Remember Beanie Babies? You know, those stuffed animals that were hot for a couple minutes back in the 1990s before their bubble of “all new materials” burst? They had names such as “Saddle the Horse,” “Leftovers the Turkey” and “Quebec Iris Versicolor the Bear.”
Image credit: BBToyStore.com
Remember them? Good! Because today’s History Wednesday isn’t about them.
Instead, today History Wednesday will look at a fad market which was even stupider than that. Let us journey to the United Provinces circa 1634.
Also known as the Dutch Republic.
Despite being a well-known symbol of the Netherlands for generations, the tulip is not native to the area. In fact it wasn’t grown in Holland at all until the latter part of the 16th Century. These first tulips are believed to have been imported from the Ottoman Empire.
For a few years that was all fine and good. It’s just another flower, right? Certainly not something for the casual observer to invest his life savings in. Well, like the 1990s Beanie Baby market, the 1630s tulip market got real stupid real quick.
The tulip’s introduction to present-day Holland roughly coincided with the area’s secession from Spain in 1581 to form the United Provinces. No longer under the thumb of the Spanish throne, the newly-independent republic’s economy began to grow quickly. By 1634, the United Republic found itself flush with enough disposable income to spend on luxury items such as, you know, flowers. This was particularly true in Amsterdam, where the Dutch East India Company and its lucrative trade routes were based.
Tulips, being much more colorful than those boring-ass native European flowers, became status symbols for the emerging merchant class. The most sought-after tulips were multi-colored varieties infected at random with the “tulip breaking virus.” Tulip connoisseurs of the day would have no doubt wanted to know how to replicate these conditions, but sadly the process wouldn’t be understood for another three centuries.
Still, très chic.
Tulip bulbs can only be safely moved from place to place during their dormant phase, roughly between June and September. As a result they were sold only during those months originally. But with demand surging in the mid-1630s that didn’t stop enterprising speculators from setting up what amounted to futures markets, allowing off-season buying with promises to deliver later. Traders often met in taverns, with buyers required to pay a “wine money” fee with every transaction.
“Tulip mania” hit its peak during the winter of 1636-37. By that time tulip futures speculation was so popular that pretty much everyone was in on it, including “farmers, mechanics, seamen, footmen, maidservants, even chimney sweeps and old clotheswomen.” Tulip fortunes were made and lost without a single plant changing hands. One contract reputedly exchanged a single half-ounce bulb of the particularly rare “Viceroy” tulip for goods worth 2,500 guilders. To put that in perspective, a skilled laborer in 1636 Holland could be reasonably expected to earn 150 guilders … a year.
In other words, for what many people earned in roughly 15 years you could buy a single, virus-ridden perennial bulb. One which wouldn’t even be available for another few months. Sounds stupid, right? Well, it was. In February 1637 – several months before the actual bulbs became available – the market dramatically bottomed out. Some were left contractually obligated to buy tulip bulbs at many times their current price, while others were stuck with bulbs they couldn’t sell. It’s said the region’s economy took years to recover.
Some blamed plague in Haarlem. Others blamed stupidity.
Image credit: Hans Splinter
While recent commentaries suggest Holland’s tulpomanie wasn’t quite what it’s cracked up to be, the story resonates through to today. The dot-com bubble and the subprime mortgage crisis were both compared to it.
And yes, so were Beanie Babies.
Good thing my nest egg is secure.