The Dutch Tulip Mania That Never Happened
The so-called “tulipmania” of 17th century Holland was vastly overblown — as we hope ours turns out.
“My problem is taking commentary and treating it as fact.” — Anne Goldgar
Take a walk through New York’s Central Park, and you can’t help but admire the tulips colored peachy-tangerine tulips. Like me, you might wonder how do they grow them? In the 17th century, Dutch society swooned for tulips, drowning themselves in the canals, going to prison (a sailor was punished when he ate one with his herring sandwich thinking it was an onion), and speculating so violently the economy fell apart in a classic asset bubble.
Only that was not quite what happened.
In 1841, the esteemed Scottish economist, Charles MacKay, author Memoirs of Extraordinary Popular Delusions and the Madness of Crowds, brought to the world’s attention the Dutch Tulip mania of 1636. His narrative suggested the smart, practical Dutch would spend an entire year’s salary on the bulbs. It wasn’t fragrance or color that made them fall in love. It was profit. Profit? He called it “Tulipomania.” Mackay wrote: “A golden bait hung temptingly out before the people, and one after the other, they rushed to the tulip-marts, like flies around a honey-pot. Nobles, citizens, farmers, mechanics, seamen, footmen, maid-servants, even chimney-sweeps, and old women, dabbled in tulips.”
If the practical Dutch could go crazy, people thought there might be hope for the rest of us. No wonder the story spread.
The bubble wasn’t untrue, however. The market for tulips declined after a year and disappeared, as they do in all manias, and by 1637, it was outlet season on Tulips. Mackay claimed the Dutch were humbled: “Many who, for a brief season, had emerged from the humbler walks of life, were cast back into their original obscurity,” wrote Mackay. “Substantial merchants were reduced almost to beggary, and many a representative of a noble line saw the fortunes of his house ruined beyond redemption.”
Mackay claimed the Dutch were severely chastised: “Many who, for a brief season, had emerged from the humbler walks of life, were cast back into their original obscurity,” wrote Mackay. “Substantial merchants were reduced almost to beggary, and many a representative of a noble line saw the fortunes of his house ruined beyond redemption.”
For over a century, economists as astute as John Kenneth Galbraith used Mackay’s account in his A Short History of Financial Euphoria. Even as the well-recognized authority, Gordon Gekko of Wall Street, said: “Back in the 1600s, the Dutch got speculations fever — to the point where you could buy a beautiful house by the canal in Amsterdam for the price of one bulb. They called it tulipmania.”
Even as the well-recognized financial authority, Gordon Gekko of Wall Street, said: “Back in the 1600s, the Dutch got speculations fever — to the point where you could buy a beautiful house by the canal in Amsterdam for the price of one bulb. They called it tulipmania.”
Gekko was right in one respect. He was giving us Hollywood’s version, not what actually happened. The bubble wasn’t totally untrue. The market for tulips declined after a year and disappeared, as they do in all manias, and by 1637, it was discount outlet season on tulips.
(Followed by Haarlem weavers who have abandoned their looms, blown by the wind and flying a flag emblazoned with tulips, Flora, goddess of flowers, her arms laden with tulips, rides to their destruction in the sea along with tipplers, money changers and the two-faced goddess Fortuna.)
A recent book by Anne Goldgar, King’s College professor and historian, Tulipmania: Money, Honor, and Knowledge in the Dutch Golden Age. Goldgar takes down the myth of tulipmania and patiently explains how we could have been misled for nearly three centuries.
When Mackay was investigating the extent of the crisis, it turns out, he was confused by the extent of sensational reporting, a frequent problem with media accounts of crashes. It led him to inflate the depth of the crisis as well as its economic impact. But the headlines that the careful, prudent Dutch had gone gaga for a flower was too good for future generations to let go. Goldgar says this happens with stories that are too good to be true, but not too good to be believed, “It’s a great story and the reason why it’s a great story is that it makes people look stupid.”
The big fake took place when, as Goldgar says, Mackey used on a 17th-century account based on rogue pamphlets that made money by pointing to the moral repulsion of Dutch society. Today’s version of that tendency is “throw the bankers in jail.”
Goldgar is an historian, and so she relied on original material as she looked into the Dutch tulip crisis: “My problem with Mackay and later writers who have relied on him — which is virtually everybody — is that he is taking a commentary and treating it as if it’s fact,” says Goldgar.
Goldgar spent years in the stacks of Dutch archives in cities at the center of the tulip trade. She collected a volume of 17th-century evidence that has been collecting dusty in civil courts, trial records, and public files. What she discovered was not an economic crash but a line in front of Tiffany‘s. It was a case of well heeled elites gone mad, not society gone bad.
The wealthy developed a passion for tulips in 17th century Holland. It was like owning the hottest internet stock in 1999. But the extent to which the mania infected the average Dutch citizen was very practically nil. “I found six examples of companies that were set up to sell tulips,” says Goldgar. As prices followed popularity, some tulips fetched 5,000 guilders, about what a house cost in 1637. But Goldgar found that only 37 people paid more than 300 guilders for a bulb, about what a carpenter took home in a year. She also could not find anyone that went bankrupt. Dutch tulipmania? More like media mania.
As to the sailor who went to prison, there is no record of this, but we have to assume it cured him of his tulip eating habit.