The very first major economic collapse in recorded history occurred in 218-202 BC when the Roman Empire experienced money troubles after the Second Punic War. As a result, bronze and silver currencies were devalued. As HowMuch.net depicts in the video below economic collapses date back thousands of years. While many countries today still feel the effects of the most recent Global Financial Crisis, it is important to note that economic troubles are not unique to the present-day, but rather date back to some of the oldest civilizations.
Crisis by Type
While no two crises are exactly the same, economic collapses can be categorized into the following types:
Fiscal: inability of the government to finance its regular activities
Credit: reduction in the general availability and accessibility of loans
Financial: value of financial institutions or assets suddenly drop
Currency: doubt as to whether a country’s central bank has enough reserves to maintain the country’s fixed exchange rate
Economic: country experiences sudden downturn brought on by a financial crisis
Hyperinflation: extremely rapid period of inflation, usually caused by fast printing of money
Supply Side Shock: unexpected event that changes supply of product, resulting in a sudden change in price
Speculative Bubble: spike in asset value with a particular industry caused by exaggerated expectations of future growth
Stock Market Crash: sudden decline of stock prices across a large part of the market
The first collapse that occurred in the Roman Empire in the year 202 BC would be classified as a currency collapse. 235 years later, the Roman Empire experienced a financial crisis, caused by the decrease in land prices thereby making difficult for borrowers to pay back loans. As a result, interest loans from the wealthy became scarce.
Below is a look at some instances in which each of the other seven types of crisis above were experienced either globally or by a specific country.
Fiscal: The European debt crisis has been ongoing since 2009 when Greece, Portugal, Ireland, Spain and Cyprus had trouble repaying their government debt.
Credit: The Crisis of 1763 began in Amsterdam with the collapse of Leendert Pieter de Neufville and spread to Germany and Scandinavia.
Economic: From 1050-1100, Europe experienced economic decline, mainly due to the Great Invasions. This economic collapse ends in the 12th century with innovations in agriculture and textiles.
Hyperinflation: From 235-285 AD, emperors in the Roman Empire devalued currency rather than make unpopular budget cuts.
Supply Side Shock: In 1970, the world’s major industrial countries entered into an energy crisis, with countries facing substantial petroleum shortages, real and perceived, as well as elevated prices.
Speculative Bubble: After several years of a booming internet industry, stocks began to sharply decline in 1999, affecting major economies, including U.S., Germany, Great Britain, and Italy.
Stock Market Crash: The Wall Street Crash of 1929, or Black Tuesday, was the most devastating stock market crash in the history of the U.S.
Despite the devastating effects throughout time, economies were able to recover from multiple collapses. For instance, the Roman Empire experienced currency and hyperinflation crises over five centuries while various countries in Europe have endured a number of crises over the last millennium. Below is a list of countries ranked by the amount of crises survived per country.
1 crisis: South Africa, Israel, Mexico, Indonesia
2 crises: India, Chile, Thailand, New Zealand
3 crises: Australia, Canada, Japan, Brazil, Ukraine, Latvia, Estonia, Lithuania
4 crises: Argentina, Andorra
5 crises: China, Russia, Romania
6 crises: Algeria, Morocco, Libya, Tunisia, Sweden, Norway
7 crises: Finland
8 crises: Ireland
9 crises: Macedonia, Albania, Bosnia and Herzegovina, Turkey, Bulgaria, Serbia
10 crises: Croatia, Switzerland, Germany, Croatia, Cyprus, Slovenia
11 crises: Austria, Greece, Netherlands
13 crises: Spain, Italy, Portugal
26 crises: United States
With only 239 years of existence as a country, the United States has experienced double the number of crises as Spain, Italy, and Portugal, which are much older societies. This equates to approximately one crisis every 9 years! Over time, the United States developed a boom-to-bust economic cycle, commencing with the Panic of 1819 when a depression was caused by bank failures. These cycles vary with time and severity. Given the strength of the U.S. economy and sophistication of its capital markets, the U.S. is able to have shorter cycles by effectively adjusting policy when the economy expands and contracts. Under this cycle theory, one would expect the next U.S. economic collapse to occur in 2025, probably much sooner.
Patterns of the Past
When the Industrial Revolution began in Europe in the 18th and 19th centuries, timing between economic collapses became notably shorter. Instead of having over 100-200 years of crisis-free periods, the 19th century began to see a sharp decline in the length of time, with a crisis occurring approximately once every decade. While the length of time has varied between collapses, it is evident that economic collapses became not only more frequent, but also more widespread. The first instance of a global crisis was experienced across Europe and the U.S. in 1873-1879 in which multiple countries experienced a worldwide price recession called the Long Depression. Over one hundred years later, stock markets around the world crashed during Black Monday, beginning in Hong Kong. Progress in technology and telecommunications has created greater accessibility among countries in the present-day. As a result, the ripple effects of events, both good and bad, spread faster and are sometimes unavoidable.