The fine art of turn of the century physical anthropology involved measuring the size of the skull (and therefore the size of the brain) to determine the innate capacity of the different “races” for civilization. It was commonly held that such morphological investigations had yielded “scientific proof” of the biological superiority of some races over others. This business was closely tied to Polygenism which emerged in the 18th century. Leading scientists considered races to be species separately created by God. After the acceptance of Darwinian evolution in the late-nineteenth century, the polygenic outlook was modified. The “races of man” were now thought to have evolved, pace Wallace (1864), from different primates or early hominids in more or less absolute isolation from each other.

Perhaps the most influential high racialist, certainly from a historical perspective, was Ernst Haeckel (1834–1919). Whereas Social Darwinism was used to justify laissez-faire capitalism in the Anglo-Saxon world, Haeckel emphasized the struggle for survival between the races as the motor of history. Our man celebrated the vanishing of weaker races and the proliferation of the vigorous ones. The Nazis were big fans. Indeed, National Socialism was nothing but “applied anthropology.” Haeckel’s thought formed the central theorem of Nazism; it was “the only element of the Nazi era which was neither modified nor manipulated in response to strategic or tactical requirements” (Rich 1973).

After Auschwitz, overt racialism was abandoned by mainstream anthropology. But it continued to thrive on the margins. The last hurrah of anthropological racialism was probably Carleton S. Coon’s Origin of the Races (1962). Coon pushed the idea that human races were different subspecies that had evolved in parallel with little or no contact. Himself a one-time president of the American Anthropological Association, he was harshly condemned by the then president, Washburn, at the 1962 meeting. At the end of the speech, the audience stood up, cheering.

Besides the racialized trauma of the mid-century passage, there was mounting evidence that all extant humanity could trace their lineage to Africa in the not too distant past so that not enough time had elapsed for the emergence of subspecies in humans. Of course, there is substantial biological variation in humanity. But it was by then understood that racial taxonomy was a poor way to understand this variation. Human biological variation is largely within populations; and even between populations it varies continuously, not discretely (a necessary implication of racial taxonomy). The modern understanding was captured by Frank Livingstone in the same year as the last hurrah of racial anthropology: “There are no races; there are only clines.”

The fine art of human craniology survived in paleontology departments. Dealing with fossils from millions of years ago (Ma), there was much less at stake in morphological taxonomy. Nor was it a secondary issue. Hominin are classified above all by cranial capacity. Indeed, the definition of the genus Homo boils down to hominins with a cranial capacity greater than 600 cubic centimeters (cc). Early hominins, although committed bipedals (including late pre-Homo tool-manufacturers) are placed in different genera above all because their brains are considered too small. Figure 1 displays the evolution of average hominin cranial capacity by taxon.

Figure 1. Average cranial capacity by hominin taxon.

Two observations. First, H. neanderthalensis had slightly bigger brains than H. sapiens. This calls into question either the equation of cranial volume with intelligence, or our name, Homo sapiens, ie “wise guy.” Second, the averages shown in Figure 1 conceal massive variation as well as the exponential growth in hominin cranial volume. Figure 2 is more revealing. Note the log scale of the time axis. What the figure shows in exponential growth in human cranial volume since we split from our common ancestor with the chimps 7 million years ago (Ma).

Figure 2. Hominin cranial volume. Source: Spocter (2007).

The mixing of genera in Figure 2 would perhaps scandalize a purist. Figure 3 zooms into the past two million years; the Age of Homo. Red represents Neanderthal crania; blue, H. sapiens; and black, other “species” in the genus Homo.

Figure 3. Cranial volume in the genus Homo. Source: Spocter (2007).

What of the races imagined by the pioneers of craniology? Given all the hullabaloo, surely there was some empirical basis for the alleged racial differences in cranial capacity? Indeed, as late 1994, Rushton, the high racialist out-of-time, argued in Race, Evolution, and Behavior that Black crania were 80 cc smaller than White crania, which in turn were 17 cc smaller than Asian crania (thereby reversing the classical ordering claimed by high racialists: White > Asian > Black).  I have found that it is always a good idea to check such claims. Table 1 shows the summary statistics for cranial volume by “race.” The data is taken from the US Army’s ANSUR II Male working database which contains a total sample of 4,082 subjects. In order to calculate cranial capacity we use the formula from Rushton (1993).

Turns out, it is precisely the other way around. On average, Black men’s crania are 15 cc larger than White men, who in turn have crania that is on average 3 cc larger than Asians. Of course, these differences are utterly insignificant in light of the substantial variation. For instance, 15 cc is a trivial 0.18 standard deviations. Indeed, the most important numbers in Table 1 are in the last three columns. They emphasize the dramatic scale of the variation at the individual level. The range for both Blacks and Whites is well over 600 cc! The standard deviation of cranial capacity for the other “races” in America is comparable. The only reason the range is lower is because of smaller sample sizes. Figure 4 shows a boxplot of the same data. Racial taxonomy gives us no handle at all on the variation in human craniology.

Figure 4. Boxplot of cranial volume by “race.” Source: ANSUR 2 (2012), author’s computations.

If you want to try this at home, you don’t need to make complicated measurements of your head. Instead, you can proxy cranial capacity by head circumference. Figure 5 shows the tight linear relationship. It also displays the estimated regression line, which you can use to get a quick and dirty estimate of your cranial volume.

Figure 5. Head circumference and cranial volume. Source: ANSUR 2 (2012), author’s computations.

Caspari et al. (2017) made a compelling argument that human subspecies are not a logical impossibility. Many extinct hominins in the genus Homo weren’t other species. Rather, they were human races or subspecies. H. erectus may indeed have been a different species since it diverged from our lineage 2 Ma; perhaps enough time for speciation. (Biologists reckon that across the animal kingdom speciation takes about 1 Ma.) But our last common ancestor with Neanderthals, Denisovans, as well as the ghost populations whose signature is all over our genome but whose fossils have yet to be found, lived some 600 Ka (thousands of years ago). That’s enough time for raciation but not speciation. More importantly, we interbred with these humans; not now and then but continuously after our multiple dispersals from Africa between 130 Ka and 40 Ka. (As we surely did with other races in our African homeland early in our career.)

H. sapiens emerged 200 Ka in Southern Africa and spread to East Africa soon after. (The “purest” H. sapiens today are the Koisan, the Kalahari Bushmen.) Meanwhile, Eurasia was populated by a number of now-extinct human races. For some half a million years then, we were genetically isolated from the hominins who populated Eurasia. Moreover, even by the standards of the late Pleistocene, Neanderthal populations were very small and isolated. Population densities were extremely low. And in the face of the violent glacial-interglacial whipsaw of Pleistocene Europe, they found themselves periodically isolated in refugia below the Alps. Dating in the Neanderthal world must have been tough! The prolonged isolation and extremely low population densities well-approximate the extended isolation of the races of the high racialist imaginary.

But isolated or not, Neanderthal were definitely people. From Capari et al. (2017):

Neanderthals were capable of complex behaviors reflecting symbolic thought, including the use of pigments, jewelry, and feathers and raptor claws as ornaments. All of this is probably evidence of symbolic social signaling, complementing the evidence of complexity of thought demonstrated by the multi-stage production of Levallois tools. Neanderthals were human.

Moreover, the notion that our race had cognitive advantages over the other races has to be abandoned. The difference wasn’t brains. Perhaps it was grandparents. … I am only half-kidding. The decisive difference seems to have been different life histories. Our race lived dramatically longer. And it is that which admitted a quantum leap in dynamism via the intergenerational transmission of knowhow and knowwhere and so on. More on that another time.

Figure 6. H. sapiens (Libben) and H. neanderthalensis (Krapina lx) survivorship curves.

Adam Tooze’s Crashed: How a decade of financial crises changed the world was released today in the UK and will be out in the US next week. Of course, no matter where you are on the planet you can get the Kindle version from the UK store right away. [Full disclosure: Adam is a personal friend and soon-to-be doctoral advisor. I also helped a little bit as he was working on the manuscript. So, caveat emptor.]

Dozens and dozens of books have appeared on the global financial crisis. Many are blow-by-blow accounts that capture the drama of the GFC. Some are memoirs by actors in the eye of the storm. Then there are those, mostly by economists, that try to diagnose the causes of the GFC. It is the last that have failed spectacularly to impress … until now.

The principal reasons for the failure have varied. Too many are irredeemably US-centric; as if the GFC was an exclusively American affair. This is especially true of books that appeared before the eurozone crisis. Most are politically-biased; either focused on the crimes of the bankers or the misdemeanors of monetary authorities, political authorities, and above all, the Federal mortgage agencies. Some see the financial crisis as nothing but the latest rendition of financial manias and panics driven by irrational exuberance that have plagued the history of capitalism. Think Tulip mania, the Mississippi bubble, the “dot com” bubble, and so on. Finally, and perhaps most importantly, too many economists’ accounts have been incorrigibly wedded to a defunct picture of the global economy based on national economic statistics. For them, the roots of the GFC lie in persistent current account imbalances.

The GFC was not just an American subprime crisis but a crisis of global banking. It was not caused by the monetary policy of the Federal Reserve, even though ultra-low rates played their part in fanning a boom in mortgage lending (as they do in every cycle). It was not driven by Fannie and Freddie. The bulk of subprime loans made during the boom in 2004-2006 were not held by the agencies. Indeed, had that been the case there would’ve been no financial crisis.

The proof is straightforward. Even at the peak of the crisis, the week following the Lehman bankruptcy, the core component of the wholesale funding flywheel collateralized by default-remote bonds, US Treasuries and agency-RMBS (residential mortgage-backed securities issued by agencies with implicit US government backing), continued to spin just as fast. Investment banks that were understood to be over water, such as Goldman and JP Morgan, were still borrowing hundreds of billions of dollars in the tri-party repo market against agency-RMBS the day after the Lehman bankruptcy. Indeed, it was the introduction of default risk into the rapidly-spinning flywheel of the secured lending markets that was the source of instability. The whole thing imploded when escalating defaults forced a revaluation of the risk posed by private label-RMBS. That was the proximate cause of the GFC.

The mortgage lending boom was the giant sucking sound of the wholesale funding market. That is, the introduction of private label-RMBS into the rehypothecation flywheel was demand-driven. As Zoltan Pozsar argued, it was the demand for safe assets emanating from massive cash pools on the one hand and the demand for risk assets by leveraged bond portfolios on the other that drove dealers to slice and dice pools of mortgages to manufacture said assets. The construction of this manufacturing capacity required a dramatic transformation of banking practice, what Gowan called the New Wall Street System and now goes under the rubric of Shadow Banking. Here’s a map of the market-based credit system created by economists at the NY Fed.

Even the amplitude of the mortgage lending boom is not enough to understand the virulence of the global financial crisis. The other critical component was the leverage cycle. In a series of path-breaking papers, Adrian and Shin showed that unlike households, nonfinancial firms and even commercial banks, the leverage of wholesale-funded investment banks (ie, broker-dealers) is procyclical. This is not simply an artifact of the securities trading business. Because net worth goes up faster than liabilities when asset prices rise, leverage falls. Leverage is thus naturally counter-cyclical. The fact that leverage is procyclical for dealers implies that they aggressively manage their balance sheets. More precisely, when asset prices rise, value-at-risk falls; dealers respond by leveraging up; that in turn pushes up asset prices further. Conversely, when asset prices fall, value-at-risk rises; dealers respond by reducing leverage; which in turn pushes asset prices even lower. This is the “leverage cycle.”

Source: Adrian and Shin (2013).

The leverage cycle is exacerbated by the wholesale funding model. Since the value of collateral goes up along with asset prices, dealers not only want to but can borrow more on the same collateral. And on the way down, the falling value of collateral reinforces the doom loop. It was these dynamics endogenous to the financial intermediary sector that drove both the extraordinary amplitude of the financial boom and the virulence of the financial crisis.

Our account so far is seemingly US-centric. But that is far from the truth. As Shin has shown, European banks played a decisive role during the financial boom. The “round-trip” transatlantic circuit accorded “a pivotal role for European banks in determining financial conditions in the United States.”

Source: Shin (2012).

Moreover, because “round-trip” flows get netted out, one gets the wrong picture from net capital flows (which correspond to current account imbalances). Instead, one must look at gross capital flows. As soon as we do that (next figure) we uncover the full scale of transatlantic finance. European capital flows into the United States utterly dwarfed the flows from Asia, even as the latter ran large current account surpluses.

Source: Shin (2012). Percentage of US GDP.

To cut a long story short, what this means is that all accounts that trace the roots of the GFC to global imbalances are flat-out wrong. It was not Bernanke’s ‘global savings glut’; it was Shin’s ‘global banking glut’. More generally, what was responsible for the GFC was the ‘excess elasticity’ of the financial intermediary sector. The origins of the catastrophe must be traced to dynamics endogenous to high neoliberal global financial intermediation.

Before Crashed, the only books on the market that did even a little bit of justice to all these findings were Mehrling’s New Lombard Street (2010) that documented the functioning of market-based finance and Rajan’s Fault Lines (2011) that focused on the fragility of the global financial system. Mehrling tells the story of how the Fed became ‘the dealer of last resort’. Rajan pays more attention to international macro-financial linkages and spillovers. Both are definitely worth reading. But neither gets close to the full picture. Enter Adam Tooze.

Crashed gets more than just the functioning of the high neoliberal global financial system and origins of the global financial crisis right. As becoming of one of the most celebrated historians alive, Adam presents a properly historicized account of the political economy of the catastrophe and its enduring aftermath. His account does not stop with the end of the crisis in the United States with the deployment of ‘financial Powell doctrine’ or even the end of the eurozone crisis that fine day when Draghi promised to do whatever it takes (the eurozone version of the financial Powell doctrine). He goes on to chart the full unraveling of the international order that ensued in the aftermath of the GFC. (I’ll write about the geopolitical and political economy aspects of the book soon.)

We are of course still living very much in the shadow of the catastrophe so the story as they say is only half finished. That’s the risk one runs in writing contemporary history.  Be that as it may, Crashed supersedes all book-length treatments so far on the origins of the catastophe.

Notes. Effective stature is an actuarially fair measure of net nutritional status. It combines anthropometric and actuarial information and is meant to be interpreted as a general measure of living standards. Simply put, it is the combination of mean population height and mean population BMI (linear in the former and quadratic in the latter) that best tracks life expectancy. Effective stature contains roughly the same information as the Waaler Index. Our estimates are based on the Waaler surface we extracted from panel data. We have rescaled and recentered our estimates to match the mean and variance of average height across nations. One can thus think of it as effective or risk-adjusted stature.

Here’s what I see going on with polarization since the human career began. The orthodoxy has it that the Neolithic Revolution and the Industrial Revolution demarcate stadial social evolution. Both the Neolithic Revolution and the Industrial Revolution are either overrated or misdated. The former is dated to ten or twelve centuries before Christ and said to last until the birth of civilization; the latter to 1760-1830 Britain. If we buy the anthropometric evidence, the second is bunk. There is also good reason to believe that Andrew Sheratt is right on the money so that what really mattered in the former case was not the Neolithic Revolution but the Secondary Products Revolution which began at Uruk and spread out from there between 4000 and 3000 BCE.

What the anthropometric evidence points to is that the premodern pattern prevailed until the late-nineteenth century. Indeed, it was not until the mid-century passage, 1920-1960, that the hockey stick is hit in earnest. I want to argue that it was the Second Industrial Revolution, 1860-1960, that made the hockey stick in living standards possible in the temperate zone; that it was the Secondary Industrial Revolution that repealed the Malthusian law; just as Sheratt’s Secondary Products revolution made Uruk the first central (and then the only existing) power. The issue is that there were indeed two general revolutions in the material possibility frontier. These were the secondary revolutions that revolutionized the value of generalized domestications in the first case and in the second case, generalized industrial production with fossil fuel-powered machinery in agriculture, industry, and transport, thus revolutionizing the thermodynamic basis of civilization.

There is indeed some truth to the stadial frame. The secondary revolutions made possible hitherto unimaginable living standards. In the first case, this began at Uruk sometime during the Ubaid period. From there on Babylonia was a part of the Central Civilization—the longest continuously urbanized macro-region is the zone at the intersection of Europe, Africa, and Asia. This is of course no coincidence. What happened in Babylonia is that a major climate shock made the lower Euphrates extraordinarily fertile. At Uruk in the fourth millennium BCE, agricultural yields, pottery manufacturing, metallurgy took off; they invented writing, administration, the potter’s wheel, the plow and the wagon; domesticated oxen for traction, cattle for milk products, and the donkey for transport; and mastered micro-domestication (leavened bread, cheese, beer and wine). The ‘early high civilization’ is an extraordinary case of polarization. The Sumerians played an extraordinary role as the founders of the Central Civilization when they had the field to themselves in the fourth millenium BCE. It was the transmission of Babylonian wagon technology at the very edge of the Uruk world-system, the steppe (southern Russia) that triggered the very formation of the Yamanaya (Proto-Indo European speakers). The wagon allowed the Yamanaya to tame the steppe since they could exploit the otherwise meager open steppe by near constant movement, as David Antony has argued so forcefully. In the history of the peopling of the world by west eurasians, Uruk thus plays the dramatic role usually assigned to alien civilizations in fiction.

The Secondary Industrial Revolution identified by Gordon as the Second Industrial Revolution, 1870-1970, made both living standards and war potential higher than hitherto imagined. (See the evidence from stature.) More generally, the evidence from anthropometry cannot be reconciled with the orthodox narrative. Let’s not forget that the hockey stick adds a dynamic element to the global condition. Interestingly, latitude is not priced in c. 1880. Far from being a “constant,” latitude’s influence was weak in the premodern era when stature was a function of the local availability of protein. It is the hockey stick that radically polarizes the world in terms of living standards. Latitude itself has a history that has yet to be told. But then so do both the secondary revolutions.

Any credible deep history of human welfare must put the secondary revolutions at the center of the narrative frame.