An Investing Bubble
Tulips were first grown in Western Europe in the middle of the sixteenth century. They were cultivated by Counsellor Herwart of Augsburg, a man famous for his collection of rare exotic plants. The bulbs were sent to Herwart by a friend from Constantinople, where the tulip had already been popular for a long time. (The word "tulip" is believed to originate from a Turkish word for turban.) In 1559 tulips were seen in Herwart's garden by Conrad Gesner who, in the following ten years, claims to have popularised them in Europe.
Tulips became sought after by the wealthy, especially in Holland and Germany - wealthy people in Amsterdam sent directly to Constantinople for bulbs, paying high prices for them. Bulbs arrived in England from Vienna in 1600.
The tulip's reputation grew to such heights that, by 1634, wealthy people who did not have a tulip collection were judged to have bad taste. Many learned men, including Pompeius de Angelis and the celebrated Lipsius of Leyden, the author of the treatise "De Constantia," were passionately fond of tulips.
An overwhelming desire to own tulips gripped the middle classes. Merchants and shopkeepers, even those with modest incomes, began to vie with each other for tulips - and in the preposterous prices they paid for them. A trader from Harlaem paid half of his life savings for a single bulb. He didn't buy for profit; he just wanted his friends to admire it.
The popularity of the tulip in Holland is inexplicable. The Dutch are generally prudent people, yet tulips are inferior to roses in both beauty and perfume. Even sweet-peas are prettier than tulips, while both sweet-peas and roses flower for longer than tulips.
Cowley, however, was loud in praise of the tulip. He said,
The tulip next appeared, all over gay,
This, though not very good poetry, was the description by a poet.
In History of Inventions, Beckmann paints a truer picture than Cowley, in prose more pleasing than Cowley's poetry:
There are few plants that acquire, through accident, weakness, or disease, so many variegations as the tulip. When uncultivated, and in its natural state, it is almost of one colour, has large leaves, and an extraordinarily long stem. When it has been weakened by cultivation, it becomes more agreeable in the eyes of the florist. The petals are then paler, smaller, and more diversified in hue; and the leaves acquire a softer green colour. Thus this masterpiece of culture, the more beautiful it turns, grows so much the weaker, so that, with the greatest skill and most careful attention, it can scarcely be transplanted, or even kept alive.
A mother often loves her sick and ever-ailing child better than her more healthy offspring. The same principle may account for the unmerited praise lavished upon these fragile blossoms.
In 1634, the madness among the Dutch to own tulips became so great that day-to-day work was neglected. Even the lowest members of society took up the tulip trade.
As the mania increased, prices rose, until, in 1635, a large number of people were investing fortunes of 100,000 florins to own forty tulip bulbs. It then became necessary to sell tulips by their weight in perits. (A perit was a small weight - less than a grain. 480 grains equalled 1 ounce.)
Prices for different varieties were as follows:
The Semper Augustus was much sought after, and even an inferior bulb could cost 2000 florins. In early 1636 there were only two of these in Holland and these were not of the best quality. One was held by dealer in Amsterdam, and the other in Harlaem. A speculator offered twelve acres of building ground for the Harlaem tulip. The Amsterdam tulip sold for 4600 florins, a new carriage, two grey horses, and a complete suit of harness.
An industrious author of the time, Munting, who wrote one thousand pages about the tulipomania,
recorded the following items - and their value - which were traded for a single Viceroy bulb:
Anyone returning to Holland who had missed the beginning of the mania was capable of grave error.
In Blainville's Travels the story is told of a wealthy merchant who received a valuable consignment of tulips from the Middle East. A sailor brought the news to the merchant in his warehouse that his tulip bulbs had arrived. The sailor, who enjoyed onions, saw what he mistook for an onion lying on a table amongst the merchant's silks and velvets and slipped it into his pocket, to accompany the fish he was going to have for breakfast. He escaped with his prize, and returned to the quay to eat his breakfast. He had barely gone when the merchant missed his Semper Augustus, worth three thousand florins, or about 280 pounds sterling. The merchant turned his warehouse upside down searching for the bulb until someone remembered the sailor.
The unhappy merchant and his followers rushed to the key where they found the sailor sitting quietly on a coil of ropes, eating the last morsel of his "onion". Little did the sailor know his whole ship's crew could have been fed for 12 months for the price of his breakfast. The sailor was jailed for several months for his trouble.
Another story is told of an English traveller, an amateur botanist, who happened to see a tulip-bulb lying in the conservatory of a wealthy Dutchman. Unaware of its value, he took out his penknife and peeled off its coats, with the view experimenting on it. He then began cutting it into pieces. Suddenly the owner pounced on; with fury in his eyes he asked the traveller if he knew what he had been doing?
"Peeling a most extraordinary onion," replied the philosopher.
"Hundert tausend duyvel," said the Dutchman; "It's an Admiral Von der Eyk!"
"Thank you," replied the traveller, taking out his note-book to record the variety; "are these admirals common in your country?"
"Death and the devil," said the Dutchman, seizing the astonished man of science by the collar; "come before the magistrate, and you shall see."
Despite his protests, the traveller was led through the streets, followed by a mob. When brought before the magistrate, he learned that the bulb he had cut up was worth four thousand florins.
Although he pleaded extenuating circumstances, the traveller was imprisoned until he could pay for the damage.
The demand for rare tulips increased so much in 1636, that they were traded on Amsterdam's Stock Exchange and in Rotterdam, Harlaem, Leyden, Alkmar, Hoorn, and other towns. For the first time, symptoms of gambling became apparent too. Stockbrokers, ever alert for a new speculation, dealt largely in tulips. They used every trick in the book to produce price fluctuations.
At first, as with all gambling mania, confidence was high - everybody gained. The tulip-brokers speculated in the rise and fall of tulip stocks. They made large profits, buying when prices fell, and selling when they rose.
Many individuals suddenly grew rich. People now rushed to trade in tulips, like flies around a honeypot. Everyone imagined that the passion for tulips would last for ever. They believed that wealthy people from all over the world would send to Holland, and pay whatever prices were asked for tulips. They dreamt that the riches of Europe would be concentrated on the shores of the Zuyder Zee, and poverty would be banished from Holland.
Noblemen, citizens, farmers, mechanics, seamen, footmen, maidservants, even chimney-sweeps and old clotheswomen, dabbled in tulips. People converted their property into cash, and invested it in flowers. Houses and lands were offered for sale at ruinously low prices, or used to pay for tulips.
The frenzy spread beyond Holland's borders and money poured into Holland from all directions. Inflation then reared its ugly head and the prices of life's necessities rose strongly. Houses and lands, horses and carriages, and luxuries of every sort, rose in value.
The tulip trade became so wide spread and detailed that new laws were enacted for the guidance of the dealers. Officials were appointed who devoted themselves exclusively to the tulip trade.
In the smaller towns, where there was no official tulip exchange, the principal tavern was usually selected as the "showplace," where high and low traded in tulips, and confirmed their bargains over sumptuous entertainments. These dinners were sometimes attended by two or three hundred people, and large vases of tulips, in full bloom, were placed at regular intervals upon the tables and sideboards.
At last, however, wiser heads began to see that this folly could not last for ever. Rich people no longer bought the flowers for their gardens, but to sell them again at profit. It was realised that somebody must lose badly in the end. As this concern spread, prices fell, never to rise again.
Confidence was now destroyed. Dealers were gripped by universal panic and began defaulting on contracts. For example:
Defaulters were announced day after day in all the towns of Holland.
Hundreds of people who had begun to believe poverty would be banished from the land, suddenly found they were owners of bulbs worth only a small fraction of what they had paid for them.
The cries of distress resounded everywhere, and each man accused his neighbour. The few who had enriched themselves by selling their bulbs when the market was at its height hid their wealth or invested it in the English or other markets. Many who, for a brief season, had emerged from the humbler walks of life, were cast back into their original obscurity. Noble families were ruined and large merchants were reduced almost to the level of beggars.
Tulip-holders held public meetings hoping to find the best way forward. Deputies were sent to the government in Amsterdam, seeking a solution. At first, the government refused to interfere. It advised the tulip-holders to agree a plan among themselves.
Several meetings were held for this purpose, all of which were stormy.
After a lot of bickering and ill-will, it was agreed, in Amsterdam, that all contracts made in the height of the mania, or prior to the month of November 1636, would be null and void. For contracts made after that date, buyers would be freed from their contracts on payment of ten percent of the contract value to the seller.
Unfortunately, this decision gave no satisfaction. The sellers, who had tulips they had arranged to sell at high prices were naturally discontented. Those who had made contracts to buy were also unhappy at even having to pay ten percent of the contract price because tulips that had been worth six thousand florins, were now worth five hundred florins. Actions for breach of contract were threatened in all the courts of the country; but the courts refused to act on what they regarded as gambling transactions.
The matter was finally referred to the Provincial Council at the Hague. The council deliberated for three months before announcing that they could offer no final decision until they had more information. They advised that, in the mean time, every seller should, in the presence of witnesses, offer the tulips to the purchaser for previously agreed contract price. If the buyer refused to take them, they might be put up for sale by public auction, and the original buyer held responsible for the difference between the actual and the stipulated price. This was exactly the same as the failed plan recommended by the deputies. There was no court in Holland that would enforce payment.
The question was raised in Amsterdam, but the judges unanimously refused to interfere, on the ground that debts contracted in gambling were not debts in law.
To find a remedy was beyond the power of the government. And so the matter ended.
Those who were unlucky enough to be left holding worthless tulip were left to bear their ruin as philosophically as they could. Those who had made profits were allowed to keep them. Dutch commerce had suffered a severe shock, from which it took years to recover.
The Dutch mania spread to some extent to England. In the year 1636 tulips were publicly sold on the London Stock Exchange, where brokers worked hard to push prices up to the levels seen in Amsterdam. In Paris brokers also strove to create tulipmania. In both cities, however, brokers enjoyed only partial success.
The mania ultimately brought the flowers into great favour, and amongst a certain class of people tulips have ever since been prized more highly than any other flowers.
The Dutch are still notorious for their partiality to tulips, and continue to pay higher prices for them than any other people. Just as rich Englishmen boast of their fine race-horses or their old pictures, wealthy Dutchman vaunt their tulips.
In England today, strange as it may appear, a tulip costs more than an oak. If a black tulip could be found, it would be worth more than a dozen acres of standing corn.
In Scotland at the end of the 1600s the highest price paid for a tulip was ten guineas. (According to the supplement to the third edition of the Encyclopedia Britannica.) From that time, their value appears to have fallen until the year 1769, when the two most valuable species in England were the Don Quevedo, worth two guineas, and the Valentinier, worth two and a half guineas. These prices appear to have been the minimum.
In the year 1800, a typical price was fifteen guineas for a single bulb.
In 1835, buyers had become so foolish that a bulb of the variety Miss Fanny Kemble was auctioned for seventy-five pounds in London. Even more astonishing was the price quoted for of a tulip owned by a gardener in the King's Road, Chelsea. In his catalogues, it was labelled at two hundred guineas!
So a flower that is less impressive than the rose - a small bunch of which might be purchase for a penny - was valued at a sum that could keep a hard-working labourer and his family in food, clothes, and lodging for six years!
If chickweed and groundsel ever come into fashion, the wealthy would, no doubt, vie with each other in adorning their gardens with them, and paying the most extravagant prices for them. In so doing, they would hardly be more foolish than the admirers of tulips. The common prices for these flowers at the present time vary from five to fifteen guineas, according to the rarity of the species.
A Quick Pictorial Guide To The Tulipomania
Image courtesy of moneyhow.co.uk