“They [Indians] are in a state of pupilage; their relation to the United States resembles that of a ward to his guardian.”

Chief Justice John Marshall, 1831


These words of John Marshall in the 1831 Supreme Court opinion on Cherokee Nation vs. Georgia stand in stark contrast to Chief Joseph’s appeal to “be a free man, free to travel, free to stop, free to work, free to trade where I choose, free to choose my own teachers, free to follow the religion of my fathers, free to talk, think and act for myself.” The dissent of Justices William Johnson and Smith Thompson are even more demeaning than Marshall’s ruling. They doubted that tribes could be elevated to the status of nations because Indians were “so low in the grade of organized society.”

Though people today would abhor the idea that any group of Americans would be treated as wards of the state, that is precisely what Marshall’s ruling and subsequent laws have made American Indians. On reservations, where tribal governments are supposed to be sovereign, persistent colonial institutions have subjected Native Americans to incomplete property rights, weak governance structures, and dependency on appropriations from the U.S. government.

Incomplete Property Rights

Though Indian reservations created in the latter half of the nineteenth century cover over 70 million acres—roughly the size of Nevada—most of the land does not really belong to the tribes or their members. Approximately 80 percent of Indian reservations are held in trust by the United States government, until, according to the Burke Act of 1906, Native Americans are determined to be “competent and capable” by the federal government.

Trusteeship means that the land is, for all intents and purposes, owned by the federal government to be managed for the benefit of Native Americans. Under trusteeship, Indian land use is regulated by the Bureau of Indian Affairs, making it difficult for tribes or individual Indians to manage their land as they see fit. Moreover, because Indians do not hold title to their land, it cannot be used as collateral for loans, something other Americans take for granted. As Peruvian economist Hernando de Soto emphasizes, lands without private title are “dead capital.”

In our previous essay, we noted that old indigenous economies were anything but “low in grade of organized society,” as Justices Johnson and Thompson opined. To the contrary, they had well developed notions of property rights, innovative governance structures, and extensive trade systems, and they were adapting well to the influx of Europeans. That adaptation, however, ended with the Indian Wars and the federal government’s trusteeship and top-down governance of Native American reservation life.

The Resource Curse

Much of the research connecting modern poverty to colonization emphasizes the ways in which abundant natural resources became a curse for indigenous people as immigrants sought to capitalize on those resources (see Acemoglu, et al. 2001). In some cases, resources were a curse because native populations could not defend their property rights in the face of colonial military power. Anderson and McChesney (1994) explain how this happened in the American West when the standing army created during the Civil War made its mission to “raid” (go to war) rather than “trade” (negotiate purchase of resources).

As a result, Indian Country went first from large territories—for example the northern half of what is now Montana—to smaller and smaller dispersed parcels. This expropriation included valuable minerals, as documented by Dippel (2014), who shows that tribes were forcibly relocated to reservations thought to be devoid of gold and silver; and the transfer of millions of acres of productive farmland from Indians to non-Indians through the allotment and privatization of reservation lands between 1887 and 1934 (Stuart 2005).

Perhaps the most egregious example in more recent times was the creation of Glacier National Park by purchasing the western half of the Blackfeet Reservation for $1.5 million while reserving for the tribe the rights to hunt, fish, and gather on the public lands. As recently as 2000, a judge referred to the exchange as a clear “adhesion negotiation,” meaning the Indians did not know what the terms of the exchange meant. In an article titled, “Ethnic Cleansing and America’s Creation of National Parks,” Isaac Kantor notes that “the agreement was accepted bitterly on behalf of the tribe by Chief White Calf, who stated, ‘Chief Mountain is my head. Now my head is cut off. The mountains have been my last refuge.’”

Following the Indian Wars, the Dawes Act of 1887 ostensibly was aimed at transforming Native Americans into yeoman farmers by allotting reservation lands to individual Indians in small parcels and eventually granting them fee simple title. The result, however, was that millions of acres of reservation lands were transferred to non-Indians. Within reservations, 29,481,685 acres were retained by tribes as tribal trust land, 17,829,414 acres [/were remained/?] as allotted trust, and 22,277,342 acres were declared fee simple, with many owned by non-Indians by 1933.

The Indian Reorganization Act of 1934, was passed to stop the transfer of Indian lands into fee simple ownership mainly held by non-Indians, but it also ensconced vast amounts of reservations into trust status. That trusteeship has three significant implications. First, trust land cannot be used as collateral for loans because the title is held by the federal government. This makes it difficult to invest in improvements such as irrigation systems or permanent buildings including houses. Second, changes in the use of trust resources must be approved by the Bureau of Indian Affairs, and this can take years. As Fort Peck tribal councilman Stoney Anketell has noted, “We're not shortchanging the need for archaeological reviews, but on land that has been farmed for 70 years? It's been tilled, plowed, planted, harvested. There's no teepee rings.” Thirdly, because the Indian Reorganization Act requires that trust lands be inherited in equal shares by all heirs, small parcels are often owned by hundreds of individuals who must all agree on how the land is used and all receive small shares of any financial returns.

The Legacy of Colonialism

Though most studies of the effect of allotment focus on transfers of land out of Indian ownership, the institutional legacy of allotment has been the effect of trusteeship on reservation productivity. Allotted trust lands cannot be used as collateral on loans, cannot be leased or transferred without approval from the BIA, and cannot be willed to a single heir. The first two restrictions make it difficult for tribes or individual Indians to invest in their land or to lease it to non-Indians for longer term, higher valued uses, and the third makes it difficult for large numbers of heirs/owners to agree on how land will be used.

Economists who have estimated the causes and effects of allotment generally find that allotment increased the gap between trust land and fee simple land productivity. Terry Anderson and Dean Lueck (1992) find evidence that agricultural productivity on 39 western reservations was highest on fee simple lands, with individual trust lands being 30 to 40 percent less productive and tribal trust lands being 80 to 90 percent less productive. Randall Akee (2009) finds that allowing long-term leasing of trust lands to non-Indians increased the value of trust lands on the Aqua Caliente reservation, because such leasing provides a way around the constraint on alienation. Jacob Russ and Thomas Stratmann (2015) analyze 12 reservations and find that fractionation—ownership by several individuals—correlates with lower per capita incomes at the reservation level and with reduced lease income from farming at the parcel level.

In short, the trust model is, as the National Congress of American Indians points out, “based on faulty and antiquated assumptions from the 19th Century that Indian people were incompetent to handle their own affairs.” Because of federal trusteeship over Indian Country, reservation land is effectively under the jurisdiction of the Bureau of Indian Affairs, rather than under the jurisdiction of the tribal governments that are “more directly accountable to the people they represent, more aware of the problems their communities face, and more agile in responding to changing circumstances.”

Unfortunately, the BIA has failed to be a good trustee or guardian. Consider, for example, the 2009 settlement of the long running class-action lawsuit in Cobell vs. Salazar. The plaintiffs claimed the U.S. government had mismanaged Indian trust assets, including money deposited in trust accounts, and therefore owed the beneficiaries more than $750 billion. Eventually the government settled for $3.4 billion, a small fraction of what was actually lost. This bureaucratic ineptitude coupled with bureaucratic constraints on land and resource use explains why land-rich tribes remain poor.

Without full ownership of their land, including the right of alienation, and without the jurisdiction to levy taxes, tribes have little hope of creating viable economies or viable governments. As law professor and tribal member Robert Miller put it at a meeting of tribal leaders in March 2019, “how do you exercise sovereignty if you have no money? Who pays the tribal police? Who builds the tribal courthouse?” Under persistent colonialism, the answer is the federal government, but the federal provision of public services—schools, policy protection, roads, and health care, to mention a few—is poor to non-existent.

The legacy of colonialism became further ensconced in reservation economies with the Indian Reorganization Act (IRA) of 1934. Like other elements of Roosevelt’s New Deal, Robert Miller concludes that the policies embodied in the IRA “helped created socialist style reservation economies.”

There are three ways in which the IRA moved tribes toward socialism. First, it encouraged tribes to strengthen their governments by adopting constitutions. This would have been a worthwhile goal had the resulting constitutions been consistent with tribal laws and cultural norms. Prior to the colonial era, tribes had constitutions that were reinforced in their ceremonies and customs. For example, Sheldon Spotted Elk, a Northern Cheyenne legal scholar, documents how the Cheyenne Constitution, though unwritten, “expresses the values of the tribe through cultural stories, ceremonies, governing organizations and gender roles among many other things.”

Instead of strengthened traditional governance structures, many tribes adopted boilerplate written constitutions patterned after the U.S. Constitutions. Because those constitutions had no basis in tribal customs and cultures, they were not really accepted by tribal members. As Spotted Elk observes, “the traditional values of each tribe through governance were discarded for the general political culture of the United States under model constitutions.” These IRA-era constitutions centralized power within strong tribal governments designed to distribute revenues from federal programs.

Second, the IRA locked Indian lands in perpetual trusteeship. On the one hand, the IRA ensured that more Indian lands would not be transferred to non-Indians in fee-simple title. On the other hand, the IRA put control of most of those lands in the hands of the BIA. In the true spirit of socialism, reservation resources are owned and managed by government.

Thirdly, the IRA allowed tribes to petition the Secretary of the Interior for tribal corporate charters that opened the door for tribes to borrow from a $10 million revolving loan fund. Professor Miller summarizes the result: “The IRA arguably had a significant impact on the economic life on reservations and helped create federally and tribally planned economies. . . . For this very reason, the IRA encountered strong opposition within and without Congress and even by Indians because the IRA allegedly promoted ‘socialism’ and ‘communism.’”

Socialism Tried and Failed

From the time that Justice Marshall penned his opinion about Indians as wards to the present, tribal economies have been at the mercy of the federal government. The socialistic economies that have evolved depend on the federal government for grants and loans and on tribal governments to spend the grants and invest the loans wisely. As we shall see in the next essay, some tribes have broken the mold and, rather than depending on grants, they are earning revenue and establishing the fiscal power required to lay the foundation for prosperous tribal economies. To break the mold, as A. J. Not Afraid, chairman of the Crow Tribe, notes, “our Tribe understands that we will be the key to unlocking our economic potential and removing ourselves from the siren call of federal handouts."  Chairman Not Afraid is one of many tribal leaders restoring the entrepreneurial spirit that allowed Native Americans to prosper before colonialism.

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