Economic History

BEGINNINGS:

The area that was to become the town of Fallsburg began its history as a summer hunting ground for Native Americans, and, after their arrival in that portion of the valley separating the Catskills from the Shawangunks,  for Dutch colonists from the valley below.  

However, what were ultimately the most critical building blocks of Fallsburg's subsequent economic history were placed millions of years before there were people of any race alive on earth. Fallsburg occupies a part of what geologists refer to as the Catskill Delta.  It's difficult to conceive the area as a delta today, but hundreds of millions of years ago, the Catskill Mountains were really the outwash plain composed of sand and silt eroded from far older and much higher mountains to the north and east.  What is now red shale and sandstone was, back then, mud and sand.  Buried deep and transformed into rock, and subsequently upthrust and eroded, this became the mountains beneath the Town of Fallsburg.  

Over the millennia, the upthrust delta eroded.  Around 10,000 - 15,000 years ago, a major ice age covered the area with a huge glacier that smoothed the terrain and scraped much of the soil away, depositing much of it in the valley to the southeast of the present-day township.  Left behind was the alternatively sandy or clayey subsoil, which even the passage of 10,000 years did not make into superb farmland.  Also significantly missing from the geological underpinnings of the area were economic mineral deposits.  The massive Catskill delta was entirely sedimentary rock and mineralization in any even remotely economic quantity was absent.  Coupled with the poor soil and the higher altitude, the Township began its populated life with three strikes against it.  The one significant economic success the area has had -- the resort industry -- was facilitated by one of the three strikes:  the higher altitude (and hence cooler summer temperatures).

SETTLEMENT:

The township's initial white settlers had a largely self-sufficient mixed subsistence economy, surviving by hunting and fishing and by what could be grown in individual garden plots.  The flood plain of the Neversink, in areas where it broadened, was the most attractive for farming, although the area already suffered, when compared against the valley below, from a growing season around two weeks shorter due to the higher elevation.  Trees also presented a significant obstacle to agriculture on any large scale. Early accounts tell of planting among stumps and roots.  Fishing and hunting were dependable means of providing food, at least until population growth reduced the availability of attractive species.  At the same time, the presence of predators such as bears, wolves, and various feline species made practices like turning ones hogs out into the woods to fatten on nuts a riskier proposition than might have been true elsewhere.  That most forest growth tended to be hemlock instead of nut-producing hardwoods also reduced the popularity of this practice in the area.

Among the earliest commercial ventures were those that were most efficient in an economy such as this:  grist mills.  Grist mills took advantage of an abundantly available and  renewable resource (water power) and replaced the labor-intensive hand-grinding of home-grown grains into flour with mechanical grinding as well as multi-day trips on foot carrying grain to be ground at mills at the fringes of white civilization.  

Although occasional rumors of economic mineral deposits in the area circulated, they were insufficient to inspire significant settlement and mining.  Or, perhaps such tentative settlement did exist for short periods of time before it was clearly demonstrated that there were no metallic ores in the area that even remotely approached concentrations worth mining given the technology of the time.  Likely the proven lead/zinc deposits in the Shawangunks, and the fact that the geology was completely different on those mountains from the geology of the Fallsburg area even to the untutored eye, contributed to the fact that no significant efforts to build mines in the area are recorded.

Following the Revolution, permanent settlement in the area began in a more organized way, with somewhat greater specialization of labor.

INDUSTRIAL ECONOMY:

Typically the next avenue of development after subsistence farming follows the natural resources available.  Lacking mineral resources, the area did have abundant hemlock forests and water power, the combination of which facilitated leather tanning.  To the extent that the area ever was industrialized in any conventional sense of the word, it probably was in this next phase:  tanning and production of rough forest products -- that the industrial apex was reached.  Given that transportation into and out of the area was not easy, tanning represented a way of using a resource that was not easily transported (hemlock bark) to process raw materials (hides) that were relatively easily transported using wagons over bad roads.  Simultaneously, capital concentration occurred, as larger landowners, largely non-resident, sold their holdings to settlers who in turn were bought out or dispossessed by local entrepreneurs.  The same process followed the more successful tanning "factories".  Medad T. Morss, a tanning entrepreneur, is an example of this breed of capitalist, as he not only controlled significant business in the Town of Fallsburgh, but also two towns north, in the Town of Rockland, where he even had a hamlet, Morsston, named for him.  

The railroad came to the Town of Fallsburgh much in the same way that excess capacity in long-haul fiber optic cable came to the United States in the late 1990s -- in a surge of speculative excess.  There was ultimately no economic reason (other than speculative excess) to have a railroad that went to the same destinations that pre-existing railroads already served -- particularly if the entrenched competition did not have the O&W's geographic obstacles to overcome.  

This was especially true because of the lack of natural resources along the O&W main line to justify that railroad's tortuous routing.  Had the O&W snaked through an area rich in mineral wealth, or abundant fertile farmland, or other source of goods to transport, perhaps it might have succeeded.  In an area where industrialization was minimal, mining was nonexistent, and agriculture tended to subsistence levels, the line -- especially since it lacked a meaningful western terminus -- realistically didn't have a chance.  Because of the terrain, maintenance of way expenses were enormous -- and so were operating expenses.  Snow removal in the winters was a frequent expense, and year-round, at some locations, pusher engines had to me continually maintained to get trains up some of the steeper grades.  Finally, the routing was determined by the towns or villages that would bond the railroad. Interestingly, villages in the Town of Fallsburgh saw fit to do so, while the County Seat, Monticello, in the Town of Thompson, did not.  Thus, the railroad ran through the Fallsburgh communities.  While the routing no doubt benefited the Town of Fallsburgh, under the handicaps the railroad faced, virtually as soon as it was built it encountered financial difficulties that it never overcame.

Notwithstanding, the railroad facilitated the next state of economic development of the Town of Fallsburgh -- which was indeed fortunate to have 25% or more of the O&W main line trackage in Sullivan County running more or less up the axis of the Township (but see the preceding paragraph for the reason so much of the trackage was in the Township).  Convenient transportation to larger population centers facilitated the transformation of the subsistence farming economy into one of dairying, which represented a more efficient use of both labor and land -- particularly important because the upland soil was far more efficiently used for grazing and haying than for planting and harvesting.  As the hemlock forests all but vanished, taking the tanning industry with them, the dairying industry grew.

SERVICE ECONOMY:

As the 19th century closed, the migration from the country to the cities across the US continued.  However, along with it came the notion that it was beneficial to get out of the cities, especially during the summer, and return to the country for a time.  Virtues were associated with "country life" -- exaggerated as they were -- were nonetheless alluring to city dwellers.  The combination of the railroad, the proximity of Fallsburgh to New York City (and the smaller cities of New Jersey), the rural character of the township, and the infrastructure of dairy farms, where caring for guests was more attractive work than caring for cattle, became the basis of a nascent resort industry.

Family farms readily added bedrooms and became boarding houses, and a growing urban middle class found it economically feasible to flee the evils of city life (which were believed to include the growing immigrant populations from central Europe) and spend part of the summer in "the country".  Sullivan County Historian John Conway has pointed out that the family farms growing into resorts were not, however, the most important element in the growth of the resort industry, and that in the last quarter of the 19th century many resort hotels, and particularly the larger ones of that era, were constructed from scratch specifically to serve as hotels.  

By 1920 the summer boarders on family farms of the pre-railroad years had morphed into a significant summer resort industry in the Town of Fallsburgh.  It had taken very few years before the immigrant groups that the  vacationers of the late 19th century had been seeking to avoid had not only joined the party, but owned it. The resort hotels were sold by their gentile builders to Jewish families who expanded them both in terms of capacity and in terms of services and facilities they offered. Simultaneously, labor and cultural/religious organizations sought to care for their members who could not continue in city life, and such organizations as the Workmen's Circle and the Jewish Welfare League began resettling immigrant families, often with health problems such as tuberculosis, on subsistence farms in the Fallsburgh area.  Mountaindale was one Fallsburgh community that notably received this population.  

As admirable as the motives were for relocating these people, even before the Great Depression it became evident that what had been accomplished was principally moving their suffering from from visible urban poverty to invisible rural poverty.  But with this group and from it came the great hotels of the Borscht Circuit, and perhaps the best economic times that the Town of Fallsburgh has ever known.  As the earlier settlers in the area had perceived that it was economic to direct agricultural pursuits away from general farming and into a specialization in dairy farming supplemented by summer boarders, or even into small, single-purpose summer hotels, this new population quickly perceived that summer visitors brought money with them to hand over directly to the hotel owner, while dairy products produced on the farm and shipped to major population centers for sale not only brought less money back, but that they did so only after both a time lag and after several middlemen had taken their share off the top.  They also seem to have intuitively understood the concept of economy of scale:  the more guests there were to amortize fixed costs, such as new facilities, the lower unit costs became, even if the fixed cost base increased.  The decision to specialize in the resort industry instead of dairy farming while taking a few summer boarders, or running small summer hotels, seems to have been an obvious one, especially to people who did not have two or three generations of self-definition as "farmers" or small-town people to cloud their vision.   

It would be incorrect to say that the Borscht Circuit erupted overnight, for it certainly had a significant precursor in what John Conway has aptly called the "Silver Age" of the Catskills resorts, but in terms of social and economic impact on the area it must have seemed to be the case.  Production of services had almost entirely supplanted the production of goods as the economic mainstay of the Township in the decade preceding the beginning of World War II.  By the early 1950s, a Social Studies teacher asked his class in nearby Liberty to raise their hands if they were dependent on the resort business for a family livelihood.  After some discussion of the fact that even the local Protestant clergy would not be in the area if their parishioners did not provide goods and services to the resort hotels and those who worked in them, every hand in the class was raised.  

A portion of this concentration was due to reinvestment in physical plant by the resort owners.  The business was highly competitive from the outset.  The season lasted only a few weeks -- Memorial Day at the earliest until Labor Day was the recognized "season" -- and within those weeks the revenue for a full year had to be earned.  Thus, competition based on features available tended to be brutal.  A larger swimming pool, an air-conditioned lobby, or a spectacular night club at a neighboring resort could easily attract a few guests away from a less-well-equipped neighbor.  

It is easy to forget about two other aspects of Fallsburg as a vacationland:  bungalows and kuchalanes (resorts with shared kitchen facilities).  Manville Wakefield, in To the Mountains by Rail, identified these resort facilities as being for those who "could not afford or did not want the hotels...."  (p. 82).  Their presence served to democratize the area, and increase the robustness of the economy of the resort business, but in the longer run no doubt contributed to some loss of cachet associated with vacationing in the Catskills.  

Another aspect of the seasonality of the resort business contributed to the problems of the next phase of the area's economic history.  This involved the people who worked at the resorts.  For college students, "the season" coincided nicely with summer vacation.  Many college students, particularly from Jewish families in the northeast, worked at the resorts summers during their college years, normally in jobs that brought them into contact with the guests:  bellhop, busboy, waiter, lifeguard, counselor in the day camp. Through hard work and well-earned tips, these students found resort work financially rewarding, and many came back summer after summer.   However, the coincidence of the college summer break and "the season" was too close for college students to fill all the labor needs of the resorts.  To take a resort hotel that had lain fallow all winter, and to make it into a "paradise in the mountains" between the time the snow melted and the arrival of the first guests could not be done by college students who arrived more or less simultaneously with the first wave of guests.  The "heavy lifting" during April and May (and such work as lawn mowing and dishwashing through the season itself) was done by "the bums."  

"The bums" was the term used by the County Welfare Commissioner, the County Sheriff, and the hotel owners  with no apologies when the author of this article interviewed them in the 1960s.  These migrant workers followed a path that led them north from Florida, following Spring northward as seasonal businesses opened, to arrive in the Catskills in April, frequently after a week or two on the Bowery in New York City and a week drying out in Camp LaGuardia in Orange County.  An alcoholism-ridden group, the bums were not an attractive workforce, but they were the workforce that was available.  

To a business that depends on a migrant workforce, the ideal is for the workers to arrive when they are needed, to do the work that needs to be done with reasonable efficiency and at low cost, and to leave as soon as their services were no longer in demand.  In reality, most migrant workforces normally experience some attrition with each stop on their migration pattern.  In the case of the bums, by the time Autumn came to the Catskills and the hotels were closed down until the next year, a few would be in jail serving terms that would keep them into the winter.  Some would be in the county sanitarium suffering from chronic disease that made them unable to work.  A few would have begun the process of assimilation into the year-round economy through marginal non-hotel (or year-round hotel) employment, frequently punctuated by alcoholic binges, recurrences of chronic illnesses, and antisocial behavior.  The gradual growth of this population through the 1950s forms a backdrop to the next economic phase.

INSTITUTIONAL ECONOMY:

The era of the bungalows -- 1945 through 1952, according to Wakefield, as he describes how bungalows were attractive to returning World War II servicemen and their brides who had been living with parents due to the housing shortage, and for whom a bungalow in the Catskills represented an escape for the summer -- represented the powerful effect of external institutional forces on the Town of Fallsburg.  Here, the institution was the Armed Forces reducing force, and creating serious stresses on the housing supply in New York City.  The beneficiary was the bungalow industry in the Catskills.  

The 1950s marked the explosive growth of commercial aviation (opening new alternatives to the Borscht Circuit), suburbanization of the city population and development of low-cost air conditioning (together obviating the need to escape the heat of the city during the summer), demise of the railroad (which had strongly supported the resort industry since it began via cooperative advertising, as well as providing a convenient way to reach "the Mountains" without an automobile), opening of Route 17 as a super highway (although not then part of the Interstate Highway System) -- that bypassed the Town of Fallsburgh, just as the O&W Railroad had bypassed the Town of Neversink 75 years before.  The decline of the Borscht Circuit was underway by 1960, and since Fallsburg was highly dependent on the resort industry, the fortunes of the Town of Fallsburgh declined with it.  The annual revenue inflow of vacationers virtually dried up, and rather sooner than later.  When a resort area (or other recreational outlet) becomes unpopular, or even merely unfashionable, the unpopularity tends to snowball.

Earlier, in the 1930s, New York State had constructed a prison in Woodbourne, and in the 1950s the Neversink Reservoir was built on the northern edge of the Hasbrouck area of the Town of Fallsburgh, with the Merriman Dam and Rondout Reservoir in Grahamsville, a short distance from Woodbourne on Route 42.  (Interestingly, this represented a throw-back to the era when the area exported other natural resources -- but this time the resource was drinking water, collected, processed, and exported by a governmental entity instead of resident entrepreneurs.) Sullivan County Community College, in Loch Sheldrake (with a featured concentration in the hospitality industry, an industry that was locally moribund by the time the college opened) opened a decade or so subsequently.  These institutions became significant employers for the Town of Fallsburgh.  

There have been temporary bright spots -- or suggestions of where bright spots might have appeared with sufficient encouragement.  While the so-called Woodstock Festival took place neither in Woodstock (located around 30 miles northeast of the Town of Fallsburg in Ulster County), nor in the Town of Fallsburg itself (the location was in the Town of Bethel, in Sullivan County but around 15 miles to the west), it did suggest an alternative way of making the Town of Fallsburg an attractive place to visit for a generation that had eschewed the area as "a place their parents might visit."  Mountaindale was the site of "Bach to Rock" -- a festival planned along the lines of the Woodstock Festival, and scheduled for July 1970, but cancelled via court order at the last moment.  A decade later, Mountaindale again attempted to become a tourist mecca as a minor league baseball stadium was constructed.  At this writing the stadium is vacant.  The hamlet of Mountaindale, nearly abandoned, has now been largely bought up and refurbished.  Whether it can attract a critical mass of commerce to remain attractive is an open question.

The most significant element of the institutional economy to come into place involved the former resort hotels themselves.  While they had become non-competitive as resort hotels during the service economy phase, when operated by entities which held not-for-profit status they again became economically viable, at least to some extent.  The not-for-profit status also implies two other elements critical to their success:  specialization and lack of ostentation. Rather than a resort hotel that needed to compete on all fronts (food, facilities, and entertainment being the three most important and most expensive) to differentiate itself from its many competitors, the specialized not-for-profit "resort" could feature one aspect of that expensive triad as long as it was merely adequate in the others.  Thus, a health resort specializing in one particular philosophy of wellness does not need to employ star entertainers in a lavish nightclub and feed the guests elaborate and abundant meals -- indeed, the converse might well be the very reason that the guests attend. In a religious facility, the "entertainment" is likely to consist of practice and discussion of religion and associated cultural activities -- something that does not usually require an 18 hole golf course on the premises.   

Whether their orientation was religious, health-oriented or cultural, the governmental subsidy provided by tax exemption, coupled with the tighter focus provided by their orientation (and required in order to maintain tax exempt status), allowed them to once again participate in the economy of the Township. The hotels would not be the grand establishments they were in the heyday of the Borscht Circuit, and they may be off the tax rolls, but they were at least no longer empty hulks, decaying while awaiting ultimate destruction by fire.  

"Suspicious" was the term fire marshals applied, for example, to the April 2003 fire at The Pines in South Fallsburg.  The Middletown Times Herald-Record quoted a police detective as saying that "people have been known to crash at the empty hotel" and noted that fire investigators had found blankets, Philly Blunt cigars and beer cans in the wing of The Pines next to the one that had been destroyed.  The Pines clearly was not one of the hotels that had made a successful transition to existence in an institutional economy.  

Whether the social problems of the underclass that grew locally during the heyday of the Borscht Circuit can be effectively dealt with in the subsidized sector is another question.  At a time of tightened state budgets it is improbable that welfare funding will significantly improve their lot.  Too visible an underclass reduces the viability of the area as a desirable locale for second homes and eventually reduces the attractiveness of the resorts, even in their not-for-profit guise.

Casino gambling under the auspices of one or more Native American tribes -- thus, again a component of the institutional economy -- potentially will bring benefits to the area.  With the predicted economic benefits it will attract an underclass of its own; the Las Vegas and Atlantic City experiences seem to assure that much.  There is also good reason to think that gambling in the Catskills has happened too late; that the United States is already "over-casinoed" and that even if casinos are built, people will not come.  The success of casinos in Sullivan County is by no means assured.  Neither can the economic and social impact on the area be predicted with confidence.  One thing is more certain than most.  What it will assuredly bring is change -- something that has been a constant in the economic history of the Town of Fallsburgh.

Geoffrey Brown 2003

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This website was last updated 05/07/2008