Extraordinary Popular Delusions and the Madness of Crowds By Charles Mackay Templeton Foundation Press; 724pp, £12.99
IT’S A pity Bertie Ahern and his cabinet colleagues hadn’t taken a look at this book during the property boom.
It was published in 1841 and has since been popular among those interested in how societies and economies become subject to short-term enthusiasms that, in hindsight, are revealed as extraordinary follies.
The book is a compendium of, as author Charles Mackay puts it, “the most remarkable instances of those moral epidemics which have been excited, sometimes by one cause and sometimes by another, and to show how easily the masses have been led astray, and how imitative and gregarious men are, even in their infatuations and crimes”. Mackay, a journalist contemporary of Charles Dickens, kicks off with examples of populations losing the run of themselves in relation to returns on investments, giving details of the Mississippi scheme, the South Sea bubble and the tulip mania. The first two involved irrational investment in the shares of two companies – the Mississippi Company in France and the South Sea Company in Britain – in the early 1700s. The third concerned investment in tulips in Holland in the 1600s.
In each case, entire societies managed to convince themselves that fortunes could be made from continued exponential growth in the value of particular items.
Shares in the South Sea Company in London could at one stage be sold for a profit within minutes of their purchase, with the shares being traded for differing prices at opposite ends of a crowded laneway.
When the unreal values placed on tulips finally collapsed in Holland, the frenzy left in its wake a welter of disputes where people who had purchased bulbs at the height of their value tried to enforce contracts for sale with people who no longer wanted to buy them. Sound familiar?
Mackay moves on from instances where societies are driven temporarily crazy by dreams of easy wealth to other outbreaks of frenzied irrationality: belief in alchemists, prophesies and fortune telling; mass involvement in the crusades; witch mania; belief in relics; and so on.
The chapters on the crusades and the witch mania are powerful reminders of how scary a species we are. In the former, the encouragement of popes, kings, lords and supposed holy men created for everyone an opportunity to visit the darkest corners of the human psyche. The chapter is a litany not just of hubris, delusion and greed, but of wholesale indulgence in slaughter and cruelty. Likewise, the section on the witchcraft mania that hit Europe in the 13th century and lasted until the 18th – when a woman was burned alive in Würzburg – makes grim reading.
What emerges clearly from the investment bubbles, crusades and witch hunts is the role of the powerful in the creation and use of such phenomena. In the investment bubbles, the insiders sometimes got out on time. The battle between the Vatican and Protestantism formed a backdrop for witch mania, just as the struggle between secular and religious power was part of the phenomenon that was the crusades.
Not that Mackay subscribes to the simple formula of blaming the powerful. He points out the ease with which people became dupes to whatever crazes and cruelties were abroad. For instance, he tells of how people were turned against the Knights Templar by enemies who accused them of witchcraft in the early 1300s, leading to the knights being thrown into prison or burned at the stake in their hundreds: “That the malice of a few could invent such a charge is a humiliating thought for the lover of his species; but that millions of mankind should credit it is still more so.”
It took more than misguided government policy to create the Irish property bubble.
Colm Keena is an Irish Times journalist