Fostering Prosperity

Chapter II - NEW YORK BEGINNINGS - mid 1600's to mid 1800's


Every settlement requires jobs and government protection.

Growing communities benefit from centrally organized fire, police,

and town planning services.

Good government helps a community prosper financially.



Looking at the skyscrapers of New York today, it is hard to imagine the place as a sleepy settlement of a few homes. Yet that's just what it's first director-general found when he arrived in 1626. There was little to indicate that it would become one of the busiest and most important cities in the world.

In fact, most of the original Dutch immigrants sailed past Manhattan island to settle 150 miles up the Hudson River. They hoped to make money trapping furs inland. Earlier, the first exploration ship had made big profits when it brought home a shipload of furs from the interior Hudson valley. These profits inspired the early settlers to take the risks of an overseas voyage. The new immigrants did make some money but they also had problems, stemming from a lack of good leaders and organization. In order to prosper, the colony needed effective government as well as money making opportunities like the fur trade.

The primary task of an effective government is the protection of its citizens. Accordingly, the first major effort undertaken by the colony's new director-general was to build a fort at the foot of Manhattan Island. He had "purchased" the island from the native Indians for trinkets worth about $24. The fort was needed for defense against attacks by Indians or the British. Until there was security, investors and additional settlers were wary of making commitments to the new colony. With the protection of the fort, the colony started to grow.

To pay for the costs of the fort, the government levied taxes on the settlers. Most were willing to pay. However when a subsequent leader decided to extend the tax to the local Indians (to pay for their "protection" by the fort) the Indians rebelled. The bloody conflicts that resulted over the next several years hurt the prosperity of the new colony.



The colony was fortunate at last in 1647 to get a strong and able leader, Peter Stuyvesant. Although he moved about on a wooden leg, Stuyvesant had great energy and followed up on a number of needed tasks that only governments can do effectively. He started with fire protection, moved to town planning and improvements, then set up a paid police force. These are basic central services that all groups need. Unlike most of the things we want, these government services do not develop naturally out of free markets. They require effective leadership, something Stuyvesant was able to provide. He was not a democratic, consensus building leader; instead he impulsively ordered actions. Prosperity then and now depends on an effective, not necessarily a democratic, government authority.

Town fires were common in the 1600's because homes were flammable wooden structures with open cooking/ heating fires in them. An out-of-control fire in one house would easily spread to neighboring homes. One family might make their home fire-safe, but couldn't protect against a careless neighbor. Determined to minimize fires, Peter Stuyvesant in his first year appointed four wardens to inspect homes for fire safety. The wardens looked at chimneys for soot buildup and for areas where inside plaster had come off, exposing bare wood to sparks.

Complete fire inspections would never happen in the free market, where people can choose to buy or not buy such a service. Those with chimneys in the worst shape may have little money and might not want to find out that they needed some costly repairs. Yet any community definitely benefits from such inspections and fire safety repairs. Good governments will insist on it. Fire safety inspections of public buildings remain an important government job today.

To enforce fire safety, Stuyvesant levied fines on offending homeowners. Money from the fines went to buy fire fighting equipment like leather buckets and ladders. Stuyvesant set up fire watch crews of eight, a duty which all adult men in the colony had to take turns doing. Later, tax money was used to buy 250 buckets, which were distributed to homeowners. They were to turn out and bring the buckets whenever a fire alarm sounded. America's tradition of tax supported, volunteer fire departments stemmed from these beginnings.

For fighting fires, the free market did provide an alternative for a time. In Philadelphia, homeowners could pay a private company for fire protection and insurance. The company would rush to put out a fire at its customers' homes, but not at others. This led to scenes where a non-subscriber next to a burning building would try to negotiate a price for fire protection as the sparks flew! Clearly, private enterprise does not work well in the face of a danger to everyone.

Another community danger that depends on government action for effective control is crime. Peter Stuyvesant built the first jail in the colony and established an eight man paid police force. Unlike community efforts in fighting fires, volunteer police forces or vigilantes have generally not worked out well. All too often, unpaid or poorly paid police have taken money from criminal elements. For guard services, some homeowners and companies have used private organizations. But for most crime fighting, communities have found that a central police organization is an essential part of good government.

Finally, Peter Stuyvesant spent a lot of time in doing town planning and improvements. He straightened streets, filled in marshy areas, and even built a canal. He didn't actually do these things, but he planned and organized for them. Once a community improvement is decided upon, it is not necessary that the government do the work. By seeking private bids on work, governments can benefit from the competitive free market system.

However, town planning is an essential service that doesn't happen by itself. Various property owners have different ideas on improvements they would like to see. If each were allowed to do as the owner pleased, the result would be an unworkable mish-mash, like the crooked streets Stuyvesant found. One of Stuyvesant's town improvements has come down to us as Wall Street. He built a northern boundary wall at that spot to protect the growing town. Stuyvesant's able leadership provided the firm support that the town's merchants needed to grow. Eventually those merchants developed New York into the leading financial center of the world, but that did not happen easily.



In spite of Stuyvesant's efforts and a great natural harbor, New York did not develop as fast as other areas in colonial times. Philadelphia blossomed under even more skilled leaders like William Penn and Benjamin Franklin. Although founded late (1681), Philadelphia attracted colonists very rapidly with its liberal policies and promotion efforts in Europe. In less than a hundred years, Philadelphia became the second largest English speaking city in the world (after London).

A major drawback inhibiting New York's growth was its aristocratic tradition. That tradition inhibited the locals' spirit of free enterprise, so evident in Philadelphia's rapid growth. A penniless Ben Franklin from Boston passed by New York on his way to seek his fortune in Philadelphia. He found an entrepreneurial climate that rewarded his efforts, and in turn Franklin contributed his skills for a better Philadelphia.

New York at the time was set up primarily for the benefit of its wealthier merchants. Favored citizens were given huge land grants along the Hudson River. One was larger than the present state of Rhode Island. This land pattern was in sharp contrast to the small, owner tilled farms around Philadelphia. Immigrant farmers wanted to buy their own land, not just work on a New York aristocrat's estate, similar to what they were leaving in Europe. Many came instead to Philadelphia, becoming an entrepreneur on the land or in town. Their hard working efforts to find a better life paid off not just for themselves, but for everyone living around Philadelphia.

It wasn't until the middle 1800's that boom times came to New York. The Revolutionary War did help limit the prestige and power of New York's aristocrats. But the completion of the Erie canal in 1825 was the main reason for the boom. It provided the best route from the Atlantic coast to the virgin soil of the Midwest, a natural magnet for land hungry farmers. Immigrants poured into New York's excellent harbor, which soon became the nation's busiest. The immigrants who stayed in the city were free to develop businesses; they were little affected by New York's aristocratic traditions. The farmers rode the Erie canal to lands beyond the big Hudson River estates.

The Erie canal, so essential to New York's growth, was planned and organized by a driving leader, Governor DeWitt Clinton. Free enterprise forces could not fund a project this large; money from taxes was necessary. Like Stuyvesant and others before him, Governor Clinton provided the leadership to raise the taxes needed for a community project. Once scorned, "Clinton's ditch" became New York's ticket to rapid growth.

The prosperity of New York developed over time out of a combination of good government and a strong entrepreneurial spirit. With both, any region or nation can become prosperous. A weakening of either force, as happened several times in New York's history, can put a damper on a region's successful development.


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