Restoring American Indians To Prosperity

Wednesday, June 1, 2022

Editor’s note: This essay introduces a new book, Renewing Indigenous Economies, released today by Hoover Institution Press. Click here to purchase a copy.

Suppose that today Congress enacted legislation creating a federal executive bureaucracy with the power to determine when and if individuals of a specific racial or ethnic group were deemed to be “capable” and “competent” to conduct their own affairs. Further, suppose that to rescue the group and its members from a history of poverty, degradation, and victimization, Congress directed the new agency to act as a “guardian” for these “wards,” holding their assets—land, minerals, oil, timber, and wildlife—in trust. Imagine the absurdity, the impossibility, the ensuing uproar. And yet, such legislation is a legacy of our past, and we tolerate its continued hold on Native American citizens.

Since the late nineteenth century, American law and judicial precedent has institutionalized the dependent status of Native Americans. Initially, the British rationalized taking and occupying Indian lands by asserting that the “uncivilized” peoples lacked the rule of law and, thus, any defensible claim to ownership to their territories. After all, if American Indians had no concept of property rights to land, no law and governance institutions, and no understanding of capitalism, it was the obligation of “civilized” people to bring them law, order, and wealth.

The problem with this rationalization is that indigenous Americans did have rules of governance, did have property rights, and did trade, save, and invest to make themselves wealthy. As Pekka Hämäläinen notes in his excellent history Lakota America, the territory “under the Lakota rule was a safe and dynamic cosmopolitan world of its own where transnational commercial circuits converged, where Indians enjoyed many comforts and advantages of the industrial age, and where new ideas about being in the world were constantly debated.”

Our new book Renewing Indigenous Economies (Hoover Institution Press), released today, picks up the theme of just how vibrant pre-European economies and cultures were. For example, David Graeber and David Wengrow, in the fascinating book The Dawn of Everything, describe a place in Louisiana called Poverty Point, though it was anything but poor. There, anthropologists have uncovered earthworks built in the 1600s extending over almost five hundred acres. The area of the ceremonial precinct or walls is larger than some of the largest Eurasian cities of the time. The massive amounts of copper, flint, soapstone, and quartz crystals—not found there naturally—attest to the fact that Poverty Point was a trading node to which Indigenous Americans traveled from far away. However, because the region did not have much that residents could have traded in return, it appears that Indians of Poverty Point offered “the intellectual property of rituals, vision quests, songs, dances, and images” (Graeber and Wengrow). The point is that when Europeans “discovered” the New World, it was already rich in goods, tools, institutions, and culture. That is why Native Americans did not simply survive, they thrived!    

Nonetheless, confronted with the well-organized and technologically advantaged standing army of the United States, even the most prosperous American tribes were eventually confined on reservations to which their traditional culture and institutions proved ill-suited. Tribes that tried to adapt their cultures and institutions to the constraints of reservation life were thwarted by a federal bureaucracy bent on culture-destroying assimilation.

As a result, Native American tribes became, and remain, the poorest of America’s poor. Poverty rates among tribes hover stubbornly around 25 percent, and unemployment rates soar as high as 69 percent. In the past decade, median income on reservations was $29,097, less than half the $66,943 for all Americans. The suicide rate among Native Americans has risen 139 percent since 1999, compared to 33 percent for the US population as a whole. The rate at which Native American females are raped is 2.5 times the national average. And to these dismal statistics add high rates of spousal, drug, and alcohol abuse.

The stark disparity between Native Americans’ dynamic indigenous past and their poverty-burdened present begs for an explanation. That explanation is rooted in institutional weakness resulting from colonialist policies emanating from Washington, DC, since the nineteenth century.

Renewing Indigenous Economies looks inside the colonial polices that stifle Indian Country development to pinpoint specific institutional problems that frustrate the climb out of poverty and to highlight examples of economic growth made possible by changing the institutional rules of the game. Recognizing that investment is prerequisite to economic growth, this book focuses on the investment climate in Indian Country, identifying specific circumstances that deter investment both by tribes and tribal members and by off-reservation companies and entrepreneurs. This book illustrates with contemporary examples the practical difficulties that institutional weakness engenders, from would-be Indian entrepreneurs who cannot get loans because banks will not accept a house on reservation land as collateral, to resource-rich tribes that cannot develop their mineral resources because investors with the necessary wherewithal avoid the added risk of crossing reservation boundaries.

Renewing Indigenous Economies explains just how different the rules of the game are on  and off reservation. An off-reservation investor trying to understand reservation economies is like an American football player trying to understand rugby or soccer. All three games are called football, but the rules, the organization, the arenas—indeed, the balls themselves—are so different that even the most talented athletes would struggle to move from the gridiron to the soccer field to the rugby arena. In short, rules of the game matter as much to football as they do to economies.

Unfortunately, simply replacing Bureau of Indian Affairs (BIA) control with tribal council control is not enough for economic renewal. Many tribes face internal institutional barriers to investment and growth. Tribal governments frequently lack the sovereign power to establish a rule of law that is consistent with tribal culture but also comprehensive enough to facilitate trade and commerce in off-reservation national or global economies. Additionally, many tribal governments struggle to be inclusive and suffer the costs and delays of factionalism.

Successful entrepreneurship and wealth creation require clear, consistent, and enforced rules that encourage capital investment in the same way that football requires successful players to invest in their skills. Unfortunately, federal oversight, very different tribal legal systems, a lack of law enforcement, and dysfunctional political processes stifle reservation prosperity and individual dignity.

Until tribes are empowered to adopt clear, consistent, and widely accepted rules, investors will continue to avoid reservation economies, and the risks of entrepreneurship by tribes and reservation inhabitants will remain daunting. The diverse cultures, governance structures, and management styles that allowed tribes to thrive before colonialism have been replaced with a grants economy dependent on government largess. As the many examples of vibrant renewal described in Renewing Indigenous Economies illustrate, the climb out of poverty requires that tribes refocus on generating trade and revenue rather than chasing government grants.

Despite the difficulties, more and more Indian nations are finding paths out of the bureaucratic sinkhole by eschewing grants from their federal guardian and instead building self-sufficiency by generating revenue. The potential for freedom and prosperity still exists, but the path requires initiative by Indians for Indians. In the words of Crow tribal member William Yellowtail, “We must give Indians permission to pursue that age-old but newly remembered paradigm of entrepreneurial self-sufficiency.”

Indigenous peoples are demonstrating the ability to renew their economies and adopt modern business practices within the framework of their traditional cultures. Tribes are turning their resources—casinos, recreation and tourism opportunities, oil, gas, and coal reserves, soybean farms, and wildlife—into assets they husband and reinvest. Success stories of the Southern Ute, the Coushatta, the Citizen Band Potawatomi, the Ohkay Owingeh Pueblo, the Tulalip Tribes, the Wisconsin Oneida Nation, the Mashantucket Pequot Tribe, the Viejas Band of Kumeyaay Indians, and others testify to the real potential for American Indians to re-establish control of their economic well-being by building on the institutional foundation that is their cultural heritage.

The way to a prosperous future is neither easy nor quick. Self-directed economic growth demands vigilance and commitment to maintaining incentive-compatible institutions capable of spawning innovation, generating entrepreneurship, and encouraging trade. Maintaining a wealth-creating institutional structure requires attention not just to productivity and trade but to the organization of tribal government structures, to the accountability of tribal leaders, to the maintenance of modern accounting records, and to the nurturing of individual entrepreneurship. Amid these challenges, the success stories told in Renewing Indigenous Economies herald hope and possibility, and make it clear that American Indians are, indeed, both “competent and capable” of renewing their economies.