For hundreds of years, until the late 19th century, people didn't have a good way to fasten papers together except to bind them, like a book, which wasn't very practical for just a few papers that might need to come apart again. They tried using straight pins, or slicing into the corner of the paper and wax sealing a piece of string in the slit to tie it all together -- both of which damaged the paper, and sometimes even fingers.
By the mid-19th century inventors were coming up with metal clamps and spring-loaded clips to do the job, but they didn't work all that well. Credit for finally coming up with something close to the modern paper clip often goes to Norwegian inventor John Vaaler in 1899... and it made such an impact in the country that in World War II they pinned the clips to their lapels as a symbol of solidarity against the Nazis. That's why there's a 23-foot statue of a paper clip in Norway.
Meanwhile, two American inventors -- Matthew Schooley and Cornelius Brosnan -- had their own paper clip patents around 1900, too, but they were more improvements on existing clips than original inventions.
Today there are many different sizes, weights and textures of paper clips, but only two main paper clip shapes. The basic oval-looped paper clip shape you're used to seeing is called a Gem clip, which came from Vaaler's design. It started being mass produced in England in the early 1900s, and became standard by the 1930s. The Gothic clip is rectangular with two triangular loops.
The first step in the manufacturing process is to choose the optimum material. Most paper clips are made from galvanized steel wire, which comes in a variety of diameters. Some manufacturers use a lighter-gauge wire, for cheaper but less-durable paper clips; others use a heavier-gauge wire. Some use a variety, depending on what size paper clips they're making: small-sized clips are often made from a light wire, while large clips are made from a heavy-duty wire.
Another consideration is yield stress, which is the amount of pressure needed to reshape the wire permanently. If the yield stress is too low, the clip will open up when placed around papers, and not bounce back to hold the stack together. If it's too high, the clip won't open easily enough to put it around the papers in the first place.
The final consideration is the finish of the wire, which dictates whether the clip will be shiny, matte, smooth, corrugated or plastic-coated.
The best-quality clips use a steel that's hard enough to hold its shape yet flexible enough to bend and open. It also needs to be non-corrosive and leave a smooth end without metal burrs when cut, because the manufacturing process doesn't include filing down the ends.
Since the 1930s, the way that paper clips are made has not really changed. The galvanized steel comes in large spools, and first, a worker feeds the end of the wire from the spool into the paper clip machine. The machine cuts the wire and then passes it through three rough wheels to bend it three times into the Gem paper clip shape. The first wheel turns the clip to make the first bend of 180 degrees, then the second wheel makes the second bend of another 180 degrees, and the third wheel makes the final bend; again, 180 degrees. This happens quickly, and the machine makes hundreds of clips every minute.
The finished paper clips are dropped into open boxes, which are then closed and sealed.
It might seem like a lot of people would be required to work in a paper clip factory that churns out so many clips, but the whole thing is largely automated. One worker can oversee dozens of machines, each of them making hundreds of clips every minute, or thousands every hour. The clips don't need to be closely inspected for quality, either, because the product is cheap, and the machines are very effective at making the three bends and cutting the wire cleanly and smoothly.
Of course, since the design hasn't changed in so long, there's no need for creative manpower either. All in all, making paper clips is a very efficient and simple process, for an efficient and simple device.