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Wednesday, April 1, 1998

Native American Success Stories

Entrepreneurship Has Lifted Some Native Americans out of Poverty

Doug Bandow, a nationally syndicated columnist, is a senior fellow at the Cato Institute and the author and editor of several books, including Tripwire: Korea and U.S. Foreign Policy in a Changed World.

Many supporters of limited government are unsure what to think of native Americans. Anyone who believes in liberty should be uneasy about how early Americans destroyed the original peoples during the expansion across the North American continent. But Indian dependence on the federal dole deserves criticism too.

The latter may be the most unfortunate modern legacy of the nation’s earlier treatment of native Americans. Of the roughly 2.2 million Indians in the United States today, roughly one-fifth live on reservations. The dominant presence in the lives of many native Americans is the hidebound Bureau of Indian Affairs (BIA), which spends $1.7 billion annually and employs 12,000 people. Gary Jordan, vice chairman of Wisconsin’s Oneida tribe, complains that the BIA has “got all the earmarks of socialism at its worst.”

It is tempting to treat native Americans as a simple budget issue: just cut BIA funding. But the plight of Indians remains a powerful emotional lever for agency supporters. Native Americans earn about half the average national income; one-third of them are in poverty. The social pathologies evident in the inner city are also present on reservations. Observes Senator Ben Nighthorse-Campbell of Colorado, chairman of the Senate Indian Affairs Committee: “To many people, their only form of sustenance is food stamps and commodities.”

The BIA seems intent on keeping native Americans dependent. What the bureaucracy most wants is a bigger budget. Ada Deer, assistant secretary of the Interior for Indian Affairs, says simply: “We need more money.” For what? “A Marshall Plan approach to Indian affairs,” she explains.

Yet there has never been a lack of cash. Indeed, the bureau is not the only federal spigot; other agencies provide funds for health care, housing, and more. Anyway, there is no reason to believe that more money invested by the same agency in the same way will do any good. Barely ten to 15 percent of BIA spending is thought to actually reach its supposed beneficiaries. Observes Senator Slade Gorton of Washington, a member of the Indian Affairs Committee: “The federal government has run a paternalistic system for nearly the entire history of the United States. It’s that system that has been a failure.”

Still, critics will be more effective if they not only decry BIA inefficiency, but also help point the way to tribal independence. And the best way to do so is to highlight Indian entrepreneurship. Many native Americans recognize that their only hope is self-help. Observes Senator Nighthorse-Campbell: “Indians now see private enterprise as the best way out of poverty.”

A number of tribes, such as California’s Cabazons, Minnesota’s Mille Lacs Chippewas, and New Mexico’s Sandias, have constructed casinos. Other tribes have benefited from their control of natural resources. For instance, Arizona’s Navajos and Jicarillas produce oil and gas. Oregon’s Confederated Tribes manage forests and operate hydroelectric dams.

Admittedly, these cases involve somewhat artificial economic success. In particular, native American casinos typically thrive because states ban any competitive facilities from non-Indians. Nevertheless, a willingness to take advantage of such opportunities, however contrived, demonstrates entrepreneurship that could be applied in other fields as well.

And, in fact, tribes have increasingly moved beyond gaming monopolies and natural resources. The three tribes of Oregon’s Warm Springs confederation run a series of enterprises that generate $80 million a year in revenue: a power plant, timber operation, vacation resort, and apparel company. Explains tribal council member Kenneth Smith: “We have done a good job of developing our national resources. But we need to do still more to diversify our economic base.”

Arizona’s White Mountain Apaches manage nine enterprises, including an aircraft parts plant, with total revenues of $45 million. Also in Arizona, the Ak-Chin tribe operates a $10 million agribusiness, and the Yavapais tribe maintains a hotel as well as a casino, and has leased land for construction of a mall. Maine’s Passamaquoddies run an auto parts plant, apparel operation, mini-mall, and farm; license out a synthetic-fiber plant and environmental scrubber technology; and have bought, and sold for a large profit, a cement plant. Wisconsin’s Oneidas own a mobile-telephone company and a partial interest in a bank, participate in a joint venture to produce circuit boards, and are moving to create metals fabrication and medical products companies. The tribe also offers loans to members for small businesses. South Dakota’s Rosebud Sioux are planning a large food-processing plant.

One of the most dramatic examples of entrepreneurial success is the Choctaws in Mississippi. “For generations the Choctaws were a virtual textbook example of the futility of reservation life,” reports Fergus Bordewich, who has written a book on Indian entrepreneurship. “Over the last quarter-century, however, the 8,000-member tribe has defied even its own modest expectations by transforming itself from a stagnant welfare culture into an economic dynamo, and one of the largest employers in Mississippi.”

It wasn’t easy. Three decades ago the Choctaw unemployment rate ran 75 percent. Eight of ten tribe members were on welfare. Infant mortality and life expectancy were at Third World levels. Few Choctaws received more than elementary education.

Then along came Chief Philip Martin. As a young man, he found the only open reservation jobs to be BIA maintenance positions. After being elected chief in 1959, he went to 150 different firms before he found one, automotive supplier Packard Electric, willing to train local workers in a Choctaw plant on the reservation. The enterprise skirted failure at first, but eventually transformed the reservation. Writes Bordewich, “people who had been totally destitute [began] to show up in new shoes and clothes without holes, and eventually in cars.” More factories followed.

Today the tribe runs a casino, construction firm, printing plant, shopping center, and other businesses that collectively generate revenues of $300 million a year. Jobs are increasingly technical and professional. The result has been widespread prosperity—average annual family incomes have climbed from $2,000 in the mid-1970s to more than $13,000 today. The number of Choctaws on welfare has fallen dramatically; education, health, and housing have sharply improved.

Obviously, many tribes have not done as well. And the nature of Indian businesses—collective ownership, resistance to sale of tribal land, an inability to pledge as loan collateral land in BIA trusteeship—limits business opportunities. Nevertheless, many native Americans have found entrepreneurship to be a way out of poverty. And more are likely to take that path in the future.

Unfortunately, some legislators are upset about too much of a good thing. In particular, they see Indian gambling revenue as a pot of money for government to raid. Proposals have surfaced on Capitol Hill to tax up to a third of native American gaming; House Ways and Means Committee Chairman Bill Archer unsuccessfully attempted to include such a levy in last year’s big-spending budget “compromise.”

The federal government’s greedy desire for cash is supplemented by some people’s objection to gambling per se. Yet native Americans are pikers compared to those who run state lotteries, which generate more than $15 billion annually. Whether or not gambling is a good thing, it should be neither banned nor monopolized by government. And there is no reason for Uncle Sam to tax native American gaming proceeds but not state lottery revenue.

For a century American Indians have been victimized by the welfare strategy of development. Dependent on federal largesse, they have languished in poverty. But an increasing number of tribes are taking the entrepreneurial path of development to prosperity. As they do so, Uncle Sam should apply the overriding rule for government: first do no harm. Taxation is, after all, the power to destroy. It’s taken decades for native Americans to stumble upon the path that most other Americans followed to prosperity. Now that they are beginning to succeed, Washington should take care not to ruin what has proven to be a good thing.

  • Doug Bandow is a senior fellow at the Cato Institute and the author of a number of books on economics and politics. He writes regularly on military non-interventionism.