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Sovereign Nations or Reservations?

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Title: Sovereign Nations or Reservations?


1
Sovereign Nations or Reservations?
  • Culture, Property Rights, and Paradigms

2
I. Poor People Rich in Resources
  • Many Indian reservations have abundant and
    valuable resources of land, timber, wildlife, and
    energy. But Indians suffer
  • high unemployment (27 40 in the 1980s)
  • low incomes (in 1990, 31 of households received
    public assistance)
  • 23 percent of households below the poverty line.

3
A rising tide raises all boats?
  • Despite recent growth partly due to gambling, per
    capita income for Native Americans living on
    reservations in 1999 was 7,846 compared to a
    U.S. average of 27,880.
  • This puts reservation Indians on par with
    citizens in developing countries such as Palau or
    Oman.

4
Pine Ridge Reservation
  • The following are a few facts about the
    reservation today.
  • Population 20,000 Lakota people -half of the
    population is under 18 years old
  • Unemployment 85
  • People want to work but there is no industry.
  • Per Capita Income 4,000.00
  • Life Expectancy - Male 55 (U.S. Avg. 75) -
    Female 60 (U.S. Avg. 80)

5
Islands of Poverty
  • Why does this bastion of poverty persist in a sea
    of wealth?

6
4 Explanations for Poor Economic Performance on
Reservations
  • 1 Powerlessness, dependency, and expropriation
    (colonialism)
  • Past expropriation of resources
  • Indian dependence on federal government for
    income
  • Indian economies will only prosper as tribes are
    freed from paternalistic controls and exploitive
    economic relations with the larger society.

7
Pine Ridges Explanation Its Not Our Fault
  • The Lakota Nation consisted of great leaders such
    as Red Cloud, Big Foot, Sitting Bull, Crazy
    Horse, and American Horse. The people who
    presently live on the reservation are a wonderful
    people. They have a beautiful culture filled
    with respect and generosity. Yet, they have been
    forced to live on land that is not conducive to
    farming, ranching or industry. (There is a reason
    that much of this area is referred to as the
    "Badlands".) http//www.redcloudschool.org/history
    /facts.htm

8
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9
2. Traditional development economics explanation
  • Traditional development economics focuses on
    endowments of human and physical capital, and on
    natural resources.
  • Poor schools, high drop-out rates, few college
    graduates mean low levels of human capital.
  • Crow Indians are poor despite being resource
    rich.

10
Crow Indian Reservation
  • For many years the vast coal deposits under the
    eastern portion of the reservation remained
    untapped.
  • One mine is now in operation and providing
    royalty income and employment to tribal members.
  • In the 1980s the Crow tribe had 27 billion worth
    of coal or over 3 million per tribal member.
  • Unfortunately, the asset earned a paltry 0.01
    percent return leaving 55 percent of tribal
    members on public assistance.

11
Untapped Potential
  • The Crow operate only a small portion of their
    irrigated or dry farm acreage and about 30
    percent of their grazing land.
  • They maintain a bison herd of 300 head.
  • Recently (August 2008) contracted with a foreign
    company to develop coal for liquefied coal fuels.

12
Crow Indian Tribe Sign Agreement 7 Billion Coal
Mine Project
  • The Crow Indian Tribe has signed an agreement
    with an Australian company that could eventually
    bring 1 billion a year to the tribe. The
    agreement outlined today (10 August 2008) calls
    for mining coal and developing energy a deal
    that could create thousands of jobs for tribal
    members.
  • Tribal leaders say this deal will let members
    realize their dreams of good homes and the best
    schools.

13
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14
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15
Crow Indians
  • http//en.wikipedia.org/wiki/Crow_Tribe

16
3. Indians are Different
  • Indians are different due to intrinsic aspects
    of Indian societies, usually indigenous culture
    or tribal social organization.
  • Indigenous populations inhabiting the North
    American, African, and Australian continents
    prior to colonization by Europeans are put forth
    as examples of environmentally sensitive cultures
    that understood sustainable behavior.

17
Inimical to Capitalism?
  • Many contend that Indian cultures are inimical to
    capitalism, but this is not supported by the
    facts.
  • Supposedly Chief Seattle said in the 1850s "How
    can you buy or sell the sky, the warmth of the
    land. . . . Every part of the Earth is sacred to
    my people."
  • Never mind the fact that these were not the words
    of the chief but were fabricated for a television
    program this view does not fit the historical
    facts.

18
Capitalistic Institutions
  • From teepees to horses to land and water,
    pre-Columbian Indians established property rights
    described by one anthropologist as "naked
    possession."
  • Even after being confined to reservations, "the
    tradition of individual ownership was so well
    established that Indians resisted government
    efforts to establish common property," says
    economist Leonard Carlson.

19
Differences, contd
  • Cultural differences existed and continue to
    exist. Modern multicultural scholars contend
    that Indians were not corrupted by the
    self-interest of capitalism.
  • It is difficult to find a correlation between the
    different Indian cultures and the performance of
    Indian economies.
  • Certainly culture and ritual were important
    constraints on Indian behavior, but prices made a
    difference in everything from their choice of
    technologies to diets to art. This simple
    insight is crucial to understanding Indian
    history.

20
4. Ineffective Governing Institutions
  • Economic stagnation is due to the lack of
    institutions capable of effectively regulating
    and channeling individual and collective
    behavior.
  • The new institutional economist asks what impact
    the rules of the game have on the interaction
    of individuals including families, clans, tribes,
    and governments as well as traditional economic
    markets my emphasis, p. 5.

21
Economic Theory
  • Economists believe that institutions and
    incentives matter.
  • This does not mean that cultural differences have
    no influence.
  • But, Culture never completely overrides the
    individual ego. Anderson, p. 19

22
Institutions
  • Institutions can be thought of as the rules of
    the game that determine who is able to derive
    wealth from the assets available to society.
  • Rules of the Game include
  • Formal laws
  • Tribal constitutions, federal laws, and tribal
    regulation
  • Informal rules

23
What are Rules?
  • "Rules" are behavioral patterns that other
    individuals expect a person to adopt and follow
    in the context of various interdependent
    activities.
  • The rules one individual is expected to follow
    influence the choices made by other
    individualslike prices, rules coordinate and
    motivate interdependent behavior.

24
Informal Rules
  • Customs, norms, religious teachings, ideologies,
    and traditions
  • These rules are generally unwritten, evolve over
    long periods in response to changing physical and
    human resource constraints at the local level.
  • In societies without written languages informal
    rules provide the bulk of the institutional
    framework.
  • The informal rules that survive work, i.e.,
    promote efficiency.

25
Definition
  • Wealth
  • Economists use wealth to mean any human values
    that contribute to human well-being.
  • Trade creates wealth, because values are
    subjective.
  • Trade is a positive sum game.

26
Institutions
  • Institutions Individual decision-making
  • Contrary to popular belief, Indians used varying
    degrees of private ownership for many assets
    including household goods, horses, land, and
    hunting and trapping territories.
  • Institutions Collective decision-making
  • Whose values get represented? Aggregation
    becomes difficult as size increases.
  • Key task How to encourage productive endeavors,
    and avoid wealth transfers (plunder).

27
Collective Decision-Making
  • The fundamental problem then becomes how to
    create collective units that have the necessary
    power to protect individual rights and to produce
    public goods without that power being used to
    transfer wealth to those who control the
    political power p. 10.

28
Three Key Determinants
  • Three determinants of how successful any society
    will be at preventing its collective agents from
    engaging in transfer activity
  • 1. Size of the group
  • 2.  Accountability (cultural constraints,
    reelection constraint)
  • 3.  Exit (voting with your feet)

29
Advantages of small societies
  • It is easier in small groups to know what
    decision makers are doing.
  • With the cost of bad collective decisions shared
    among a small number of people, each member of
    the group has a strong incentive to see to it
    that good collective decisions are made.

30
Accountability
  • Cultural norms, traditions, rituals, and taboos
    may constrain charismatic leaders.
  • In Indian culture informal cultural constraints
    may be more effective than formal constitutions
    or laws holding tribal leaders accountable.
  • Especially true if the constitutions were imposed
    on the tribe by the federal government.
  • The prospect of reelection provides some check on
    performance.

31
Avoiding the Transfer Society
  • Once relegated to reservations, tribal
    governments (under the BIA) accumulated powers
    that limited the alternatives for individuals.
  • Indian culture did not recognize a single central
    authority.
  • Central authority was divided among different
    leaders.
  • The Hunt Chief and War Chief were different men.
  • Exit was always an option but after reservations
    were established, exit means integrating into
    non-Indian society (greatly raising the cost of
    exit).

32
Preventing Wealth Transfers
  • Powerful central authorities need to be
    constrained from plundering the wealth of the
    community.
  • Years of federal government control have
  • Eroded some of the informal cultural constraints
    on the behavior of community leaders.
  • Some tribal councils have been notorious for
    their corruption.

33
Pine Ridge Reservation Corruption
  • In January 2000, the Grass Roots Oyate, a Lakota
    Sioux activist organization, began its occupation
    of the Oglala Sioux Tribal Headquarters to
    protest massive corruption in tribal government.
  • With the support of the BIA, the tribal president
    was suspended in May 2000, and inquiries were
    made into the management of tribal funds.

34
Institutional Change Examples
  • Changing resource values (e.g., the horse)
  • Indians had a rich history of institutional
    evolution, suggesting that they were very capable
    of responding to the benefits and costs of
    changing the rules of the game p. 14.
  • Congressional Action
  • Public Choice theoriesrent-seeking and
    special-interest groups.
  • Congressional action designed to benefit white
    settlers.

35
The Winters Doctrine
  • Indians on the Fort Belknap Reservation were able
    to claim water rights through the courts.
  • Water rights had become increasingly valuable.
  • The Court reasoned that Congress had intended
    that establishment of reservations implied water
    rights sufficient to irrigate arable acreage of
    the reservation.
  • Reasonable assumption?

36
Economic Performance
  • Capital investments on reservations have failed
    to increase wealth of residents.
  • Some tribes have acted opportunistically,
    breaking contractual promises, thereby raising
    risk to investors (sovereigns paradox).
  • Substantial expenditures to increase human
    capital investments have provided jobs, but the
    programs have not created viable and
    self-sustaining economies.

37
Institutions and Economic Growth
  • What incentives do the institutions produce?
  • Are individuals and groups rewarded for
    investments in physical and human capital?
  • The federal governments commitment to assist
    Indians has turned to direct provision of goods
    and services, creating perverse incentives.
  • This encourages Indians to spend resources
    lobbying for transfers rather than making
    investments in self-sustaining projects.

38
Institutions and Success
  • Just as a growing number of studies show that
    private property, a consistent rule of law, and a
    lack of burdensome governmental regulations are
    crucial for encouraging investment in the
    developing world, the same holds for
    reservations.
  • Agricultural productivity on Indian lands is 30
    to 90 percent less than on similar private lands.

39
Institutions Success (contd)
  • Tribal judicial systems are noted for their bias
    decisions that discourage outsiders from
    contracting with tribes or individual Indians.
  • Tribes that have relinquished their judicial
    authority to the states wherein they lie had
    growth rates for 19891999 that averaged 20
    percentage points higher than tribes without
    equivalent state oversight.

40
Conclusion
  • Many believe that the only hopes for pulling
    Native Americans out of poverty are quick fixes
    such as federal aid and gambling, which are not
    sustainable solutions, especially for rural
    tribes.
  • If American Indians are to escape poverty, they
    will have to abandon what former interior
    secretary James Watt called "bastions of
    socialism" and commit to a rule of law with
    secure property rights and market institutions.
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