Anthropologists in the Stock Exchange

A Financial History of Victorian Science

Marc Flandreau

• Publisher: University of Chicago Press
• Year: 2016
• ISBN:
  9780226360584
• Topic: Social Sciences
• Subtopic: Sociology
• Index: Social Sciences

Uncovering strange plots by early British anthropologists to use scientific status to manipulate the stock market, Anthropologists in the Stock Exchange tells a provocative story that marries the birth of the social sciences with the exploits of global finance. Marc Flandreau tracks a group of Victorian gentleman-swindlers as they shuffled between the corridors of the London Stock Exchange and the meeting rooms of learned society, showing that anthropological studies were integral to investment and speculation in foreign government debt, and, inversely, that finance played a crucial role in shaping the contours of human knowledge.
           
Flandreau argues that finance and science were at the heart of a new brand of imperialism born during Benjamin Disraeli's first term as Britain's prime minister in the 1860s. As anthropologists advocated the study of Miskito Indians or stated their views on a Jamaican rebellion, they were in fact catering to the impulses of the stock exchange—for their own benefit. In this way the very development of the field of anthropology was deeply tied to issues relevant to the financial market—from trust to corruption. Moreover, this book shows how the interplay between anthropology and finance formed the foundational structures of late nineteenth-century British imperialism and helped produce essential technologies of globalization as we know it today. 

CHAPTER ONE

Writing about the Margin

In early 1863, a group of self-styled anthropologists split from the older Ethnological Society to set up their Anthropological Society of London. They had two main leaders. One was James Hunt, a thirty-year-old speech therapist who had been former secretary of the Ethnological Society of London. The other was the already famous British explorer Captain Richard Francis Burton, a former employee of the East India Company, a passionate translator of foreign languages, notably erotic folklore, and a founder of the modern anthropology of the body.1 Hunt would hold the fort while Burton would travel. He would organize discussion and take care of the society’s publications while Burton concentrated on his books.

As reward, Hunt was made president of the society with responsibility for running it. Burton, as vice-president, would provide social and scientific backup. The society then endowed itself with vice-presidents, honorary secretaries, and a list of Council members as would any learned society worthy of its name. Facilities were found at 4 St. Martin’s Place near Trafalgar Square in a building owned by the Royal Society of Literature, which also hosted the meetings of the Ethnological Society of London. In the summer of 1864, the rental was expanded to secure space for a small museum and library.2 With the collaboration of Nicholas Trübner, a publisher contemporaries described as “an intermediary between Europe and the East,” the “Anthropologicals” launched several periodicals: the Journal of the Anthropological Society of London, which kept members informed of meetings and discussions; the Anthropological Review, which contained articles, surveys, and speculation on current topics (see figure 1); and the semi-periodic Memoirs Read before the Anthropological Society of London, where the longer and more significant papers were published. There was also in 1866 the short-lived Popular Magazine of Anthropology and a number of translations of influential Continental anthropologists.3

FIGURE 1. Cover page of first issue of Anthropological Review (vol. 1, 1863).

A fascination for symbols—their production and interpretation—would remain a distinctive trait of the Anthropologicals. On the society’s logo, the Latin phrase Societas Anthropologiae Londinensis was displayed along the sides of a Masonic triangle, and within the triangle, the three Masonic dots were respectively represented by a skull, a brain, and an eyeball, all surrounding a second triangle in the center of which was a flint implement.4 Among other ghoulish fetishes, the Anthropologicals also kept in their headquarters an articulated skeleton, visible through the window of the building much to the displeasure of the Christian Union Institute across the road, which asked the society to remove it from their sight. The society responded it was willing to put up a blind to shut out the view if the Christian Union would pay for it. From this, it seems, came the name of the group of men who led the society: the “Cannibal Club.”5 Among the ostensible goals of the group, perceptible in the name they had given themselves, was shock and provocation. Anthropologists sought to delineate a new, raw form of knowledge, set apart from ethnology (according to some Cannibals—certainly according to Burton) and its good intentions, conformism, and bigotry. Anthropology became a synonym for a sort of scientific crudity. In a preface written anonymously for her husband Richard Burton’s Highlands of Brazil (1869), Isabel Arundell dwelt on his penchant for the raw (half in apology, half in praise), and warned readers of the need “to steer through these anthropological sand-banks . . . as best as he or she may.”6

During the eight following years, the two organizations—the Anthropological Society and the Ethnological Society—indeed lived a feuding existence. For all practical purposes, both societies focused on similar subjects, and members of both could be considered students of the science of man, a definition on which they almost unanimously agreed. The involvement of Burton in the Anthropological Society, with his reputation as a rabid fieldworker who had once disguised himself as an Indian merchant to penetrate forbidden Mecca, also provided the Cannibals with some of their branding. They proved themselves willing to discuss and publish on such matters as hermaphrodites or practices of clitoral elongation. The rival institutions fought for audience and membership, output and legitimacy, and above all leadership in the science of man. The early annual reports of the Anthropological Society kept score, reporting the number of papers presented respectively by anthropologists and ethnologists at the annual meetings of the British Association for the Advancement of Science, where the latest scientific ideas were floated and enjoyed the light of publicity. But even when public relations were acrimonious, there was also an almost permanent discussion of merger. Repeated attempts were made, the first in 1864. Another significant effort collapsed in the late spring and early summer of 1868, when the two societies failed to create a “Society for the Promotion of the Science of Man.”

This episode in fact caused much ink to flow, for the failed amalgamation triggered a controversy in which these students of man started throwing insults at one another much sharper than the stone implements or Indian arrows they were fond of studying. The dispute was started by a trenchant letter to Hunt, written by one Hyde Clarke, a member of both societies, in which he denounced the Anthropological Society’s poor governance standards. The letter was published on August 15, 1868, in the Athenaeum, a literary criticism journal that boasted of being the “first literary journal to have made honesty its aim.” Hyde Clarke’s letter started an extended controversy, for he had questioned Hunt’s character, painting him and his Cannibals as individuals prepared to derive personal benefits from exploiting the readers of the Anthropological Society’s publications. They had exaggerated membership, doctored the books, and effectively put the society’s Fellows in debt.7 This led to a protracted and much advertised dispute, with the Anthropological Council trying but failing to exclude Hyde Clarke from the society.

In August 1869, a few months after the dust of the Athenaeum controversy settled, James Hunt passed away. He did so at the untimely age of thirty-six, an age more befitting the life expectancy of a Jamaican slave than that of the member of a learned society whose tendency to try and be immortal is well known.8 His death was followed by new openings for reunification from the Ethnological Society’s leader, Thomas Huxley, and this time the overtures met with success. Thus were ethnology and anthropology happily reconciled in early 1871. Together, they gave rise to an Anthropological Institute under the presidency of John Lubbock, a prominent member of the Ethnological Society who ran the so-called X-Club, the Ethnological Society’s counterpart to the Cannibal Club.9 Lubbock was a former research assistant to Charles Darwin, an entomologist who carried ants with him in his travels, a protector of ruins, a banker, a member of Parliament, the creator of the Bank Holiday once known as “St. Lubbock” day, an archaeologist, and the coiner of the terms Neolithic and Paleolithic.10 To secure the merger, compromises had been necessary, and one was the use of the term anthropology in the new organization’s name. This was no small concession. Anthropology had been a rude word for ethnologists in Lubbock’s group, and they did not conceal their distaste. “Anthro . . . —(I never can spell the horrid word)” was how his wife, Ellen Lubbock, famously put it.11 In fact it is still unclear to students of the subject why the word triumphed while Hunt was out of the way.

Chance, Coincidence, and Encounters

Seemingly unbeknown to the men grappling with the vicissitudes of anthropology, another drama played out on another Victorian stage. Starting in the 1850s, the London Stock Exchange, still burdened with bad memories of foreign investment since the crisis of 1825, was the scene of a new investment boom that focused on infrastructure projects such as railways, telegraphs, and navigation companies. As the European economy recovered from the economic and political turmoil of 1848, the continent discovered that its world leadership had further increased. In the 1850s the Ottoman Empire’s disintegration accelerated, providing Europeans with the possibility of a shorter and more secure route for their Asian voyages through a planned canal at Suez. Europe retained an enormous edge over the other expansionary power of the time, the United States, which brandished the Monroe Doctrine, annexed Texas and California, and looked toward South America. During the 1860s, the United States became preoccupied by a bloody Civil War that was to consume most of its energies, interrupt its domination of cotton exports, and enable the troops of the French emperor to land in Mexico in an attempt to introduce an Austrian ruler.

The versatility of European capitalism was enormous. If cotton could not be obtained from the United States following destruction of the plantation system, other possibilities existed from creating or expanding existing outlets. Cotton might just as well be obtained from Egypt, India, or Abyssinia. Europe’s stock markets, centered in London, and Europe’s formidable annual contingent of emigrants to the Americas still held the capacity to design the world. Foreign issues reached the floor of the London Stock Exchange in accelerating succession despite the crisis of 1866, which unlike previous crises such as the one in 1825 did not cause a foreign debt crash. This was because the Bank of England generously poured in liquidity and kept the ball rolling for another a seven-year period apt to inspire biblical metaphors. Speculation resumed, and the foreign investment boom continued until 1873, when Germany’s adoption of the gold standard caused a major drain on world gold resources and, some argued, by forcing the Bank of England to raise its interest rate to defend its gold reserves, eventually put the financial market in reverse. In early May 1875, Bernard Cracroft’s Weekly Stock and Share List would contain a much-discussed chart showing the vicissitudes in the price of government-guaranteed railway bonds of Honduras, San Domingo, Costa Rica, Paraguay, and Bolivia. “Investors in these ambitious securities,” one journal commented humorously and with evident geographical gusto, could have the “pleasure of tracing in this chart their capricious flight down to the time when, after uncertain zigzags in the empyrean of the latitude of 80, or even in the case of the high vaulting Honduras and the yet more aspiring Paraguayan of 90, they all with one accord swoop down to 20 and 10, except Honduras, which seems unable to rest even there.”12

When the foreign debt bull market of the 1860s and early 1870s was put in bear mode, problems with the way securities had been previously originated and distributed became apparent. In the myriad projects that had been hatched at the London Stock Exchange and sold to investors worldwide, it became apparent that there were many fraudulent (or as we would say today, toxic) products. The way railways, telegraph, and navigation companies had been structured revealed subpar financial ethics. This was just a few years after Herbert Spencer coined the expression “railway morals.” And for evident reasons: railways had none. The problem was so exemplary of the tendencies of Victorian society that foreign railway promotion became the background for Trollope’s famous novel The Way We Live Now, written between May and December 1873 and published in 1875 precisely at the time when those aspiring foreign securities had all with one accord swooped down to 20 and 10 in Cracroft’s chart.13

As Trollope described with immense sociological and economic acumen in his novel, the collection of railway scams had been inflated or “puffed” by the use of fabulous narratives and poetic figures, and the “puffers” who manipulated the project or “jobbed” them in the stock exchange inspired Trollope’s imaginary railway from Salt Lake City to Vera Cruz and his hero, Melmotte. Trollope’s narrative rides the bubble. Melmotte’s fortune rises in the wake of the railway to Vera Cruz puff, which lifts him from the stock exchange to Parliament. With the bubble eventually exposed, the railway stock crashes, punctured, and Melmotte commits suicide after a good dinner—though this last part may have been melodramatic compared to real-life models, who instead took a boat to France, where they enjoyed the good dinner safe from complications. The depredations of foreign finance fixated the minds of contemporaries and led to many discussions in the press and in public debates. A parliamentary commission, the famous Select Committee on Loans to Foreign States, was set up to inquire into the matter. It issued its much-discussed report in 1875, the same year Trollope’s book was released.

Beyond literary style, there were a few differences between Trollope and the select committee. In Trollope’s novel, Melmotte schemes a private joint stock company. There were indeed many such projects, but the Select Committee on Loans to Foreign States decided to focus on one particularly prevalent type of machination that backed a railway line with a foreign government loan. There were several reasons for this financial engineering strategy, one being that foreign government debt issues, unlike companies, were subjected to laxer disclosure requirements. Joint-stock companies had to apply to the Board of Trade (which played a kind of regulatory role), name at least seven promoters, and disclose the list of their shareholders. Nothing of the like was required for issuers of government debt.

The committee discussed the machinations at length, and provided extremely detailed commentary and data on the techniques employed by the abusers. It received criticism however, for failing to take decisive action beyond the usual recommendation for enhanced transparency.14 In place of this professed failure a scheme evolved ostensibly to protect investors and deal with the wrongdoings that were being committed in this market. The arrangement, initially known as the Council of Foreign Bondholders, was first advertised in the immediate aftermath of the crisis of 1866, then floated in a rudimentary form in the fall of 1868 by Isidor Gerstenberg, a London stockbroker and veteran at bondholder activism. The Council operated informally for a few years and was formalized in 1873 as the Corporation of Foreign Bondholders. The incorporation coincided with growing public rumors of pervasive fraudulent behavior and calls for moralization of foreign finance. Thus was the corporation born with remarkable timing, ready to redress the evil that was about to be revealed by the Select Committee on Loans to Foreign States and by Trollope.

Like any respectable Victorian institution, the corporation had an executive board known as the Council, which featured in a most senior position the very same man who had just been appointed to the helm of the Anthropological Institute: Sir John Lubbock. He would act as vice-chairman of the Council until 1889, then chairman between 1890 and 1898. This was no mere honorific title, since the corporation’s archives show that Lubbock was an influential man in the organization from the first years. Indeed, Lubbock’s name appears among the group of eight promoters whose signatures are found on its application for incorporation in the archives of the Board of Trade.15

I am not aware of any work that has emphasized this fact. In Patton’s careful biography, the activities of Lubbock at the Corporation of Foreign Bondholders feature briefly in one separate and final chapter and are obviously not his subject. The chapter is called “The Sins of Saint Lubbock” because an accusation of gerrymandering and nepotism from a member of the Council created difficulties for Lubbock. In his classic Ethnology in the Museum, William Ryan Chapman finds Lubbock in many places and writes that this testified to his “organizational talents” that would have been “recognized from the first.”16 He was indeed into everything and, as far as science is concerned, never too deeply into anything. Patton’s biography gives the impression of a scientific tourist who mixed up archaeology and Schliemann-spotting and whose division of prehistory into Paleolithic and Neolithic he drew from secondhand literature. But it remains that Lubbock was a man of multiple facets, which modern commemorations state as a fact to admire rather than as a riddle to solve.

It is not clear why previous research has ignored or brushed aside the coincidental role of John Lubbock in both finance and anthropology. If we conceive him as an anthropologist or ethnologist or paleographer, then his involvement in the Corporation of Foreign Bondholders may have arisen because he was also a...

Table of contents

• Cover
• Title Page
• Copyright Page
• Dedication
• Contents
• Preface
• Acknowledgments
• Introduction: The Stock Exchange Modality
• 1. Writing about the Margin
• 2. Rise of the Cannibals
• 3. Anthropologists without Qualities
• 4. The Ogre of Foreign Loans
• 5. The Learned Society in the Foreign Debt Food Chain
• 6. Acts of Speculation
• 7. Wanderlust: A Victorian Racist
• 8. Salt-Water Anthropology
• 9. The Violence of Science
• 10. The Man Who Ate the Cannibals
• 11. Subject Races
• Conclusion: Catharsis
• Supplement 1: Principles of Social Editing
• Supplement 2: Pim’s Travels
• Supplement 3: The Demographics of Cannibals
• Supplement 4: How to Prick an Anthropological Bubble
• Notes
• Sources
• Works Cited
• Index