in the Tauri up in the tower now of course it's completely odious for me to come to Stanford and and talk about networks this is in British English like delivering coals to Newcastle which proverbially already has quite a lot of coal and there are already so many scholars here working on social networks to leave it leave aside the more technical networks that the computer scientists study you may very well ask yourselves what is he thinking of he is wandering like a blindfolded man into a minefield of expertise so if one looks at what Matthew Jackson The Economist is doing or what Caroline a winter of Paulo Finland are doing or even the recent work that I only just came across by Ural escovitch this is clearly one of the world's great centers for the study of networks and historians here like the economists have already got the point that networks matter but I do think that perhaps because of the dominance predominance of computer science there are still some new perspectives that I might be able to bring precisely because I'm an old-fashioned Oxford trained historian to whom Harvard seemed newfangled so how did I get myself into the absurd situation of talking to Stanford people about networks I blame Henry Kissinger I as you may be aware have been working rather a lot in the last few years on a biography of Kissinger which is a classical biography in the sense that it's based on a vast amount of documentary research in his private papers but also in about a hundred archives around the world and I'm only halfway through it at the halfway point I decided to step back and reflect on how exactly to write the second volume and I had an insight perhaps born of thinking about coming here thinking about proximity of Silicon Valley that I don't think would have occurred to me otherwise and the insight was this that to explain why Henry Kissinger went from being relatively obscure Harvard professor to being more or less the president of the United States in the death throes of the Nixon presidency you have to look beyond the formal hierarchical structures of the American political system you have to understand that Kissinger was an extraordinarily gifted networker whose power derived not from his position first as National Security Advisor and then the Secretary of State but more from the network that he built a network that extended across the formal bureaucratic boundaries of Washington in the illustration I've chosen here he's with Kay Graham who probably was the most powerful woman in Washington in the 1970s and they're at a Malcolm Forbes birthday party this photograph is a reminder of the importance of the informal network of power the kissinger began to build even in the 1960s so i think what i'm in the process of doing is theorizing about the particular case of kissinger with the view to mapping his network formally to show that that was the real source of his power and that the reason he and Nixon were so fond of back channels of term they often used was that the network Kissinger built two other states that the representatives of other countries was the real key to his power that the Brennan but also to his Chinese counterpart Jo and lye and so forth so this was really why I decided to start thinking about networks and then I realized something funny about historians the historians don't think about networks are by and large that's why this is a fashionable subject precisely because it's novel if you go to talk cello and I urge you to do it it's one of my favorite places in the world and look at the extraordinary mural in the catedral de santa maria assunta you'll see this perfect example of hierarchy which derives from the ancient greek word from the rule of a high priest and here is the hierarchical order of eastern christianity perfectly Illustrated historians see hierarchies far more readily than they see networks this is how your government used to look long ago this is how it now looks but ultimately historians of say the foreign policy of the United States or its economic policy or its monetary policy abound at some level to internalize these charts these org charts and to make certain assumptions about how power works I know we're not allowed to use the phrase trickle-down anymore since it became trumped up trickle-down I'm sure you're all eating for tonight's debate which I'm told will be about substance rather than personality is that very novel but the trickling down of power is something that is embedded in any charm like this and the problem is even if you try to escape from political history as I did as a young man to try to work on on business history you encounter precisely the same kinds of diagram this is Alfred Sloan's famous organizational study of General Motors from 1921 there are places at Harvard Business School where shrine's exists with this diagram at the head I guess that for much of my career I uncritically assumed that this was how the world was structured why would one not as an historian when you set out to write your PhD you're sent to something called the archives you begin cutting your teeth with all documents collected in in archives hierarchical structures have archives it's one of the ways they keep themselves true to their original principles networks generally don't you know look in vain for the archive of the Bohemian Grove I was discussing that over drinks there probably is one somewhere in somebody's attic but the chances of it's being preserved so that a hundred years from now it will be possible to write the history of the Bohemian Grove er actually if past experience is any guide rather low the Phillips curve is alive and well or not depending on your preferences in macro theory but did you ever see a picture of Bill Phillips with money AK I love this picture because it illustrates how I think economists just can't help thinking about the world this was a hydraulic computer at least perhaps that's using the word too broadly but it was a device designed to model the workings of Keynesian policy in the UK in the nineteen late 1940s and I think this is still how economists think just to put a little bit more juice in the machine and lo and behold aggregate demand will grow and then we can see just how big the multiplier is stop not too much you don't want to overdo it my colleague John Cochran is is smiling I hope with some recognition of how his arch enemies think about about macro but this is a profoundly hierarchical way of thinking about how economies work Janet yellen's coming Yellen is the Wizard of Oz at the top of my tea system of trickle-down economics I mean what could better illustrate the trickle-down principle than mone ACK with its hydraulic tunes I think we're all still captives at the mid 20th century we're all still in thrall to certain assumptions about power that power ultimately should be exercised from the top by a strong man I alone can do this Donald Trump said at the Republican convention he was playing to are fundamentally atavistic desire for power to be hierarchical but that to be a strong man at the top exercising power this is a global complex and of course by implication we measure hierarchical institutions by their capacity to mobilize it's astonishing to think that the great hierarchical states of the mid 20th century totalitarian and democratic alike were able to take the teenagers the male teenagers of their populations and can script them on them train them often very brutally and send them into hideous conventional battles in which they slaughtered one another I have a 17 year old son if I attempted to get him to do even the smallest domestic task there would be resistance how can it be that his great-grandfather's generation so ah so easily could be induced to engage in total war the world has changed we all know that it's changed we know that the teenagers have been empowered we constantly talk and to kili in this part of the world about the power of social networks Jared Cohen Google has written about this is engaged in a project jigsaw that to my eyes is a corporate project for world revolution although I was assured by the Google CEO that it was entirely politically neutral as an enterprise maybe we've just become more aware of networks maybe the problem of dealing with the many-headed Hydra of Islamic extremism has forced people at least in security studies to think less hierarchically about the enemy this is a sketch from 2004 of the emerging global Salafi Network and if the crudeness of the sketch makes you realize just how early we were at that stage in thinking about networks of Terror I wish I had a dollar or perhaps just a Google stock for everybody who said to me that the world is networked as never before in the last 10 years it's true I mean if one looks at this Pew these Pew numbers which are really no quite old it is remarkable to see what large percentages of young Chinese American and Egyptians use social networks use their phones for political news in that sense I think we are in a new era but I want to stress that what is novel about our time is the technology not the networking what we are dealing with here is an empowered networking the networking itself has always been there but we historians have paid much too little attention to it now there is a problem a very profound methodological problem about thinking and writing about networks there is already a community engaged in this activity the community of conspiracy theorists and the community of conspiracy theorists is remarkably influential outside the sacred groves of academia this chart here is one I came across when I was researching Volume one of the Kissinger book the conspiracy to rule the world and it connects absolutely everything all the way up to the order of the Illuminati at the top I'm still waiting for my invitation to address the order of the Illuminati I've spoken to almost all the other groups on this chart but not the Illuminati it's a really hard invitation to get even when people try to be more serious more rigorous about mapping the networks that ruled the world they tend to do it as here in an extraordinary unschooled way so just taking all the businesses that you think are represented at Bilderberg meetings and then sort of drawing lines between them that's not really network analysis though people are tremendously impressed by this who are not sophisticated and every time I attend the Builder Bilderberg meeting I'm amazed how much drivel is published about the meeting online with charts like this giving a kind of spurious respectability to the coverage you quoted a profile of me in The Guardian newspaper I'm amazed you found any positive line in that profile to quote The Guardian newspaper carries this kind of stuff annually every time there's a Bilderberg meeting lending credence to conspiracy theories then there's the problem that once you give the right software or rather the wrong software to people working in the humanities they just can't resist producing illustrations like these of the talks I I can't remember which furball is which I mean one of them it's all of Western thought I think but clearly this is at the other extreme just as the conspiracy theorists produce nonsense network diagrams unfortunately so the more enthusiastic young scholars who want to network the entire history of humanity end up with with fur balls from this durian it's important to recognize that the idea of powerful networks is an old one just as the politics of populism is nothing new and we've heard it all before late 19th century backlash against globalization produce all sorts of things that we're hearing again in our time so when we talk about powerful networks we should remember that that was a big part of late 19th century populist complaints about the way the world worked this 1894 American chart entitled the English octopus was when I came across when I was studying the power of the Rothschild banks a hundred years ago it was widely believed that the Rothschild banks read the world you could be a Marxist and believe this or an anti-semite or both and charts like this depicting a kind of octopus-like entity that continued to be published in the United States and in Europe and ended up being a part of Nazi propaganda in the 1930s and 1940s so part of the challenge when it comes to thinking seriously about the power of networks is not only that networks don't keep very good records it is also that precisely because of that fact it is very easy to make our myths pseudo history about their power the key point is that networks were real there was a network of Enlightenment scholars who communicated to one another mostly by writing letters and in Stanford's mapping the Republic of Letters we can in fact trace the network that made the Enlightenment probably the greatest contribution to human thought on the subject of politics economics and society and this is just one snapshot that I that I've chosen to illustrate how we can learn from formally graphing networks here you have Locke's correspondence in various shades of blue and Voltaire's in various shades of orange one of the findings of this this project is that Locke was far more of a global correspondent and Voltaire who essentially correspondent with people who were in France or were French and near France my former colleague at Harvard the wonderful Emma Rothschild has a terrific book about a Scottish family this was bound to appeal to me the Johnsons who were a classic commercial dynasty their 18th century Network is depicted here with the Johnsons as as the blue nodes the sort of light blue nodes there are individual members of the Johnson family with their friends and rivals are acquaintances in in red and each of the different kinds of link has a different color in this chart even a few yellow lines denoting relations between slaves and and their owners another related project has been trying to to show how connected provincial France was to the French Empire in the 18th century and this is really all those people in the town of angoulême for whom we have records depicted showing those with overseas contacts in in red and it's surprising just how globalised a little town in France was in the late 18th century the economists will enjoy this this is a network diagram of essentially the Keynesian revolution in British economics with the Keynesian including Keynes himself to the left where they belong and their opponents to the right now these diagrams always become too complicated to be legible so I zoomed in so you can see that the two major nodes of Keynesianism in its opponents you can see the key figures there Keynes himself but also the Robinsons and over here you've got people like Lionel Robbins and but I didn't want to forget Stanford which does actually make an appearance in the Keynesian revolution I'll be in a slightly modest one in the very top of the diagram because Alan Abbott Jung was head of the Stanford Economics Department I'm sure you all remember him well and and had some connections to the British Keynesianism before of course they became Kenyans he died long before anybody had thought of giving at that name and then a rather important Cambridge figure Ruth Cohen studied at Stanford before going on back to the UK and becoming principle of noonim so there are lots of different ways in which historians are using network analysis to understand different kinds of historical change economic geopolitical intellectual my question is what's the question because I noticed some of my colleagues getting so carried away with the software that those illustrations almost become an end in themselves and I'm left wondering if it's so very surprising that people in the past had relationships I mean obviously they did and what can we really learn from mapping those relationships as meticulously as these different studies do what is it that we're engaged in doing when we try formally to study networks are we just playing the Milgram game over and over again oh gee six degrees of separation I can get from myself to Nathan Rothschild that easily is it that we're trying to revalidate grana versus argument about about weak ties are we just really reproving old hypotheses are we trying to trace the spread contagion like spread of ideas in the way that Christakis and fowler suggest happens I think there has to be more to it than that and my hunch at the moment is that if this enterprise is to yield any results it must go to the next stage the kind of stage you find in the work of barabási we need to understand the way the historical networks behave in terms of phase transitions in terms of their their scale their properties if we are to say anything that is historically meaningful otherwise we're just drawing pretty pictures and though it's fun doesn't add anything to our fundamental challenges historians to explain why big things happened I'm going to conclude with an example of how that might be done how that might be done we have seen in the past an occasion when technology empowered networks relative to hierarchical structures and that was the Reformation the printing press essentially empowered the networks of 16th century Europe in a way that simply hadn't been possible before and one obvious inference to draw that once you empower networks so that hierarchies that least momentarily taught her if not topple expect trouble the Arab Spring may be an intimation of a wider disruption comparable in its scale to the Wars of Religion that remember endured for more than a century after the Reformation began in Europe there's a nice paper by a guy named Itamar showing that the effect of the printing press on the volume of books and the price of a printed book was almost exactly the same in its scale and dynamics though more protracted in time than the impact of the personal computer in our time those charts when this goes back and forth are very similar price collapses 99% and the volume is exponentially growing from a historians point of view that raises an interesting analogy perhaps we are seeing some reenactments of the Reformation crisis and the technology that this part of the world has done so much to produce is having the same effect on the world the Gutenberg's printing press had on Europe in the early 16th century but then you have to ask yourself how would an earth that the hierarchies get back on top as they did here it is happening the Treaty of Westphalia in the process of being ratified here at one stir in May 1648 could it be that technology after the printing press evolved in ways that favored hierarchies so that by the 19th century Telegraph's steam ships railroads and the rest reinforce the hierarchical empires that had survived the buffeting of the earlier Reformation these are mere hypotheses but they do bring me back to my core interest in the 1970s because there's a sense in which the challenge to hierarchical power began then but in the Tahrir Square uprising but much longer ago the overthrow of Richard Nixon ultimately was the triumph of the media networks over the hierarchical power of an imperial presidency that Nixon had had sought to strengthen perhaps we're already seeing the hierarchies reasserting themselves in our time when I saw this slide from the prism program leaked just a couple of years ago I remember thinking how remarkable it was the name Google appeared down here in the org chart this illustrates for me the extent to which history continues to be a dialectical process the dialectic is between networks and hierarchies in most of history the hierarchies are dominant and that's probably why historians study them but every now and then in our time and I think in at least one other time the networks get the upper hand and then historians have to be much more creative about the way they do research because as I mentioned networks generally don't leave archives thank you very much indeed so I will open it up for questions after I ask a question or two but thanks so much for those remarks that was a sort of broad broad set of topics that we covered and I want to just sort of cycle ahead to the present day you talked a bit during the presentation about recent developments like the Arab Spring there Bob basically been just incredible changes in technology in recent years that have the some extent influenced what sort of networks form and what the effect of those networks are so - on two separate margins and on the one hand I think it seems plausible that the that technology has provided networks today with the upper hand although as you as you know there's a sense in which hierarchies to some extent may become more productive through these technology changes as well NSA here in the US is a good example and so I'm curious your sense of today is it the case that on that networks are sort of or technology is strengthening networks more than hierarchies or if we look in other parts of the world let's say Russia or elsewhere is it going in the in the opposite direction so and there are many parts of the world where you can shine the light that the Middle East Russia Europe and so I'm curious about your thoughts sir and China - Nana well in some ways the the tension between the hierarchy of the party and the network created by the Internet is is most obvious and I've spent more time in China recently than in Russia so my insights would probably be better or in China I think our if you'd asked me a few years ago I would have said they really have a huge problem there because not only have they created a bourgeoisie they've allowed it extraordinary amounts of horizontal communication of the sort that you would expect to be highly disruptive to a hierarchical system I think I would revise that view now because the party has been remarkably clever about the way that it has gone about harnessing or controlling the network there is censorship as is well known but it's impossible to whack every mole and the censorship seems to focus on the thing that the regime is most scared of which is gatherings that the regime understands something that not everybody who studies this realizes it's not really enough to gather online you have to gather properly in real physical space to pose a threat to a hierarchy and so as soon as anybody suggests meeting in namer City Changsha even if there's no political purpose to the meeting that's what the system picks up the other interesting thing about the way that the Chinese regime deals with microblogs is that it seems to allow them to flourish as a way of monitoring opinion and it's it's surprising how much one can say online in China I spend time as you mentioned market Ching hua and my students are quite unlike their can tip they're their counterparts when I went to the Soviet Union many years ago they are extraordinary free and frank and what they say but they're aware that what they say is being monitored and so there is a certain element of self-censorship going on in Russia I think we have something different there the Putin regime has been very very innovative in trying to use social networks to advance its geopolitical goals I don't know if anybody here has ever been on the wrong side of the Putin regime I once made the mistake of likening mr. Putin to Michael Corleone II in The Godfather films after he seemed to make Europe and offer it couldn't refuse at a conference in Munich this was in the days when gas was expensive and I've been on the receiving end of those troll attacks that the Russians are now able to unleash and a lot of it's automated so thus of Kremlin BOTS come after you it's quite terrifying because of this year number of tweets and Facebook postings they can generate an apple bomb was written about this she's been even more subjected to it as her husband Radek Sikorski the bottom line to answer your question is that although I described it as a dialectic I emitted to add the Hegelian point that after the thesis and the antithesis comes the synthesis and the synthesis of the networks the new networks that we here have created with hierarchical states of the old generation is remarkable to behold and that's certainly what we're seeing in in Moscow and in Beijing that's mr. Putin tell him I'm busy monitoring this very carefully I should think it's great arm wonderful so I have one more question for you before I open it up so as you mentioned a number of economists and others here at Stanford have study networks one of my colleagues Matt Jackson has done quite a bit of work in this in this area trying to think about both the causes and the consequences of network formation and one thing that some of his work has sort of put out there as a possibility is that the growth in trade and in globalization over the years over the decades created stronger networks increase the sort of number of partners and and and the strength of the networks between countries and that that may be serving as a powerful force to prevent large-scale war on the sort of scale that we saw earlier in the 20th century I'm curious to see your your thoughts on whether that seems plausible and moreover whether the sort of increase in sort of inward-looking tendencies in Britain we've seen brexit in the u.s. there's a lot of there quite a few calls to increase trade barriers make immigration more difficult and so forth possibility of going in the opposite direction do you see that as being maduk for those the stability of those of those things going for I think that's a terrific question and I'm looking forward to getting to know Matt Jackson and upgrading my math so that I can understand somebody made elements and his course that are currently somewhat beyond me I think it's true to say that globalization has been a network phenomenon it's not just that we've integrated labor markets and capital markets and commodity in goods markets we've also integrated information and and not only through markets but through various kinds of network however I think there is a strong sense in this country in Britain indeed in many Northern Hemisphere countries that globalization essentially is something that benefits elites and that the the integration of the leads is a great deal more global than the integration of everybody else and the one percent is very cosmopolitan they're not point not one percent is astonishingly cosmopolitan you're all members of it so you know that I mean if you are Charles Murray's are archetypal roofer in his mythical underclass town of fish town all of this sucks and you are strongly attracted to the idea of a backlash against globalization that targets this cosmopolitan elite I think part of what we're seeing at the moment is a classical backlash against globalization very similar in its rhetoric to what we saw in the late 19th century which goes to show that you can have that kind of politics without technology of the sort that we have today the people who campaign successfully to exclude the Chinese from California and indeed the United States in the 1870s so successfully that they got legislation passed in 1882 that excluded the Chinese from the United States didn't have Twitter and they didn't have Facebook and a lot of what they did was standing on boxes and yelling at crowds but they achieved more than I suspect this generation of populist s-- will achieve they didn't build a wall literally but if you look at the cartoons of Dennis tyranny in the 1870s they have him building a wall metaphorically right across the San Francisco Harbor so I think we should recognize that that although there is a kind of globalization Network there are also networks of populism a pretty potent one last thought which which might be a good way to open up the discussion is Andy Haldane's point which Hal Scott has just reinforced with his new book that if we have highly are complex financial networks connecting the great nodes of the international financial system in ways that are unstable we may end up getting ourselves into as bigger mess as we got into in 2008 Andy Haldane is the chief economist at the Bank of England and he did a very good paper on increasing complexity of the International Financial Network I think it is absolutely spot-on and how Scott has a new book just out arguing that dodd-frank unintended consequences to make the international financial system even more unstable with it was even more fragile than it was in 2007 so watch closely because this brings me back to the point about a kind of network we're talking about networks can be very robust but they can also be very fragile and those sorts of big transitions that can happen are the kind of thing that I think we need to study whether we're economist or historians right okay so I'm going to open it up now for questions we have a question right here I loved your book the great degeneration probably your thinnest book and less academic more it felt like a personal statement I was hoping you could just explain what the catalyst was for that and then expand on a great quote from the good the bad the ugly on those who dig and those with loaded guns I'm so glad you brought that up my favorite movie of all time is the good the bad and the ugly and my favorite scene in it is the the triangular gunfight you may remember supremely wonderful bit of cinematography as Clint Eastwood Lee Van Cleef and Eli Wallach face off in a three-cornered gunfight which I'm sure has all kinds of mathematical possibilities that John Cochran explored but to the to the simple historian this scene is famous because at the end after Eastwood has shot Lee Van Cleef and after Eli Wallach has realized that his gun was always empty he's to it us as the immortal line just to understand the context they're in a civil war graveyard there are thousands of graves but one of them has the treasure that they're seeking they just don't know which one and eastwood says to eli wallach there are two kinds of people in this world my friend there are those with loaded guns and those who dig this is for me all you really need to know about the world that is essentially the essence of the global economy there are those with loaded guns and those who dig so so I'm glad you raised the good the bad the ugly because I I was I was thinking about it a lot when I was composing the lectures that became the great degeneration a great degeneration started out as for lectures for the BBC the BBC called me up to invite me to give the wreath lectures which is a big deal in Britain as I was sitting in the delivery suite at Brigham Women's Hospital in Boston just minutes after the birth of our son Thomas what perfect timing to get somebody to agree to something's like of course door whatever you want can I go now and then I had to give the damn lectures and so I had to come up with four I hoped uhm polemical arguments about what I would regard as the institutional degeneration or decay of Western states I I have some sympathy with the idea of secular stagnation that Larry Summers has been touting ever since he didn't get the Fed job it should have been me to remember that song it should have been me so the trouble about secular stagnation is the last time a Keynesian came up with it was our when Hanson and it was a moment immediately falsified by event so I I'm skeptical about the way in which he frames it my argument is that just as the rest of the world has been improving its institutions so we've allowed us to degenerate in the area of public finance regulation the law and education and our institutions on both sides of the Atlantic are worse quite a bit worse than they were in the 1980s and that's really the problem and what's to me depressing is that in the period since I wrote that which I supposed must be five years ago now nearly the ideas in that book have had absolutely no influence on the American political class none I wait in vain for even a single phrase to make its way into the presidential debates but the core idea of the book is actually from Adam Smith Smith says in The Wealth of Nations that you can get into the stationary state you can have growth and be successful and get wealthy then you can enter the stationary state and his description is supposed to be China of the 18th century but it applies almost perfectly to us today so you don't take it from me get it from Adam Smith ok great next question ah pitch where I'm sorry not come though you spoke of a kind of a contest between hierarchy and networks in various times in history one being superior and then sometimes the other right now we see a struggle between the networks and the governments and the powerful people who own the networks or only Mark Zuckerberg my neighbors but the question really is have there been periods of time in history when the networks were supreme it took a long time for the hierarchical you take charge well I think you've asked a terrific question I think we're at the early stage of very very interesting conflicts between men like your neighbor who owned the networks as it were you can be a user we're all netizens in the sense that we're all users but if you're an owner of a key platform as Mark Zuckerberg is an enormous proportion of Facebook then you are the 21st century's equivalent of Andrew Carnegie or rockefeller you are one of the new Giants of the economy we're not quite at the point when the collision between these new economic powers and the old established hierarchical parts of the economy is out in the open but we're very close to it and the European Commission has already begun what will be a much more protracted conflict between States and quasi monopolies in the next 10 years and whether Donald Trump to win the election which I still don't rule out even though he's had a terrible week I think then it would burst out into the open not least because of Mark Zuckerberg political liberalism so I think this is a really really interesting thing to watch it's one of the reasons I want to write this book I think we we fail to see that the real dynamic is not necessarily going to be networked versus hierarchy it's going to be old hierarchy versus new hierarchy because ultimately Silicon Valley for all its rhetoric of internet democracy it's a very hierarchical place in which the capital is concentrated in as few hands as it was in the Gilded Age of American industrialization Nixon I just would like your perspective on where you think the endgame is going to be in China I grew up when the internet was most of us did when I was wide open and China is the first place that maybe maybe except Russia that so significantly tried to control it and limit the access and all of that and so how do you see that playing out because it's an artificial distortion and what the original inventors of the internet had in mind when they created it well I'm going to answer your question and I didn't know remember to answer your second question which I fail to do but they're closely linked and your question was has there ever been a time when the networks have rained and the hierarchies have lost and I think there was a period beginning in the Reformation and continuing right through ad to the early 19th century when networks in the Western world were distinctly more powerful than hierarchies and all the revolutions that we study in history beginning with the Reformation and then going through to the Industrial Revolution to the great commercial revolutions that led to the settlement of North America the Enlightenment Scientific Revolution and then the political revolutions in the United States and in France these these were all driven by networks that the founding fathers were part of a tremendously powerful Network when you go and see the musical Hamilton which I urge you all to do you you're reminded that that ultimately the American Revolution was a kind of network against a hierarchy and it's it's almost a caricature form there but I think that that's the story of modernity because networks do the creativity there's no question that it's the networks that tend to do the innovation they have this peer-to-peer quality that allows ideas to very rapidly evolve in hierarchies essentially take care of security and rent-seeking that's what hierarchies do the hierarchies are essentially protection rackets they say to the networks look it's a dangerous world well will we've got your back but we'd like to collect the following percentage from your revenue stream and that's essentially our hierarchical structures evolving some are legitimate they're called States and others not that's organized crime but that's basically how the world works and what's fascinating in the early 19th centuries to see the reom position power Aquabats what Napoleon is the bun comes along and says the French revolutionaries yeah but you really need me to defeat your external enemies and almost immediately the ideas of liberty equality and fraternity a subsume in a supremely hierarchical very narcissistic project so the Chinese find themselves staring down both barrels of Western history as we lived it then ultimately because they never really had a bourgeoisie before on any significant scale they face the social revolution that was a part and parcel of all the change that happened in Europe in the 17th and 18th and 19th centuries and it's not at all clear to me that over the long run the one-party state can withstand the economic the social consequences and the cultural consequences of the economic revolution has achieved having said that I think any policymaker who bets on a Jasmine Revolution a phrase that Hillary Clinton wants other ill-advisedly used is going to be disappointed because this is not happening anytime soon right now what is most impressive to me when I go to chat China is that the hierarchy still works in the sense that it is very hot to do anything illicit in China without the authorities knowing it can be in on it but they do know about it I'm correspondingly there is still some sufficient social mobility through the party further to be buying and as long as their social mobility and you have a shot at getting up into the elite of the party then I think the system has surprisingly legitimacy but it is a fascinating experiment that's being run right now and the most interesting experiment in the world and and I think ultimately something something's gotta give and we'll see the conventional wisdom this is my last thought on the subject is that Xi Jinping is the strongest leader in China since thanks for helping possibly since Mao I'm not so sure I think in truth his power is increasingly formal he has formal power no question but there's a whole informal kind of power based on social networks that it's slipping away from the party's control and that the centrifugal forces may be stronger than people expect over the next 10 or 20 years it'd be very hard to maintain China as a unitary state government from Beijing under these circumstances with that I think we are out of time I'm sorry we we pride ourselves on being on time here at C / its 602 and so I think we have to wrap it up but please join me in thanking Neil Ferguson

Channel: Stanford Institute for Economic Policy Research (SIEPR)

Views: 18,189

Rating: 4.9263802 out of 5

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Id: a-7dtA7kqyg

Length: 56min 42sec (3402 seconds)

Published: Wed Oct 19 2016