Resource

• https://www.citeco.fr/10000-years-history-economics/the-origins

Content

8500 to 2500 BC - Emergence of farmers and stockbreeders

First in the « Fertile Crescent » in the Middle East (8500 BC), in China (7500 BC), and in America (3500 to 2500 BC).

Farming and stockbreeding first appeared in the « Fertile Crescent » in the Middle East (8500 BC), but also in China (7500 BC) and in North and South America (3500 to 2500 BC). The « Neolithic Revolution » then spread from these regions to all continents. The crops grown in the Middle East reached for example Greece in 6500 BC, then the rest of Europe.

Populations were starting to discover the economic benefits of farming and stockbreeding compared to traditional hunting, fishing, and gathering activities. They gradually abandoned their nomadic lifestyle and settled down, which increased population density and therefore trading opportunities.

3500 BC - The Invention of the wheel

The wheel was invented in the 4th millennium BC in Lower Mesopotamia (modern-day Iraq), where the Sumerian people inserted rotating axles into solid discs of wood. It was only in 2000 BC that the discs began to be hollowed out to make a lighter wheel.

This innovation led to major advances in two main areas. First, transport: the wheel began to be used on carts and battle chariots. Second, and more importantly, it contributed to the mechanization of agriculture (animal traction, crop irrigation) and craft industries (for example, the centrifugal force of the wheel is the basic mechanism in windmills).

3300 BC - Emergence of lending and writing, initially used for accounting

The emergence of writing in Sumer in the Middle East (3300 BC), then in Egypt (3000 BC), China (1300 BC), and Mexico (600 BC).

Writing appeared in four civilizations that had all started farming and breeding from an early stage: in Sumer in the Middle East (3300 BC), then in Egypt (3000 BC), China (1300 BC), and Mexico (600 BC).

Indeed, farming and rearing imply the existence of a surplus that can be stored and traded with other economic players engaged in other activities. In some societies, this phenomenon went hand in hand with the emergence of centralized political institutions, which led to the appearance and use of writing, in particular for accounting and lending purposes. Writing then progressively spread throughout the world from these centers through trade.

3000 BC - Appearance of the first towns

The appearance of the first towns in the Middle East, in the region known as the Fertile Crescent (in Europe: around 1200 BC).

These towns grouped together large populations in a limited area. They developed more sophisticated social and political hierarchies, and labor was clearly divided into agricultural activities and urban activities, notably craft industries. According to estimates, some of these towns had populations of up to 50,000.

Three factors helped to foster the emergence of towns: increasing sedentarisation to cultivate the land; advances in agricultural techniques which boosted crop yields and made it possible to produce surpluses that could be stored and traded; improvements in transport techniques and routes which made it easier to transfer goods from fields to towns.

The grouping together of people in towns led to profound changes in ways of life and in economic, social, and political relationships. As the French historian Fernand Braudel wrote, « Towns are like electric transformers. They increase tension, accelerate the rhythm of exchange and constantly recharge human life ». (Civilisation and Capitalism, 1967).

1700 BC- The first text of civil and commercial law in Babylon (Mesopotamia)

The Code of Hammurabi, a tall black basalt stele engraved with text and surmounted by a bas relief, discovered in 1901, is one of the earliest proofs of the legislative abilities of human societies. It was erected during the reign of Hammurabi, king of Babylon, in Mesopotamia. It contains 282 laws, which cover almost all fields of everyday life of Babylonian society at the time. This legal treaty, of civil and commercial law, became a reference for schools of scribes, which copied it out for over a thousand years.

1300 BC - Cowry shells, a form of currency

Long before our era the cowry shell was used as a means of payment and regarded as a symbol of wealth and power. This monetary usage continued until the 20th century. The two main varieties are the cypress moneta and the cypraea annulus, and they have all the features we might expect from a currency - durability, convenience, divisibility, as well as being easily identifiable. In comparison with foodstuffs, which are perishable, and feathers, which can be damaged by vermin, cowry shells can withstand frequent handling and are small and easy to transport. As they are nearly always the same shape and size, they could also be counted or simply weighed to determine the value of a payment.

They were accepted in Asia, Africa, Oceania, and even in certain parts of Europe. The oldest traces of their use as a currency can be found on bronze objects unearthed in China, dating back to the 13th century B.C. Meanwhile, the Chinese characters for certain words with a strong economic connotation (e.g. money, coin, buy, value) also resemble cowries.

800 to 400 BC - Economic Principles of Judaism

The first books of the Bible, written between the 8th and 5th cen­turies BC, make numerous ref­er­ences to eco­nomic life in the com­munities they describe. They present earthly wealth, nor­mally acquired through labor, as a divine blessing, but one that places a number of responsib­il­ities on the wealthy, including an oblig­ation towards the poor.

Sacred Jewish texts also forbid the charging of interest rates on loans between members of the faith, no doubt in order to protect the poor but also to encourage the rich to take a step back from their wealth. The Bible states that debts should be for­given (and slaves freed) after a period of 7 or 50 years. Other pas­sages contain ethical rules for trade, such as what con­sti­tutes a fair price or a reas­onable level of profit.

600 to 560 BC - Birth of metal coins

The king of Lydia, Alyattes, and his fabled son Croesus are amongst the earliest rulers to have issued standardized and certified metal coins.

As well as other objects - such as shells - gold, silver, or copper were in very early use as money. They are easily divisible and transportable and have a significant intrinsic value. Based on these properties, the kings of Lydia - including Croesus, who has become fabled for his fortune - decided to introduce a unified, certified weight for coins made from electrum (a naturally-occurring alloy of gold and silver) and, subsequently, gold or silver bean-shaped coins known as crossings.

At the same time, they derived an income from these monetary issues by giving coins a higher face value than the amount of metal used, in order to meet their expenses.

520 to 510 BC - Minting of the first Athenian owls

Athenian coins, bearing the helmeted head of Athena on the obverse and an owl on the reverse, became extremely popular throughout the ancient Greek world. Their success was due in part to the quality of the silver used, from the Athenian mines at Laurion, and to Athens’ mil­itary and political supremacy throughout much of the 5th century BC. The coins, known as « owls », were widely used in the 5th century and were copied by other regions, such as Egypt and southern Italy.

The motifs on the coins are dir­ectly related to Athens: Athena, the goddess of both warfare and wisdom, was the pro­tector of the city, while the owl on the reverse is one of the attributes of Athena - the goddess was said to have the eyes of an owl due to her ability to see what is obscure (wisdom), as the owl can see in the dark.

Note: when Greece joined the euro, it chose an owl for the national side of its €1 coin, in ref­erence to the ancient Athenian coins.

335 to 323 BC - Aris­totle the­orises the prin­ciple of bal­anced trade and the three major func­tions of money

Money serves as a unit of account, a medium of exchange, and a store of value. By bal­ancing trade, money makes trading easier, which enables all parties to better meet their needs and con­tributes to devel­oping social relations.

218 to 202 BC - Major monetary crisis during the 2nd Punic War

Faced with serious fin­ancial problems during the second war against Carthage, the Roman State had recourse to mon­etary manip­u­la­tions to devalue the bronze and silver currencies.

133 to 123 BC - Failure of Gracchi’s reforms

Tiberius Gracchus was elected a plebeian tribune in 134 BC and was particularly sensitive to the fate of slaves and of poor peasants whose land had been appropriated by the Roman nobility while they were away serving on military campaigns. He proposed an agricultural reform limiting land ownership to 125 hectares per citizen or 250 hectares per family, and distributing the freed-up land to the poorest Romans, usually free of charge.

A triumvirate which included Tiberius’ brother, Gaius Gracchus, was charged with enacting the law. However, the Roman senators saw it as a threat to their own estates, as well as to their powers of land attribution. Tiberius was murdered in 133 BC.

Gaius Gracchus was elected a tribune in 123 BC and continued his brother’s reforms. He ordered bushels of wheat to be distributed to Roman citizens at a low price and planned to set up colonies in Italy and Carthage. The Senate ordered his death, which occurs in circumstances still unclear.

44 BC - Coins bearing the image of Julius Caesar

Julius Caesar was the first Roman to have his effigy on a coin during his lifetime. By doing this, he wanted to show all his sub­jects that he was the absolute ruler of Rome. The money thus became an instrument of political pro­pa­ganda. Fol­lowing Caesar’s death (March 44 BC), all Roman emperors minted coins bearing their image.

AD 33 - Financial crisis in Rome

In ancient Rome, wealthy indi­viduals and espe­cially members of the imperial elite (sen­ators and knights), fre­quently granted loans at interest to members of the public. In AD 33, these loans became increas­ingly scarce, leading to a severe crisis.

We still only have a partial explan­ation for why these loans became harder to find: land prices fell and bor­rowers found it harder to sell their property to pay back their loans; and, in order to boost the property market, a measure was intro­duced requiring sen­ators to invest 2/​3 of their wealth in real estate located on the Italian pen­insula. This rule had pre­vi­ously been imple­mented by Julius Caesar but had since been aban­doned; its revival proved dis­astrous for the credit market, as sen­ators had to ask bor­rowers to pay back their loans.

In order to increase the amount of liquidity in the economy and restore con­fidence, Emperor Tiberius granted an interest-free loan of one hundred million ses­terces from his own per­sonal fortune.

1st century AD - Economic Principles of Christianity

The New Testament, written in the second half of the 1st century AD and in the early 2nd century AD, as well as the writings of the Church Fathers, incorporated many of the economic teachings of the earlier Jewish texts. In particular: the duty of charity (from the Latin caritas, meaning love) towards those in need and the ban on loans at interest (which the Church maintained for several centuries while allowing certain exceptions). Christianity placed particular emphasis on the spirit of poverty: money was seen as a distraction from the essential, which is man’s relationship with God and with his fellow men. Similarly, Christianity also stressed that there should be a separation between the spiritual and the New Testament, written in the second half of the 1st century AD and in the early 2nd century AD, as well as the writings of the Church Fathers, incorporated many of the economic teachings of the earlier Jewish texts. In particular: the duty of charity (from the Latin caritas, meaning love) towards those in need and the ban on loans at interest (which the Church maintained for several centuries while allowing certain exceptions).

Christianity placed particular emphasis on the spirit of poverty: money was seen as a distraction from the essential, which is man’s relationship with God and with his fellow men. Similarly, Christianity also stressed that there should be a separation between the spiritual and the material (as when Jesus drove the merchants from the Temple).

162 - Polyaenus’ stratagems for financing war

In around AD 165, the Greek-born author Polyaenus wrote a collection of works detailing the stratagems or ruses used in famous historical wars. The works were dedicated to the co-​​Emperors Lucius Verus and Marcus Aurelius and were intended to provide inspiration for their military policies.

As well as military and diplomatic tactics, the Stratagems of War included various methods for financing military operations, which Polyaenus said had been used in the past. They included an exceptional tax, public borrowing, the private financing (more or less voluntary) of ships, the seizure of booty, the sale of religious property, and monetary manipulation (minting of coins using a lower grade of the metal, and obligation of merchants and/​or soldiers to use these new coins instead of the older ones).

3rd century AD - Inflation crisis in Rome

The State of Rome had sig­ni­ficant fin­ancial oblig­a­tions: free dis­tri­bution of grain to the pop­u­lation, payment of legion­aries, etc. However, only conquered pop­u­la­tions were subject to tax. In the 1st and 2nd cen­turies AD, the State was able to keep its fin­ances bal­anced thanks to the spoils of war. But from the 3rd century onwards, the sources of fresh money began to dry up (end of the expansion of the Empire and the wars of secession in His­pania, Gaul, and the Middle East).

Rather than making unpopular budget cuts, the emperors decided to reduce the amount of silver in the denarius (by the start of the 3rd century AD, the silver purity of the coins had been cut to 50% from over 90% a hundred years earlier). This devalu­ation of the coinage accel­erated after the issuance of the ant­oninianus by Cara­calla in AD 215; the coin was worth two denari but only weighed one and a half, and its silver purity con­tinued to decline rapidly, first to 48% in AD 238 and then to just 4% in AD 276. This devalu­ation caused prices to soar: the price of grain, for example, was mul­ti­plied by 16 between AD 218 and AD 293.

294 AD - Diocletian reformed the monetary system in Rome

Diocletian completed the monetary reforms introduced by Aurelian in 274. A three-metal system of gold, silver, and bronze was reintroduced with the creation of Argentium (90% minimum silver content) and three bronze coins. The issuance of gold coins (aureus), which had restarted under Aurelian, was continued.

But this reform failed to halt price inflation which, to the contrary, accelerated. In 301, Diocletian attempted to control inflation by issuing a maximum price edict and salaries of workers. Meanwhile, it radically restructures the tax system, largely by changing the property tax base and strengthening the system of perception.

AD 310 - Creation of the Solidus by Constantine

After the economic disruption caused by the inflationary crisis of the 3rd century AD, Emperor Constantine decided to reform the monetary system in order to restore stability. In AD 310, he began to issue a new gold coin called the solidus, whose name, derived from the Latin for solid, clearly reflected the emperor’s desire to stabilize the currency.

In AD 312, the weight of the solidus was set at 4.55g, representing a devaluation of around 15% compared to the Diocletian aurelus. It continued to be used throughout the Byzantine Empire up until the 10th century, and its weight remained unchanged. Constantine ensured there was a sufficient supply of gold to issue the solidus through the seizure of war booty from his enemy Licinius, the confiscation of gold from pagan temples, and the application of new taxes that were payable in gold. The solidus was the cornerstone of the new Roman monetary system throughout the 4th and 5th centuries.

AD 600 to 700 - Economic Principles of Islam

The founding texts of Islam, and notably the Koran which dates from the first half of the 7th century AD, cover various aspects of day-to-day life and incorporate a number of elements from Jewish and Christian teachings. The obligation to give alms or zakat (which signifies purification in Arabic) to the poor, either on an individual or collective basis, is one of the five pillars of Muslim life. Private property is encouraged, although Muslims must recognize that all property is ultimately owned by God.

Regarding money, Islam forbids loans at interest and promotes methods of financing where all stakeholders share in the profits and losses generated by the undertaking. The remuneration of the lender thus depends on the profitability of the transaction he is helping to finance. These principles form the basis of all Islamic banks and financial institutions.

8th to 10th century AD - Economic development of the Muslim empire, in particular, Bagdad

Baghdad plays a major role in the global economy. The pro­duction is intense in the areas of agri­culture, live­stock, tex­tiles, metal­lurgy, and paper. Trade is internal: exchanges take place within a network of major cities (Baghdad, Dam­ascus, Cairo …). But the Muslim empire imports (wood, iron, weapons …) from Asia, Europe, and Africa and exported (luxury goods) to the West. To stim­ulate inter­con­tin­ental trade, gold dinars were struck. But to prevent their trans­port­ation, bankers, and traders invent deferred payment systems across time (cheques) and space (bills of exchange).

AD 781 - Charlemagne’s monetary reforms

After decades of monetary disorder, Pepin the Short decided to standardize the weight and shape of the silver denier in AD 755. Charlemagne continued his father’s efforts to restore order to the monetary system, reinstating the royal monopoly over the minting of coins and making the silver denier the official currency of the empire.

The sou was worth 12 deniers and the livre was worth 20 sous: this counting system, known as the duodecimal system (from the Latin duodecimos meaning one-twelfth), was used up until the French Revolution.

994 - The first banknotes or paper money

During the Song Dynasty, the shortage of metal coins and the prac­tical dif­fi­culties in using bronze coins led to the devel­opment of « paper money ». It took on a major role in domestic trans­ac­tions, gold and silver being used for inter­na­tional trans­ac­tions. Because this paper money was not backed by a given quantity of metal, this res­ulted in high inflation. This invention is one of the « wonders » that Marco Polo brought back to Europe in his travel journal in the late 13th century. In Europe, the first bank­notes were issued in 1661 by the Bank of Stockholm, founded by Johann Palm­struch, which went bankrupt for lack of suf­fi­cient reserves. Banknote issuance only became well-established in the 18th century in Europe.

1040 AD - First use of movable type made in Terra cotta

In China, under the Sung dynasty (960−1279), Bi Sheng improved printing tech­niques by inventing movable type. He fash­ioned clay cubes that were sculpted, baked, and assembled onto an iron frame using wax and resin. Due to their fra­gility, these char­acters were later made of metal.

12th and 13th centuries - Medieval economic revolution

In Europe during the late Middle Ages, sig­ni­ficant changes in agri­culture, tech­niques, and trade. After a period of eco­nomic decline due in par­ticular to the great inva­sions, Europe exper­i­enced a period of eco­nomic growth that cul­minated in the 12th and 13th cen­turies and mani­fested itself in the con­struction of large cathedrals. Innov­a­tions improved yields in agri­culture (crop rotation), as in tex­tiles (ver­tical loom, spinning wheel). A striking feature is the devel­opment of energy sources other than human strength (animals thanks to shoulder collars and horseshoes, for draughting and trans­port­ation, but also wind and water thanks to wind­mills) and the arrival of new products such as paper, watches, com­passes, and wheel­barrows. These innov­a­tions were fostered by the growth in trade: within Europe, with the con­struction of bridges, canals, and the organ­isation of major « fairs » (in par­ticular in the Cham­pagne), but also with the Muslim world and Asia thanks to advances in ship­building and the crusades.

1161 to 1167 - Coali­tions of the Hanseatic League on the North Sea and the Lombard League in Italy

These trade and/​or military coalitions contributed to the growth of merchant cities and city-states.

13th and 14th centuries - Development of large trading empires in Africa, South of the Sahara

The Mali Empire, for example, reached its height under the reign of Kanku Musa between 1307 and 1332. At that time it extended over a vast area from the Atlantic Ocean to Niger. Tim­buktu, Gao, and Djenne were the eco­nomic and cul­tural centers of the empire. Prosperity stemmed from the trans-​​Saharan caravan trade in copper, salt, gold, and fabrics. The Niger River was also an important trade route.

13th and 14th centuries - Accel­er­ation of trade along the Silk Road, dom­inated by the Mongol Empire

The Silk Road is a network of trade routes between Asia and Europe, running from China to Antioch (today’s Turkey).

1202 - Fibonacci brings Arab numbers to Europe

Leonardi Fibonacci, or Leonardo of Pisa, was an Italian mathematician from a wealthy merchant family, who popularised the Hindu-​​Arab numeral system in Europe through his book Liber Abaci or Book of Calculation, a treatise on calculus. At the time, the Western world was still using Roman numerals.

The introduction of the Hindu-​​Arabic system helped to boost the credit market as it simplified the calculation of interest payments. Fibonacci’s works, including the famous « Fibonacci sequence », are still used today in market finance.

1234 - Invention of metal movable type printing

Around 1234, Choe Yun-​​ui invented the metal movable type. The Buddhist Treaty (Jikji) or Chiksimgyong, by the monk Kyonghan, published in Korea in 1377, is the world’s oldest metal movable type book. It is kept in the Bibliothèque Nationale de France.

Mid-13th century - Creation, in France, of the first joint stock company

Around 1250, some cit­izens of Toulouse joined forces to set up the « Société des Moulins de Bazacle », whose ninety-​​six shares were traded at a price that varied according to eco­nomic con­di­tions and the per­formance of the mills. It became the « Société civile anonyme du Moulin du Bazacle » in the 19th century. In 1888, the water mill was turned into a hydro­electric plant. In 1910, it became the « Société toulou­saine d’électricité du Bazacle ». It was nation­alised in 1946, like the rest of the elec­tricity sector.

1262 - Assertion of royal power over monetary creation

Order of Chartres signed by Louis IX (Saint-​​Louis). In France, with the Order of Chartres, the King acquired a monopoly on monetary creation: the royal currency was forced into legal tender across the country and counterfeiting was prohibited. This monopoly enabled the governing authorities to guarantee the quality of the precious metals present in the gold coins (reintroduced by Louis IX) and silver coins, and therefore to generate the confidence needed for the currency to be accepted by all.

1290 - 1360 - Monetary manipulations, in particular, to finance royal spending

In France, in par­ticular during the reign of King Philip IV the Fair (1285−1314).

In France, in order to finance royal spending but also to facil­itate trade, King Philip IV the Fair (who reigned from 1285 to 1314) con­ducted a series of cur­rency manip­u­la­tions by cre­ating new cur­rencies and by reducing their metal content without changing their face value. These manip­u­la­tions con­tinued throughout the first half of the 14th century, to finance mil­itary spending brought about by the Hundred Years’ War.

14th and 15th centuries - The first major banks

In Europe, these are mainly the banks founded by the Medici family in Italy, Jacques Coeur in France, and the Fugger family in the Holy Roman Empire. The development of banking activities in Europe had initially been hampered by the fact that interest-bearing loans were condemned by the Church. Interest-bearing loans had for a long time been a specialty of Jewish families, at the mercy of a repudiation of their debts by successive monarchs.

During the 14th century, given the needs of trade, a number of merchant families, such as the Medici in Italy, the Fugger in the Holy Roman Empire, and Jacques Coeur in France, started specializing in diversified and large-scale banking activities, in particular foreign exchange and discount transactions (repurchase of bills of exchange held by a merchant on one of his clients in exchange for a cash advance).

14th century - Creation of the first stock exchange

In Bruges in current Belgium.Before the creation of stock exchanges, financial securities (such as debt securities for example) were exclusively traded « over the counter », i.e. between a seller and a buyer who would meet in such places as the current Pont au Change in Paris or on the square in front of the inn held by the Van der Buerse family in Bruges. In this city, the first stock exchange was set up in 1309 and took on the name of this family. In France, the first commodities exchange was established in Lyon in 1540. The first stocks were traded in 1698 at Jonathan’s Coffee House in London. These stock exchanges facilitated the trading of securities by enabling all buyers and sellers to meet in one place.

14th century - The economic crisis of the 14th century

The medieval eco­nomic revolution of the 12th and 13th cen­turies led to a boom in activity in Europe, and espe­cially in France. But this was cut short abruptly at the start of the 14th century due to a number of events: climate change, crises in agri­cul­tural pro­duction (in par­ticular the great famine of 1314-​​1317), the dev­ast­ation caused by the start of the Hundred Years’ War between France and England in 1337, the various calam­ities suffered by the Byz­antine Empire, epi­demics (the Black Death from 1347 to 1351, fol­lowed by repeated out­breaks up until 1370).

As a result of these epi­demics in par­ticular, the pop­u­lation in some regions of Europe was more than halved. France’s pop­u­lation only returned to its 1320 level in around 1600.

Against this backdrop, goods prices fell sharply, and there were numerous state defaults throughout Europe, as well as bank­ruptcies of private banks: in 1345, for example, Edward III of England defaulted on his debt, while the Florentine banks Bardi and Perruzi both went bankrupt. The epi­demics also prompted a rise in wages as the supply of labor became increas­ingly scarce.

1355 to 1366 - Publication of the Treatise on Money by Nicolas Oresme

This book is viewed as the pre­cursor of political eco­nomics. Fol­lowing a series of tech­nical con­sid­er­a­tions on coin minting, the Frenchman Nicolas Oresme sets the found­a­tions for what is con­sidered as the ancestor of mon­et­arist the­ories. He stresses that the Prince, by seeking to alter the metal content of coins, triggered price increases and des­troyed people’s con­fidence in trading. He also puts forward the idea that the Prince is not the owner of money, but that it belongs to the com­munity that uses it.

1360 - Birth of the franc

After being captured by the English in 1356, France’s King John II (also known as John the Good) was released in 1360 but ordered to pay the remainder of his ransom. He passed three tax and monetary laws, including one creating a new gold currency, known as the franc à cheval (the horseback franc). The new franc was to become the only currency in use throughout the realm, and its stability was guaranteed by the monarch. John II promised to end the currency manipulations that had marked the reigns of his predecessors.

The name « franc », which means freed in English, was adopted in reference to John the Good’s liberation.

To help raise funds for his ransom, the king also introduced a new tax, known as an aide, which was kept in place by his son and successor, Charles V. Charles also minted new franc coins showing the king standing upright rather than on horseback - these became known as the franc à pied (franc on foot) in contrast with their predecessor, the franc à cheval.

Mid-15th century - China starts closing up

The Ming dynasty put an end to naval exped­i­tions. It closed its ports and borders to foreign ships and travelers.

1452 to 1456 - Invention of printing in Europe

The first movable type book was produced by Gutenberg in Germany but preceded in China in the 11th century. In China from the 11th century, clay movable types were used to print text. But a new milestone was truly reached when Gutenberg printed a Bible using metal movable type in the mid-15th century in Germany. Thanks to this technique, it became possible to reproduce books using mechanical processes, thus facilitating the dissemination and emergence of knowledge across Europe.

1474 - First regulations on patents

In Venice, intel­lectual property is pro­tected for the first time by general law.

Late 15th - 16th centuries - The Great Discoveries

Chris­topher Columbus arrived in America in 1492 and Vasco da Gama opened up the route to India in 1498. Under the impetus of Por­tugal and Spain, new trade routes were opened to reach the « Indies » without having to pass through the inter­me­di­aries what were then the Arab coun­tries and Venice. The Por­tuguese chose to go around Africa via the Cape of Good Hope to reach India; this was done by Vasco da Gama in 1498. The Kingdom of Spain sup­ported the project of Genoese Chris­topher Columbus to open a western route to India, which would even­tually link Europe up to the Americas in 1492. These « Great Dis­cov­eries » mark the start of a glob­al­iz­ation process by con­trib­uting to the strong growth of trade between con­tinents: the « tri­an­gular trade » between Europe, Africa, and the Americas, the trade between Europe and Asia thanks to the pre­cious metals mined in the « new world » colonies.

1494 - Double-entry accounting

Double-entry accounting actually appeared in Venice and Florence in the late 13th century, hence its original name of Venetian method of accounting. Luca Pacioli, an Italian monk and mathematician, compiled and presented, in a language understandable by all, the details of the Venetian method, in a book published in 1494. This method has hardly evolved over the centuries, even though the accounting techniques for organization and valuation have changed significantly.

16th to 17th centuries - Implementation of the mercantilist doctrine in several European countries

Per­son­ified by Colbert in France. It views exports as a major source of enrichment for a country, in par­ticular thanks to the pre­cious metals that they generate.

1517 - Economic principles of Protestantism

The start of the Protestant Reformation is usually dated to 1517, the year Martin Luther issued his condemnation of the papal practice of indulgences. Luther argued that it was not possible to replace the penance for sins that would normally be given on absolution with a monetary donation to the Church.

Academics such as the sociologist Max Weber (1864−1920), have suggested a link between the ethics of certain branches of Protestantism, notably Calvinism, and the rise of capitalism in some countries. Protestantism emphasizes the value of work as a way of making the most of, and therefore glorifying, God’s creation; professional success was seen as a sign of divine election. As Puritanism also recommends a frugal lifestyle and the rejection of luxury, this work ethic was seen as the ideal foundation for the development of means of production and economic growth. It subsequently spread beyond Protestant groups.

Luther supported the traditional ban on loans at interest. However, John Calvin held that they were legitimate, depending on the rate of interest offered (the rate should not be too high), and on the purpose of the loan (loans for production were encouraged, but not consumer loans).

1540 - First commodities exchange in France

In France, the first com­mod­ities exchange was set up in Lyon around 1540. Its success stemmed largely from bills of exchange and dis­counting. It was in com­pet­ition with that in Antwerp.

1545 - Spain starts extracting silver from the mines in Potosi

The exploit­ation of this mine in what is now Bolivia and other « new world » mines led to an influx of pre­cious metals into Europe and Asia.

1568 - Controversy between Bodin and Malestroit in France

In 1566, Malestroit, an advisor to the king and president of the French public accounts commission, conducted an inquiry into widespread price inflation and the diminishing value of money. He defended the concept that inflation was a mere illusion: the precious-​​metal content of coins and so their value had diminished, but food prices in terms of precious metals had not increased.

In 1568, Jean Bodin responded that price inflation had mainly been driven by the massive inflows of precious metals to Europe since the discovery of gold and silver mines in South America. He was therefore one of the first to put forward what became subsequently known by economists as quantitative monetary theory.

17th to 18th centuries - Heyday of the triangular trade between Europe, Africa, and America

European ships arrive in Africa loaded with weapons and cloth, sail to America car­rying slaves, and return to Europe loaded with tropical goods.

1636-1637 - First speculative bubble, on the tulip bulb market

In the Neth­er­lands in the 17th century, the prices of tulips were driven upward as a result of their rarity and novelty. In the 1630s, they became an object of spec­u­lation. This euphoria lasted until 1637 when a sudden price reversal led buyers to sell in a movement of panic.

1661 - The first bearer notes redeemable in cash in Sweden

A pro­posal to issue such notes was made by Johan Palm­struch, Swedish mer­chant, banker, and founder of the Bank of Stockholm (1656).

1662 - William Petty’s Treatise of Taxes and Contributions

The seminal eco­nomic work by the erudite and multi-talented William Petty, in which he con­siders the best tax policies for pro­moting growth. He pro­poses the use of the tax and spends method, with emphasis on taxing con­sumption and imports rather than income. In his view tax policy should be used to finance public spending by the State while keeping the accounts balanced.

1668 - Creation of the first central bank

The Bank of Sweden in 1668, followed by the Bank of England in 1694. Following the collapse of the Bank of Stockholm managed by Johan Palmstruch (who in 1661 innovated by issuing notes in excess of the amounts of precious metals held in deposits), the « Bank of the Estates of the Realm » (now Bank of Sweden ) was set up in 1668. The Bank of England was founded in 1694, and the Banque de France in 1800. These early central banks gradually differentiated themselves from other banks (now called «second-tier banks » or « commercial banks ») by progressively acquiring the monopoly of banknote issuance in a given territory (in 1848 for the Banque de France for the whole metropolitan territory).

1685 - Money issuance through the reuse of playing cards in Canada (New France)

The measure was introduced by the French administrators to address the shortage of royal money.

Early 18th century - Beginning of the agricultural revolution in Europe

During the 18th century, the improvement in agri­cul­tural tech­niques led to higher yields and better food quality: the extension of farmland, the intro­duction of new crops, and the end of fal­lowing thanks to crop rotation. Advances in science and tech­nology, together with a favorable climate during this period, fostered such changes. A number of the­orists and agro­nomists intro­duced new prac­tices, encouraged by the pos­itive stance taken by the mon­archical state. These innov­a­tions brought radical changes to the lives of rural pop­u­la­tions and French society in general.

1701 - 1716 - First paper money issuance in France

In particular by the Scottish banker Law, who went bankrupt in 1720. The first unfortunate experience of banknote issuance (the « billets de monnoye ») was conducted in France but remained limited. In 1716, the Banque Générale established by John Law issued on a larger scale of paper money against gold, with the guarantee of the regent Philippe d’Orléans from 1718. Issuance of paper money very soon got out of hand and the bank was unable, with its gold reserves, to meet the increasing number of requests for conversion, which gave rise to a general panic, and finally went bankrupt in 1720.

1720 - South Sea Bubble in Great Britain

Founded in London in 1711, the South Sea Company The company was granted a monopoly to trade with South America, hence its name. The company knows a craze and sees the volume of its issued shares increase, and their prices soar. However, a few months later, it has to face a drop in its share price. Many investors find themselves completely ruined. This stock market crisis is one of the first crashes in history.

1724 - Creation of the Paris Bourse

Ini­tially in the Hôtel de Nevers. In 1826, it moved to the Palais Brongniart, famous for its « pit » around which gathered the stockbrokers.

1740 - 1760 - The industrial revolution

The industrial revolution started in the United Kingdom. It was preceded by an agricultural revolution in the early 18th century (which contributed to raising yields and to freeing the necessary workforce for the industry), and a proto-industrialization phase (when agrarian families used their free time to produce craft items for the urban merchants who would sell them on distant markets). The industrial revolution was characterized by successive innovations, such as the first use of coal in metallurgy (1709), the first steam engine (T. Newcomen, 1710​​ - 1712) and its improvements (James Watt, 1769), the first mechanical weaving loom (1764). These innovations gradually spread across Western Europe during the 19th century and resulted in productivity gains, thus bringing these countries into an era of faster - albeit more unstable and resource​​hungry - growth.

1773 - Boston Tea Party

In 1773, a conflict broke out between the thirteen colonies and Great Britain. A group of settlers, unhappy about the direct taxes (on sugar, stamps, and tea) introduced by the British Parliament, staged a revolt. Disguised as Indians, they threw overboard into Boston Harbor the cargo of tea from three ships. This event was the start of the process that resulted in the independence of the United States in 1776.

1776 - Publication, in the United Kingdom, of the Wealth of Nations by Adam Smith

In the Wealth of Nations, Adam Smith looks at the causes of the recent prosperity of some countries, such as England and the Netherlands. Whilst not excluding a certain role for the State, he developed the theory of the « invisible hand », according to which the individual search for profit and personal interests also contributes to the general interest, thanks to free trade and entrepreneurship, and to competition.

1789 - 1796 - Issuance of assignats in France

During the French Revolution, mass issuance of notes secured on Church property, whose value was rapidly declining.

1789 - French Revolution: economic causes and Environment

The French Revolution took place in a context characterized by feelings of injustice and the over-concentration of power and wealth in the hands of a small proportion of the population at the expense of the majority (the Third Estate).

An important figure of the time in economic terms was Jacques Necker, a banker and, inter alia, controller general of finances under Louis XVI. Between 1776 and 1781 he sought to reduce State spending, and in 1788 attempted to resolve the financial crisis related to the State’s debts by convoking the Estates-General. At the same time, he introduced protectionist measures to tackle the food crisis caused by the wheat harvest failure.

Necker is a symbol of State economic interventionism. He is often contrasted to Turgot, controller general of finances from 1774 to 1776, member of the Physiocrats group founded by François Quesnay, and advocate of economic liberalism.

1791 - Promulgation of Le Chapelier Law in France

This law banned coali­tions, in par­ticular of employees: it pro­hibited strikes (until 1864) and the form­ation of unions (until 1884).

1792 - Creation of the New York Stock Exchange

Today, the « New York Stock Exchange », com­monly known as Wall Street, is the largest stock exchange in the world.

1792 - Creation of the dollar

Under the pres­idency of George Wash­ington, the dollar became the official cur­rency of the United States.

Late 18th to 19th century - Start of the abolition of slavery

France (1794 then 1848), the United Kingdom (1833), the Ottoman Empire (1847), the United States (1865), etc. After having been abolished by the Constitution in 1794, slavery in the French colonies was reintroduced by Napoleon in 1802 under pressure from sugar cane producers in the West Indies. It is not until 1848, 15 years after the United Kingdom, that Victor Schoelcher got the French government to sign a decree abolishing slavery for good in France. In the United States, the election of Abraham Lincoln, a supporter of abolition, led the country into a bloody civil war, the « American Civil War », in 1861. It ended with the victory of the Northern States over the Southern States and a law abolishing slavery in 1865. From an economic perspective, the abolition of slavery marks a fundamental change in labor relations. The worker is no longer the property of a master, but a free employee who supplies labor to his employer in exchange for payment.

1797 - Two-thirds bankruptcy in France

The State is heavily burdened by debt inherited from the royal administration and the Revolution, Dominique Ramel, Minister of Finance under the Directory, decided to close the government securities market and passed a law canceling de facto two-thirds of the public debt. Through this «two-thirds bankruptcy », his intention was to « erase the consequences of past mistakes to provide the State with the means to its future. »

1798 - Publication of An Essay on the Principle of Population by Thomas Robert Malthus

Malthus used math­em­atical cal­cu­la­tions to demon­strate that unchecked, pop­u­lation grows faster than its means of sub­sistence, with the natural con­sequences of famine, war, and excessive mor­tality. In order to limit pop­u­lation increase, Malthus recom­mended in par­ticular revoking the laws pro­tecting the poor that were in force in England at that time.

1800 - Creation of the Banque de France by Napoleon Bonaparte

Napoleon Bona­parte created the Banque de France to foster eco­nomic recovery after the strong recession of the revolu­tionary period. This new insti­tution was charged with issuing notes payable to the bearer on sight, in return for dis­counting of trade bills. The ori­ginal statutes organized the activ­ities of the Bank, but other com­peting issuing insti­tu­tions remained. In 1803, the Bank obtained an issuing right for the city of Paris, then gradually until 1848, for the whole country.

Two notes were issued by the Banque de France from June-​​July 1800. Their respective face values, of 500 and 1,000 francs, were however extremely high and so they were used primarily by merchants.

1801 - Promulgation of the General Enclosure Act by the British Parliament

The enclosure movement started in England in the 16th century. It gained pace in the 18th century before really accelerating as a result of the General Enclosure Act of 1801. This law enabled landowners - and notably nouveau riche farmers - to enclose their land without a prior Parliamentary act, as had previously been the case. This reform hit the poor hard as they had been previously entitled to cultivate the land without necessarily owning it and especially those landless peasants who used common land for pasture and crops.

The effects of the act were contrasted. On the one hand, enclosure deprived many peasants of their sole means of subsistence and forced them to seek work in the towns and cities. On the other hand, the enclosure of common land resulted in the productivity gains that many historians believe were a prerequisite for the industrial revolution.

1803 - Traité d’économie politique (Treatise on economic policy) by Jean-Baptiste Say

Say aimed to pop­ularise Adam Smith’s writings and help spread his ideas. He also developed the eponymous Say’s law, which states that the money obtained from selling a product makes it pos­sible to buy other products. His Treatise com­prises three books, each dealing with a stage in the eco­nomic process: pro­duction, dis­tri­bution and con­sumption of wealth.

1803 - Creation, in France, of the franc Germinal

The mon­etary reform of 7 Ger­minal Year 11 (28 March 1803) estab­lished a bimet­allic system (gold and silver) that gov­erned the franc until 1928 and gave it great sta­bility until 1914.

1811 - 1812 - Revolt of the Luddites in the United Kingdom

Luddism was a social movement of workers opposed to mech­an­isation in the textile industry.

1829 - Construction of the Rocket, one of the first steam engines

By Steph­enson in the United Kingdom. During the 19th century, railways also developed in con­tin­ental Europe and notably in France.

1831 - Revolt of the canuts in Lyon

The canuts were Lyo­nnais silk workers. They were paid per piece and demanded the setting of a minimum price. Their revolt was severely repressed.

1833 - 1834 - Creation of the Zollverein, a customs union between the German States

This customs union, particularly advocated by the German economist Friedrich List, included most of the states in the German Confederation, largely dominated at the time by Prussia. It promoted free trade throughout the Germanic area and fostered the strong growth of German industry (in particular in the rail sector) and trade. This union did not include Austria, which later contributed to exacerbating the Austro-​​Prussian rivalry for the domination of Central Europe.

1842 - First Opium War between China and the United Kingdom

In the early 19th century, opium smug­gling in China was a real political and eco­nomic problem. In 1838, Emperor Dao­guang ordered the destruction of stocks of opium held by traf­fickers (mainly British) in Canton, the heart of the trade and the only Chinese city open to for­eigners. The British retaliated by sending out a war fleet. The first Opium War ended, in 1842, with China’s defeat and the signing of the Treaty of Nanking, which forced the Chinese to cede the island of Hong Kong and accept greater eco­nomic openness.

1844 - In the United Kingdom, a strict link between note issuance and gold stocks

The purpose of the Bank Charter Act was to restrict the strong growth of bank­notes in cir­cu­lation, which had res­ulted from the sharp rise in the number of banks in the 1830s. It imposed the cur­rency prin­ciple, whereby, to avoid inflation, note-issuance by banks had to be pro­por­tional to the amount of gold held. This marked the triumph of the gold standard. In addition, the role of the central bank was strengthened since no other bank had the right to issue banknotes.

1845 - the Irish potato famine

In the 19th century, the potato was an indis­pensable food. In 1845, blight (a para­sitical mold) con­tam­inated potato crops, leading to a famine with con­sid­erable loss of life in Ireland, where almost a million people died over the course of a decade.

At the same time, the English decided to expel the peasants from their land because they were no longer able to pay their land taxes. The famine and the expul­sions fuelled a massive wave of Irish emig­ration, with around two million people leaving the island, mostly for the United States and Canada.

The potato blight-induced famine also impacted Northern Europe as a whole.

1846 - Abolition of the Corn Laws and the beginning of a period of free trade

In the United Kingdom, lifting of quotas and tariffs on wheat imports by Prime Min­ister Robert Peel. Pro­mul­gated between 1773 and 1815, « the Corn Laws » intro­duced a set of bar­riers to wheat imports in order to protect British agri­culture: tariffs, or import ban on wheat if its price drops below a certain threshold, etc. In 1817, eco­nomist David Ricardo provided some serious argu­ments against pro­tec­tionism by showing that a country such as the United Kingdom had an interest in spe­cial­izing in tex­tiles, in which it had a com­par­ative advantage, rather than con­tinue to devote pro­duction factors to agri­culture. A few decades after his death, in 1846, it is these argu­ments that led the Con­ser­vative Prime Min­ister Robert Peel to lift these reg­u­la­tions. This event marks the United Kingdom’s lasting con­version to free trade, in par­ticular with the signing in 1860 of a com­mercial treaty with France.

1848 - Banknotes acquire legal tender in France

If a banknote is « legal tender », this means that it must be accepted for any set­tlement, just like metal coins. The legal tender of Banque de France bank­notes was lifted in 1850 and finally restored in 1870. Fur­thermore, in 1848, the Banque de France imposed « forced cur­rency » dis­pensing the Banque de France from the oblig­ation to reim­burse in cash the bank­notes that it received. This oblig­ation was, however, restored several times, before being finally with­drawn in 1936.

1848 - The California Gold Rush

In 1848, just east of Sacramento, the carpenter James Marshall was overseeing the construction of a sawmill for the rich landowner Johann August Sutter when he noticed a few nuggets of gold in the foundations. News of the discovery quickly spread, and before long prospectors began to flock to the area in their thousands in the hope of finding more gold. Among those willing to try their luck were some 30,000 Frenchmen, who came fleeing the political turmoil of 1848 in France.

Although short-lived, gold fever devastated the Californian countryside and proved fatal for a large portion of the Indian population. This remarkable episode in history is described in detail in Blaise Cendrars’ novel Gold.

1850 - 1875 - Creation of large French banks

In the 19th century, the banks helped finance world trade and the construction of the railways. Some of the leading bankers were renowned personalities of the time. James de Rothschild, for example, founded the French arm of the Rothschild banking group, while in 1836 Jacques Laffitte created Caisse générale du commerce et de l’industrie, the first bank to extend long-term financing to companies (liquidated in 1848). The Pereire brothers founded Crédit Mobilier in 1852, with a similar objective: to finance industrial development.

The 1863 limited companies act provided for the creation of banking institutions capable of absorbing the savings of the middle classes, and, between the wars, those of the working classes too. As of 1863, Council of State authorization was no longer needed for the creation of limited companies provided their capital was below 20 million francs, a restriction which was lifted in 1867. The new banks that emerged at the time included Crédit foncier (1852), Crédit Lyonnais (1863), Société Générale (1864), and Banque de l’Indochine (1875).

1852 - Le Bon Marché, the first department store in France

It was set up in Paris by Aristide and Marguerite Boucicaut. It was soon followed by the BHV (1856), the Printemps (1865), and the Samaritaine (1869).

1859 - An experiment in corporate social responsibility: the Familistère

Jean-​​Baptiste André Godin was born in France in 1817, to a modest family of craftsmen. He built up a successful business manufacturing cast-iron stoves but was deeply affected by the working-class poverty he witnessed in the wake of the first industrial revolution. He was influenced by the « utopian socialism » of the French philosopher Charles Fourier.

Godin was convinced that one of the best ways to reduce suffering in society was to improve housing, so in 1859 he began building the Familistère (family lodging) next to his factory in Guise (Aisne). It was completed 25 years later, and provided accommodation for 300 families, along with services such as a library, crèche, school, and theatre. Godin gradually transferred ownership of the Familistère to his workers, turning it into an early form of production cooperative.

This unique social experiment survived until 1968.

1859 - First industrial oil drilling

Edwin L. Drake, recruited by the Seneca Oil Company, drilled for oil in Pennsylvania by adapting the tech­nique used in the salt mines. In reality, such drilling had already been done a few years ago, in par­ticular in Romania and Germany. And even, as early as 1594, in the region of Baku, now the capital of Azerbaijan, 35-meter-deep wells had been dug to extract oil. But Edwin L. Drake’s oil drilling marks the start of a « black gold rush » and the emer­gence of a proper oil industry.

1860 - Signature of a free trade treaty between France and the United Kingdom

The purpose of the treaty was to lower customs duties on commodities and on the majority of food products. While France halved its customs duties on manufactured goods, set at 30%, the United Kingdom lowered its tariffs on French wine. France’s foreign trade then boomed: imports and exports tripled both in volume and value terms between 1860 and 1880. This Franco-British rapprochement, wanted by Queen Victoria and Napoleon III, confirms the willingness of the two hereditary enemies to seek alliance and cooperation.

1864 - Legalization of the right to strike in France

The Ollivier Act abol­ished the le Chapelier Act of 1791 which pro­hibited coali­tions. The Empire showed more tol­erance towards workers since striking became legal. However, strikes were not to impinge on the freedom to work or to lead to any violence.

1865 - Launch of the first cheques in France

English bankers first issued cheques in 1742: they were no longer allowed to issue bank­notes as the Bank of England held a monopoly over the issuance, so they created a new form of paper money.

In France, the first cheques were issued in 1826 by the Banque de France; these were called « blank man­dates », and allowed cus­tomers of the Bank to withdraw funds from their own accounts. Cheques, as we know them today, were created under the law of 1865, and sub­sequent laws were passed spe­cifying their terms of use: in 1911, for example, a law was intro­duced cre­ating the crossed cheque (which can only be paid into a bank account); in 1917 and 1926, it became an offense to write a cheque without suf­fi­cient funds; and in 1931 inter­na­tional legis­lation on cheques was harmonized.

1865 - Creation of the Latin Monetary Union between France and several European countries

The Convention de Paris, signed by France, Belgium, Italy, Switzerland, and Luxemburg, set up a common mon­etary system based on bimetallism.

1867 - Publication of the first volume of Karl Marx’s Capital

Based on a philo­sophical, his­torical, eco­nomic and soci­olo­gical ana­lysis, Karl Marx the­orized the internal con­tra­dic­tions of cap­it­alism, marked by class struggle (espe­cially between the bour­geoisie and the pro­let­ariat). He stressed the eco­nomic determ­inants of the devel­opment of soci­eties. He pre­dicted and advocated the end of cap­it­alism and its replacement after a period of dic­tat­orship of the pro­let­ariat, by socialism and communism.

1869 - Opening of the Suez Canal

La Compagnie Universelle du canal maritime de Suez (Universal Suez Ship Canal Company) began work on the Suez Canal in 1859, and it was inaugurated ten years later. This canal, which links the Mediterranean to the Red Sea, had a significant impact on the world goods trade, as it meant ships from Europe no longer had to sail around Africa to reach Asia. In 1956, the Suez Canal was the stage for a serious crisis involving Egypt, Britain, and France.

1870 - Necessity of money in France during the Franco-German war

Money tokens are issued to replace bank­notes and metal coins in a context of sig­ni­ficant hoarding and dif­fi­culties in sup­plying notes and coins.

1871 - 1879 - Birth of the German mark

The introduction of a new currency often coincides with a period of political reform. In the case of Germany, the new currency put the finishing touch on the formal unification of the German states.

The economic community had been calling for monetary unification for some time, in order to take advantage of the industrial upturn triggered by the creation of the Zollverein in 1834. Monetary fragmentation (at the time there were 7 monetary domains and 33 issuing banks) was hampering trade and preventing the introduction of a strong currency pegged to the British pound and to gold, the main pillars of the international monetary system at the time.

There are three key dates in German monetary unification: in 1871, Chancellor Bismarck created the gold mark, which was largely funded by the war reparations paid by France in gold francs; in 1873, a law was passed making the gold mark the official currency of the Reich; and in 1875, the Reichsbank, or central bank of the German Empire, was created in the final step towards monetary unification. The bank was responsible for minting gold coins, issuing banknotes, and managing the exchange and discount rates.

1873 - 1900 - Monetary instability in the United States leading up to the gold standard

The Coinage Act of 1873 was enacted to enable the United States to gradually move from a bimet­allic system, where both gold and silver coins were in cir­cu­lation, to the gold standard. However, given the defla­tionary effects of this reform, new laws par­tially can­celed it. The debate between sup­porters of bimet­allism and sup­porters of the gold standard, therefore, remained open for a long time. It was only in 1900 that the Gold Standard Act enabled the United States to adopt the gold standard.

1873 - 1896 - Great Depression in Europe and the United States

This period was marked by a decline in the general price level (deflation) and an economic slowdown, without however a decrease in production. Two factors explain this deflation. On the one hand, competition from new countries, in particular the United States, in agricultural and mining markets. Supply grew rapidly thanks to the expansion of cultivated land, which contributed to lowering world prices. The drop in European farmers’ income led to a decrease in their purchases of manufactured goods, thereby threatening the industry. On the other hand, as the construction of the most profitable railway lines had come to an end, this resulted in a « rail crisis » that occurred at different times across countries during the 19th century. Consequently, investment plummeted and the balance sheets of rail companies deteriorated. This led to the collapse of rail companies and banks that had invested in this sector.

1873 - Publication of Lombard Street: a description of the money market by Walter Bagehot

Seminal work on crisis management and the role of a central bank, in which Walter Bagehot argues in favor of increasing the Bank of England’s gold reserves to enable it to manage a liquidity crisis and act as a lender of last resort. He believed that the Bank of England should lend to banks that were short of liquidity but not to those unable to repay their debts - i.e. insolvent ones.

1873 - Crash of the Vienna Stock Exchange in Austria

The early 1870s were marked by the collapse of several banks in Europe. This crisis was followed by the crash of the Vienna Stock Exchange, which then affected central Europe and later the United States. This marked the beginning of an economic crisis, the Great Depression, which lasted until 1896.

1873 - Scandinavian Monetary Union

Fixed exchange rate system based on the gold standard between Sweden and Denmark, and later Norway in 1875. The Union ensured exchange rate stability. Member countries still had their own currencies. This Monetary Union, which lasted until 1914, is one of the results of the Scandinavian political movement of the 19th century, which supported the idea of a unified Scandinavia.

1874 - Léon Walras pub­lishes Élé­ments d’économie poli­tique pure (Ele­ments of pure economics)

Along with those of Stanley Jevons and Carl Menger, this work by Walras was salient to modern economic theory. Walras was the first to attempt to model an economy to explain how prices are formed. He worked on general equilibrium, namely analyzing an overall economy’s state of balance taking into account the equilibrium on all its markets in goods and services. Subsequently, Alfred Marshall and in particular Kenneth Arrow and Gérard Debreu grounded this analysis in a formal mathematical framework and demonstrated the existence of general equilibrium.

1874 - Invention of the telephone

In the United States by Antonio Meucci. Graham Bell filed a patent two years later.

1879 - Dissemination of electricity

In 1799, Volta invented the electric battery and became the first person to gen­erate an elec­trical current. In 1879, elec­tricity began to arrive in res­id­ential prop­erties with Thomas Edison’s devel­opment of the incan­descent electric light bulb. In the same year, he built the first electric power station in Man­hattan, leading very quickly to the con­struction of power sta­tions in Europe.

Late 19th century - Return to protectionism in Germany and France

In Germany from 1879. In France in 1892 with the introduction of the « Méline tariff » (law aimed at protecting French agriculture from international competition). This return to protectionism is the consequence of the slowdown in world growth following the Great Depression, the fall in world prices (by 40% between 1874 and 1899), and heightened competition from new countries in the food sector (in particular US wheat).

1880 - 1914 - The second industrial revolution

In Europe and the United States, with innovations in the electricity and oil sectors, the chemical industry, railways, and steamboats, etc. The second half of the 19th century and early 20th century saw the development of successive innovations that paved the way for significant productivity gains. These included the mechanical production of electricity and the internal combustion engine, the chemical industry, means of communication such as the telegraph and the telephone, and means of transport such as railways and steamboats. These means of communication and transport contributed to fostering international trade and propelled industrialized countries into a new episode of globalization, which ended in 1914. This period is also marked by the emergence of new economic powers such as the United States, Germany, and Japan (Meiji era).

Late 19th century - early 20th - Rationalizing work organization in the United States

Taylorism (named after its inventor, Fre­d­erick Taylor, an American engineer) started to develop in the 1880s. Taylor advocated a sci­entific organ­iz­ation of work, involving new pro­duction pro­cesses (task sequencing), a new pay system (shift from piecework wage to hourly wage), and, finally, higher pro­ductivity. These ideas were first met with great success in the steel industry. Henry Ford adapted this system to the auto­motive industry. From 1913, the pro­duction of the Ford Model T (launched in 1908) was based on three main ele­ments: stand­ard­iz­ation, the pro­duction line, and the con­veyor belt.

1882 - Stock market crash and collapse of the Union générale in France

This Catholic bank, founded in 1878, posted very rapid growth, thanks to a con­sid­erable number of buy­backs and risky invest­ments, espe­cially inter­na­tionally, in the regions of Central Europe and the Danube. This growth came to a sudden halt in 1882, the bank had gone bankrupt due to excessive stock prices and poor fin­ancial man­agement. The stock markets in Lyon and Paris were shaken and a crisis of several years ensued, which affected the mining, metal­lurgy, and con­struction sectors.

1884 - Legalisation of trade unions in France

This law, put forward by Waldeck-​​Rousseau, Minister of the Interior, was the first law in France to allow trade unions. However, it set very strict rules for their creation and organization. Furthermore, until 1946, trade unions were banned in the civil service.

1885 - Berlin Conference on Africa

The aim of this conference, organized by Chancellor Bismarck between November 1884 and February 1885, was to provide a framework for the colonization of Africa that had begun much earlier. Rules were established between the colonizing states, including free trade access to the major African river basins and the obligation to actually occupy a territory before claiming it. British, French, Germans, Belgians, Portuguese, and Italians then moved into the heart of Africa and divided it up in less than fifteen years.

1890 - Antitrust Act in the United States

The Sherman Antitrust Act prohibits all contracts, arrangements, and agreements between producers or between distributors that might restrict trade or lead to the constitution of a monopoly. This Act marks the beginning of modern competition law.

1890 - Collapse and rescue of the Barings Bank

The Bank collapsed as a result of Argentina and Uruguay’s payment default. It was later rescued by a consortium organized by the Governor of the Bank of England. It went bankrupt in 1995 following stock price and accounting manipulations by an employee.

1891 - Rerum Novarum: the eco­nomic and social doc­trine of the Catholic Church

In 1891, Pope Leo XIII issued the first encyclical relating to Catholic doctrine on social and economic issues. Its name, Rerum Novarum, means « of new things » and the document was a response to the industrial revolution that had been taking place since the 18th century, and the emergence of liberal and subsequently Marxist economic theories.

Leo XIII outlined a third way, in between these two theories, which asserted workers’ rights but opposed any notion of class struggle. Catholic doctrine reiterated the basic economic principles of Christianity and notably affirmed the following: the right of property ownership, tempered by the duty to provide for the common good and to use that property for the benefit of others; a fair wage; charity towards the poor; freedom of association for workers. State intervention was permitted but had to follow the principle of subsidiarity, i.e. it should be restricted to matters that could not be settled by other competent authorities (family, associations, unions, local authorities).

Some problems could only be dealt with at the international level, by competent economic and social authorities. Since 1891, successive popes have published various updates to the Rerum Novarum, dealing with issues such as international debt, the consequences of the collapse of communism, cross-border migration, and financial crises.

1892 - Panama financial scandal

In 1878, France was granted a concession to build the Panama Canal. The work began in 1881 and ran into a number of difficulties including an outbreak of yellow fever, which caused many deaths on the site. As capital was in short supply the French people had to be appealed to for investment. Despite extremely pessimistic engineers’ reports as to the successful completion of the project, funds were secured through a system of corruption targeting parliamentarians and journalists. However, in 1889 the Compagnie Universelle du canal interocéanique de Panama went bankrupt, and three years later the scandal emerged in the press.

Having bought the concession from France, the United States finally finished the Panama Canal in 1914. Today it represents a strategic crossing point between the Pacific and Atlantic oceans.

1895 - Invention of the radio and cinema

In 1895, thanks to a number of inventions such as Hertz’s receiver and Branly’s coherer, Marconi successfully emitted signals with a range of more than three kilometers. In 1901, the first transatlantic radio signal was received. Radio went on to become an essential tool for the army and a means of receiving information and entertainment for households.

In 1895, the Lumière brothers staged the first public projection and patented the cinematograph. There followed major innovations such as films with sound (1927) and films in color (1935).

1896 - Creation of the Dow Jones in the United States.

First stock index, based on the stock prices of twelve companies listed on the New York Stock Exchange.

1907 - US bank run followed by the creation of the Fed

The trigger event of the bank run of 1907 was the decision by the Knickerbocker Trust Company, a company specialized in long-term wealth management for individuals and companies, to refuse to honor its debts. This led to numerous withdrawals of money from banks and a fall in the US stock market of nearly 50% in one year. The ensuing domino effect was impossible to stop because all the smaller banks in New York had deposited their surplus reserves with other banks, and the panic spread across the entire United States. A rescue plan, made possible by an injection of private funds by the banker J.P. Morgan, re-established confidence in the financial system.

The vulnerability of the American banking system revealed the need to centralize money supply and bank regulation with a lender of last resort. This paved the way for the 1913 « Owen-Glass Federal Reserve Act » creating the Federal Reserve Bank, otherwise known as the « Fed ».

1908 - Launch of the Ford Model T in the United States

This marked the start of rationalized industrial production, based on Frederick Taylor’s theories on the division of labor. The introduction of assembly-line production of a standardized model broke numerous efficiency records, with a Model T rolling off the line every 10 seconds at the Highland Park factory! This in turn enabled Ford to double the minimum daily wage, to USD 5, and to slash selling prices. Some 15 million Model T Fords were to be produced through to 1927.

1914 - 1920 - Necessity money during World War I in France

In a context of money shortage exacer­bated by the col­lection of gold by the State and hoarding beha­viour, money tokens were issued to replace notes and coins.

1914 - Introduction of income tax in France

Income tax was introduced in France as part of the government’s strategy to raise finance by increasing taxes on wealthier households. It was the second major progressive tax to be levied in France after the progressive tax on inheritance was introduced in 1901.

The idea of an income tax was first put forward in 1869 by Leon Gambetta, with the support of the Radical Party. His aim was to ease social tensions by reducing the powers of the owners of the means of production.

From 1894 onwards the proposal was put forward repeatedly by various finance ministers but was systematically rejected by the lower house of parliament, the National Assembly. Its opponents argued that it was a confiscatory tax that would discourage savings and therefore investment.

In 1909, Joseph Caillaux, finance minister in Georges Clemenceau’s government, managed to get the bill passed by the Assembly. But it would be another five years before the upper house, the French Senate, gave its approval, under pressure to raise funds to rearm the country in the face of the war threat. The Senate passed the bill on 3 July 1914, four days before the assassination of Archduke Franz Ferdinand in Sarajevo.

Income tax was introduced in 1842 in the United Kingdom, in 1893 in Germany, and in 1913 in the United States.

1914 - 1918 - First World War

The First World War caused the death of more than 10 million people and permanently incapacitated injury to many others. The demographic deficit of the inter-war period was worsened by the Spanish flu epidemic, which swept Europe in 1918 and 1919 causing nearly 30 million deaths. The war also had major material repercussions, particularly on infrastructures.

Governments took on a heightened role to finance the war effort between 1914 and 1918. But as public spending grew so did the need for new funds. In France, for example, income tax was created in 1914 to meet this need.

Another consequence of the First World War was the arrival of women in the labor market, mobilized to deal with labor shortages in manufacturing, farming, and transport.

Lastly, governments universally abandoned the gold standard by withdrawing the possibility of converting banknotes into gold.

1917 - Russian Revolution

The Russians suffered a number of defeats in the First World War. The revolutions of February and October 1917 led to the collapse of the Tsarist regime. Under Lenin’s leadership, the Bolsheviks came to power and step by step implemented the first-ever planned economy. They instigated state capitalism, characterized by ownership by the public authorities of the means of production, notably companies. On acceding to power the Bolsheviks introduced major measures such as the banning of most newspapers and the prohibition of strikes.

Another measure had repercussions as far away as France: in 1918, Lenin canceled the loans the Tsarist government had contracted abroad. The French middle classes were hit particularly hard as they had invested substantial amounts in these loans.

1919 - First international passenger air service

During World War I, the company Farman supplied a large number of reconnaissance aircraft and bombers. It then developed commercial aircraft. In February 1919, it was the first to launch a commercial flight between Paris and London, in 2h37. In 1921, the Compagnie des Grands Express aériens opened a second air service between Paris and Lausanne.

1919 - Creation of the International Labour Organization (ILO)

Under the aegis of the Ver­sailles Treaty, signed at the end of the First World War between belligerents.

1920 - Independence movement led by Mahatma Gandhi

Gandhi exhorted Indians to acquire a spinning wheel and to spin and weave their own clothes and fabrics, according to tra­di­tional tech­niques. This ini­ti­ative, known as khadi, is part of the inde­pendence movement led by Gandhi. It provided addi­tional work to people in rural areas who lived primarily off agriculture.

1922 - 1923 - Hyperinflation in Germany

Between 1913 and December 1923, retail prices increased by about 1 trillion, with inflation accelerating in 1922-​​1923. After World War I, the Versailles Treaty of 1919 condemned defeated Germany to pay reparations of a disproportionate amount (equivalent to two years of its pre-war GDP). The State financed these payments by creating money, which led to a self-sustaining rise in prices: as prices rose faster and faster, people sought to buy right away for fear of having to pay more later. This flight from money led to hyperinflation: prices rose faster and faster and increased by 1 trillion between 1913 and December 1923. Gradually, the Reichsmark lost its functions as money, as evidenced by women burning banknotes to keep warm since they were worth less than wood logs. On 15 November 1923, a monetary reform broke the inflationary spiral by replacing the Reichsmark with the Rentenmark, on the basis of 1 Rentenmark for 1 trillion Reichsmark. This hyperinflation crisis also saw the rise of mass unemployment and extremist movements, in particular the Nazi Party of Adolf Hitler, which failed its attempted coup on 8-​​9 November 1923 in Munich.

1922 - Setting up of the Gold Exchange Standard

The value of most cur­rencies is defined as rel­ative to gold, but only the pound sterling (until 1931) and the dollar (until 1933) were con­vertible into gold.

1926 - Invention of Television

In 1926, Scot John Baird broadcast the first tele­vision images, and 1931 saw the first screening of a public tele­vision pro­gramme in France. Tele­vision gradually became a popular medium in the 1950s.

1928 - The franc germinal is replaced by the franc Poincaré in France

After World War I, the franc floated on the foreign exchange market and depre­ciated. This deteri­or­ation in the pur­chasing power of money was due to war and recon­struction expenses, the rise in public debt, and the trade balance deficit. Thanks to the policy con­ducted by Raymond Poincaré, the franc sta­bilized on the foreign exchange market in 1926. A debate then took place between advocates of a revalu­ation of the franc to its pre-war level (franc ger­minal) and those in favor of a devalu­ation of the franc to its real value. In 1928, the Poincaré gov­ernment chose to devalue the franc by 80%: the « franc Poincaré » was only worth a fifth of the gold equi­valent of the franc ger­minal. A new law par­tially re-​​established the con­vert­ib­ility of bank­notes into gold: this system was known as the « gold bullion standard » where gold bullion was sold at a fixed price in exchange for bank­notes at the Banque de France.

1928 - The first Five-Year Plan in the USSR

In 1928, Stalin launched his First Five-Year Plan to speed up the process of industrialization in the Soviet Union so that it could compete with output levels in developed capitalist economies. Stalin’s priority was heavy industry and he ordered the collectivization of all farmland, a measure that he hoped would accelerate the mechanization of agricultural production.

The plan produced mixed results. Industrial growth in the capital goods sector came at the expense of the rural populations. Agricultural collectivization failed to boost farm yields, while a large portion of agricultural output was requisitioned in order to finance industrial investment, leading to food shortages and famine in the countryside.

The USSR subsequently implemented 12 more plans in the period up to 1991.

The Soviet Gosplan (central planning committee) was notably criticized by Austrian economist Friedrich Hayek, who stressed that it was impossible to centralize the management of all different sectors of production.

1929 - Stock market crash on Wall Street and the start of the 1930s crisis

Sharp fall in share prices in New York and in the developed market economies. Start of the Great Depression. The 1920s were years of prosperity in the United States. Share prices amplified this movement, increasing threefold between 1924 and September 1929. The trend suddenly reversed on 24 October 1929, a day which is also known as « Black Thursday ». Share prices lost nearly 40% between 22 October 22 and 13 November, dragging the other world stock markets into turmoil. The stock market crash precipitated the United States and Europe into an economic depression that lasted, for some countries, until 1939. Banks went bankrupt or cut back on lending and businesses were no longer able to obtain financing by issuing shares, which led to a collapse in consumption and investment. The weak demand then triggered a crisis of overproduction that drove down prices, further aggravating the crisis because economic players preferred to wait and see rather than buy. Mass unemployment settled in, which further exacerbated the weakness of demand. In some countries, this depression brought about a series of fiscal stimulus packages, in particular in the United States with the « New Deal » of President F.D. Roosevelt in 1932, programs that were theorized by Keynes in his General Theory published in 1936.

1930 - Opening of the first supermarket in New York

The first store of this kind was opened in September 1916 in Memphis (United States). In 1930, Michael J. Cullen opened the first super­market in New York. It offered a large range of goods sup­plied by a whole­saler friend. Neither shop window nor counter. Cartons of washing powder, boxes of tin cans, and crates of bottles were piled high. To cut prices, there was hardly any present­ation and no service.

1930 - Creation of the Bank for International Settlements (BIS)

The BIS was initially set up to address the issue of loans related to the settlement of reparations by Germany. It also plays a coordinating role between the world’s major central banks

1930 - Salt March organized by Gandhi in India

Gandhi encouraged his fellow coun­trymen to break the United Kingdom’s State monopoly on the dis­tri­bution of salt as part of his fight against colonization

1931 - Bankruptcy of the Creditanstalt, the first bank in Austria

The Great Depression of 1929 in the US affects Europe and in particular Germany and Austria. European economies depend, in fact, strongly on the US capital. In 1931, Austria’s largest bank, Creditanstalt, declares bankruptcy, causing the collapse of the Austrian stock market.

1932 - The Wörgl Experiment in Tyrol, Austria: the first parallel currency

In 1932, following the economic theories of the economist Silvio Gesell, the Austrian town of Wörgl introduced a local currency designed to lose 1% of its value each month. This gave holders an incentive to spend it as quickly as possible and therefore increase their consumption; launched in response to the Great Depression, the experiment was intended to discourage the hoarding of money. The currency proved a great success in Wörgl and other Austrian towns planned similar experiments. It was banned by an administrative court at the end of 1933.

In 1934, a group of Zurich business owners launched another parallel currency, the wir, in Switzerland, to increase the amount of liquidity in the economy. The wir is still in circulation today.

1933 - The New Deal in the United States

In order to tackle the social and economic consequences of the 1929 stock market crash and subsequent crisis, the newly elected President Franklin Roosevelt introduced a series of measures, known as the New Deal, in 1933. These included:

financial sector reforms: closure and merger of a large number of banks, introduction of a guarantee on customer deposits, securities regulation, separation of retail banking and securities activities;

the payment of compensation to farmers who reduced their output, in order to raise prices, and a reschedule of their debt;

funding of public works to create jobs, such as reforestation projects (jobs for young people), and infrastructure projects (roads, dams);

introduction of unemployment benefits and retirement pensions;

suspension of the gold standard and devaluation of the dollar;

policies to limit excessive competition between manufacturers: introduction of floors on prices, quantities, and wages;

extension of workers’ freedom of association and encouragement of the signature of collective agreements.

These measures are often described as Keynesian. In fact, there was no clearly defined underlying doctrine - they were merely a pragmatic response to an explosive social situation and the perceived threat of deflation.

The measures brought about a lasting transformation in the economy and in American society as a whole (they notably strengthened the role of the Federal Government). Unemployment, which had risen to 25% of the workforce in 1933, fell to 14% in 1937, although it subsequently rose again to 19% in 1939, just before the outbreak of World War II.

1936 - Keynes publishes the General Theory of Employment, Interest, and Money

This book offers an explanation of the economic crisis and the development of mass unemployment.

1936 - Victory of the Popular Front and the Matignon agreements in France

Social reforms such as the intro­duction of paid annual leave, man­datory col­lective agree­ments and the reduction in the workweek.

1939 - 1945 - World War II: a conflict with major economic consequences

In human terms, World War II turned out to be the bloodiest war of all time, with over 55 million victims. These human losses caused a sharp decline in the labor force. Material losses were also very high: in the areas that were bombed, the infrastructure was almost entirely destroyed. In addition, in order to finance the war and then reconstruction, countries often resorted to borrowing. This resulted in a general price rise in many countries (in France, the inflation rate was close to 50% between 1945 and 1948) and a weakening of public finances due to increased debt. In addition, at the end of the war, the society started changing. European countries took measures towards greater social protection and laid the foundations of the welfare state: government spending, which had already risen sharply during the war, reached a lastingly high level. Finally, Europe was divided in two by the « iron curtain »: in the West, parliamentary democracies allied with the United States; in the East, countries under Soviet influence. Two opposing economic models. The United States became the creditor of Western European countries. International cooperation emerged, with the creation of the Organization for European Economic Cooperation (OEEC, which in 1961 became the Organization for Economic Cooperation and Development - OECD) in charge of the Marshall Plan designed to help rebuild European economies. The Eastern European countries, which, in the footsteps of the USSR, refused the Marshall Plan aid, set up the Council for Mutual Economic Assistance (COMECON).

1939 - 1945 - Necessity money during World War II in France

Early in the war, money tokens are issued in some cities to replace banknotes and coins when the Bank of France stopped the operation of some of its branches for a while.

1942 - Schumpeter’s creative destruction

Joseph Schumpeter popularised this expression, which he had already coined in previous works such as Business Cycles, through his book Capitalism, Socialism, and Democracy. The economist explained business cycles thus: a major innovation triggers a growth phase and thereby job creation; certain companies, whose techniques or products have become obsolete, go bust, leading to a phase of depression that destroys jobs; this period of economic difficulty nevertheless fires the creative energy of new entrepreneurs, thereby leading to fresh innovations and a new phase of growth.

1944 - 1947 - The Bretton Woods agreements and the GATT

Setting up of a new international monetary system based on fixed exchange rates with gold and the dollar, and trade liberalization. The economic depression of the 1930s led to a series of devaluations (to promote exports) and protectionist measures (to limit imports) that ultimately worsened the crisis by deterring international trade. The victorious powers of World War II sought to draw lessons from this experience. In 1944, the Bretton Woods agreements set up a fixed exchange rate system based on gold and the dollar, the only currency convertible into gold. Two institutions were created: the International Monetary Fund to ensure the stability of the international monetary system and exchange rates and address countries’ external imbalances; the World Bank to help rebuild economies after the war and contribute to development. In 1947, the first Agreement on Tariffs and Trade (GATT) was signed, the first in a series of agreements to liberalize international trade.

1945 - 1946 - Creation of a social security system and nationalization in France

Implementation of the economic program drawn up by the French Resistance. After France’s Liberation, a social insurance system (covering in particular sickness, old age, and family) was set up and private companies were taken over by the State (especially in the transport, energy, and financial sectors). The Banque de France, over which State control had already been strengthened in 1936, was nationalized.

1945 - 1975 - Decolonization

At the end of World War II, the colonies that had taken part in the war effort claimed their independence. Backed by the United States, the Soviet Union, and the UN, which supported their cause by asserting « the right of peoples to self-determination », the idea of independence took form and spread rapidly. The movement started in Asia, then spread to Africa. Independence was achieved either peacefully or through armed conflict. The newly formed nations either maintained or cut back their economic ties with their former colonial powers.

1945 - 1974 - The post-World War II 30-year boom period (the trente glorieuses)

In the free-market developed countries, a period of exceptional growth. During the three decades following the Second World War, the free-market developed countries saw high growth, above 5% annually in the case of France. New products (household appliances, cars, airplanes, televisions) and new processes and modes of work organization (mechanization of agricultural and industrial production, Fordism) appeared or developed, leading to a sustained increase in productivity. These productivity gains made it possible, in turn, to raise wages, thus supporting demand and growth. In many countries, this expansion also fostered the creation of the welfare state (social security in France in 1945) to protect workers from risks such as illness, old age, and unemployment.

1947 - The Marshall Plan

The Marshall Plan was a United States initiative to provide aid to Western Europe after the end of World War II. It was announced in a speech by George Marshall, the US Secretary of State, in 1947. The plan was intended to prevent the spread of Soviet influence in Europe as Marshall was convinced that communism thrived on poverty and social turmoil.

The US granted a total of USD 13 billion in economic aid (around USD 140 billion in today’s money), spread over four years, to 16 European countries, including France and Germany. It also proposed aid to Eastern European countries, but the offer was rejected by Moscow.

The aid - consisting essentially of donations - was used to buy American goods. States benefiting from the funds were encouraged to stimulate investment and were also required to coordinate with each other on how the aid should be allocated, leading to the creation of the Organisation for European Economic Cooperation or OEEC (which became the OECD in 1961).

The Marshall Plan contributed to the revival of the European economy; it also boosted the US economy by helping to sustain economic activity in the post-war period.

1949 - China becomes communist

Proclamation of the People’s Republic of China by Mao Zedong. China adopted a planned economy.

1950 - Creation of a minimum wage in France

The Salaire Minimum Interprofessionnel Garanti (SMIG) was the first minimum wage in France. It was indexed to inflation but not to economic growth. It did not apply in the agricultural sector - for which there is a Salaire Minimum Agricole Garanti (SMAG) - and was set at different levels depending on the regions. In 1968, the SMAG was aligned with the SMIG. In 1970, the SMIG was replaced by the Salaire Minimum Interprofessionnel de Croissance (SMIC). It was uniform across all French regions. It was revalued using a new computation method in which the increase in average wages was taken into account. The objective was to help the minimum wage catch up with the average wage, which was then much higher.

1951 - Marketing of the first electronic computer

In the United States, the Univac I. Univac marketed the first transistor computer (cheaper, more reliable, and faster) in 1956.

1954 - First nuclear power stations supplying civil energy

The first nuclear reactor was built at the University of Chicago in 1942 to fulfill military needs. 1951 saw the first nuclear energy generated, in the United States. In 1954 the Soviet Union built the first civil nuclear power station to be connected to the power grid. The United Kingdom followed suit in 1956 before the United States in 1957 and France in 1963, with the Chinon power station. This marked the beginning of the industrial development of nuclear power.

1954 - Introduction of the VAT in France

The Value Added Tax is a technically neutral tax: its weight relative to the price paid by the final consumer is always the same irrespective of the modes of production, the distribution channels, and the product origin. After France, dozens of countries adopted this system to levy taxes on consumption.

1955 - Bandung Conference

The Bandung Conference on non-alignment marked the emergence of the Third World countries and led to the acceleration of the decolonization process.

1956 - Creation of the Paris Club

An informal group of creditor countries charged with restructuring the debt of heavily indebted countries. This forum was set up in 1956 when Argentina agreed to meet its public creditors in Paris. The Paris Club deals with public debt, i.e. government debt and private-sector debt guaranteed by the public sector. Today, 19 creditor countries are permanent members of the group.

1956 - Milton Friedman publishes his article on the quantitative theory of money

The theory according to which prices vary in proportion to the quantity of money. For Friedman, « inflation is always and everywhere a monetary phenomenon ».

1957 - Treaty of Rome establishing the EEC and the common market

6 countries in 1957, and 27 countries today. In 1951, when six European countries signed the treaty on coal and steel, two highly strategic sectors for armament, Jean Monnet declared that Europe would not be made all at once, but « through concrete achievements which first create a de facto solidarity ». It is also in this spirit that the Treaty of Rome was signed on 25 March 1957, establishing a European Economic Community at the time with the same six countries (France, Germany, Italy, Belgium, the Netherlands, and Luxembourg). By fostering intra-Community trade, creating common policies, or harmonizing national policies, the objective is to foster interdependencies that help to forge a European identity.

1958 - The Rueff-Pinay stabilisation plan in France

It aimed at balancing the budget and created the new franc, which came into circulation on 1 January 1960.

1965 - French women are given the right to choose a professional activity and manage their own assets

The Law of 13 July 1965 authorized women to manage their own property and assets freely by opening a bank account in their own name and choosing to exercise a professional activity without the permission of their husbands.

1966 - Launch of the first general-purpose credit card

14 American banks joined together to form the Interbank Association, and in 1966 issued the first general-purpose credit card. Similar initiatives had already been launched in the United States in the 1950s, but in these cases, the cards could only be used to settle specific types of transactions. In France, the Groupement Carte Bleue (bank card consortium) was created in 1967.

1968 - General strike and industrial action in France

This action ended with the Grenelle agreements, which led to an increase in the minimum wage and real wages.

1971 - 1973 - End of the gold-dollar standard and switch to a floating exchange rate system

End of the gold convertibility of the dollar in 1971. Currency exchange rates are no longer fixed as from 1973. In 1944, the Bretton Woods agreements had set up a system of fixed exchange rates between currencies and gold or the dollar, the keystone of the system being the possibility of converting, at a fixed parity, the dollar into gold ($35 per ounce). However, from the 1960s, this system was undermined by the external deficits of the United States, which imported more than it exported and financed the difference by creating money. The quantity of « Eurodollars » (i.e. dollars held by economic agents who are not residents of the United States) in circulation worldwide grew rapidly, especially as banks outside the United States (in particular in Europe) started extending loans in dollars. The gold reserves of the Fed (the central bank of the United States) became clearly insufficient for converting dollars according to the official parity. These contradictions led President Richard Nixon to decide, on 15 August 1971, to suspend the gold convertibility of the dollar, then devalue it several times. In March 1973, a new foreign exchange crisis led to a generalized floating of currencies: most currencies had « floating » exchange rates that varied from day to day. In 1976, the Jamaica Accord recognized this situation and the end of any reference to gold in the international monetary system.

1972 - Beginning of global environmental movement

Two major events relating to the environment took place in 1972. In March, the Club of Rome, a think tank bringing together scientists, economists, national and international public servants, and industry representatives from 53 countries, published its first report. It called into question the benefits of growth, raising the alarm as to its impact on the environment and on the foreseeable shortage of energy resources. The report was accused at the time of being overly pessimistic but now seems ahead of its time in several respects.

Three months later, the United Nations Conference on the Human Environment was held in Stockholm. It was the first time that the international community had devoted such a summit to the theme of the environment. The conference laid the foundations for the United Nations Environment Programme (UNEP) created at the end of 1972.

1973 - First oil shock

During the Yom Kippur War, the Arab oil-producing countries embargoed sales to the United States and the Netherlands. The Organization of the Petroleum Exporting Countries (OPEC), formed in 1960, subsequently quadrupled oil prices.

This supply shock aggravated the already fragile economic environment in most industrialized countries (cf., in particular, the slowdown in productivity gains since the 60s and the international monetary system crisis that had been ongoing since 1971): following the crude-oil price hike, inflation surged, trade balances deteriorated, growth plummeted and unemployment increased.

1974 - 1975 - Collapse of the Herstatt Bank in Germany and creation of the Basel Committee

The collapse of this medium-sized bank sparked a deep crisis in the foreign exchange market, on which it was very active. The New York interbank market came to a standstill, almost leading to the collapse of a number of other institutions. This bankruptcy brought to light the systemic risks related to the increasing internationalization of banks.

Shortly after this event, Peter Cooke from the Bank of England proposed setting up a committee of central banks and banking supervisory authorities, which became known as the Basel Committee. In 1988, this committee issued a set of guidelines known as the Basel I recommendations. In particular, these featured the Cooke ratio, which set financial institutions an 8% target minimum ratio for capital to loans granted. The Basel II Accord, a new system that came into force in 2006, notably replaced the Cooke ratio with the McDonough ratio, which factored in market and operational risks such as fraud alongside credit (or counterparty) risks. Most recently, the Basel III agreement of 2010 reformed banking regulation following the subprime crisis.

1975 - 1991 - Hyperinflation in Argentina

Inflation started rising prior to the 1980s debt crisis. However, in order to contain the recession that followed the crisis, Argentina started printing money. This led to an average annual inflation rate of 300% between 1975 and 1990. For example, during the 1980s, the purchasing power of the middle class shrunk by 30%. In 1985, in order to curb hyperinflation, the Argentinian currency, the peso, was replaced by the « austral », 1 austral being worth 1,000 pesos. However, monthly inflation rates remained high, exceeding 20% after 1988. In 1991, it was decided to anchor the Argentinian peso, which had once more become the official currency, to the US dollar. Money supply growth was also restricted by law.

1978 - Liberalisation and economic opening of China

Deng Xiaoping takes over after Mao Zedong’s death (1976). After the death of Mao Zedong in 1976, Deng Xiaoping took over the reins of power in China in 1978. He conducted economic reforms resulting in the release of private initiatives and a significant opening of the economy (foreign investment, export development) while maintaining an authoritarian political system. In a few decades, China went from being a planned and virtually self-sufficient economy to a market economy open to world markets. The country built up external surpluses and entered into a catching-up process with high growth rates.

1979 - Creation of the European Monetary System (EMS)

A milestone in the history of European integration, at the instigation of German Chancellor H. Schmidt and French President V. Giscard d’Estaing. The European Monetary System was a regime of fixed but adjustable exchange rates, i.e. the bilateral exchange rates between each currency pair could be modified by agreement between member countries. Its objective was to stabilize the exchange rate of European currencies. The EMS implied maintaining bilateral exchange rates (the exchange rate between two currencies) within a maximum fluctuation band of + / - 2.25%. A European unit of account, the ECU (European Currency Unit), representing a basket of European currencies, was created.

1979 - Second oil shock

Tensions on supply (Iranian revolution and Iran-Irak war) cause a three-fold increase in oil prices.

1981 - 1983 - France’s left-wing economic policy and the subsequent austerity turn

François Mitterrand was elected President of the French Republic in 1981, a period marked by the effects of the second oil shock: since 1978, growth had been slowing and inflation accelerating (a combination known as stagflation), while unemployment had been on the rise. Supported by an alliance of left-wing parties (the Socialist Party, Communist Party, and Radical Party of the Left), the new president wanted to break away from capitalism and introduce a new social model. He began to implement a left-wing economic policy that was completely different from that being followed by France’s main trading partners at the time Mitterand introduced a series of measures and reforms including a wave of nationalizations in the industrial and banking sectors; a sharp increase in welfare benefits; a reduction in working time (39 hours a week, 5th week of paid holiday, retirement at age 60, etc.); a program of major public works; and the introduction of a solidarity tax on wealth.

This Keynesian-inspired policy led to a rapid deterioration in the budget deficit and trade deficit. The franc was devalued three times between 1981 and March 1983.

In March 1983, Mitterrand adopted what was known as the tournant de la rigueur, or austerity turn, a series of policies aimed at adapting France to the new international economic environment and keeping the franc in the European Monetary System (EMS). The main priority was to combat inflation: wages were no longer indexed to prices, taxes were increased and subsidies to state-owned companies were cut.

1982 - Debt crisis in emerging countries

In 1982, Mexico declared that it could no longer honor its payments to foreign creditors. In its wake, fourteen Southern countries declared themselves insolvent. This crisis was mainly caused by the rise in interest rates in the North to curb inflation, the drop in commodity prices, and some relatively unwise investments in developing countries. The seven richest countries in the world (G7) decided to commission the International Monetary Fund to put in place a series of structural adjustment plans aimed at improving the finances of indebted countries in exchange for financial aid and debt relief.

1986 - Single European Act

The Single European Act amended the 1957 Treaty of Rome, which aimed to create a true single market out of the existing common market. This was dependent on the free movement of people, goods, capital, and services. Thanks to the new institutional rules and objectives laid down by the Single Act, the single market was considered to have been broadly established on 1 January 1993.

Another notable advance in the construction of Europe occurred in the same year with the reform of the European Structural Funds, which had been set up to tackle growing inequality between European regions.

1987 - Wall Street crash in the United States

Unlike the crash of 1929, this crash was not followed by an economic crisis, thanks to the policy of monetary easing conducted by the Fed.

1987 - Montreal Protocol: the first major environmental protocol

International agreement designed to phase out the production of substances that deplete the ozone layer. It was signed in 1987 by 24 countries and the European Economic Community. In 2009, no less than 196 countries had signed it. It thus became the first environmental protocol to be universally ratified. One of the positive outcomes of this Protocol is that the production of CFC (chlorofluorocarbon) gas, largely responsible for the depletion of the ozone layer, has almost ceased

1988 - Creation of the CAC 40 index in France

The CAC 40 is the main stock index on the Paris financial market. It draws its name from the system - Cotation Assistée en Continu - (Continuous Assisted Quotation): this electronic trading system replaced the traditional auctioning that used to take place in the pit at the Palais Brongniart. The CAC index is based on the share prices of the 40 companies that have a significant market capitalization and that belong to an industry with long-term growth prospects. It is calculated daily in real-time and is regularly updated: some companies enter the index, while others leave it.

1989 -1991 - Breakup of the Eastern Bloc

Large-scale demonstrations bring down the Communist regimes in the USSR and Eastern Europe. The Berlin Wall falls on 9 November 1989.

1989 - Invention of the world wide web

Born out of the 1960s ARPA project supported by the Pentagon, the Internet began to be used widely by the public in the early 1990s thanks to the development of the world wide web and the Mosaic browser by Tim Berners Lee in 1989. The first web page was published in 1992 on the site of CERN, the European Organization for Nuclear Research. By 2001 half of the United States population had been connected to the Internet. Worldwide, there were a billion Internet users by 2004 and two billion by early 2011.

1992 - 1993 - European Monetary System crisis

In 1992, in the wake of Denmark’s rejection by referendum of the Treaty establishing the Economic and Monetary Union, financial markets became jittery. The campaign for the French referendum on the same issue heightened concerns about the future of the single currency project. Attacked by speculators (in particular, hedge fund managers such as George Soros), the pound sterling, the lira, and the peseta were to be devalued or to leave the EMS. In 1993, the French franc was again attacked by financial markets. The EMS fluctuation band was then widened to + / - 15%. This put an end to speculative attacks.

1992 - Signing of the Maastricht Treaty

This treaty establishes between the Member States of the European Community a European Union, which aims in particular at introducing a single currency.

1992 - Rio Earth Summit

In 1987, the United Nations Brundtland Report (« Our Common Future ») laid the foundations for sustainable development, based on three pillars: the environment, society, and the economy. The following year saw the creation of the Intergovernmental Panel on Climate Change (IPCC), which published its first report in 1990, establishing a link between human greenhouse gas emissions and global warming.

These two events led the United Nations to organize the 1992 Earth Summit in Rio de Janeiro, which yielded agreements on protecting biodiversity and fighting global warming, with the introduction of the Agenda 21 action program. This program established recommendations to tackle a wide variety of problems ranging from housing and ocean management to desertification. In 2012, the Rio +20 Earth Summit took place with the aim of reviewing the achievements of the previous summits and establishing what still had to be done. The priorities laid down by the United Nations are the green economy and the eradication of poverty.

1995 - Creation of the World Trade Organisation (WTO)

The WTO aims at setting up a set of rules governing international trade, based on the GATT agreements.

1995 - General strike in France

A three-week strike against a proposed reform of the health insurance system and pension regimes of public sector employees.

1997 - Kyoto Protocol

The publication of the second report by the Intergovernmental Panel on Climate Change (IPCC) led to negotiations resulting in the signing in 1997 of the Kyoto Protocol, which has been ratified by 190 countries. This agreement required developed countries to commit to a 5.2% reduction in greenhouse gas emissions from 1990 levels by 2012. However, the United States, the world’s largest emitter of greenhouse gases, signed the protocol but did not ratify it, and the protocol stipulates no obligations for emerging countries.

With the Kyoto Protocol expiring in 2012, the 2009 Copenhagen Summit was intended as the platform for negotiating post-Kyoto arrangements. However, this summit founded on the divergent interests of the developed and emerging nations, and the negotiations ended in an agreement without any binding targets. It took the Durban conference in late 2011 to reach an agreement on the pursuit of the Kyoto Protocol as of 1 January 2013.

1997 - Monetary and financial crisis in Asia

This crisis spread throughout South-East Asia (ASEAN) after a decade of strong growth.

1998 - Creation of the European Central Bank (ECB) and the Eurosystem

The ECB is responsible for the single European currency and its main task is maintaining price stability throughout the euro area. The Eurosystem is the monetary authority of the euro area. It comprises, in addition to the ECB, the national central banks of all the EU Member States that have adopted the euro.

Late 20th century - Development of the financial markets

The role of financial companies changed at the end of the 20th century, with the merging of banks and insurance companies to create large financial groups which would become true market intermediaries. The 1980s saw the deregulation of the banking sector, marking the end of specialized banking and freeing up banks to market a range of different services.

In France, a number of banks, such as Société Générale, Crédit Agricole, and Paribas were privatized. In the 1990s the French banking sector went through a number of restructurings often resulting from collapses or near-collapses, such as that of Crédit Lyonnais in 1993. Other mergers ensued, such as that between BNP and Paribas.

Late 20th century - The digital revolution of information and communication technologies

From the late 1970s, innovations in information technology and telecommunications started spreading on a large scale, including the personal computer and mobile phone. If the invention of the computer back to the Second World War, it is truly diffuse until 1977 with the release of personal computers (launch on the Apple II).

Similarly, if the first mobile phones are designed in the 1970s (the first handheld mobile phone developed by Dr. Martin Cooper), it is only at the end of the 1990s that their use is spreading widely.

These innovations profoundly modify both the way of life of households and businesses operating and are the source of productivity gains that have significant potential for growth.

1999 - Setting-up of TARGET 1 in Europe

The creation of the euro required setting up a cross-border settlement system for the entire euro area. The objectives of TARGET (an acronym for Trans-European Automated Real-Time Gross Settlement Express Transfer) are two-fold: first, to act as a channel for the transmission of the Eurosystem’s single monetary policy and, second, to strengthen the security of large-value settlements. TARGET 1 was modernized in 2008 with the introduction of TARGET 2.

1999 - Introduction of the euro

Creation of a single currency among European countries: 11 countries in 1999, 19 countries in January 2015.

With the development of intra-European trade, the economies of each country became extremely sensitive to exchange rate variations. Against the backdrop of currency instability after 1971, some EEC countries first set up a set of mechanisms for limiting exchange rate fluctuations between them: the European Monetary Snake (1972) and then the European Monetary System (1979). In order to promote intra-European trade and given the difficulties of maintaining fixed exchange rates in a context of free movement of capital, the objective of creating a single currency was laid down in the Maastricht Treaty signed in 1992. The euro was introduced, among 11 countries, on 1 January 1999 for bank accounts and financial products. Notes and coins were put into circulation in 2002. The euro area weathered a major crisis in 2010 but welcomed its 17th, 18th, and 19th member country in 2011, 2014, and 2015.

2000 - 2002 - Bursting of the Internet bubble

After years of strong growth, the share prices of new technology companies fell sharply.

2000s - Emergence of social networks

In the 2000s, a plethora of social networks - websites equipped with interactive tools for forming a network of personal or professional contacts - came into being. Facebook, Twitter, YouTube, Linkedin, and Viadeo developed into highly attractive companies for investors worldwide.

2000 - Merger of Amsterdam, Brussels, and Paris stock exchanges

Creation of Euronext, which merged with the New York Stock Exchange in 2007 to give rise to NYSE Euronext, the world’s leading exchange group.

2000 - 2009 - Hyperinflation in Zimbabwe

In July 2008, the new Zimbabwean $ 100 billion banknote would buy about three eggs. Hyperinflation was stopped by the adoption of the US dollar as the country’s official currency.

2001 - Attacks against the World Trade Center on 11 September

Two airplanes crashed into the Twin Towers in New York. The serious turmoil in financial markets was overcome by the coordinated action of public authorities, notably central banks.

2001 - China becomes a member of the WTO

After a long 15-year process, the largest country in the world in terms of population joined the WTO. China has thus contracted the international rights and obligations arising from different agreements. This membership has accelerated China’s integration into the global economy.

2001 - Financial and economic crisis in Argentina

Argentina abandons the fixed exchange rate of 1 peso = 1 dollar, strongly devalues its currency, and temporarily suspends the repayment of its debt.

2001 - Collapse of Enron, the 7th largest company in the United States

The bankruptcy of Enron and that of Arthur Andersen (the auditor of Enron’s accounts) gave rise to a large debate on accounting rules and led to the adoption of new standards

2003 - … Third oil shock

Oil prices picked up, in particular, due to the rise in demand from emerging countries.

2007 - Start of the subprime crisis

In August 2007, payment defaults by borrowers in the United States led to the subprime crisis, involving variable-rate mortgages granted to lower-income Americans (as opposed to prime credits, granted to better-off borrowers). Between 2000 and 2007, subprime loans rose from 9% to 20% of total outstanding US loans. The progressive increases in the Fed’s key rates implemented from 2004 onwards in a climate of sustained growth meant that many US households were unable to repay their borrowings when due, at just the same time that the rise in real estate market prices was coming to an end.

Losses on subprime loans weakened financial institutions’ balance sheets. In September 2008, in particular, Lehman Brothers Bank ran into serious difficulty and was not supported by the US government, forcing it into bankruptcy. The financial markets were immediately affected with the 30 largest US capitalisations losing 50% of their value compared with September 2007.

In this context, an atmosphere of mutual distrust developed between banks, with each refusing to lend short-term on the interbank market as they feared their counterparts could already be too weak to meet the repayments. The shortage of credit then led to the economic crisis.

2008 - 2011 - Setting up of electronic payment media common to all euro area countries

The SEPA (Single Euro Payments Area) is gradually introduced.

2008 - 2009 - Responses by the G20 countries to the subprime crisis

The G20 emerged as the principal forum for coordinating an international response to the global financial and economic crisis of 2007-2008. This inter-governmental body, formed in 1999, comprises the world’s twenty largest economies, representing around 90% of global GDP. This gives it greater legitimacy than other bodies such as the G8, which does not include several of the major emerging nations.

In late 2008, the G20 met in Washington for the first time at the head of state or head of government level. This meeting called for prudential and financial supervision rules to be strengthened. In 2009, the G20 summits in London and then in Pittsburgh formulated the outline of new international financial regulations, proposing a series of measures to regulate economic and financial players’ behavior. These included:

stronger capital requirements for banks (the Basel III prudential regulations, adopted in 2010);

controls on market operators’ remuneration, to avoid them taking excessive risk. In Europe, these were complemented in 2013 by a ceiling on traders’ bonuses;

changes to international accounting standards, to attenuate their pro-cyclical nature. These changes targeted, in particular, the valuation of portfolios at market prices when considered to be non-representative;

strengthening supervision of the financial sector and the monitoring of systemic risk, with the formation of the Financial Stability Board (succeeding the Financial Stability Forum set up in 1999) and colleges of supervisors for cross-border financial institutions. In Europe, this led to the formation of the European Systemic Risk Board, attached to the ECB, and of three pan-European authorities to regulate banks, insurance companies, and the financial markets;

stronger efforts to combat tax havens, with the OECD given, in particular, the role of publishing a list of non-cooperative countries;

implementing and/or strengthening the regulation of rating agencies, speculative funds, and markets for derivative over-the-counter products.

Faced with the financial crisis, the major central banks adopted, for their part, unprecedented measures. In particular, following Lehman Brothers’ bankruptcy in 2008, they simultaneously announced a 50-basis point cut in their key intervention rates. Moreover, as early as 2007, swap agreements have been put in place between central banks to enable banks from different countries to access the currencies they needed. The central banks then relaxed their monetary policies at their own pace and implemented non-conventional monetary policies to the extent they felt appropriate.

2009 - Bankruptcy and restructuring of General Motors

In June, GM was forced into bankruptcy. The company, partly recapitalized by the US federal government, was partially relisted in November 2010.

2009 - Failure of the Copenhagen Summit on climate change

In late 2009, the Copenhagen Summit concluded with only a simple political statement affirming the need to limit the global average temperature increase to no more than 2°C above pre-industrial levels (1750). There was, however, no agreement on how to do this in practical terms. In particular, it failed to agree on limiting greenhouse gas emissions, and the question of forming a global environmental agency was side-lined.

This failure was related to many developed countries refusal to adopt restrictive targets on limiting emissions by 2020 and to developing countries’ insistence on their right to develop their economies. The lack of success in Copenhagen also highlighted the limitations of inter-governmental procedures when trying to agree on the management of public assets globally. Nor did the new economic context, characterized by the financial and then economic crisis, facilitate the negotiations.

Since the Copenhagen Summit, conferences have been held annually (Cancun 2010, Durban 2011, Doha 2012, Warsaw 2013, and Lima, to be held later in 2014) in an attempt to reach a global agreement in Paris in late 2015 that could become effective from 2020 as the successor to the 1997 Kyoto Protocol. There are two key negotiating points: agreeing on voluntary national targets consistent with an effective global response to climate change and resolving the question of how to finance the efforts of developing countries.

2010 - Debt crisis in certain euro area countries

The euro area debt crisis started in late 2009 with the new Greek government announcing that its deficit and public debt were significantly higher than previously stated. This announcement resulted in an immediate loss of investor confidence in Greek debt securities. In May 2010, the IMF and the European Union granted Greece a financial support package of EUR 110 billion in exchange for the introduction of an austerity budget. Other European countries subsequently experienced difficulties in obtaining refinancing on the capital markets at satisfactory rates: Ireland (in 2010), Portugal (2011), and Cyprus (2013) also received IMF and European loans; in 2012, Spain received a European loan to help it to recapitalize its banking system.

Alongside these support plans, European countries adopted fiscal adjustment measures with the aim of consolidating their public finances. Following the subprime crisis, they introduced recovery plans (increased public spending and/or reduced taxes) to stimulate economic activity, which accentuated the deterioration in public finances usually seen in crisis periods. In Europe, the Treaty on Stability, Coordination, and Governance was signed in 2012 by 25 of the then 27 EU member states (with the exception of the United Kingdom and the Czech Republic).

The debt crisis also prompted the introduction of new euro area solidarity mechanisms. A EUR 750 billion European Financial Stability Facility (EFSF) was set up in 2010. It was replaced in 2013 by the European Stability Mechanism (ESM). The ESM has a capital of EUR 700 billion to guarantee its financial market borrowings. It can lend directly to Member States, purchase on the primary or secondary markets securities issued by troubled countries, or even recapitalize financial sectors in difficulty. Countries requesting ESM support must implement substantial budgetary adjustment measures, often accompanied by structural reform of their economies.

The situation of countries benefiting from such financial support differs: Ireland, Spain, and Portugal officially completed their programs in 2013 and 2014; programs continued, in early 2015, for Cyprus and Greece, where the situation remained particularly fragile.

For its part, the Eurosystem took a series of measures to address the subprime debt crisis, the sovereign debt crisis, and more recently the risk of deflation. The ECB cut its key refinancing rate several times, from 4.25% in July 2008 to 0.05% in September 2014. It also introduced a number of non-conventional measures, including long-term loans and unlimited short-term refinancing loans to banks; one-off secondary market purchases of sovereign debt issued by certain countries in difficulty (the Securities Market Programme, instituted in 2010), the implementation of an as yet unused mechanism for unlimited secondary market purchases of sovereign debt (the Outright Monetary Transactions Programme, launched in 2012), the implementation of a vast asset-backed securities purchase program in the non-financial private sector in 2014, a covered bond purchase program in the financial sector in 2014 and, in 2015, in the public sector, a program to purchase securities issued by governments and European institutions in the secondary market.

2010 - China becomes the world’s second-largest economic power (by GDP, in current dollar terms)

In 2010, China overtook Japan to become the world’s second-largest economic power behind the United States in terms of GDP expressed in current dollar terms. The United States still ranks in first place by a large margin. In the same year, US GDP was 2.5 times greater than China’s. Note, however, that Japan’s per capita GDP was still 10 times higher than that of China.

Gaining second place was only one of a number of Chinese successes. For example, China outstripped the US in 2009 to become the world’s largest car market and, in the same year, took first place from Germany as the world’s leading exporter. In the financial area, China has the largest foreign-currency reserves (estimated at close to USD 4,000 billion in early 2014).

According to IMF estimates in 2014, Chinese GDP, no longer calculated in dollars but in purchasing power parity (PPP), outstripped that of the USA 2014.

It should be noted that the PPP exchange rate measures the number of dollars required to purchase the same quantity of goods and services as could be purchased with a currency unit of the country concerned. PPP-expressed GDP is a complex and sometimes disputed calculation but it eliminates differences in price levels between countries and therefore provides a better comparison of the real wealth of nations.

2011 - Indignants movement

Protests brought together tens of thousands of people, first in Spain and then in many other countries, notably in the United States, under the « Occupy Wall Street » banner. This protest movement sought to highlight growing economic precariousness, social injustice, and the lack of future prospects.

2012 - European banking union

The financial crisis demonstrated the need to halt fragmentation in European financial markets and put an end to the adverse feedback loop between banking sector weaknesses and the deterioration in public accounts. Reforms were therefore implemented to strengthen the supervision of banking institutions and resolve their difficulties without calling on the taxpayer. With this in mind, euro area Member States decided in 2012 to create the European Banking Union, based on three pillars.

The first pillar took concrete shape with the adoption in 2013 of European regulations to set up the Single Supervisory Mechanism (SSM): with effect from November 2014, major euro area banking groups (around 130 institutions) will be supervised directly by the ECB; other institutions will continue to be supervised by their national supervisory authorities under the auspices of the ECB. EU countries that are not in the euro area may also be members of the Banking Union.

The second pillar concerns the implementation of a Single Resolution Mechanism (SRM) for banks, with the aim of harmonizing the rules applicable to distressed banks. The European regulation implementing the SRM was adopted in 2014 and sets out the rules for dealing with bank failures while minimizing the involvement of taxpayers. The SRM will be fully operational in early 2016: it will include in particular a Single Resolution Fund (SRF) that will be funded gradually as of 2015 by commercial banks to reach some EUR 55 billion after eight years.

The third pillar supplements the decision taken in 2010 to harmonize deposit protection guarantees throughout Europe, in the event of a bank failure, at EUR 100,000 per depositor and per institution. Deadlines for reimbursing depositors will be gradually reduced from 20 days to 7 days by 2024.

2015 - Most recent euro area enlargement

Lithuania joined the euro area on 1 January 2015, becoming the 19th Member State of the European Union to adopt the euro. Nine EU Member States are not members of the Euro area: Bulgaria, Croatia, Denmark, Hungary, Poland, the Czech Republic, Romania, the United Kingdom, and Sweden.

In accordance with the European treaties, Member States shall adopt the euro when they satisfy the criteria for joining Monetary Union (except for the United Kingdom and Denmark, which signed an opt-out clause). These criteria, regularly assessed by the European Commission and the ECB, aim to guarantee a high and sustainable degree of economic convergence:

• stable prices, not exceeding by more than 1.5% that of the three best-performing Member States in terms of inflation,
• sustainable public finances (a ratio of government debt to the gross domestic product at market prices below the 60% reference value),
• converging long-term interest rates (not exceeding by more than 2 percentage points that of, at most, the three best-performing Member States in terms of price stability),
• a stable exchange rate (absence of severe tensions and without devaluing against the currency of any other Member State for at least two years).

Other conditions, in particular legal requirements, must be met.

The euro was introduced on 1 January 1999 in 11 EU Member States (Austria, Belgium, Finland, France, Germany, Italy, Ireland, Luxembourg, the Netherlands, Portugal, and Spain). It expanded to include Greece on 1 January 2001, Slovenia in 2007, Cyprus and Malta in 2008, Slovakia in 2009, Estonia in 2011, Latvia in 2014, and lastly Lithuania in 2015.

2015 - Paris Climate Agreement

On 12 December 2015, at the end of the Paris climate conference (known as the Conference of the Parties or «COP 21»), 195 countries approved the Paris Agreement, the first global climate agreement. It officially entered into force on 4 November 2016, thirty days after the date on which 55 countries responsible for at least 55% of greenhouse gas emissions had ratified the agreement.

The Paris Agreement sets out an international plan of action to contain long-term global warming «well below 2°C above pre-industrial levels» and even to «pursue efforts to limit the temperature increase to 1.5°C». To achieve this, the agreement stipulates that signatory parties must review their commitment to reducing greenhouse gas emissions every five years.

The Paris Agreement also provides for the signatory parties to aim to reach a global emissions peak as soon as possible and to undertake rapid reductions thereafter so as to achieve a balance between emissions and removals (net zero emissions target) by the second half of the century.

The agreement also states that developed countries are to provide financial support to developing countries of at least USD 100 billion per year to enable them to reduce their emissions and adjust to the effects of climate change. It also invites developed countries to «continue taking the lead by undertaking economy-wide absolute emission reduction targets». Developing countries, for their part, should «continue enhancing their mitigation efforts».

The Paris Agreement does not include a system of sanctions. However, an overall assessment of the agreement is planned for 2023 and thereafter every five years. These assessments will enable countries to inform each other and inform the public of progress made in achieving the objectives set.

In 2017, the new US President, D. Trump, announced that the United States would withdraw from the Paris Agreement. Under the terms of the Agreement, this exit will only be official in 2019 and effective in 2020. Civil society (local authorities, companies, NGOs, etc.) was strongly involved in preparing and providing a follow-up to the Paris Agreement (COP 21 to 23 in particular).