Title: Sovereign Nations or Reservations?
1Sovereign Nations or Reservations?
- Culture, Property Rights, and Paradigms
2I. 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.
3A 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.
4Pine 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)
5Islands of Poverty
- Why does this bastion of poverty persist in a sea
of wealth?
64 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.
7Pine 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
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92. 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.
10Crow 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.
11Untapped 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.
12Crow 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.
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15Crow Indians
- http//en.wikipedia.org/wiki/Crow_Tribe
163. 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.
17Inimical 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.
18Capitalistic 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.
19Differences, 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.
204. 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.
21Economic 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
22Institutions
- 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
23What 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.
24Informal 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.
25Definition
- 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.
26Institutions
- 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).
27Collective 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.
28Three 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)
29Advantages 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.
30Accountability
- 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.
31Avoiding 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).
32Preventing 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.
33Pine 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.
34Institutional 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.
35The 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?
36Economic 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.
37Institutions 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.
38Institutions 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.
39Institutions 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.
40Conclusion
- 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.