Tulips are the most widely planted flowers in the Netherlands and are also the national flower of the Netherlands. They symbolize beauty, solemnity, luxury and success. There is a legend about the origin of tulips in the Netherlands: In ancient times, there was a beautiful girl who was loved by three warriors at the same time. One gave her a crown, one gave her a sword, and another gave her a piece of gold. But she was not in love with any of them, so she had to pray to the flower god. The flower god felt that love could not be forced, so he turned the crown into flowers, the sword into green leaves, and the gold into stems and roots, and together they became a tulip.
Background
Starting in 1634, the Netherlands was in ruins and the country went crazy for tulips. Like all speculative bubbles, the people involved actually made money at first. As the price rose steadily, you just had to buy low and sell high, buy high and sell higher. After getting the sweetness, everyone’s confidence increased greatly, and they invested more money in the sale of tulips, hoping to make more money. The original bystanders saw that it was so easy to make money, and they couldn’t resist the temptation and joined the crazy buying team. At the same time, speculators from various European countries also gathered in the Netherlands to participate in this speculative craze. In order to facilitate tulip trading, people simply opened a fixed trading market in the Amsterdam Stock Exchange. Subsequently, fixed tulip trading venues were also opened in cities such as Rotterdam and Leiden.
In his book Extraordinary Popular Delusions and the Madness of Masses, published in 1841, the Scottish historian Charles Mackay gave a very vivid description of the tulip mania: “Everyone believed that the tulip fever would last forever, and rich people from all over the world would place orders with the Netherlands, and no matter what the price, someone would pay the bill. Europe’s wealth was concentrating on the Zuiders Coast, and in the Netherlands, which was so blessed, poverty would be gone forever. Whether it was nobles, citizens, farmers, or craftsmen, boatmen, attendants, guys, even chimney sweeps and ragmen, everyone was buying tulips. Old women in clothing shops all joined the tulip speculation. Regardless of their class, people converted their property into cash and invested in this flower. … In small towns without exchanges, larger bars were the “auction houses” for tulip trading. The bar not only provided dinner, but also confirmed transactions for guests. Such dinner parties sometimes had two or three hundred people in attendance. In order to increase the satisfaction of customers, rows of large vases filled with blooming tulips were often neatly placed on the dining table or sideboard. “
A true story may more vividly illustrate the atmosphere and people’s mood of that era. It is said that there was a shoemaker in The Hague who cultivated a rare “black” tulip on a small plantation. After the news spread, a group of growers from Haarlem visited him and persuaded him to sell the flower to them. In the end, the shoemaker sold his treasure to them at a high price of 1,500 Dutch guilders. Unexpectedly, one of the buyers immediately threw the black tulip to the ground and trampled it into a puddle of mud with his feet. The shoemaker was stunned. The buyers explained with ease that they had also cultivated a black tulip, and in order to ensure that their flower was unique, they were willing to pay any price, even tens of thousands of Dutch guilders if necessary.
By 1636, the price of tulips had risen to an appalling level. Take the rare variety “Forever Augustus” as an example. The price of this tulip was 1,000 Dutch guilders in 1623, and it had risen to 5,500 Dutch guilders in 1636. In February 1637, the price of a “Forever Augustus” was as high as 6,700 Dutch guilders. This price was enough to buy a mansion on the canal in Amsterdam, or buy 27 tons of cheese! Compared with this top-grade tulip, the increase in the price of ordinary tulips was even more “crazy”. In January 1637, the market price of an ordinary 1.5-pound “Wittkrunen” bulb was only 64 Dutch guilders, but by February 5, it had reached 1,668 Dutch guilders! Don’t forget that the average annual income of the Dutch at that time was only 150 Dutch guilders.
When the craze reached its peak, that is, in the cold winter of 1636-1637, people not only bought and sold the harvested tulip bulbs, but also bought and sold the bulbs to be harvested in 1637 in advance. The futures market for bulbs was born. The bulbs did not need to be paid for before the actual delivery of the goods, which further intensified the speculation of tulips. Since the newly formed futures market had no clear rules and no specific constraints on both buyers and sellers, it was possible for merchants to turn the tide in the futures market, buy short and sell short, which made the tulip bubble, which had been “blown up”, expand rapidly in a short period of time.
No one who was immersed in the tulip craze realized that a shocking collapse was imminent.
Today’s economists regard this tulip craze as the best example of the “greater fool theory”. By the end of 1636, any remaining rationality had long since left the Dutch tulip market. Although most people knew that the price of tulip bulbs had long been far from its normal value, they would rather believe that others would be more “stupid” than them and would willingly pay a higher price. But in any case, the speculative frenzy could not last forever, and this was indeed the case. The end of the tulip mania finally came unexpectedly on February 4, 1637, and the biggest “fool” finally appeared.
Although the date of the bubble collapse was recorded very clearly, no one can tell exactly how the speculative bubble collapsed. The reason for the bubble collapse is still a mystery. People clearly remember that before this, transactions were going very smoothly, and no one knew why the market suddenly collapsed. Perhaps there is no better reason than to say that this is the inevitable result of the bubble expanding to the extreme.
For a time, the large-scale selling of sellers caused the market to fall into a state of panic. At this time, tulips became a hot potato, and no one dared to take over. The price of bulbs also fell like a boulder rolling down a cliff. The Dutch government issued a statement that the price of tulip bulbs fell without reason, advised citizens to stop selling, and tried to settle all contracts at 10% of the contract price, but these efforts were useless. A week later, the price of tulips had fallen by an average of 90%, and those ordinary varieties of tulips were almost worthless, even less than the price of an onion.
By the time people realized it, it was too late. So people flocked to the courts, hoping to use the power of the law to fulfill the contract and recover their losses. Soon, the courts were flooded with tulip lawsuits. Almost overnight, countless people became penniless paupers, wealthy businessmen became beggars, and some nobles fell into irreparable bankruptcy. Among the victims were both highly educated intellectuals and illiterate people who could not read a single word, because greed has no class boundaries.
The situation got out of control, and the government had to step in to solve it, but they were helpless in the face of such a difficult problem. In the end, all the “bitter fruits” had to be swallowed by the speculators themselves. On April 27, 1637, the Dutch government decided to terminate all contracts and prohibit speculative tulip trading. At this point, people were completely desperate! Those who used to cry for joy because of their sudden wealth were now crying for the sudden poverty. The exhausted Dutch stared at the tulip bulbs in their hands with dull eyes every day, reflecting on everything in their dreams…
The result of the disaster led to people’s immense hatred of tulips, and painters also got a place to display their talents. In a satirical painting created by the famous painter Jan Bruegel, a group of stupid monkeys are engaged in tulip trading in full swing. Whether it is the flower growers, florists, or speculators involved, they were all mercilessly mocked by the painter.
The tulip incident not only dealt a heavy blow to the world-famous Amsterdam Stock Exchange, but also plunged the economy of the Netherlands into chaos, accelerating the pace of the Netherlands’ decline from a powerful colonial empire. Since the mid-17th century, the Netherlands’ position in Europe has been strongly challenged by Britain, and the center of European prosperity has begun to shift to the other side of the English Channel.
