Tulipomania

The tulipomanía or crisis of the tulips was a period of speculative euphoria that took place in the Netherlands in century XVII. The object of speculation were the tulip bulbs, whose price reached exorbitant levels, resulting in a large economic bubble and a financial crisis. It constitutes one of the first speculative phenomena of masses of which one has news.

The story of these events was popularized by the Scottish journalist Charles Mackay, who reflected it in his book Memoirs of extraordinary illusions and the madness of the multitudes (1841).

Causes

Several factors explain the origin of Dutch tulipomania. On the one hand, the success of the Dutch East India Company and the commercial prosperity of the Netherlands, and on the other, the taste for flowers, especially exotic ones, which became objects of ostentation and symbol of wealth.

As well, and for reasons that at that time were not known, the tulips cultivated in the Netherlands underwent variations in their appearance, being born therefore the multicolored, unrepeatable tulips, which increased their exoticism and therefore their price. Today it is known that the cause of this phenomenon was a parasite of the flower, the aphid, which transmits a virus to the plant known as Tulip Breaking Potyvirus.

Introduction of the tulip in Europe

The tulip – from present-day Turkey, then the Ottoman Empire, where it had sacred connotations and adorned the sultans' costumes – was introduced to the Netherlands in 1559. In fact, the word "tulip" comes from the French turban, deformation of the Turkish Ottoman Tülbent, this term coming from the Persian dulband and meaning all turban.

Although evidence of ornamental use has been found in 11th- century al-Ándalus indicating a more remote introduction to Europe in time, the traditional version attributes its diffusion to the Austrian ambassador to Turkey, Ogier Ghislain de Busbecq, in the 16th century. Ogier was an enthusiastic floriculturist, and when he returned to Europe in 1544 he brought some bulbs with him to the Imperial Gardens of Vienna. Later, in 1593, the prominent botanist Carolus Clusius left his job in the Imperial Gardens to take a position as professor of botany in Leiden (Holland), where he brought a collection of tulip bulbs that created great interest and enthusiasm.

Clusius began to cultivate tulips of exotic varieties: nevertheless, jealous of his collection, he kept them kept. But one night someone broke into his garden and stole his bulbs. The Dutch sandy soil, reclaimed from the sea, proved to be ideal for growing the plant, and the tulip spread throughout the territory.

For many people tulips may seem useless, without smell or medicinal application, blooming only one or two weeks a year. But Dutch gardeners appreciated tulips for their beauty, and many painters preferred it as a reason for their paintings.

The price increase

Although the attempt was made to control the process by which monochrome tulips became multicolored, Dutch horticulturists were not able, so the randomness of exoticism contributed to progressively raise the price of each bulb. The rarest varieties were named after illustrious figures and prestigious admirals. In the decade of the twenties of the seventeenth century the price of the tulip began to grow at great speed. There are absurd sales records: luxurious mansions in exchange for a single bulb, or flowers sold in exchange for the fifteen-year salary of a well-paid artisan. In 1623 a single bulb could be worth 1000 Dutch florins: a normal person in Holland had an average annual income of 150 florins. During the 1630s, it seemed that the price of bulbs was growing unlimitedly and the whole country invested everything it had in speculative tulip trade. The benefits reached 500%.

In 1635, 40 bulbs were sold per 100,000 florins. For comparison, one tonne of butter cost 100 florins, and eight pigs 240 florins. A tulip bulb came to be sold for the price equivalent to 24 tons of wheat. Semper Augustus beat the sales record: 6000 florins for a single bulb, in Haarlem.

In 1636 an epidemic of bubonic plague was declared that decimated the Dutch population. The lack of labor multiplied the prices even more, and an irresistible bull market was generated. Such was the fever, that a futures market was created, from bulbs not yet collected. This phenomenon was known as windhandel ('air business'), and was popularized mainly in the taverns of small cities, despite the fact that a state edict of 1610 had prohibited the business because of the difficulties of contractual execution that it generated. Despite the prohibition, business of this type continued between individuals. Buyers into debt and mortgaged to buy flowers, and there came a moment longer bulbs interchanged but an authentic financial speculation was made by notes of credit. Extensive and beautiful sales catalogs were published, and tulips entered the stock market. All social classes, from the high bourgeoisie to the artisans, were involved in the phenomenon.

End of the bubble

On February 5, 1637, a lot of 1.000.000 tulips of great rarity was sold for 90,000 florins: it was the last big sale of tulips. The next day a lot of half a kilo for 1250 florins was put on sale without being a buyer. Then the bubble burst. Prices began to plummet and there was no way to recover the investment: everyone sold and nobody bought. Huge debts had been committed to buy flowers that were worth nothing now. Bankruptcies followed one another and hit all social classes. The lack of guarantees of this curious financial market, the impossibility of facing contracts and panic led the Dutch economy to bankruptcy.

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