The Flower That Consumed A Nation | Tulip Mania (1636–1637)
Each spring, among the gardens of flowers, one flower on this planet outshines the rest. Setting aflame the lowlands of the Dutch was the brightly coloured blossoms. Enchanted by the beauty of the flower, not many know the secret of its history. The bulbs of the flower was once worth their weight in gold and its gorgeous patterns praised an entire nation, eventually turning into an object for financial speculation. Bets were placed exponentially on its rising price leading thousands of investors into devastation when the market crashed. Known as the first bubble in the history of booms — The Burst of the Tulip Bubble.
In the 1620's, prices of tulips soar astronomically to an extend that an entire townhouse was offered for just 10 bulbs of a very rare tulip type. It was the Semper Augustus, the most expensive tulip during the Tulip Mania. As the years go by, prices continued to rise and by 1637, the price of a single Semper Augustus was worth 10,000 guilder, only to plunge within days later. An extreme devastation to Dutch investors. “10,000 guilder was enough to feed, clothe and house a whole Dutch family for half a lifetime, or sufficient to purchase one of the grandest homes on the most fashionable canal in Amsterdam for cash, complete with a coach house and an 80-ft garden”, according to Mike Dash who wrote Tulipomania: The Story of the World’s Most Coveted Flower and the Extraordinary Passions It Aroused.
To further understand this frenzy over tulips, let us look back once again the story behind this extraordinary flower when it seemed like the passion for tulips would last forever.
The Golden Century | Year 1600–1700
It was the dawn of a newly independent Holland’s trade fortune. The Netherlands’ economic resources are now channelled into commerce as the country embarked on the times of the Golden Age. Amsterdam merchants were located at the center of the East Indies trade which led to a new growing class of wealthy merchants who advertised their wealth and success by setting up estates surrounded by gardens of flowers. The most remarkable sense of pride was the breathtaking tulips.
Tulips, back then was originated from the Pamir and Tan Shan mountain located in Central Asia. In the late 16th century, tulips were brought to the Netherlands from the Sultan of Turkey in the Ottomon Empire. A botanist therein, by the name of Carolus Clusius became the cultivation pioneer of the tulips in the Netherlands. Clusius had owned his personal private garden with various hues of tulips in which he had dedicated much of his life studying the mysterious phenomenon — the breaking of the tulip virus, the beginning of the Tulip Mania.
Tulip breaking virus is a type of virus that infects the tulip causing the colour of the tulip to break. This resulted in stripes, intricate bars, streaks, feathering and even flame-like effect of different colours on the tulip petals. The appealing multi-colour tulip petals made it extremely rare and therefore, highly sought-after, a symbol of wealth among the Dutch community.
As the Dutch economy grew, the popularity and demand for more tulips became greater than the supply. That was because tulip seeds typically takes 7 to 12 years to grow a flowering bulb and each bulb can only produce 2 to 3 clones yearly. However, the mother bulb lasts for only several years and with proper cultivation, the daughter buds will become flowering bulbs after 1 to 3 years. Due to its slow growth in nature, demands begin to soar and the supply was unable to keep up with the skyrocketing demand of these blossoms, which then came the next best idea — Tulip futures contracts.
The Invention of Futures Contracts & The Preposterous Rise in Tulip Prices
Tulip blooms about one week in the month of April and May. During its dormant phase, from the month of June to September, planters of the tulip would uproot and move the bulbs. Actual purchase of bulbs in the spot market were happening during that period of time. Then what happens during the rest of the year? During the rest of the year, tulip traders and florists would purchase signed contracts for tulip bulb ownership by the end of the season. This made purchasing bulb very much convenient even without the bulbs themselves. This led to reckless bulb buying and as contracts became easily traded, people began transacting contracts multiple times a day. As demand and popularity grew, the professional planters paid higher and higher prices to purchase bulbs with virus.
In the meantime, bystanders from the sideline saw how fortune could potentially be made as the value of tulips increased. This resulted in the participation of speculators to join the growing market. However, these speculators who purchased bulbs and contracts had no absolute interest in the flowers themselves but only the desire to make instant profitable returns in a short period of time. This created a false perception of demands among the Dutch community believing that every seller can always find a buyer to sell to. Frenzy around contracts rose drastically to a point came a famous incident in which inheritance of a deceased father was auctioned off for 70 bulbs by 7 orphaned children.
This increasing mania had generated anecdotes in which an auction in Alkmaar, Viceroy and Admirael van Enchuysen tulip sold for 4,230 and 5,200 florins respectively whereas a Semper Augustus bulb was traded for 12 acres of land. By 1637, the height of this bizarre craze had gotten almost everyone involved in the trade be it the rich, poor, aristocrats, plebes and every children. Prices skyrocketed up to 1,100% in a month and by the peak of the Tulip Mania, a single tulip bulb was worth almost 10 times the annual income of a skilled craftsman.
The Burst of The Tulip Bubble
February 3rd,1637, just when everyone thought the hype would last forever, sure enough, the tulip bubble burst. Tulip bulb contract prices plunged and the tulip trading ground came to a halt. For the first time, buyers refused to show up at the routine bulb auction in Haarlem and tulip traders could no longer find new buyers who are willing to pay the already inflated prices. Almost overnight, the bulb trade disappeared because prices shot to dizzying heights that people decided not to pay.
There were traders who attempted to support prices but to no avail. Traders were left holding bulb contracts at prices that were 10 times more than those on the open market whereas others found themselves owning bulbs which now worth merely a fraction of the price they once paid. The Dutch government offered to honour the contracts at 10% of their value in order to stop the meltdown which, as a result, only worsen the plunge of the tulip market. No court was willing to enforce the payment of the contracts since the judges regarded these contracted debts as gambling and therefor was not enforceable by law. Eventually, the majority of the contracts were abolished. Tulip Mania had finally came to an end with traders still owning the bulbs they held by the end of the bubble.
The Modern View Contradiction
Even so, my research on this topic had given me insights from several professional authors and researchers who believed otherwise. According to them, the fallout was not as drastic as it may seem. At that point of time, there were people who had lost their fortune while many others simply had to pay small penalties for not honouring their signed contracts and move on with their lives. There were authors who mentioned the significant impact of the bubble upon the Dutch economy whereas several few regarded that the overall Dutch economy was not affected much at all.
Whatever the truth is and whichever you decide to believe weighs no more importance than the lessons you may yield from this story. The greatest lesson would be to learn from the past and never repeat this tragic history again. Ignorance is not always bliss. As Edmund Burke once quoted,
“ Those who do not remember the past are condemned to repeat it. ”
Who knew that a simple tulip would have the power to bring down an entire nation.
