Tulip Mania — an early speculation

Here tulips bloom as they are told: unkempt about those hedges blows and English unofficial rose’

Rupert Brook

What would our gardens be with tulips, from the plain reds and yellows to

the exotic multicoloured varieties? Now thought of as a typical English

flower, their ancestry takes us far from these shores.

The tulip first came to Europe in 1554, when Ogier de Busbecq, a

ambassador of the Holy Roman Empire to the Sultanate of Turkey sent

bulbs back to Vienna as a gift for the Emperor, Ferdinand I. From there

bulbs made their way through Germany to the Netherlands, particularly

Amsterdam. Here they became the subject of study and experimentation,

particularly in about 1593 by Carolus Clusius of the University of

Leiden. He found that despite their origins in a hot country, they thrived

in the colder climate of Holland.

Tulips were unlike any other flower then extant in Europe. Their intense

colouration made them popular with collectors as status

symbols. Holland in the late 16th century had gained

independence from Spain and was becoming powerful economically. Its

newly rich merchant class was looking for ways to display its wealth. The

usual way was to create an estate with sumptuous flower beds around

it. The tulip was to become the ideal ‘must have’ item for the newly

rich. Of the different varieties available, none was more prized than the

Bizarden, the flowers with intricate patterns and streaks of contrasting

colours through the solid colours of the petals. It is strange to think that

this effect, so highly prized and so highly priced, is now known to be

caused by a virus called the Tulip Breaking Virus, named because it breaks

the hold of the plant on a single colour.

To produce a single tulip bulb from seed takes between seven and 12

years. Each bulb can be used to produce more seeds but dies after about

three years. The seeds from the original bulb will seed after three

years. The virus that caused such wonderful colour effects was not

common, so the bulbs producing the Bizarden became highly sought after

and thus very highly priced. They were given wonderful names, usually

beginning with the word Admiral or General. Sadly most of these exotics

no longer exist, but from surviving illustrations we can see how they

would have been a sensation.

A spot market for tulips was established. The bulbs can only be harvested

between June and September, so they were bought and sold physically

during this period. For the rest of the year contracts were sold, witnessed

by notaries; this was clearly the origin of the current futures market. The

trade was so intense that in 1610, short selling was banned, with further

bans imposed in 1621, 1630 and 1636. A standardised price index was soon

established. The prices realised were fantastic, with even the bulbs that

grew flowers in single colours selling for several hundred Guilders. The

name given to the trade was ‘windhandel’ — wind trade, because it was

only paper contracts that were usually changing hands, not the bulbs

themselves. Tulip bulbs became the fourth most profitable export for

Holland, after gin, herrings and cheese. Speculators pushed prices up and

huge fortunes were made from selling contracts, but, it must be noted,

rarely did the bulbs change hands.

The market peaked during the winter of 1636–7, when some bulbs were

bought and sold as many as 10 times in a single day. Prices were

staggering. Records show that one bulb was exchanged for items worth

2,500 Guilders and a parcel of 40 fetched 100,000 Guilders. Two

bulbs were exchanged for 12 acres of land. By contrast, the annual wage

for a skilled man might be 150 Guilders. Tulipmania was at its peak.

By the beginning of 1637, the bulbs were trading at higher and higher

prices, with new buyers being constantly sought. Unfortunately the

number of new buyers willing to pay high prices did not match the supply

and by February 1637 there were no new buyers to be found. Demand fell

and so, dramatically, did prices. Sellers of bulbs now realised that their

assets were unsaleable and therefore practically worthless. People who

had future contracts now found that the price they had agreed to pay was

about 10 times more than the bulbs were worth. The trade collapsed into

arguments, recrimination and blame placing. Fortunately for the contract

holders the courts ruled that their speculation was actually gambling, so

contracts were legally unenforceable. Paper fortunes were lost overnight

and tulips lost their value for many years. In fact they never again

reached such heights. There is a possible cause for this collapse, which

started in the town of Haarlem. For the first time ever, no buyers showed

up for a tulip auction. The usual reason given is that prices were to high,

but records show that there was, at the same date, an outbreak of Bubonic

plague in town. Was this perhaps a contributing factor to the collapse of

the trade? It seems likely; however prized tulips may have been, most

people would value their lives more.

C. Michael Montagu 2019