The Wealth of Indian Nations

Stories of my ancestors interacting with families of the Northwestern Shoshone tribe enthralled me as a girl. The idea that the native people were self-sufficient and often helped the early settlers survive by trading goods, such as animal skins, and by sharing their knowledge of water sources and hunting grounds was inspiring. Today, however, many “First Nations” are stuck in a welfare state. PERC’s latest issue of PERC Reports looks at past and present trends in indigenous life, shining a light on how property rights and individual initiative can help create a higher standard of living and improve environmental quality on reservations and beyond.

PERC president TERRY ANDERSON points out that American Indians and First Nations people can reach back into their rich cultural heritage and find institutions that rewarded individual initiative. The key is for tribes to take this initiative again and for Congress to give tribal nations the rights that were once theirs.

Why is it that reservations are so poor asks JOHN KOPPISCH with Forbes. People are quick to point to alcoholism or underdeveloped land, but as Koppisch wisely writes, “those are just the symptoms. Prosperity is built on property rights, and reservations often have neither.”

Tribal governments can help solve the poverty problem. ROBERT MILLER draws on his experience as Chief Justice of the Grand Ronde Tribe and as a citizen of the Eastern Shawnee Tribe to explore how native governments can establish the laws and court systems necessary to attract investment.

In the past, native nations built their economies via extensive trade networks. Arctic tribal historian, JOHN BOCKSTOCE, reveals how the Eskimos and Chukchi in the greater Bering Strait region had been trading for thousands of years before the Russian and American trading vessels arrived.

Beyond North America, IAN BOISVERT, with BlueSky Mediation & Law and a former PERC graduate fellow, introduces the idea of “Tradable Occupation Rights” for the Maori in New Zealand. Creating these rights would offer both commercial and customary ocean users a market to resolve conflict and promote more efficient uses of resources.

This special issue of PERC Reports is made possible by the generous support of the M. J. Murdock Charitable Trust. PERC is continually grateful for their investment in tribal issues and free market solutions.


Economic Prosperity for North American Indians

The link between natural resources, institutions, and economic prosperity is nowhere more apparent than on American Indian reservations. For this reason, PERC hosted a workshop at Lewis and Clark College on “Institutions, Resource Use, and Economic Prosperity for North American Indians.”

If the scholarly papers presented at the workshop didn’t provide enough evidence of this link, Don Leal and I saw it first hand when we hunted pheasants on the Crow Reservation last weekend. Like most western reservations, the Crow has three categories of land ownership: tribal lands held in trust by the U.S. Government; individual Indian lands also held in trust; and privately owned lands. The important thing to note is that the trust lands are shrouded in layer upon layer of bureaucratic red tape. It was this bureaucracy that led to a court decision (Cobell v. Salazar) holding that the federal government pay $3.4 billion to individual Indian for violation of its fiduciary trust responsibility. How would you like the federal government to be trustee of your assets?

Moreover, trusteeship makes it impossible for tribes or individual owners to use land as collateral for loans, one of the main sources for agricultural investment. Not surprisingly, trust lands have little investment and little agricultural productivity.

Under tribal rules, Don and I could only hunt on trust lands so we took along an ownership map. Turns out the map was not necessary; we could easily tell the trust land from the private land. With only a fence running between the two, the private lands had crops, grain storage bins, barns, and so on; the trust lands had only a few cows or horses grazing on them.

PERC’s research shows that property rights are key to good resource stewardship and economic development is key to understanding why American Indians remain at the bottom of the income ladder. Stay tuned to PERC for more research on this subject.


Watch Terry Anderson on Stossel

PERC’s Terry Anderson made an appearance on Stossel Friday night to discuss the causes of American Indian poverty. The video is here:

For more from Terry on property rights and Indian reservations, see the following related links:


TONIGHT: Terry Anderson on Stossel at 10PM ET

PERC’s Terry Anderson will be on Stossel on the Fox Business Channel tonight to discuss property rights on Indian reservations. The program airs tonight at 10 PM ET and re-airs Saturday at 9 PM and midnight ET and Sunday at 9 PM ET.

Be sure to tune in. See Terry’s earlier appearance on Stossel here.


Fighting Over Fracking

by Laura E. Huggins

There is a battle brewing between the energy industry and environmentalists concerning the dangers of removing natural gas from shale using a process called hydraulic fracturing, or

Fracking involves pushing millions of gallons of water (mixed with sand and chemicals) through wells at high pressure to fracture the shale. Roughly half the fracking fluid remains in the ground. The rest of it comes back out of the well and is considered industrial waste.

This process has been around for more than 60 years. But only in the past several years, with the rising cost of fossil fuels, has it been determined to be cost effective.

Given that fracking is relatively new to the scene many people can’t say if they support this process. The positive economic impact of natural gas drilling is proven, but if this process is contaminating local aquifers there may be unintended consequences, which bring us to property rights.

If there are problems, for example, who is liable, the surface owner or the owner of the lease for sub-surface mineral rights? I would love to read more about hydrofracking and nuisance law or impacts on tribal lands.

One of the few people raising concerns associated with property rights and fracking is Idaho Statesman reporter (and former PERC media fellowRocky Barker.

Company officials told the Legislature that they were negotiating both subsurface leases and surface use agreements. But landowners should be sure the agreements they sign protect their rights, experts said.

Another key issue the oil and gas conservation commission will have to address is unitizing the gas field for development. This process, which delineates how the subsurface resource is divided, is ripe for gerrymandering that could cut mineral right owners out on royalties.


Commerce by a Frozen Sea

Some economic histories are valuable because they provide insights into events and places previously not fully explored, while others contribute through a well-formulated test of economic propositions. In Commerce by a Frozen Sea, Ann M. Carlos and Frank D. Lewis have given us a marvelous melding of the two. The authors have written a carefully researched and well-organized discussion of the early fur trade in the very northern reaches of North America as well as a fascinating use of basic economic theory. The book extends our understanding of the overall extent of the trade and the interaction between the European traders — primarily the French and British — and indigenous tribes.  Europe wanted furs, primarily beaver, and the resident tribal groups valued the commodities available from the more economically-developed countries.

When Adam Smith published his Wealth of Nations in 1776, he devoted a bit more than a page to the Hudson Bay Company, which was over a hundred years old at that point, having been created by royal charter in 1670. Smith places his discussion of the Company in his section discussing the costs and benefits of joint stock companies, and thinks the Hudson Bay Company probably had a reasonable level of profits, despite some of the principal-agent problems inherent in such organization.

Smith could have made the Company and its relations with the Native Americans in the region around Hudson Bay a prime example of one of his basic assumptions about human nature, “the propensity to truck, barter, and exchange one thing for another.”  He also argued that the division of labor is limited by the extent of the market  and he would have found in the activities of the Hudson Bay company a surprisingly robust case study of entrepreneurial efforts to further extend the market and hence the division of labor.

Commerce by a Frozen Sea is, at its core, an account of the gains from trade when two very different cultures with very different resources and productive abilities come into contact. And that contact itself was not exogenous, but driven by farsighted individuals who were able to organize trade across thousands of miles in the most difficult of circumstances. The Hudson Bay was frozen for most of the year, so the outposts or “factories” along the edges of the Bay depended upon the yearly vessel that would bring rations for the Europeans stationed at the factory as well as trade goods. These goods were often ordered specifically by the Indians the year before. The ship would then load the furs that had accumulated at the trading post for the return trip to Europe.
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How Government Perpetuates Native American Poverty

Last week, PERC was featured on the Fox Business Channel’s Stossel program for a Thanksgiving special giving thanks to property rights. Executive director Terry Anderson joined Manny Jules, former chief of the Kamloops Indian Band, to discuss how property ownership benefits Native Americans.

Watch the video interview from Fox here.

American Indian tribes are the single largest land holders in the United States; in aggregate nearly 100 million acres—an area just smaller than California. And much of these lands are rich in natural resources. Along with timber, grazing, and crop lands, other resources include oil, coal, and  uranium.

One might think such assets would equal prosperity. Not so for the majority of American Indians. The same variables important to economic prosperity in developing countries are important on Indian reservations. Without institutions that reduce the temptation for government to engage in transfer activities and without private property creating a reward for productivity, Terry Anderson says, “Indian economies are likely to remain enclaves of poverty in a sea of prosperity.”

The impact of insecure property rights can be seen on almost any reservation. Some families of the Pine Ridge Indian Reservation in South Dakota, for example, are still living with no electricity, telephone, running water, or sewer. On this reservation, the eighth largest, unemployment hovers around 80 percent and 49 percent live below the federal poverty level. The life expectancies are in the high 40s for males and the low 50s for females.

On the bright side, starting with The Self Determination Act and followed by a series of compacts, some tribes have taken a lead in assuming management responsibility for their reservation. The Confederated Salish and Kootenai on the Flathead Reservation (Stossel showed an aerial image of this reservation) have been successful at starting small businesses and at managing their timber resources (see PERC’s “Two Forests Under the Big Sky“). The White Mountain Apache operate a sustainable logging operation and a lucrative elk hunting camp, all without Bureau of Indian Affairs control. In both of these cases individuals are rewarded for their initiative and tribal governments refrain from counterproductive redistribution. This direction offers a new path for reservations still caught in a collectivist trap.

For more on property rights in Indian societies, see Self-Determination: The Other Path for Native Americans, edited by Terry Anderson, Bruce Benson, and Thomas Flanagan.


Watch PERC on the Fox Business Network

by Shawn Regan

As John Stossel writes this week, the first Thanksgiving almost didn’t happen. Communal property arrangements caused early Plymouth settlers to nearly starve. Food production was low and famine soon resulted. It wasn’t until settlers began assigning property rights to parcels of land that Thanksgiving was possible.  Corn was planted, harvests rose, and in 1623, the first Thanksgiving was held.

This week, Stossel will be dedicating an entire show to the subject of property rights. The show will discuss the role of property rights in Native American societies, in promoting prosperity in the developing world, and how they saved the American bison. PERC executive director Terry Anderson will appear, as well as PERC fellow Brian Yablonski. Be sure to tune in to STOSSEL on the Fox Business Network on Thursday at 9 PM EST. It will be rebroadcast at midnight on Thursday, Saturday at 9 PM and midnight, and Sunday at 9 PM (all times eastern).

Watch a preview of the show here.