Tulip Mania: Madness in the 17th Century Netherlands
On the 3rd of February 1637, the tulip mania collapsed in the United Provinces (now the Netherlands) as sellers could no longer find buyers for their bulb contracts. Tulip mania refers to a period in the Dutch Golden Age during which contract prices for tulip bulbs reached astronomical levels. This phenomenon resulted in all kinds of financial speculations, gambling, and, in the aftermath of this period, had a disastrous impact on Dutch commerce.
The first tulips were brought to Europe from Turkey around 1554. Allegedly, Ogier de Busbecq, the ambassador of Ferdinand I to the Sultan of Turkey, sent the first tulip bulbs to Vienna, from where they were soon distributed to Augsburg, Antwerp and Amsterdam. The flowers’ unusual nature and exotic beauty quickly caught the eyes of the wealthy. That is why initially the possession of tulips was attributed to status. With time, however, the tulip mania spread among the people of all backgrounds and financial resources.
“In 1634, the rage among the Dutch to possess them was so great that the ordinary industry of the country was neglected, and the population, even to its lowest dregs, embarked in the tulip trade. As the mania increased, prices augmented, until, in the year 1635, many persons were known to invest a fortune of 100,000 florins in the purchase of forty roots. It then became necessary to sell them by their weight in perits, a small weight less than a grain. A tulip of the species called Admiral Liefken, weighing 400 perits, was worth 4400 florins; an Admiral Van der Eyck, weighing 446 perits, was worth 1260 florins; …a Semper Augustus, weighing 200 perits, was thought to be very cheap at 5500 florins. The latter was much sought after, and even an inferior bulb might command the price of 2000 florins. It is related that, at one time, early in 1636, there were only two roots of this kind to be had in all Holland and those not at their best quality. One was in the possession of a dealer in Amsterdam, and the other in Harlaem. So anxious were the speculators to obtain them, that one person offered the fee-simple of twelve acres of building-ground for the Harlaem tulip. The one from Amsterdam was bought for 4600 florins, a new carriage, two grey horses, and a complete set of harness. “ (Charles Mackay, Extraordinary Popular Delusions and the Madness of Crowds)
There were some extreme cases of tulip transactions; for example, in order to purchase a single bulb of a rare species of tulip called the Viceroy, one buyer offered the following goods: 4 tons of wheat, 8 tons of rye, 4 fat oxen, 8 fat swine, 12 fat sheep, 600 litres of wine, nearly 4000 litres of beer, 2000 litres of butter, 1000 lbs. of cheese, one bed, a suit of clothes, and a silver drinking cup – all of it worth an equivalent of 2500 florins. ([in:] Mackay). By 1636, the demand for tulips of a rare species increased so much that the tulip business would eventually enter the Stock Exchange in Amsterdam, Rotterdam, Harlaem, Leyden, Alkmar, Hoorn, and other towns. “The stock-jobbers, ever on the alert for a new speculation, dealt largely in tulips, making use of all the means they so well knew how to employ to cause fluctuations in prices. At first, as in all these gambling manias, confidence was at its height, and everybody gained. The tulip-jobbers speculated in the rise and fall of the tulip stocks, and made large profits by buying when prices fell, and selling out when they rose. …Everyone imagined that the passion for tulips would last forever, and that the wealthy from every part of the world would send to Holland, and pay whatever prices were asked for them. …Nobles, citizens, farmers, mechanics, seamen, footmen, maid-servants, even chimney-sweeps and old clotheswomen, dabbled in tulips. People of all grades converted their property into cash, and invested it in flowers. Houses and lands were offered for sale at ruinously low prices, or assigned in payment of bargains made at the tulip-mart.” (Mackay).
The popularity of the flower attracted foreign buyers, and, as a consequence, the prices of houses, land, horses, carriages, and other luxuries rose proportionally to meet demand. In order to prevent fraud, a new code of laws was soon established, providing necessary guidance for the dealers. Specialised notaries and clerks were designated to deal with the interests of the trade. But with time, the increasing number of dealers started affecting the demand for tulip bulbs. The more dealers there were, the more tulips were on offer, and thus the flower lost its uniqueness and was no longer of interest to the rich. The prices fell and the panic grew. “A had agreed to purchase ten Semper Augustines from B, at four thousand florins each, at six weeks after the signing of the contract. B was ready at the appointed time; but the price had fallen to three or four hundred florins, and A refused either to pay the difference or receive the tulips. Defaulters were announced day after day in all the towns of Holland. Hundreds who, a few months earlier, had begun to doubt that there was such a thing as poverty in the land, suddenly found themselves the possessors of a few bulbs, which nobody would buy, even though they offered them at one quarter of the price they had paid for them. The cry of distress resounded everywhere, and each man accused his neighbour.” (Mackay)
Tulip mania is an extraordinary example of irrational crowd madness. It also portrays the phenomenon of ascribing value to goods. It seems that the value of an object is often dictated by impulses originating in our subconscious – hidden faults of human character, such as vanity and greed.