Friday, April 24, 2015

Fun Friday Facts #104: Tulip Mania

Image by John O'Neill from Wikipedia

Tulips are one of my favorite flowers. I love them. Unfortunately, so do the deer, so I can’t grow them, although I was kind enough to plant some anyway. I enjoy looking at them for the five minutes between when they bloom and when the deer eat them.

The term “tulip mania” refers to the period in the Dutch Golden Age of the 17th century during which futures contract prices for tulip bulbs reached ridiculously high prices before abruptly collapsing, in what is debatably one of the earliest recorded examples of an economic bubble.

Most historians credit Ogier de Busbecq, who was Ferdinand I, Holy Roman Emperor’s ambassador to the Sultan of Turkey, with introducing the tulip to Europe in 1554. From Vienna, tulip bulbs soon made their way to Augsburg in Bavaria and Antwerp and Amsterdam in the Netherlands. In 1593, Flemish botanist Carolus Clusius planted his tulip bulbs in the Hortus Botanicus in Leiden, what is today the oldest botanical garden in the Netherlands. He found that the colorful flowers easily tolerated the colder climate of Northern Europe, and tulips began to grow in popularity, thanks to being more intensely colorful than any other flower in Europe at the time.

The tulip’s newfound popularity in Europe coincided with Dutch independence from Spain and the beginning of the Dutch Golden Age. Dutch merchants were cleaning up thanks to the Dutch East India Company, which allowed them to rake in profits of up to 400 percent from a single trade voyage. Tulips became a luxury item and a way for the nouveau riche to show off their money.

While single-color tulips in red, yellow, or white were popular, the most desirable tulips were multicolored, such as the Semper Augustus, which bears the dubious distinction of being the most expensive tulip ever sold – just before the tulip crash, a single Semper Augustus bulb commanded a price of 10,000 guilders. While it’s difficult to translate that amount of money in today’s currency, it would have been enough at the time to have “purchased a grand house on the most fashionable canal in Amsterdam or clothed and fed an entire Dutch family for half a lifetime.” Keep in mind that “an entire Dutch family” in 1637 would have been massive compared to today’s families, since people had so many more kids back then in order to increase the odds that one of them would live long enough to have kids of his own.

If tulip mania were happening today, this flower, the Semper Augustus, would be worth more than ten million euros.

While today’s variegated tulips are the result of careful breeding, the variegated tulips that commanded such high prices during tulip mania were the result of infection by the tulip breaking virus, so-called because it “breaks” the color of the tulip into two or more different colors. While the tulip breaking virus creates stunning flowers, it also weakens the plant, making it harder to cultivate new bulbs. This, as you can imagine, did not help keep tulip prices reasonable.

This flower, the Admirael van der Eijck, sold on 5 February 1637 for 1,045 guilders -- about seven years' wages for a skilled worker.

But by 1636, at the height of tulip mania, even ordinary, dull, unremarkable, single-color tulip bulbs were fetching between 150 and 200 guilders – more than a skilled worker could earn in an entire year. That year, tulip bulbs were the Netherlands’ fourth most popular export, after gin, herrings, and cheese. Though tulip prices were already high, especially for rare variegated tulips, speculation in tulip prices drove prices up to ridiculous levels by the end of the year, when some tulip bulbs were changing hands as often as ten times a day. In February 1637, the bottom abruptly fell out of the tulip market when, for the first time, buyers failed to appear at a tulip auction in Haarlem, which was in the grip of an outbreak of the Black Death. While some historians speculate that the Black Death contributed to tulip mania by giving the tulip speculators a general “fuck it, I’m just going to die of the plague next week anyway” attitude toward personal finance, it’s clear that the Black Death also contributed to the sudden drop in tulip prices, which would continue to fall for the next several decades.

The Black Death -- ruining your economy since 1346.