The Dutch Golden Age, which spanned from the late 16th to the late 17th century, saw the Netherlands become one of the most prosperous and advanced nations in Europe, if not the world.
One of the most bizarre phenomenons to occur during this time was ‘tulip mania’. Tulips had only just arrived in western Europe and were highly prized, and therefore expensive, as a result. In the early 17th century, people became increasingly interested in tulips, and a speculative market for tulip bulbs sprang up, the likes of which had never been seen before.
Here are 10 facts about the first known economic bubble in history, which allowed men to make and lose fortunes in the very same day.
1. Tulips with multiple colours became most fashionable
Tulips arrived in the Netherlands in the 1590s, and botanists began to grow and study them from this period onwards. Like many flowers, they can come in a variety of different colours: the first tulips to arrive had petals of just one colour, but with careful experimentation and other changes, it became possible to get striated effects on the petals, streaks of a different colour or flame-like patterns.
This variation on tulip petals was seen as the most desirable aesthetic. Cultivars did their best to study and produce the effect in tulips, swapping cuttings, bulbs and seeds with each other in the beginning, in order to experiment and report back on their findings.
2. No one knew how to ‘break’ a tulip
Although botanists studied tulips, genetic science was a long way off. No one really understood how to get tulips to break (have petals with mixed colours), but they certainly tried every method they could think of to achieve the effect.
Some believed that sprinkling the soil in which the bulb was growing with pigments of the desired colour would achieve the effect, whilst others tried to fuse together bulbs of different colours.
Some farmers were much more superstitious, choosing to fertilize their soil with all sorts of substances in the hope that a ritual that had worked for them once before would work again.
3. Demand for tulips grew rapidly
As tulips became more and more fashionable, cultivars saw a gap in the market: they began selling bulbs and cuttings of the tulips they cultivated.
Part of this was driven by a wave of prosperity in the Netherlands that meant the middle classes, merchants, artisans and tradesmen, had disposable income that they could use to buy luxuries in a way that would have been almost unthinkable 50 years before.
4. A tulip called Semper Augustus was the most prized variety
By the 1620s, a variety of tulip called the Semper Augustus had become the most prized. At one point in time, there were fewer than 12 Semper Augustus bulbs in existence: a mysterious collector effectively had a monopoly on bulbs, which drove the price up to record levels.
In 1623, one bidder offered to part with 12,000 Dutch guilders (more than the cost of an upmarket townhouse in Amsterdam) for just 10 Semper Augustus bulbs.
Semper Augustus no longer exists today, but contemporaries described it as extremely beautiful, characterised by white petals with crimson flames running along them in perfectly symmetrical, unbroken lines.
5. The trade in tulips was all speculative
Rather than trading or buying the flowers themselves, tulip purchasing and trading was all about the bulbs. As a result, it was effectively a future or speculative market: only time would tell, when the bulb was planted and bloomed, whether your investment had been a good one.
6. People jumped into the tulip trade in the hope of making more money
For several years the market for tulips grew steadily, with more people investing over time and prices rising exponentially. By the early 1630s, the money changing hands had grown dramatically.
Hearing that huge profits could be made simply by buying and selling tulip bulbs, many more piled in on the market, further raising prices. The most expensive bulbs could be traded for thousands of guilders – several years’ worth of wages for middle-class families.
7. The market reached fever pitch in the winter of 1636-1937
At the start of 1636, the tulip market formally became a ‘futures market’: physical bulbs no longer changed hands, but contracts to buy bulbs at the end of the season were bought and sold instead.
At this point, the market reached its peak: tulips were the 4th biggest export in the Netherlands and bulb contracts often changed hands multiple times a day. Hundreds of men brought themselves to bankruptcy in their pursuit of tulip bulbs.
8. The tulip bubble burst in February 1637
The tulip market collapsed virtually overnight. Beginning in February 1637 in Haarlem, auctions suddenly found themselves empty. Speculators could no longer afford even the cheapest, single colour bulbs and demand disappeared overnight.
Some credit an outbreak of plague with the sudden change in the market, but the precise catalyst is unclear. Prices for bulbs tumbled and the change in the market spelled ruin for many who had poured their life savings into bulbs that were now next to worthless.
9. Actually very few people were financially affected by tulip mania
Although the tulip market saw huge amounts of money changing hands, it was actually only a very small section of Dutch society that participated in the craze for tulips.
Despite this, commentators and wider society were shocked that something as simple as a flower bulb could possibly be worth more than most people would earn in several years. This in turn sparked debates about the nature of value. These discussions would resonate across Dutch society for some time.
10. Some historians and economists have debated how real the bubble actually was
In the years immediately following tulip mania, many began to write about the period as a lesson in morality as much as anything else, casting shame and criticism on those who participated in reckless gambling on bulbs.
The economic bubble did not affect the wider Dutch economy, and price data for the period is extremely limited, making it difficult to tell exactly what happened during this period and whether or not there was a bubble in specific terms.
Regardless, tulip mania’s legacy as a cultural phenomenon has been firmly cemented, and it stands as an example of one of the most bizarre speculative frenzies in economic history.