The Austrian

Can Freedom Survive Without the State?


[The Square and the Tower: Networks and Power, and the Freemasons to Facebook by Niall Ferguson, Penguin Press, 2018.]

Niall Ferguson has impeccable credentials as a member of the “Establishment” (a word that comes, he tells us, from the historian A.J.P. Taylor). He has taught history at Oxford, Cambridge, Harvard, and NYU and is also a consultant to a global hedge fund. As one might expect, he is not a libertarian. Nevertheless, he has often challenged conventional opinion in a way libertarians will find congenial. In The Pity of War, for example, he argued that the British ought to have stayed out of World War I, despite the prevailing orthodoxy that the Crusade against Kaiser Bill was a “good thing.” In The Square and the Tower, he continues and expands his challenge to prevailing leftist dogmas.

Ferguson finds a unifying theme that he applies to a great many historical episodes: a conflict between hierarchies and networks. Hierarchies are “vertically structured organizations characterized by centralized and top-down command, control and communication.” Networks, by contrast, are informal channels of communication among individuals. Ferguson complicates matters by contending that “far from being the opposite of a network, a hierarchy is a special kind of network,” one in which one “always adds nodes downwards, but never connect nodes laterally.”

This means that people at the same level in a hierarchy communicate only with those above or below them, not those at the same level. (Is this always true?) Ferguson often complicates matters unduly, and his learned references to Euler’s solution to the Königsberg Bridge Problem and his many mathematical diagrams and reports of research on networks in various fields do not contribute to his accounts of historical events. His scholarly range is impressive, though he unaccountably fails to cite Harrison White, one of the most influential sociologists writing on networks.

The real contrast that the book illuminates is not between top-down organizations and other networks: it is rather the clash between state coercion and people’s free activities. The book moves from prehistoric times to the present, and always the malign effects of the state are unmistakable. Ferguson cites the great historian Sir Ronald Syme, who in “his classic study The Roman Revolution ... argued that the Republic had ... been run by a Roman aristocracy whose feuds had allowed Italy to descend into civil war. ... It was by building his followers into a ‘Caesarian party’ that Augustus was able gradually to concentrate power in his own hands while nominally restoring the Republic. ‘In certain respects,’ wrote Syme, ‘his Principate was a syndicate.’”

Ferguson has become an even more resolute revisionist about World War I than in his earlier book. “Russia appeared intent on exploiting the Bosnian crisis with a view to the permanent weakening, if not the dismemberment, of Austria-Hungary. ... If any individual deserves to be blamed for the systemic failure that occurred [after the assassination of Archduke Franz Ferdinand], it was the British Foreign Secretary, Sir Edward Grey. Britain was supposed to be the balancing power in a crisis such as this.” Blundering and rash actions by those at the top of the hierarchies of the European Great Powers led to catastrophe.

The success of the Bolshevik Revolution, Ferguson holds, stems in large part from a state-sponsored conspiracy. “Yet the one German plot that worked proved to be so successful that it very nearly revolutionized the whole world. This was the plot to send the Bolshevik leader Vladimir Ilyich Lenin, then living in Switzerland, back to Russia, in the wake of the February 1917 Revolution that overthrew Tsar Nicholas II. ... The German government supplied Lenin not only with a railway ticket from Zurich to Petrograd ... but also with lavish funds to unseat the new provisional government.”

In his account of the rise of Nazism, Ferguson shows how worship of a political movement can lead to disaster. “To many observers, it seemed like a religious awakening. ... The Nazis developed a self-conscious liturgy, with 9 November (the date of the 1918 Revolution and the failed 1923 Beer Hall putsch) as a Day of Mourning, complete with fires, wreaths, altars, blood-stained relics and even a Nazis book of martyrs.” Ferguson has here rightly drawn from Eric Voegelin, who is incorrectly called a Catholic.

Ferguson ardently admires Henry Kissinger, but even those of us who do not share his favorable view of this Machiavellian intriguer will gain much from Ferguson’s extensive research on how Kissinger propelled himself to the summit of power. Ferguson puts his account of networks to good use: “The hypothesis must be that Kissinger’s influence and reputation were products not only of his influence and industriousness, but also of his preternatural connectedness. ... The network was the precondition for his ‘chain reaction’ diplomacy. ... That was what justified the claim that ‘Kissinger [probably] had more impact than any other person in the world.’”

Opponents of the free market sometimes argue that the internet came about through the expansion of a program sponsored by the Defense Department. Ferguson does not agree. After describing the governmentally sponsored Advanced Research Projects Network (ARPANET), he says, “It therefore mattered greatly that what became the internet was not designed that way, but rather arose more or less spontaneously and organically, with academics and private sector computer engineers rather than military planners taking the lead.” Both here and in his earlier book The Ascent of Money, Ferguson ignores the Austrian theory of the business cycle, but he has no illusions about the role of the Federal Reserve System in provoking the financial crisis of 2008: “The Federal Reserve allowed monetary policy to be too loose between 2002 and 2004. ... [Even after the Lehman bankruptcy.] Incredibly, however, staff economists at the Federal Reserve saw no reason to anticipate a recession.”

Ferguson mordantly criticizes the role of the state in the modern economy. “The federal government has degenerated into what has been called an ‘administrative’ or ‘managerial’ state, hierarchical and bureaucratic in its mode of operation, dedicated to generating ever more complicated regulation that had precisely the opposite effect of that intended. ... The administrative state has found an easy solution to the problem of increasing the number of public ‘goods’ without making commensurate increases in taxation, and that is to finance current government consumption through borrowing. ... Yet all these expedients of the administrative state impose burdens on the private sector that ultimately reduce the rate of growth and job creation. ... In short, the administrative state represents the last iteration of political hierarchy: a system that spews out rules, generates complexity, and undermines both prosperity and stability.”

Given his powerful case against the state, it is disappointing that Ferguson ends by calling for stronger state hierarchies. These are needed, he thinks, to combat future cyber warfare and Islamic jihad. This is not the first time that an author has failed to draw the correct lessons from his own book, and readers of The Square and the Tower would be well-advised to benefit from the author’s insights into the evils of the state while they ignore his conclusion.

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