In 1636, according to an 1841 account by Scottish author Charles MacKay, all of Dutch society went mad with exotic tulips. As Mackay wrote in his very popular book, Memories of extraordinary popular illusions and the madness of crowds, as prices rose, people got carried away in a speculative fever, spending a year’s salary on rare bulbs in the hope of reselling them for a profit.
Mackay has dubbed the phenomenon “Tulip addiction”.
“A golden bait was temptingly hung in front of people, and one after another, they rushed towards the tulip-marts, like flies around a jar of honey,” Mackay wrote. “Nobles, citizens, farmers, mechanics, seafarers, footmen, servants, even chimney sweeps and old women-clothes, dabbled in tulips.”
When the tulip bubble suddenly burst in 1637, Mackay claimed that it had wreaked havoc on the Dutch economy.
Tulip Price Index from 1636 to 1637. The values for this index were compiled by Earl A. Thompson in Thompson, Earl (2007), “The Tulipmania: Fact or artefact?”, Public choice 130, 99-114 (2007).
Public choice / CC BY-SA 3.0
“Many of those who, for a brief season, had come out of the humblest walks of life, were thrown back into their original obscurity,” wrote Mackay. “The substantial merchants were reduced almost to begging, and many representatives of a noble line saw the fortune of his house ruined beyond redemption.”
But according to historian Anne Goldgar, Mackay’s tales of huge lost fortunes and helpless people drowning in canals are more fiction than fact. Goldgar, professor of modern history at King’s College London and author of Tulipmania: money, honor and knowledge in the Dutch golden age, understands why the myth of Mackay endured.
“It’s a great story and the reason it is great is that it makes people look stupid,” says Goldgar, who laments that even a serious economist like John Kenneth Galbraith interpreted the account of Mackay in A brief history of financial euphoria. “But the idea that the tulip madness caused a big depression is completely false. As far as I know, this has had no real effect on the economy. “
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The problem, says Goldgar, is the raw material used by Mackay. In seventeenth-century Holland, there was a rich tradition of satirical poetry and song that made fun of what Dutch society considered moral failure. From this tradition came out entertaining pamphlets and poems that targeted the alleged madness of tulip buyers, whose crime believed that the tulip trade would be their ticket to Dutch high society.
“My problem with Mackay and the subsequent writers who have relied on him – who is practically everyone – is that he takes a bunch of documents that are comments and treats them as if they were factual,” says Goldgar.
To get the real scoop on tulip madness, Goldgar went to the source. She spent years browsing the archives of Dutch cities like Amsterdam, Alkmaar, Enkhuizen and especially Haarlem, the center of the tulip trade. She meticulously collected handwritten data from the 17th century from notaries public, small claims courts, wills and more. And what Goldgar found was not an irrational and widespread craze for tulips, but a relatively small, short-lived market for exotic luxury.
In the mid-1600s, the Dutch experienced a period of unparalleled wealth and prosperity. Newly independent from Spain, the Dutch merchants enriched the trade through the Dutch East India Company. With money to spend, art and the exotic have become trendy collectibles. This is how the Dutch became fascinated by rare “broken” tulips, bulbs that produced striped and speckled flowers.
First, these prized tulips were purchased as showy exhibits, but it didn’t take long for the tulip trade to become a full-fledged market.
“I found six examples of businesses that were set up to sell tulips,” says Goldgar, “so people quickly jumped on the train to take advantage of something that was a desired commodity.”
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Tulip prices rose from December 1636 to February 1637, some of the most popular light bulbs, such as the coveted Switzer, experienced a price increase of 12 times. The most expensive tulip recipes that Goldgar found were for 5,000 guilders, the current rate for a beautiful house in 1637. But these exorbitant prices were outrageous. She found only 37 people who paid more than 300 guilders for a tulip bulb, the equivalent of what a skilled craftsman earned in a year.
But even if a form of tulip mania hit Holland in 1636, did it reach all levels of society, from the nobility landed to chimney sweeps? Goldgar says no. Most buyers were the type to expect speculation on luxury goods – people who could afford it. They were successful traders and artisans, not maids and peasants.
A satire by Tulip Mania, painted by Jan Brueghel the Younger around 1640.
Fine Art Images / Heritage Images / Getty Images
“I have only identified around 350 people who were involved in the trade, although I am sure this number is low because I did not look at all of the cities,” said Goldgar. “These people were very often linked to each other in various ways, through a profession, a family or a religion.”
What really surprised Goldgar, given the stories of Mackay’s financial ruin, was that she couldn’t find a single case of someone who went bankrupt after the tulip market crash. Even the Dutch painter Jan van Goyen, who would have lost everything in the tulip crash, seems to have been the victim of land speculation. The real economic benefits, according to Goldgar, were much more contained and manageable.
“The people who risked losing the most money in the tulip market were wealthy enough that the loss of 1,000 guilders would not be a big problem for them,” said Goldgar. “It’s painful and boring, but it had no real effect on production.”
Although the tulip madness and the resulting crash did not weaken the Dutch economy as Mackay claimed, there has always been collateral damage. According to court records, Goldgar found evidence of loss of reputation and broken relationships when buyers who had promised to pay 100 or 1,000 guilders for a tulip refused to pay. Goldgar says these flaws have caused a certain level of “culture shock” in an economy based on trade and sophisticated credit relationships.
Even though the tulip craze has ended abruptly and ignominiously, Goldgar does not agree with Galbraith and others who dismiss the entire episode as a case of irrational exuberance.
“Tulips were fashionable, and people pay for fashion,” says Goldgar. “The apparent ridiculousness of this was played at the time to make fun of people who failed.”
