By: Elizabeth Klein
There was once a time in Holland where one Semper Augustus tulip bulb could buy a mansion, a coach house, and a garden. It could pay for the needs of a Dutch family for half their lifetime. A Viceroy bulb could pay for each of the following:
- Two lasts of wheat
- Four lasts of rye
- Four fat oxen
- Eight fat swine
- Twelve fat sheep
- Two casks of wine
- Four large casks of beer
- Two tons of butter
- 1,000 lbs. of cheese
- A complete bed
- A suit of clothes
- A silver drinking cup
It sounds crazy now, but this all happened during Holland’s Tulip Mania of 1637. At that time, just one tulip bulb essentially meant that a person was set for the rest of their life.
In the 1590s, botanist Carolus Clusius began cultivating a flower garden made of tulips which he got from modern-day Turkey. Clusius used the garden for medicinal research, and found a flame-like pattern in the flower (later discovered to be a non-fatal virus). After refusing to sell his exotic bulbs in town, his neighbors stole some. This occurrence is often attributed as the beginning of Tulip Mania, as the neighbors brought these bulbs to the general public and began to trade them. It wasn’t until 1634, however, that the bulb trade grew in popularity.
As the bulbs entered the public market, owners and botanists began to attempt to breed the flowers to see what kinds of interesting patterns they could create. Center breeds like Semper Augustus and Viceroy became the standard for tulips. The owners, who were mainly members of the upper class, began to trade amongst friends.
Over time, the popularity of these bulbs increased. The owners started trading for money.
As the trade increased, awareness of the beautiful tulips increased as well. As this awareness increased, so did demand. And as demand increased, the price of tulips increased. People would buy tulips for the sole purpose of selling them for a higher price. They would invest in future crops of tulip bulbs. A stock market of sorts grew around this tulip trade, and it was dangerous. The tulip trade was only a bubble, because the bulbs had no true worth. They were just flowers, after all. They only cost so much money because the Dutch gave them value; hence, there was no guarantee on their worth. People began to do anything to acquire bulbs. They sold their land and savings; they liquidated any assets they had for the tulips. At the peak of the tulip trade, one bulb could sell for 10 times the annual income of a common craftsman. But, like all bubbles, this one had to end.
Just like the beginning of the trade, there is much speculation as to how Tulip Mania ended. Some people claim that one night in Haarlem, a buyer simply didn’t show up for his deal, which created a nationwide panic and led to the crash of the tulip market. Others claim that buyers began to crystallize their profits rather than continue to sell. And many believe that the Dutch simply opened their eyes and scoffed at the prices. Nonetheless, the market crashed in what seemed like a day.
People began to panic. Everyone began selling; no one wanted to buy. Traders stopped honoring their contracts; bulb prices decreased by 90%. While tulip bulbs had once been able to buy entire properties, their value had decreased to the price of an onion. Things got so bad that the Dutch government attempted to intervene. They offered to honor bulb contracts at 10% of their original value, but too much damage was done. The Dutch economy suffered greatly, and Tulip Mania was considered one of the first (and worst) recorded economic bubbles in history.
One might think that we all could’ve learned a lesson from Tulip Mania. But that wasn’t really the case. Think of the stock market crash in 1929, Black Monday in 1987, and the recent house market crash in 2008. It’s important to look back on events like this and try not to repeat the same mistakes in the future. We could all serve to benefit if we keep in mind that there was a time when people honestly believed that one simple tulip bulb was worth entire estates.