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How the Government Keeps Indians in Poverty

Wall Street Journal
Nov. 22, 1995


By Terry L. Anderson

For a few brief weeks this autumn, American Indians were in the news with their protests over the World Series’ teams nicknames. But, as usual, the protests have faded into the background—and the attention was never on the critical social and economic issues, anyway. The appalling economic conditions on Indian reservations will not disappear so easily.

Of all ethnic groups in this country, Native Americans who live on reservations are the most impoverished. Over 20% of Native American reservation households have annual incomes below $5000, compared with 6% for the overall U.S. population. Only 8% of reservation households have annual incomes greater than $35,000, compared with 18% for the overall U.S. population.

Why are reservation economies so poor? A common explanation is that the atrocities of the late nineteenth century left Native Americans with the worst lands. The data, however, do not support this claim. Department of Agriculture figures show that the average quality of agricultural land on reservations is slightly better than the farmland in surrounding counties. Moreover, many reservations are rich in minerals, energy, and timber. If well managed, these could generate substantial income. The Crow reservation in Montana, for example, has coal reserves valued at $26 billion or $3.3 million per capita—but the tribe earns a shockingly low 0.01% rate of return per year.

A hint at the reason for Native Americans’ poverty came to me some years ago when I took guests from Switzerland to visit an Indian rancher on a Montana reservation. Knowing that my guests had a romantic view of American Indians, I tried to prepare them for the poverty they would witness. But to my surprise, the family we visited was far from poor. Against a backdrop of spectacular mountains stood a handsome home, a well-kept yard, and productive fields.

After we became acquainted, I asked the Indian rancher if my general impression of reservation economies was incorrect, or if there was something different about this family. He matter-of-factly answered, “I own this place.”

I learned that some land on reservations is privately owned, not controlled by the Bureau of Indian Affairs (BIA). Other land is allotted to individual Indians but held in trust by the Bureau of Indian Affairs (individual trust land); and some belongs to the tribe but also is held in trust by the BIA (tribal trust land).

The land that is privately owned is far more productive than the other two categories of tenure. Indeed, a study of agricultural land on a large cross-section of Western reservations indicates that tribal trust land is 80% to 90% less productive than privately owned land. Individual trust land is 30% to 40% less productive.

These results do not necessarily argue for “privatization” of reservations, a proposal that would be opposed by nearly all tribes. But, somehow, the productive success that private property makes possible must be made available to all Native Americans.

Certainly, it is not now. BIA trusteeship imposes layers of bureaucracy and legal constraints on Indian land-use decisions. For example, banks are unwilling to make loans for improvements on trust lands because it is nearly impossible to repossess trust land if a borrower defaults on a loan. Tribal politics often compound BIA trust constraints, as tribal council meetings become a vehicle for political patronage. A member of the Crow tribe in southeastern Montana comments: “Like grass-hoppers, clans jump back and forth between factions” to garner political rewards.

Tribes have sought to unshackle themselves from the BIA through “self-determination,” and, for the first time in decades, the devolution mood in Congress offers a chance for them to push their cause. But economic success requires that tribes reward individual initiative and constrain tribal politics. Some reservations have managed to do this. For example, the Confederated Salish and Kootenai on the Flathead Reservation have been successful at starting small businesses and at managing their timber resources. The White Mountain Apache operate a sustainable logging operation, a successful ski facility, and a lucrative elk hunting camp, all without BIA control. In both these cases individuals are rewarded for their initiative and tribal governments refrain from counterproductive redistribution.

The baseball teams that were targeted for their nicknames provide a useful analogy. To win a game, each player must produce home runs or diving catches, but these individual exploits must be coordinated to make the double play or sacrifice out successful.

American Indians can reach back into their rich cultural heritage to find institutions that strike this balance. Throughout Native American history, the braves, warriors, and chiefs—the heroes for whom sports teams are named—rewarded individual effort while coordinating efforts through tribal governance. Riding a horse into a stampeding herd of buffalo, for example, required tremendous individual skill, and this skill was rewarded. Hunters marked their arrows so that the successful hunter would be known. The animals then belonged to the brave who launched the lethal arrow; he could divide the meat and the skins as he saw fit. At the same time, a cooperative effort was necessary to keep the herd from stampeding prematurely, so a hunt chief coordinated the overall activity.

All too often in reservation economies, the role of the individual hunter has been neglected. It’s time for that to change. Some reservations, such as the Flathead and White Mountain Apache, have loosened the BIA grip and shown the rewards of self-determination. The key is for other tribes to take this initiative and for Congress and federal bureaucrats to give Native Americans the freedom they deserve.

Terry L. Anderson is a professor of economics at Montana State University and the executive director of PERC. He is author of Sovereign Nations or Reservations? a study of Native American economic history (San Francisco: Pacific Research Institute).

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