Tulip mania occurred during the “Dutch Golden Age”, a time where Dutch art, science, military power, and trade were all regarded as the most acclaimed in the world, and when tulip bulbs became the hottest commodity on the market.
At the peak of Tulip Mania in March 1637, some varieties of tulip bulbs were selling for more than 10 times the annual income of a skilled craftsman. Economists generally recognize this as the first recorded economic bubble, similar to the dot com bubble of 1995-2001.
Why were tulip bulbs so valuable?
These days tulips may be synonymous with Dutch culture and the Netherlands, but the region didn’t get its first tulip until 1593 after the Flemish botanist Carolus Clusius planted his personal collection of tulip bulbs while working at the University of Leiden.
Able to survive the harsh conditions of the United Provinces (modern day Netherlands), tulips became very popular due to their vibrant colors and unique shape that looked unlike any other plant in Europe.
Seeing an opportunity, wealthy Dutch merchants began to engage in the trading of tulip bulbs as a luxury item. They were typically classified in groups, from the more common solid colored bulbs to the rarest of the rare Bizarden (Bizarres) which typically had yellow or white streaks on a purple background.
The vivid colors and flame-like streaks made the already exotic looking plants even more desirable. Traders and florists began to give their tulips titles like Admirael (Admiral), Generael (General), and even names inspired by Alexander the Great and Roman General Scipio Africanus.
The most sought-after tulips (Bizarres) were so unique looking due to a tulip-specific virus known as the “tulip breaking virus”, named for its tendency to “break” the colors of a tulip petal into two or more.
As a result, tulip growers were paying more and more money for bulbs with the virus, which were rapidly growing in popularity.
With prices rising steadily, speculators (traders who expected the price of tulips to rise) entered the market in 1634. Prices continued to rise throughout 1636, but by November of that year even the solid-colored tulip bulbs began to increase in value.
Dutch futures markets were opened where traders could buy or sell contracts entitling them to bulbs at the end of the season. Each contract carried a three guilder (the basic monetary unit at the time) fee and were with individual counter-parties, not the futures Exchange.
The Dutch used the word windhandel (or “wind trade”) to describe contract trading because no bulbs were actually changing hands. After gin, herrings, and cheese, tulip bulbs became the fourth leading export of the Netherlands in 1636. The price of tulip bulbs skyrocketed due to speculators, with men making and losing fortunes overnight.
In February 1637, the party ended and tulip bulb contract prices collapsed. It first began in Haarlem (a Dutch city) where buyers refused to show up at a bulb auction. Historians suspect this may have been caused by the bubonic plague, which had its worst outbreak in Haarlem at this time. With prices at an all-time low, trading completely ground to a halt and Tulip Mania was effectively ended.
The legacy of Tulip Mania
In modern times, Tulip Mania is remembered more as a life lesson than anything else. Economists referenced it regularly during the dot com bubble of 1995-2001
It was most recently brought up in the press in 2013 when former president of the Dutch Central Bank, Nout Wellink, described the cryptocurrency Bitcoin as being “worse than the tulip mania,” adding, “At least then you got a tulip, now you get nothing.”