MBA Notes: Business History

Key topics:
- The foundations of contract law
- The first business gurus
- Early accounting (and the death penalty!)
- Stock markets and coffee houses
- Limiting liabilities
- Encouraging innovations
- Banking beginnings
- The world's oldest ventures

'May you live in interesting times' – an expression part curse, part exhortation that might have been coined for the years straddling the first and second decades of the 21st century.
As this era looks eerily similar to the world depression triggered in 1929 the philosopher, George Santayana's quote – 'those who cannot learn from history are doomed to repeat it' – is peculiarly appropriate. Henry Ford, the founder of the car company, famously said: 'History is more or less bunk. It's tradition. We don't want tradition. We want to live in the present and the only history that is worth a tinker's damn is the history we make today.'

There are reasons why an MBA student should acquire a basic appreciation of the milestone events that have led up to the current theories of how organizations, their constituents and their surrounding environments currently operate. The first is much the same reason as why most people learn something of the history of their country, its neighbours, its friends and enemies.

Such a study lends interest, context and an appreciation of how we got to where we are today. It is much easier to understand, for example, the enmity between the French and the British with a smattering of information on the Hundred Years' War, the Peninsula War and the smouldering commercial and territorial disputes that ranged around the world from the Americas to India as well as across the African continent.

The second reason is perhaps even more important. Harvard professor Geoffrey Jones, who edited The Oxford Handbook of Business History with University of Wisconsin-Madison professor Jonathan Zeitlin, claims in his core history text used at Harvard that: 'Over the last few decades, business historians have generated rich empirical data that in some cases confirms and in other cases contradicts many of today's fashionable theories and assumptions by other disciplines. But unless you were a business historian, this data went largely unnoticed, and the consequences were not just academic. This loss of history has resulted in the spread of influential theories based on ill-informed understandings of the past. For example', Jones continues, 'current accepted advice is that wealth and growth will come to countries that open their borders to foreign direct investment. The historical evidence shows clearly that this is an article of faith rather than proven by the historical evidence of the past.'

How business history is studied in business schools
If you had taken your MBA before 2000 you would have been unlikely to find business history on the curriculum anywhere outside of the top dozen or so business schools. The subject, however, is fast becoming mainstream. Even comparative newcomers are embracing the subject. Reading Business School, for example, set up its Centre for International Business History (CIBH) in 1997, Cardiff has established an Accounting and Business History Research Group (ABHRG) and the Copenhagen Business School's Centre for Business History, established in 1999, is undertaking a long-term study into the nature and consequences of banking crises. The past few years should give them plenty of material to work on!
Business history as taught in business schools has no single unified body of knowledge in the manner in which, say, accounting, marketing or organizational behaviour has. It would be impossible to study accounting without covering the principles underpinning the key financial reports and how to interpret financial information. While there may well be some unique content in specialized electives, say on Financial Analysis of Mergers, Acquisitions and Other Complex Corporate Restructurings taught at the London Business School, or Dealing with Financial Crime on offer at Cass Business School, the core accounting syllabus in all business schools is near identical – though the way in which it is taught may not be.
History is taught in school and university in eras or themes: the Tudors, the Renaissance, the European World, for example. In one of the premier UK university history departments nothing much is covered after 1720, while at Harvard Business School nothing much before 1820 is included in the syllabus! At Copenhagen MBA students may have a thorough grasp of Norwegian, Swedish and Danish banking in the interwar years without even a passing reference to the Industrial Revolution, mercantilism or the development of the great family business dynasties. It is just that the subject is too vast to be covered in a meaningful way except by narrowing down the range.

Business history is taught eclectically and MBAs swapping notes on their experiences of Business History may find very little in common.

Here, a broad sweep of the subject is taken, providing snapshots of important milestones on matters of enduring significance to business. The content is divided into three eras that are to some extent homogeneous, though the time periods covered in each are very different. The subject starts from 4000 BC, though the purists would argue that organization and innovation started at least 8,000 years earlier when some communities gave up foraging for farming, adopting fundamentally new tools and techniques for making a living. Unfortunately, little or nothing survives in documented form to make it possible to study such ancient business history. The eras covered range from 3,000 years down to a mere half-century. You are probably aware of the claim that 90 per cent of all the scientists that ever lived are alive today. Well, much the same claim can be made for business innovations. While many important and essential developments occurred many hundreds and even thousands of years ago, the most recent era is the best documented and the most prolific.

The three periods covered are representative samples of some important milestones in business history, selected here as they are the eras least familiar to most students who have at least a passing appreciation of the post Industrial Revolution business world. Although for teaching purposes neat dates are often ascribed to such eras, in practice there is considerable overlap. The Fuggers and the Hanseatic League extended beyond what is commonly regarded as Mediaeval, while patents began their life in that period but didn't have a serious impact until much later.

Babylon and beyond (4000 BC–1000 AD)
Two enduring legacies from the ancient business world are the foundations of commercial law and the first efforts at accounting. Both these areas were subject to bursts of rapid development as new ideas took hold. For example, the introduction of coined money in about 600 BC by the Greeks allowed bankers to keep account books, change and lend money, and even arrange for cash transfers for citizens through affiliate banks in cities thousands of miles away. The Greeks were less interested in accounting as a way to influence business decisions than as a mechanism for citizens to maintain real authority and control over their government's finances. Members of the Athens Popular Assembly were responsible for controlling receipt and expenditure of public funds and 10 state accountants, chosen by lot, kept them up to the mark.
Although it was not until AD 1080 that the first law school was established, in Bologna, Italy, and incidentally still in business today, contract law governing transactions and protecting consumer rights had already been around for nearly 4,000 years.
One early example of a family-run business is included here to show that the phenomenon is not peculiar to the Middle Ages and beyond.

Accountancy: single-entry bookkeeping
Sometime before 3000 BC the people of Uruk and other sister-cities of Mesopotamia began to use pictographic tablets of clay to record economic transactions. The script for the tablets evolved from symbols and provides evidence of an ancient financial system that was growing to accommodate the needs of the Uruk economy. The Mesopotamian equivalent of today's bookkeeper was the scribe. His duties were similar, but even more extensive. In addition to writing up the transactions, he ensured that the agreements complied with the detailed code requirements for commercial transactions. Temples, palaces and private firms employed hundreds of scribes and, much as with the accounting profession today, it was considered a prestigious profession.
In a typical transaction of the time, the parties might seek out the scribe at the gates to the city. They would describe their agreement to the scribe, who would take from his supply a small quantity of specially prepared clay on which to record the transaction.
Governmental bookkeeping in ancient Egypt developed in a fashion similar to the Mesopotamian. The use of papyrus rather than clay tablets allowed more detailed records to be made more easily. And extensive records were kept, particularly for the network of royal storehouses within which the 'in kind' tax payments such as sheep or cattle were kept, as coinage had not yet been developed.
Egyptian bookkeepers associated with each storehouse kept meticulous records, which were checked by an elaborate internal verification system. These early accountants had good reason to be honest and accurate, because irregularities disclosed by royal audits were punishable by fine, mutilation or death. Although such records were important, ancient Egyptian accounting never progressed beyond simple list making in its thousands of years of existence. Almost one million accounting records in tablet form currently survive in museum collections around the world.
China, during the Chao Dynasty (1122–256 BC), used bookkeeping chiefly as a means of evaluating the efficiency of governmental programmes and the civil servants who administered them. A level of sophistication was achieved which was not surpassed in China until after the introduction of the double-entry system a thousand years later.

Accounts in ancient Rome evolved from records traditionally kept by the heads of families, where daily entry of household receipts and payments were kept in an adversaria or daybook, and monthly postings were made to a cashbook known as a codex accepti et expensi.
 

Up to mediaeval times, this single-entry system of bookkeeping, divided into two general parts, Income and Outgo, with a statement at the end showing the balance due to the lord of the manner, prevailed in England, as elsewhere. Although these accounts were fairly basic, they were sufficient to handle the needs of the very simple business structures that prevailed. Businessmen operated for the most part on their own account, or in single-venture partnerships that dissolved at the end of a relatively short period of time. This, incidentally, was still the essence of the structure of Lloyd's insurance market into the 21st century. Judging from the uniformity of the way the single-entry bookkeeping was practised, it seems fairly certain that a model was worked out, written up, and widely adopted.

Law: Hammurabi's Code: 1795–1750 BC
Business needs law to determine property rights, without which no meaningful enterprise can take place, and to govern the behaviour and responsibilities of buyers, sellers and others involved in any transaction. The laws that govern business behaviour have evolved over millions of years. The Hammurabi code of laws is the earliest-known example of an entire body of laws, arranged in orderly groups, so that all might read and know what was required of them. The code was carved on a black stone monument, eight feet high, and clearly intended to be in public view. The stone was found in the year 1901, not in Babylon, but in a city of the Persian mountains, to which some later conqueror must have carried it in triumph. The original code now resides in the Louvre Museum in Paris, though much of it has been erased by time.
The code regulates in clear and definite strokes the organization of society in general and commercial dealings in particular. One law states that 'if a man builds a house badly, and it falls and kills the owner, the builder is to be slain. If the owner's son was killed, then the builder's son is slain.' Even 4,000 years ago it was considered necessary to protect consumers from shoddy workmanship.

The following laws give evidence of a fairly sophisticated business environment that was well established and prolific enough to require detailed regulation:

- If a merchant entrust money to an agent (broker) for some investment, and the broker suffer a loss in the place to which he goes, he shall make good the capital to the merchant.
- If, while on the journey, an enemy take away from him anything that he had, the broker shall swear by God and be free of obligation. This is a forerunner of the term 'force majeure' which under today's contract law frees both parties from liabilities and obligations when an extraordinary event beyond their control (war, natural disaster, strike etc) occurs.
- If a merchant give an agent corn, wool, oil, or any other goods to transport, the agent shall give a receipt for the amount, and compensate the merchant therefore. Then he shall obtain a receipt from the merchant for the money that he gives the merchant.
- If the agent is careless, and does not take a receipt for the money which he gave the merchant, he cannot consider the un-receipted money as his own.
- If the agent accept money from the merchant, but have a quarrel with the merchant (denying the receipt), then shall the merchant swear before God and witnesses that he has given this money to the agent, and the agent shall pay him three times the sum.

Hammurabi's code was certainly not the earliest. Preceding sets of laws have disappeared, but several traces of them have been found, and Hammurabi's own code clearly implies their existence. He only claimed to be reorganizing a legal system long established.

Family business: Kongo Gumi: 578 to date
According to an 8th-century chronicle considered to be Japan's oldest written history, the first Kongo came to Japan from what is now South Korea and remained in the country at the request of Emperor Yomei. The first Kongo built Shitennoji, one of Japan's first Buddhist temples, in Osaka and the company still serves as its 'chief carpenter', handling repairs and construction of new buildings almost exclusively.
Just as it did in 578, the firm specializes in building traditional Buddhist temples and Shinto shrines, although it has branched out somewhat into general contracting. There are no textbooks to teach miyadaiku (specialists in the construction of shrines and temples) how to construct their complex wooden frameworks. The skills are passed down through an apprenticeship-like system, where younger carpenters 'learn and steal' the trade from the master. The skills are considered an intangible cultural asset, for which they feel a great responsibility and a need to pass it on to younger generations.

The firm has been in profit for as long as employees can remember, racking up sales of 9.4 billion yen (RM304m) in the last business year. It hasn't all been smooth sailing, though. In the late 19th century, business nearly came to a halt owing to an anti-Buddhist movement that led to the destruction of some temples. During the last war, the company managed to survive by building wooden boxes for military use.
Masakazu Kongo, the firm's current boss, has some enduring advice for businesses: 'Everybody may be fretting about the recession, how tough times are, but you shouldn't be overwhelmed by all the gloom. Believe in your business and stick to it.'

Mediaeval merchants (1000–1700)
The next half millennium saw as much development in the business world as had occurred in the whole of recorded history up to that date. The first business advisers hit the road with a message very similar to the one espoused by The Economist magazine (9–15 March 2002) nearly a thousand years later: 'Be honest, be frugal, be prepared.' A network of international banks straddled Europe; city and family conglomerates were established, some that survive to this day.

The first 'management consultants'
This is one of the earliest business gurus, an anonymous Norwegian author, offering advice to the international businessmen of the day in a treatise entitled 'The King's Mirror' (circa AD 1260). The treatise is wide ranging, with only part of it dealing with merchants of the day. From this we can see that written expert advice for business people is by no means a recent innovation. We can also deduce that long before Stanford and Harvard launched their MBA programmes, numeracy, networking and corporate responsibility were high on the list of skills needed for success in business.

The tips about how to behave on foreign business trips and on forging partnerships are as valid now as they were 800 years ago:

- He should be 'polite and agreeable' but should examine goods before he buys them and in the presence of witnesses. If by chance he has purchased inferior goods, let him resell them for what they are and, taking his losses, deceive no one, as he has been deceived.
- When abroad, the merchant should live well but carefully and with restraint of speech and passion.
- He should study especially the local law books, when he has time. He should master the customs of the place he is trading in.
- He should shun drinking, chess, harlots, quarrelling, and gambling.
- He should study the sky, directions, and the sea so as to be able to navigate. All merchants have great need of arithmetic.
- Let him cultivate the friendship of the officials of the country in which he trades and pay the dues that are required. Let him see to it that none of the government's property gets into his cargo.
- He should sell quickly if he can get suitable prices and then be off, for a quick turnover is the life of trade.
- He should always buy shares in a good ship or in none at all.
- If he acquires wealth rapidly, then he should invest part of his wealth in a partnership trade with others doing the travelling, but he should be cautious in selecting partners.
- If he acquires a great deal of wealth in trade, let him divide it into three parts. Let him invest one-third in partnership with experienced and reliable men who are permanently located in towns. The other two-thirds may then be invested in various business ventures for the sake of the safety that lies in diversity.

Banking and the Knights Templar
Despite being remembered mostly for their military prowess during the crusades, this order of knights became, in part by accident, the first major international banking institution. Their specific forte was in keeping the highways open to allow pilgrims to come to the Holy Land unmolested. This goal inevitably meant that the Templars owned some of the mightiest castles, and because of their awesome reputation as fighting men, their castles served as ideal places to deposit money and other valuables. A French knight, for example, could deposit money or mortgage his chateau through the Templars in Paris and pick up gold coins along the route to Jerusalem, and back again if he survived! The Templars charged a fee both for the transaction and for converting the money into various currencies along the route.
Over the years the business grew and eventually the Templars ran a network of full-service banks stretching across Europe from England to Jerusalem. At their maximum strength the Templars employed about 7,000 people, owned 870 castles and fortified houses and were the principal banker to popes and kings.

Free trade and the Hanseatic League
Following the ravages of the Black Death in Europe, cities began to grow and prosper as trade increased and small-scale manufacturing revived. In the northern German seaports, merchants and traders sought protection for their business transactions and the transport of their goods. The city of Lubeck had made a treaty with the city of Hamburg in 1230, which established free trade between the two and guaranteed that the road linking the North Sea and the Baltic Sea would be guarded. The absence of a strong central government in Germany allowed the cities to make such treaties, and soon other communities asked to join the arrangement. Riga, Danzig, a trade centre in London in 1266, and Novgorod in Russia all became part of the League's network of 85 cities.
At its peak the League maintained an army and a navy, guarded roads from city to city, kept a fortress and a storehouse in each city, waged war and enforced the merchant's laws at the various fairs.
Hansa businessmen created partnerships for single ventures only, sending a ship from one port to another and then dissolving the organization. Their bookkeeping techniques were crude, and they constantly fought over the division of profits and the calculation of losses.
As powerful rulers created nation states in England, France, Russia and Sweden, this loose federation of merchants simply could not succeed as modern nation states emerged. Its last general assembly is said to have been held about 1669, but its power had long since evaporated.

The House of Fugger
Fugger's business was a bridge between the Mediaeval and modern worlds. The dynasty began in 1367 when Hans Fugger moved his family to Augsburg, Bavaria, and started a business weaving fustian, a strong cotton-and-linen fabric. His sons Andreas and Jacob I developed the family textile trade before severing their partnership in 1454. On their own, both branches continued to expand their reach. Andreas and his sons moved into finance, in Antwerp and Venice as well as Augsburg. Jacob's sons evolved from trade in textile goods to cotton and spice, and ultimately into mining and processing silver and copper. The family developed a network of trading posts under Jacob's nephew and successor Anton that by 1525 extended from the Mediterranean to the Baltic.
When Anton's nephew Hans Jacob (1516–75) took over, he kept control of their holdings through regular reports from their worldwide network of agents. These reports were consolidated into 'Fugger Newsletters' and circulated among their associates. This was one of the first uses of the word 'news' to refer to deliberate attempts to gather the latest intelligence. Three branches of descendants survive today; one of them – Prince Carl Fugger-Baben-hausen – re-established the Fugger bank in 1954.

The era of ventures (1700–1900)
Throughout history until the 18th century most businesses were small, self-financed and usually short-lived affairs. True, there were exceptions; The East India Company was a monopoly that all but ran India and the Far East, even having its own military and governmental functions. The Peruzzi Company, one of the largest Florentine business ventures, was 60 per cent financed by seven family members and 40 per cent by ten outsiders as far back as 1300. It was organized as quasi-permanent multiple partnerships. Pacioli's double-entry bookkeeping system had made long-term ventures possible for the Venetian merchant adventurers. But the general rule was that business was either a one-man band or family affair, using their own limited financial resources, and any collaboration with other business people was on a venture-by-venture basis. The Industrial Revolution was about to change all that, but three other trading innovations, though less well recognized, were set to have an equally profound effect on business life.

Intellectual property rights
A patent gives the owner of an invention the right to take legal action against others to prevent the unlicensed manufacture, use, importation or sale of the patented invention. Its purpose is to give inventors the breathing space to develop a business based on the invention, or to license it to someone who can. A patent is in essence a bargain between the state and the inventor. The state offers a short-term monopoly of around 20 years, in return for the inventor making a full description of the invention – known as a specification – public through the Patent Office. In this way, other inventors can readily have access to the latest thinking in practically every area of technology and build on that to make further inventions. That in turn creates wealth and opportunities for the country concerned. The speed with which information now flows and the global nature of enterprise mean that any benefit is more to the general good rather than to any country, but the principle remains.

The origins of patents for invention are obscure and no one country can claim to have been the first in the field with a patent system. In about 1200 Venice granted 10-year monopolies to inventors of silk-making devices, and in 1444 published the text of the oldest patent law in the world, officially announced as 'Inventor Bylaws'. However, Britain can claim to have the longest continuous patent tradition in the world. Its origins can be traced back to the 15th century, when the Crown started making specific grants of privilege to manufacturers and traders.
Such grants were signified by Letters Patent, open letters marked with the king's Great Seal. Henry VI granted the earliest known English patent for invention to Flemish-born John of Utynam in 1449. The patent gave John a 20-year monopoly for a method of making stained glass, required for the windows of Eton College, that had not been previously known in England.

Two important legal conditions were established that apply today:

- The famous patent of Arkwright for spinning machines was not allowed for the lack of an adequate specification in 1785, after it had been in existence for 10 years.
- Watt's 1796 patent for steam engines established the important principles that valid patents could be granted for improvements to an existing patented device.

The Japanese took an interesting approach to the subject. Because at the time there was a tendency to abhor new things, a 'Law for New Items' was proclaimed in year 6 of the Kyoho Era (1721). It was not until 1885 that the Japanese Patent Office was up and running. The first patent applied for was a patent for 'Hotta's Method for Rust Stopping Paint and Painting Method', applied for by Zuishou Hotta. The Chinese Patent Office opened in 1985. The late opening of the communist and former communist patent offices was due to their philosophical reluctance to accede private property rights.

Stock markets
The need for stock exchanges developed out of early trading activities in agricultural and other commodities. During the Middle Ages, traders found it easier to use credit that required supporting documentation of drafts, notes and bills of exchange. The history of the earliest stock exchange, the French stock exchange, goes back to the 12th century when transactions occurred in commercial bills of exchange. To control this budding market, Phillip the Fair of France (1268–1314) created the profession of couratier de change, which was the predecessor of the French stockbroker. At about the same time, in Bruges, merchants began gathering in front of the house of the Van Der Buerse family to engage in trading. Soon the name of the family became identified with trading and in time a 'bourse' came to signify a stock exchange. At the same time, stock exchanges began to materialize in other trading centres like the Netherlands (Amsterdam Bourse) and Frankfurt (the Deutsche Stock Exchange, formerly the Börse).

In 1698, when one John Castaing in 'Jonathan's Coffee-house' in Exchange Alley in the City of London began publishing a list of stock and commodity prices called 'The Course of the Exchange and other things', the business of stock exchanges really got under way. By 1761 a group of 150 stockbrokers and jobbers had formed a club at Jonathan's to buy and sell shares. In 1773 the brokers erected their own building in Sweeting's Alley, with a dealing room on the ground floor and a coffee room above. Briefly known as 'New Jonathan's', members soon altered the name to 'The Stock Exchange'.

It was not until 1791 that the United States had its first bourse when the Philadelphia traders organized a stock exchange. The following year, 21 New York traders agreed to deal with each other under a buttonwood tree on Wall Street. By 1794 the market had moved indoors. India's premier stock exchange, Bombay Stock Exchange (BSE), can also trace its origin back as far as 125 years when it started as a voluntary non-profit-making association. In the 1870s, a securities system was introduced in Japan and public bond negotiation began. This resulted in the request for a public trading institution, and the 'Stock Exchange Ordinance' was enacted in May 1878. Based on this ordinance, the 'Tokyo Stock Exchange Co., Ltd' was established on 15 May 1878 and trading began on 1 June.

These early stock exchanges were gentlemen's clubs governed only by a few house rules. Trading rarely started before 10.30 and was over by 15.30. No records were filed, no rules governed the case of a trader who could not deliver what he had sold and nothing prevented prices being manipulated.

Limited liability companies
From the earliest trading times to the present day, the most popular legal structure under which to operate has been as a sole trader, which in effect means every man for himself. In the beginning, a merchant always risked his own money, if he had any to invest: if he travelled, as most did, he risked his life on the journey. The caravan trade of Asia, Asia Minor, and North and Central Africa ploughed their way through the sands that separated distant cities and seaports. The largest caravans comprised thousands of camels and required careful administration. They also stimulated people to band together in partnerships, pooling protection costs and profits to spread the risks. The partnerships would usually last only for the particular journey. Later on, older merchants who had made money from earlier ventures could join such expeditions by putting up money, without the hardship of making the trip themselves. This could be seen as an early form of limited partnership.

As the ventures became more costly and of longer duration, partnership structures of fixed duration between one, three or five years became common, with an ever-increasing range of partners with differing shares in the venture. To add to the complications these partners could join and leave, perhaps for no more sinister reason than death, at different times.

The concept of limited liability, where the shareholders are not liable, in the last resort, for the debts of their business, changed the whole nature of business and risk taking. It opened the floodgate, encouraging a new generation of entrepreneurs to undertake much larger-scale ventures without taking on themselves all the consequences of failure. As the name suggests, in this form of business liability is limited to the amount you contribute by way of share capital and, in the event of failure, creditors' claims are restricted to the assets of the company. The shareholders of the business are not normally liable as individuals for the business debts beyond the paid-up value of their shares.
The concept itself can be traced back to the Roman Empire, where it was granted, albeit infrequently, as a special favour to friends for large undertakings by those in power. The idea was resurrected in 1811 when New York State brought in a general limited liability law for manufacturing companies. Most US states followed suit and eventually Britain caught up in 1854. Today, most countries have a legal structure incorporating the concept of limited liability.

The age of financial panics (1900–to date)
For most people the financial crisis that erupted in 2007/08 was the first full-blown global financial crisis that anyone alive had seen. The man at the helm of the most important financial market, Ben Bernanke, chairman of the Federal Reserve, the central bank of the United States, was as well placed as anyone to oversee the Federal Reserve's response.

Formerly a tenured professor at Princeton University, chairing the department of economics there, his reputation is in part founded on his interest in the economic and political causes of the Great Depression. He has published numerous academic journal articles on the subject including the much quoted 1983 article in the American Economic Review: 'Nonmonetary Effects of the Financial Crisis in the Propagation of the Great Depression.'

But even the 1929 depression and the ensuing banking failures that rocked the world, was not the first financial crisis to strike. Major banking panics hit the United States in 1857, 1873, 1884, 1890, 1893, 1896 and 1907. Argentina in 1890 and Australia in 1893 suffered banking system losses of roughly 10 per cent of GDP in the wake of real estate market collapses in those countries. When 22 two banks failed in Norway in 1900 the economy was dragged down 3 per cent and in 1893 Italy's financial crisis wiped 1 per cent of GDP.

The catalogue of disasters is long and spreads across almost every economy; the US Savings and Loan industry disaster of the 1980s, banking collapses in Japan and Scandinavia a decade later and similar banking failures occurring in 140 developing countries over these same decades wiped between 1 per cent of GDP and more than 10 per cent of GDP in 20 of those countries.

Contrast that with the global economy's contraction of just 2 per cent in 2009 and the present crisis doesn't seem that unusual. But in some economies the consequences of the latest financial crisis have been more severe. In the United States real GDP declined a total of 4.7 per cent between the fourth quarter of 2007 and the second quarter of 2009, before stabilizing. Estonia, Latvia and Lithuania saw real GDP fall by between 15 and 18 per cent in 2009 before corners were being turned. In the final half of 2012 the Greek economy was still in free fall with GDP dropping at an annualized rate of some 7 per cent.