he 17th century was truly the age of expansion and evolution for the western world and especially for focusing the growth of any economy into worldwide trade. Trading different commodities or luxuries defined by things that were not produced in the western hemisphere was a profitable business and the prices within the trade were mostly driven by a somewhat stable demand.
Economy at the time was still a term that wasn’t really understood by the world. The impact cash flow has on a country’s economy was believed to not really matter because most people were below the poverty line, which meant that they were living in agriculture, bartering, and nevertheless in no need of any luxuries.
However, in the 1630s a flower from Asia would come to Europe to create what historian’s argued to be the first economic bubble. The event was named the Tulip Mania and it was based on a single product (Tulip flower) and the stupidity of rich people. In this article, we will take a look at this economic bubble and how similar it is to the economic bubbles in our present.
Just to get this out of the way before we dwell into the story, I don’t support, neither deny the ideology of an economic bubble when it comes to the present economy based on cryptocurrencies, overpriced stocks, and so on.
The tulip flower originates from Northern China and it was something unique for that part of the world, in other words, something rare that Europeans would have loved to have as it was something others of the same social rank would not be able to own. Contemporary painters such as Jan Breughel and Ambrosius Bosschaert were doing a lot of paintings based on exotic flowers during the beginning of the 17th century. This aroused the interest of some people to become botanists.
At the time the Dutch were the richest, knowledgeable, and advanced nation with a population that was having the lowest rate of poverty in the world. This meant that people had the time and money to focus on new interests or start new businesses around the world to profit even more. The general mentality of the Dutch population is a factor that caused this economic bubble and to generalize this mindset would probably have been acquired by anyone rich enough to buy luxuries they do not need.
One of the most well-known botanists at the time was Carolus Clusius who during the 1590s spent many years studying exotic flowers such as the tulip at the University of Leiden. Within the University’s garden, Clusius had his own private garden where he was mostly growing tulips for study.
Tulips were quite difficult to grow as they were used to a very different environment than where they were now trying to grow in. That is why they were sold as one of the most expensive flowers on the western market at around 0.50 guilder, a currency introduced in the Netherlands in the 17th century.
Today one guilder from the 17th century would be worth around $60. The average worker within the Netherlands earned around 24 guilders per month, so you can imagine how expensive the flower was at a stable price. We can say that this period of the 1610s is the starting period for the bubble to inflate.
Clusius was able to identify some strange, yet interesting things about tulips from his years of study. One of these strange phenomena was that from one year to another, the tulips would start blooming in different colors than their “natural” red and even different patterns on the petals. It was later on discovered in the 19th century that this was caused by a virus that was affecting the pigment of the tulip, making it change color each year it would bloom.
This brought to the attention of many other botanists who started growing tulips and exchanging different rare colors/patterns in trying to grow new patterns that are even rarer than the previous ones. You can imagine the Dutch population upon seeing these incredibly rare flowers how they would desire to have something that is “unique” in the world and would be willing to pay a lot for them.
The bubble blooming
It all started with scholars and botanists who only wanted to study this magnificent flower where they would exchange one seed of a specific pattern for another. The Dutch Republic at the time even had its own organization (started by botanists) in order to help botanists trade seeds. However, out of nowhere many random people started to request seeds and especially the blooming flowers in exchange for money.
For the bubble itself, this was perfect timing as around the 1620s the Dutch Republic (known today as the Netherlands) hit its peak as it officially became the richest country in the world due to its successful trading systems.
Tulips were a new trend and everyone had to have them. It even got to the point where middle-class citizens who didn’t buy luxuries because they could not afford them started to spare some cash for tulips which once again they did not need. The tulip became more of a product that would represent the social status of a person just like an expensive car, watch, phone, or so on.
In 1623 someone offered botanists who held what at the time was considered as the most beautiful tulip pattern (Semper Augustus) 12,000 guilders for 10 tulips, which is $720,000, around the same price as a house and many more times what the average person would make in a lifetime during the 17th century.
The 1630s is when the mania for tulips really began with various types and patterns of tulips that were more and more attractive than the previous ones. The flower sort of became like a collectible for adults that were desperate to fill their gardens with these beauties. The problem was that there were so many varieties with so many unique patterns that having a stable price was impossible. From what Historian Mike Dash mentioned in his book, Tulipomania: The Story of the World’s Most Coveted Flower and the Extraordinary Passions It Aroused, it seems that the price of the tulips was mainly driven by the rarity of the flower. By 1933 the tulips started actually being used as currency to the point where people would actually buy a house with one tulip and the other party was crazy enough to give their house in exchange for a tulip.
This is where the idiocracy presented in the painting at the start of the article by Jan Breughel starts to show. He represents these crazy people as “brainless monkeys” because at the end of the day that was only a flower that in reality didn’t have offer the value that people were paying. How could a flower replace a house? And who in their right mind would exchange a house for a flower that would die in a few months?
It is called a bubble because people within in are having their minds closed within an economic system that is mainly driven by “trends” which as shown throughout history tend to be short-lived.
What really filled the economic bubble was people that wanted to get rich overnight. As the price was going up there were many stories of merchants that became extremely wealthy from just selling tulips, therefore more and more people wanted to get into it. In 1633 a single bulb of the rare Semper Augustus tulip was around 5,500 guilders ($330,000) and by 1637 the price almost doubled to 10,000 guilders per bulb ($600,000) over half a million dollars for a flower!
At the time, with that sort of money you could live in luxury for almost a whole lifetime without moving a single finger, it was crazy the economical spikes provoked by these flowers. This was also the time when the demand for flowers sort of started to be balanced by the supply of new merchants.
The bubble burst
The highest peak was reached in the winter of 1636–1637 with the prices of a rare and unique tulip reaching even 20,000 guilders (around 1.2 million US dollars). This is where the supply started to overwhelm the demand created by the trend originally. A single tulip bulb would be exchanged by 10 different people in one single day making profits of over 10,000 guilders from a single bulb.
These sorts of trades took place in unconventional places such as strange alleys or taverns where hundreds of people would gather and would trade from one corner of the tavern to the other until they made enough profit to make them go home.
In February of 1637, the tulip market suddenly collapsed as everyone lost interest as they probably realized they were flowers which in most cases many died during the winter period. Big-time tulip traders were dropping their prices by the hour in their separation to sell something in order to get rid of their high investments in rare tulips.
This is when the Dutch Republic lost its title as the richest country in the world as the value of tulips dropped below one guilder and most people ended up in tremendous debt for years to come. The government had a huge problem on its hands as cash flow was almost nonexistent because people didn’t have any money to buy anything which means that the bubble bursting also affected the overall economy of the country.
Although this event had devastating financial consequences, this did not stop the interest of the general Dutch population in flowers or art that represented flowers, but they awoke to the reality that a flower should never be worth as much or even more than a house.
Tulip Mania and today’s economic bubbles
The idiocracy presented in the tulip mania cannot be exactly compared with the stupidity represented in the cryptocurrency rush that has been highly trending lately or other investment opportunities that have been also trending on social media as well as not to forget NFT arts.
I am not here to say if these are or are not bubbles, but they are believed to be by many people and it seems so as they are filled by a population who is only interested to take part in a trend rather than actually profiting from this financial investment. Many people buy for example DOGE coin because it is cool to own that cryptocurrency and it is supported by Elon Musk, in other words, people are attracted by celebrating endorsement which in my opinion is quite stupid.
Everyone is free to do and chose to live as they will, they do not have to follow the lifestyle and trends of others. A bubble that seems to come very close to the tulip mania is NFT which are digital pieces of art that have been lately selling for millions. This is mainly due to a trend that has been started by people with simply too much time on their hands and it will only be kept alive by the interest of the public.
Once social media users lose interest guess what will happen with the prices? That is one possibility whilst this could be an economical revolution where art covers the 21st century and here is the future for you. I am not saying that the bubble will burst, nor that it exists, but what I want you to understand from this article is that we should learn from history before doing anything in this life.
The biggest idiocracy with all of these “investment opportunities” is that many people are risking their life savings as if it was a gamble more than anything. At the same time, the markets have become so volatile that even for the most experienced traders it is difficult to predict. However, there is even the worst category that goes and gets a huge bank loan to invest in this trend.
You see, the economical bubble itself is more of a psychological perspective of finance that represents a group of people that are fixated on a specific investment that has only been brought to their attention due to a trend. I believe that many politicians and other people from wall street are using the term in a way to put people off from these investment opportunities.
The hope that the world has with these trends is that it can end poverty in the world which would be amazing, but people should not rush into it just because others have become millionaires of these trends. If there is something to be understood from our present society is that people are getting bored quickly and the pace of boredom is usually in correlation with the speed at which technology evolves.