History of Business
Q1. What are the similarities between the tulip trade and the market crash of 1929?
When tulipmania hit Holland in the mid 1600’s the tulip could not grow fast enough to keep up with the raging demand. Holland was in its “golden age” of science and arts, with the high to mid classes had money for luxuries. These classes wanted something that set them apart from everyone else and if possible to grow their money through investing. The tulips shape and beauty, unmatched by any flower found in the region at the time, initially created high prices for the flower. As more and more people started buying the flower the demand went through the roof. The more unique of a design on the pedals of the tulip, the higher the price tag, some tulips were traded for land, estates, etc. People at the time couldn’t get enough of the tulips and soon enough everyone from all classes had a craze for the flower. Businesses started to form around the bulbs and those businesses tried to control the supply to try and create even more demand for the tulip. Everyone was speculating that the flower was a sound and growing investment. You can see similar traits of the Tulipmania bubble and crash in the October 1929 Stock Market Crash in the United States. In the same way that the people of Holland felt confident around the time of the bubble so did the American people. America came out on top at the end of World War I and industry everywhere was booming. The American people had luxuries like never before. The common persons idea of the stock market at the time was one of confidence that it was a no-risk investment. People saw the basic ideas of gains and losses and began to invest everything they had in the market without doing any research into the companies they were investing in. People in businesses that ran off the stock markets success (e.g. investment bankers, brokers, traders, and sometimes owners) began manipulating the…