Racial Wheel of Life

This is something I have been thinking about for some time now:

Race is always a strange thing in fantasy games, especially those in the vein of D&D. It means a lot to players, because it can change how a character works and performs in very essential ways. At the same time, it makes little actual difference in the game world. With settlements routinely composed of a potpourri of various races, who all live together as if such essential differences did not matter – unless the plot of the current adventure requires otherwise, in which case racial tensions are suddenly all over the place (yet everybody lives together in that single city, still).

Races have this strange sense of belonging, yet nobody is really related to anybody else – gnomes and dwarves do not come from common stock, yet they are portrayed as brothers, and while the clichéd enmity between dwarves and elves features as indistinct background noise and a reason to crack out the "shorty" and "pointy ears" jokes at the gaming table, they still somehow recognize each other as belonging to a broader group of "good", "free", or "demi-human" races.

So, what if races actually were interrelated? And not just the tired "Oh, elves and humans can have kids! Half-elves, you know?" spiel, but an actual web of relations, an all-encompassing cycle of (humanoid) life, interconnecting each and everyone through their blood. Halflings? Oh, they are the children of elves and humans. Humans? They came from elven and dwarfish stock.

Suddenly, the mixed settlements become more than reasonable – they are not really mixed after all, they are all part of that one ominous "good/free race" that is otherwise implied to be somehow superimposed on the separate races of the world. The reason why the barkeep comes to have a halfling-sized stool at his establishment? Because his brother and two of his own kids (the ones with his first wife) are halflings, dummy! What sort of man wouldn't have furniture fit for his very own family?

At the same time, tensions between the fantasy "races" become even more sinister at a single stroke – genocide turns into fratricide, and extermination instead of segregation or domination becomes the word of the day for those twisted souls who somehow view one single spoke of the great humanoid wheel of life as superior to the others. After all, how can human supremacy work, if the continuity of "humanity" is always threatened by a pollution of the blood that literally turns children into non-humans? If in a few short generations starting with but a single orc or elf or dwarf a pure-blood human nation could turn into the fantasy bigot's demented fear of a "cesspit" of intermingling races?

Below is a simple model of such a racial wheel, featuring common D&D races (leaving out half-elves and -orcs, as these somehow seem beside the point in this world-building exercise). More complex wheels, maybe consisting of several closed cycles, or differentiating between some sort of "primary" or progenitor races and those who fill second generation rungs, would be possible as well. The chosen example has a bias towards humans, going with the common notion of humans being the most numerous race of the world (followed, in this version, by orcs).