Dutch Republic was much stronger in decades after Tulip Mania

[David Farber <dave () farber net>]

Begin forwarded message:

From: odlyzko () dtc umn edu (Andrew Odlyzko)
Date: September 29, 2008 7:28:28 PM EDT
To: dave () farber net
Cc: v.dekker () trouw nl, dirkvanderwoude () gmail com
Subject: Re: Dutch Republic was much stronger in decades after Tulip  
Mania

Dave,

For IP, if you wish:

Dirk is absolutely correct.  The Dutch Tulip Mania, in spite of what
Charles Mackay wrote, had a negligible impact on Dutch economic
history.  The Dutch Republic was then on its way towards a leadership
position in terms of technological and economic development, and
the Tulip Mania caused at most a minor hiccup.

At this time, the best treatment of the Tulip Mania seems to be in the
recent book of Anne Goldgar, "Tulipmania: Money, Honor, and Knowledge
in the Dutch Golden Age," Univ. Chicago Press, 2007.  She shows (based
on extensive research in Dutch archives, especially in archives of
court cases, a reflection of one of the few predictable phenomena
of bubbles, namely that lawyers will get rich off of them, and that
those lawyers will dig up some of the most interesting and most
reliable information about the abuses of the bubbles), that the
Tulip Mania was a small affair involving a modest number of people
(most coming from a particular Protestant sect, which was prominent
in the tulip trade).  She found a really delightful tidbit, namely
two tulip traders who ended up in a lawsuit over broken commitments
after the Tulip Mania, and then about a decade later, appeared in
another lawsuit, over another dishonored trading commitment in
tulips.  Interest in tulips survived the Tulip Mania, and fancy prices
were seen later on.  As to whether the Tulip Mania was totally
irrational or not, the debate continues, with some efficient market
theorists indeed arguing that the prices were not crazy, given that
occasionally new varities appeared (in a process not understood in
those days) and attained extraordinary prices.  But there does not
seem to be any ground for the belief that the Tulip Mania affected
the Dutch economy at large.

In general, Charles Mackay's "Extraordinary Popular Delusions and the
Madness of Crowds" has been criticized by many historians, and not
just for his treatment of the Tulip Mania.  He was a sensationalist
who relied on secondary and often biased sources.  But in addition to
his many sins of commission, in inaccurate treatment of various
financial and other events, he is (in my opinion) even more at fault
because of his sins of omission.  The first edition of his book was
published in 1841, soon after the huge British investment bubble
of the mid-1820s, and the somewhat smaller bubble of the mid-1830s.
Yet even though he could easily have gathered detailed information
about them, he did not.  (And neither did any other historians, with
just a couple of exceptions.)  And then, when he put out a second,
expanded edition in 1852, he did not bother to devote any serious
attention to the British Railway Mania of the 1840s, the greatest
technology bubble in history, which collapsed just a couple of years
earlier.  And so an opportunity to gather first-hand accounts of
that event was lost.

Best regards,
Andrew




> From: David Farber <dave () farber net>
> Subject: Dutch Republic was much stronger in decades after Tulip Mania
> Date: Mon, 29 Sep 2008 11:12:02 -0400

> Begin forwarded message:

> From: "Dirk van der Woude" <dirkvanderwoude () gmail com>
> Date: September 29, 2008 11:01:25 AM EDT
> To: dave () farber net
> Cc: "Dekker, Vincent" <v.dekker () trouw nl>
> Subject: Dutch Republic was much stronger in decades after Tulip Mania
> Reply-To: dhvanderwoude () gmail com
>
> Dave, for IP if you wish.
>
> Ehrr - the Tulip mania was in 1637 That's several decades
> before the real high power of the Dutch Republic, the years it
> kept the mightiest ever French King Louis XIV more or less
> under it's thumb. In the same periode the Dutch even managed
> to conquer the UK, get their Stadtholder William crowned as
> king etc. From 1688 for some two years London was patrolled
> by Dutch soldiers (or perhaps German soldiers in Dutch pay,
> my landspeople always being masters of outsourcing).
> So the decay, if there was one, certainly was started by the
> tulip mania related.
>
> The influence of the Dutch Republic waned after the 17e century,
> however not so much financially. Like up to the mid 1800's all of
> the USA debt was to Dutch financers - indeed the first foreign
> loan to the USA was 5 million guilders in 1782, secured by
> Mr John Adams. Other statistics show that even in the early
> 1800's the income per capita in the Netherlands was the
> second highest of Europe, albeit massively unfairly distributed.
>
> There is another theory, on the waning of the Dutch influence,
> to me much more plausible: the Dutch capital and brains in the
> mid 1600's and especially after the Glorious Revolution of 1688
> moved to the UK. Recently Lisa Jardine in a new book revived
> the vision of Charles Wilson in the 40's of last century. Below
> some excerpts of a review published this month.
>
> From Amsterdam,
> Dirk van der Woude
>
>
> http://tinyurl.com/3vdfkn
> 'Going Dutch' is elegant and thought-provoking
>
> By JONATHAN LOPEZ, For The Associated Press Mon Sep 15, 5:47 PM ET
>
> "Going Dutch: How England Plundered Holland's Glory" (Harper. 432
> pages. $35), by Lisa Jardine: In November 1688, Prince William of
> Orange, the elected leader of the Dutch republic, set sail from the
> port of Hellevoetsluis in command of a 450-ship invasion fleet bound
> for England.
>
> William's 20,000 troops landed on the coast of Devon, marched to
> London and deposed King James II, who was allowed to flee to France
> after a brief period of captivity. Coercing the approval of
> Parliament, William and his wife then usurped James' throne,
> assuming the roles of king and queen of England. Or, at least,
> that's one way to describe what happened.
>
> This revisionist account of the Glorious Revolution � a watershed
> moment that's more often seen as a rejection of James' abusive rule
> by his own subjects � forms the centerpiece of London University
> professor Lisa Jardine's elegant and thought-provoking new book,
> "Going Dutch," a sweeping chronicle of the intellectual, political
> and cultural links forged between England and the Netherlands during
> the 17th century.
>
> "Going Dutch" opens with a simple question: Why has the Dutch
> invasion of 1688 gone down in the history books as a popular English
> uprising? "Why is there no trace of this mighty armada ... in
> conventional historical accounts of the so-called 'Glorious
> Revolution'?" Jardine asks. "Why are so few of us aware that at the
> time of the English Parliament's 'welcoming' of William ... the
> country was in the grip of a full-scale military occupation?"
>
> (...) Deftly tracing the movements of people and ideas in fields
> ranging from monetary policy to garden design, Jardine evokes a
> dialogue of civilizations in which attitudes on both sides of the
> Anglo-Dutch divide developed in tandem. She argues that this pre-
> existing web of cultural exchange helped smooth over the abrupt
> transition from the reign of James to that of William and Mary, and
> made it seem, in hindsight, less like a foreign takeover than a
> purely internal English dispute.
>
> (...)
>
> In Jardine's view, the English and the Dutch developed a special
> affinity that not only brought the two cultures together but also
> disqualified other nations, to some extent, from participating in
> the conversation. The English, for example, consciously emulated
> Dutch financial practices, which were generally acknowledged to be
> superior. And as England's financial institutions grew increasingly
> similar to their counterparts in the Netherlands, both countries
> decreased their transactions with France. The English and Dutch,
> Jardine suggests, became birds of a feather who flocked together.
>
> (...)
>
> The subtitle of "Going Dutch," for example, is "How England
> Plundered Holland's Glory," but we learn only on page 357 that
> Jardine intends this phrase to refer to the declining cultural
> influence of the Netherlands and the rising influence of Great
> Britain during the 18th century. This discussion, which lies
> somewhat beyond the scope and timeframe of "Going Dutch," seems very
> much like a movie trailer for an upcoming sequel.
>
>
>
>
> On Mon, Sep 29, 2008 at 3:38 PM, David Farber <dave () farber net> wrote:
>
>
> Begin forwarded message:
>
> From: "Dave Wilson" <dave () wilson net>
> Date: September 29, 2008 9:00:00 AM EDT
> To: "David Farber" <dave () farber net>
> Subject: tulips
>
> I decided to reread the chapter on the Dutch tulip mania of the 17th
> century from a 19th century tome, "Extraordinary Popular Delusions
> and the Madness of Crowds" by an English journalist, Charles Mackay
> (note that modern free market thinkers believe this account is BS,
> because there can by definition be no speculative manias in a free
> market). Anyway, I was struck by this paragraph, which details what
> happened after a few years when the music stopped and the price of
> tulip bulbs stopped going up (the subsequent decline marks,
> Britain during the 18th century. This discussion, which lies
> somewhat beyond the scope and timeframe of "Going Dutch," seems very
> much like a movie trailer for an upcoming sequel.
>
>
>
>
> On Mon, Sep 29, 2008 at 3:38 PM, David Farber <dave () farber net> wrote:
>
>
> Begin forwarded message:
>
> From: "Dave Wilson" <dave () wilson net>
> Date: September 29, 2008 9:00:00 AM EDT
> To: "David Farber" <dave () farber net>
> Subject: tulips
>
> I decided to reread the chapter on the Dutch tulip mania of the 17th
> century from a 19th century tome, "Extraordinary Popular Delusions
> and the Madness of Crowds" by an English journalist, Charles Mackay
> (note that modern free market thinkers believe this account is BS,
> because there can by definition be no speculative manias in a free
> market). Anyway, I was struck by this paragraph, which details what
> happened after a few years when the music stopped and the price of
> tulip bulbs stopped going up (the subsequent decline marks,
> coincidentally or not, the end of the Netherlands as a world power):
>
> " At last, however, the more prudent began to see that this folly
> could not last for ever. Rich people no longer bought the flowers to
> keep them in their gardens, but to sell them again at cent. per
> cent. profit. It was seen that somebody must lose fearfully in the
> end. As this conviction spread, prices fell, and never rose again.
> Confidence was destroyed, and a universal panic seized upon the
> dealers. A had agreed to purchase ten Sempers Augustines from B, at
> four thousand florins each, at six weeks after the signing of the
> contract. B was ready with the flowers at the appointed time; but
> the price had fallen to three or four hundred florins, and A refused
> either to pay the difference or receive the tulips. Defaulters were
> announced day after day in all the towns of Holland. Hundreds who, a
> few months previously, had begun to doubt that there was such a
> thing as poverty in the land, suddenly found themselves the
> possessors of a few bulbs, which nobody would buy, even though they
> offered them at one quarter of the sums they had paid for them. The
> cry of distress resounded everywhere, and each man accused his
> neighbour. The few who had contrived to enrich themselves hid their
> wealth from the knowledge of their fellow-citizens, and invested it
> in the English or other funds. Many who, for a brief season, had
> emerged from the humbler walks of life, were cast back into their
> original obscurity. Substantial merchants were reduced almost to
> beggary, and many a representative of a noble line saw the fortunes
> of his house ruined beyond redemption."
>
> Archives
>
>
>
> --
> A successful society is characterized by a rising living standard
> for its population, increasing investment in factories and basic
> infrastructure, and the generation of additional surplus, which is
> invested in generating new discoveries in science and technology.
> --Robert Trout





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