Tulipomania: The Blooming Boom of Holland

By Mr. Ghaz, October 16, 2009

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Tulipomania: The Blooming Boom of Holland

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What would you expect to get in return for two loads of wheat plus four loads of rye plus four fat oxen, 12 fat sheep, two hogsheads of wine, four barrels of beer, two barrels of butter, 1,000 pounds of cheese, a bed, a new suit clothes, and a silver beaker?

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In fact this was the extraordinary price – worth 2,500 florins (about $1,000) at the time – that one man paid for a single tulip bulb in Holland in the 1630’s. Even higher sums than that changed hands at the height of what has come to be known as “Tulipomania” – a range for trading in tulip bulbs that swept the nation between 1634 and 1637.

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Hardly anyone escaped for fever: merchants, noblemen, farmers, chimney sweeps – all were caught up by the fact that it was suddenly possible to become very rich, very quickly, by owning even one of these humble bulbs.

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How did such an extraordinary state of affairs come to be?

The “Breaking” of a Bulb

Tulips were still comparatively rare in 17th century Holland, and as early as 1623 unusual ones were fetching high price. But during the mania of the 1630’s, prices reached astronomical levels because cultivated tulips were found to have an extraordinary property. Any tulip bulb that usually produces a flower of a single color will eventually “break” and produce a flower, sometimes stunningly beautiful, of two or more colors. Once this happens, the change is permanent: the bulb will continue to produce a multicolor flower.

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The market in tulips during the mania was really based on a massive gamble, not unlike a risky speculation on the modern stock market. A buyer would invest money in a tulip bulb in the hope that – sooner, rather than later – it would break into an especially remarkable flower. If it did, huge profits could be made from selling bulbs grown from the one bearing this rate, possibly unique, new bloom.

Invisible Assets

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Anyone who could acquire a few bulbs had a chance to make a fortune. For instance, one bulb was sold for 4,600 florins (about $1,800 today) plus a fine new carriage and a pair of horses.

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One of bizarre aspects of Tulipomania was that most of those who bought and sold tulips never saw the bulbs themselves: ownership was transferred from dealer to dealer while the bulb remained in the ground. Opportunities for fraud were rife. One contemporary writer said that more bulbs “were sold and purchased, bespoke and promised to be delivered, than in all probability were to be found in the gardens of Holland.” In two separate years, the variety called Semper Augustus failed, and no bulbs were produced. Even so, a roaring trade in that tulip continued.

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To own a few bulbs of any variety, some workingmen sold everything they had, even the tools on which their lives depended; some of tem made fortunes and “gained in a few months,” said one writer, “houses, coaches and horses, and figured away like the first characters in the land.”

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Not that riches always brought contentment. A cobbler at The Hague found that his investment had broken to produce a previously unheard-of black tulip. In due coarse he was approached by a group of florists from Haarlem was eventually persuaded the cobbler to part with his singular bulb for 1,500 florins ($600 today).

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He was appalled when his customers promptly stamped the precious bulb into the ground. One of the groups silenced his cries of protest with: “We, too, have a black tulip. We would have paid 10,000 florins, if you had asked for it, to ruin your chances of competing with us.” One version of the story says that the cobbler was so distressed at the thought of the riches he had so carelessly given away that he hanged himself.

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Rare Beauties: Introduced into Holland in 1562, tulips quickly became popular. Within decades the bulbs of particularly striking tulips were changing hands for thousands florins, the equivalent of hundreds of dollars today.

Boom Years

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Of coarse not everyone was infected by the mania. One professor of botany became so enraged by the whole business that the mere sight of a tulip was enough to make him attack it ferociously with his stick. Nonetheless, the madness continued. In the three boom years of Tulipomania, transactions worth more than $15 million in today’s currency were made in Haarlem alone. To this day the city remains the center of the Dutch tulip industry.

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Early in 1637, the bubble burst. Amateur traders shaky were the foundations of a business fueled by such rabid speculation. There was a rush to sell out, and the market collapsed. Everyone wanted to sell, no one wanted to buy.

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An enormous number of people found that their riches were merely paper fortunes, for they were owed huge sums of money by buyers who had been intending to pay only after they had, in turn, sold the bulbs and made their own vast profits. But all prospects of those profits had now vanished. In the end many sellers had to be content with as little as 10 percent of the price they had originally asked.

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For Holland Tulipomania brought in its wake a financial crisis as serious as the crash of the U.S. stock market in 1929, when many a paper fortune was resting on little more than wishful thinking. The year 1637 became renowned as one in which, as one observer put it, “one fool hatched another, and the people were rich without property and wise without understanding.”