Unlocking the Wealth of Indian Nations

Many Europeans still view Native Americans as the “noble savage” depicted in the paintings of Karl Bodmer. Traveling with the German explorer Prince Maximillan zu Wied-Neuwied from 1832 through 1834, Bodmer saw and painted American Indians with the dignity and cultural wealth they deserved. Unfortunately, that dignity and wealth have been stripped from most Native Americans by the federal government.

The dignity painted by Bodmer derived from the fact that Native Americans had well established institutions—property rights, limited government, and trade—that sustained indigenous economies. Before the arrival of Europeans, the more sedentary Indians of the East had well defined tribal and individual property rights to land, and invested in making land more productive. Pacific Northwest tribes invested in weirs to catch salmon on their upstream migration and sustainably harvested salmon to increase populations. Pueblo bands in the southwest developed sophisticated irrigation systems to cope with aridity. Even the more nomadic Plains Indians invested in “surrounds” into which buffalo were driven and in stone walls miles long to drive buffalo over cliffs. Thanks to the ingenuity of their members, many tribes were able to build up a surplus of goods—to, in other words, accumulate wealth—and trade with other tribes.

A story from the Lewis and Clark expedition shows the propensity of Native Americans to trade. While the Corps of Discovery, as the expedition was called, spent the first winter of 1803 in a Mandan village (now North Dakota), the blacksmith among them made trade axes and used them to barter with Indians for food, horses, and artifacts. Months later, when the expedition reached the Pacific Coast, they were surprised that one of the axes had beaten them there, having been traded between Indians many times across the plains and mountains. In the words of Adam Smith, Indians had the “propensity to truck, barter, and exchange.”

If Bodmer ventured into Indian Country today, however, he would be struck by the poverty and lack of economic development. Housing is typically substandard, businesses are small if they exist at all, and infrastructure is poor. In 2015, average household income on reservations was 68 percent below the U.S. average of $53,657; twenty percent of the households made less than $5,000 annually compared to 6 percent for the overall U.S. population; and 25 percent of the Indian population was below the poverty level compared to 15 percent for the nation as a whole. The suicide rate among Native American males aged 15 to 34 is 1.5 times than for the general population, the rate at which Native American females are raped is 2.5 times the national average, and the rate of child abuse on reservations is twice the national average.

In essence, Indian reservations are islands of poverty in a sea of wealth. Even though the Native American population of 2.9 million is roughly the population of Kansas, it is mainly ignored except by Washington bureaucrats. Bureaucracies, housed mostly in the Department of Interior, employed 9,000 people and spent approximately $2.9 billion in 2012. That amounts to one bureaucrat for every 322 Indians and $1,000 for every Indian.

The subjugation of Native Americans by the federal government began at the same time that Bodmer was traveling with Maximillan, when in 1832, Supreme Court Justice John Marshall concluded that the relationship between the federal government and Indians is that of “a ward to his guardian.” Since then through laws such as the Allotment Act (1877) and the Indian Reorganization Act (1934), Congress has locked Indian lands into perpetual trusteeship with the Department of Interior (DOI) as the trustee. As trustee, the DOI regulates land use, oversees leasing of Indian lands, collects revenue from Indian land leases, and distributes revenues back to the tribes and individual Indians. The resulting bureaucratic red tape makes development virtually impossible.

Consider what this means for the abundant energy resources in Indian Country. Reservations contain almost 30 percent of the coal reserves west of the Mississippi, 50 percent of potential uranium reserves, and 20 percent of known oil and gas reserves. The Council of Energy Resource Tribes recently estimated the total value of these resources at nearly $1.5 trillion.

Energy development on reservations could lead to jobs for people with the highest unemployment rates in the country, in some cases over 50 percent. For instance, on the Blackfeet reservation in Montana, drilling a single oil well resulted in 49 new jobs for the tribe, and each of its members received a $200 royalty payment in 2013. From its oil and gas reserves, the Blackfeet tribe has collected around $30 million in leases and bonus payments. Not surprisingly, Ron Crossguns, from the tribe’s oil and gas department, doesn’t think outsiders should tell the tribe how to manage its energy resources: “It’s our right. We say yes or no. I don’t think the outside world should come out here and dictate to us what we should do with our properties.”

The Bureau of Indian Affairs (BIA) is involved in nearly every aspect of energy development on Indians lands, including reviewing and approving pipeline agreements and rights-of-way approvals, and the process is notoriously inefficient. A 2015 Government Accountability Office (GAO) report observed that “the added complexity of the federal process stops many developers from pursuing Indian oil and gas resources for development” and that the process “can involve significantly more steps than the development of private or state resources, increase development costs, and add to the timeline for development.” The GAO report noted further that in 2014, the Southern Ute tribe reported that the BIA’s review of several of its pipeline rights-of-way agreements took as long as eight years. A simple review of a wind-energy lease on the Rosebud Sioux Reservation in South Dakota took a year and a half for the BIA to review. According to the developer, the delay made the project lose its agreement with the local utility, resulting in a loss of revenue for the company and the tribe.

Beyond energy resources, tribes also have water, timber, fisheries, grazing lands, and recreational amenities that could help pull them out of poverty. And, of course, for some tribes, especially those in more urban areas, gaming has brought jobs and income.

The enormous resource potential on reservations begs the question: Why can’t tribes unlock their wealth potential? Is it because their culture is inimical to economic growth? Is it that their members lack entrepreneurial and technical skills?

As described above, the historical record suggests that these are not the reasons for poverty in Indian Country. As tribe member and law professor Robert Miller notes, “Contrary to what most Americans believe, individual and family entrepreneurship is not a new concept to Indian cultures.”

If culture and entrepreneurship are not the impediments, what is the key to reservation growth? The key to Unlocking the Wealth of Indian Nations (Lexington Press, 2016),, is for Indian Nations to establish clear and stable property rights to their land, to create a rule of law that will attract the capital investment necessary to stimulate reservation economies, and to create fiscally responsible tribal governments that can provide the local infrastructure to support investment.

The lack of a rule of law on reservations thwarts capital investment in Indian Nations. Because tribes are considered sovereign nations, many have their own judicial systems separate and apart from the states in which they reside. Because tribal courts often do not follow jurisprudential rules taken for granted outside reservations, they discourage capital investment and credit markets on reservations. Writing for Forbes, Joseph Koppisch quoted an officer of a local lending institution near the Crow Reservation in Montana: “We take on such a huge extra risk with someone from the reservation. If I knew contracts would be enforced, then I could do a lot more business there.” As a result, when reservations with independent courts are compared to those whose civil disputes are adjudicated in state courts, per capita income for Indians on the latter reservations was 35 percentage points higher than the former. Hence, a stronger rule of law on reservations could contribute significantly to helping Indian Nations rise out of poverty.

The Trump administration may change much of this status quo. Trump has formed the Native American Affairs Coalition to free Indians from “a suffocating federal bureaucracy.” As Markwayne Mullin, a U.S. representative from Oklahoma and a Cherokee tribe member who is co-chairing Trump’s coalition, put it: “It is time to end the overreaching paternalism that has held American Indians back from being the drivers of their own destiny.”

If Native Americans are to determine their own destiny, rise out of poverty, and unlock their wealth trapped by trusteeship, they must achieve what the great Nez Perce Chief Joseph sought in 1879: “Let me be a free man, free to travel, free to stop, free to work, free to trade where I choose, free to follow the religion of my fathers, free to talk, think and act for myself.” It is past time to give Native American the freedom they deserve to make their own decisions about the future of their culture and economies.

Terry L. Anderson is a fellow with the Lichtenstein Academy, PERC (Bozeman, MT), and the Hoover Institution, Stanford University. This essay is based on research published in Unlocking the Wealth of Indian Nations (Lexington Books) edited by Dr. Anderson.