Tulipmania

TulipmaniaSuggested by Brad Nelson • In the 1630s, visitors to the prosperous trading cities of the Netherlands couldn’t help but notice that thousands of normally sober, hardworking Dutch citizens from every walk of life were caught up in an extraordinary frenzy of buying and selling. The object of this unprecedented speculation was the tulip, a delicate and exotic Eastern import.
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3 Responses to Tulipmania

  1. Brad Nelson Brad Nelson says:

    This is a book whose central subject isn’t mania, per se, if only because that aspect isn’t all that rich in detail. Not only was it simply a simple speculation “get rich quick” scheme that burst, but apparently (according to the author) there aren’t a lot of historical details about this episode.

    Therefore much of this book is about the early history of the tulip, particularly in regards to the Turks who first popularized it and revered it. You get a little background on the Turks, on the relative wastelands where tulips first grew wild, and then bits and pieces of Dutch culture leading up to the tulip bubble.

    So this book is interesting mostly for some of the peripheral historical details on life in the 16th and 17th centuries, particularly in and around The Netherlands. But the mania itself is hardly enough to carry this book and doesn’t try to. But you do learn some interesting details about tulips, about how trade in general was conducted, and a somewhat obnoxiously pro-Muslim look in the beginning.

    This is not a riveting look at human nature or a condemnation of it. The bubble itself is interesting in that it had almost no impact on the Dutch economy because those involved in the bubble were mostly amateurs outside the field, not established banks and trade unions.

    This is not a book to read about the tulipmania as much as it is a loose collection of interesting background facts. That’s both a plus and a minus because I’m quite sure a more detailed and focused book on the tulip mania would have bored me to tears. But to learn little things like just how much beer the typical Dutchman drank was fun and interesting.

  2. Timothy Lane says:

    The tulip mania may have been the first known speculative bubble, but certainly not the last. A friend of mine once wrote a parody about an internet company called tulipmania.com. Of course, in real life no one would have been that obvious about it.

  3. Brad Nelson Brad Nelson says:

    As the author notes, trading involving tulips didn’t end when the bubble burst. The high-end bulbs were still coveted, as they always had been, by those with money who collected and traded them for their beauty. The premium bulbs did not command quite the prices after the bubble burst in February 1637, but they were still highly-priced.

    And the Dutch mania for tulips had created a market in France and other countries. Florists and growers didn’t go completely out of business. And the Dutch, of course, to this day continue to be a major supplier of tulips and other flowers. The bubble by no means completely eradicating the trade.

    And certainly a lot of people lost money. The mania was apparently a function of regular Joes (Jans?) selling their weaving machinery, for instance, and getting into the bulb trade. This wasn’t the banking industry going berserk. But apparently much of the losses were simply paper losses. After the bubble burst, most of the outstanding contracts were resolved by the buyers paying anywhere from 3.5% to 10% in order to fulfill the contract. According to the author, this was affordable by a great many of the debtors and still gave the growers enough money to cover their costs and perhaps then some.

    An interesting side note (and, really, this is what makes the book work) is that few, if any, of the most highly prized tulips remain today. This is so because these variegated (aka “broken”) tulips (such as the King of all tulips, Semper Augustus) were given these traits by a virus. And this virus eventually weakened and killed these sub-species. In fact, the author notes that this virus was eventually eradicated. The variegated tulips that exist today are not the result of a virus but of careful breeding. These are more of the “fun facts” that make this book work, to the extent that it does.

    What fueled the high prices in the first place was not only the glory of the beauty some of these tulips, but how difficult it was to create more of them. You can only get more tulips when the bulbs sort of bud-off. And this is an unpredictable process and one that a tulip undergoes for only a brief few years, if at all. And then even if you get an off-shoot bulb, it may or may not be “broken” (that is, have the virus in it that creates the stupendous color patterns of the parent).

    And it wasn’t these rare bulbs that had much to do with the bubble if only because there were not that many of them. But they did give prestige to the trade and gave the appearance that a lot of money could be made. The bubble reached bursting point, as the author notes, when the demand had reached a point where good-quality tulip bulbs (of high or medium quality) could not be procured. What people then did was to start trading low-quality bulbs (low by their standards – many of thise were classic single-colored tulips). These bulbs got caught up in the mania but were not in demand except on paper and the expectation that they would always rise in price (as they did until they did not). These same bulbs that used to be sold by the pound (bulk, basically) were now traded at near premium prices.

    It was noted by the author that one of the Turk sultans tried (successfully, I believe) to avoid a similar bubble by restricting how many tulips could be sold. But what continued to exist were enthusiastic (and rich) connoisseurs throughout Europe and foreign regions who continued to trade in the best of bulbs. But not for profit. It was more of a gardening hobby, a plaything for the rich.

    Adding to the rarity of tulips (and the difficulty in dealing with them) was that you could deal in the bulbs (out of the ground) for only part of the year. The season had been someone limited which, the author noted, was extended by other means. And because you were buying bulbs and couldn’t see the flowers, there was much opportunity for fraud and error. But the Dutch found a way to extend the tulip trading season by dealing in “futures,” buying bulbs still in the ground that they had never seen.

    The author also notes, interestingly, that the seasonal nature of tulip growing has been overcome today by various techniques. So you can plant them any time of the year and (I think) keep the bulbs out of the ground for extended times. I have a mind to start a tulip bed this year. I’d like to try it. And apparently tulips are a wonderful plant to grow because they do well in poor soil. Here in the Northwest, the challenge would be to see that they don’t get too much water. In their native habitat, tulips grown in sandy, dry conditions. Quite amazing plants, really.

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