October 2004

Sovereignty and Indian Affairs

Panel One: Sovereignty and Credible Commitments in Reservation Economies

Terry Anderson
Property and Environment Research Center

In introducing the topic, Anderson spoke of his discovery in 1976 of an Indian reservation in Montana where he found a standard of living impressively high relative to what he had seen on reservations elsewhere.  He learned that the prosperity was due to individual ownership, unlike the poverty often found in Indian communities managed by collective tribal ownership.  From that point on, he became dedicated to the relation between economic prosperity and property rights on reservations.  He concluded by observing that we too often rest on our knowledge of how reservations are arranged today instead of drawing upon records of Indian society in the period before the Europeans arrived and how institutions--as opposed to communal management--may give a long overdue boost to productivity and prosperity.

Dominic P. Parker
Property and Environment Research Center

Parker emphasized data indicating the economic incentives of fee-simple land in contrast with land held under tribal trusts.  Fee-simple land, explained Parker, is exempt from collective tribal management and the oversight of the Bureau of Indian Affairs--specifically, Indians can sell, lease, or alter the land independent of the tribal bureaucracy.  Parker cited per-capita income (PCI) trends on reservations, showing how PCI is higher on reservations where more than 50 percent of the land is fee-simple.  Likewise, PCI growth is more robust on fee-simple dominated reservations.  Parker explained how studies also show that fee-simple systems are more affordable than those dominated by individual or tribal trusts, and such economic incentives promote healthy investment in properties and capital markets.

Since tribal jurisdiction often stifles contract efficiency and accountability and discrepancies between and within tribes can negatively affect the reliability of the rule of law, it is preferable to encourage state jurisdiction on Indian matters.  U.S. courts, according to Parker's analysis, prevent tribe members from contracting out of adjudication.  As such, Parker summarized that economic performance on reservations would be enhanced by encouraging and rewarding investments and enterprise while stabilizing the rule of law.

Ronald N. Johnson
Retired Professor, Montana State University

The sovereignty of Indian tribes has spread legalized gambling in the United States.  The Indian Gaming Regulatory Act of 1988 (IGRA) classified gaming into three groups:  Class I, which is under the authority of the tribes, includes tribal games played for "minimal prizes."  Class II consists of bingo and similar games played in the same venue as bingo.  Class III gaming, which generally includes most Las Vegas-style casino games, requires that the gaming be approved by the state and federal government, as well as the tribe itself.  While property-rights obscurity in the IGRA could ultimately prove problematic, the industry has thrived and promises to continue growing.

Johnson noted that the sharing of gaming revenues with the state frequently helps achieve agreements between states and tribes.  He explained that, even so, tribes retain ultimate power over the benefits of tribal revenues, and since only about one-third of gaming tribes make per-capita payments, it seems that most tribes essentially tax the revenues 100 percent and apply them elsewhere.  The gaming industry has been widely accepted and encouraged by Americans, and the tribes have successfully developed profitable ventures that have brought business experience and continually growing revenues.  Johnson contended that while these positive attributes indicate promising economic productivity, it may take generations to determine how wisely tribes are allocating revenues.

Panel Two: Property Rights and Sovereign's Paradox

Robert J. Miller
Lewis & Clark College

Miller, drawing upon a constitutional view, provided a history on Indians as nations and, for practical purposes, political entities.  He listed treaties made by the United States with Indian nations, including the Articles of Confederation and the Continental Congress, emphasizing the treatment of Indian nations as though they were, in fact, their own governments.  For much of history, Indians opting out of paying taxes to the U.S. government were not represented and therefore unable to vote.  Under the General Allotment Act of 1887, the U.S. government gave 160-acre parcels of land to individual tribe members, retaining surplus land to sell to white settlers.  Miller explained that the land ownership problem is exacerbated by "fractionalization," meaning that under the first ten years of the Allotment Act, land could not be willed to individuals--to one child, for example.  Instead the land was allotted to all of an individual's children, and then to all of those children's children in turn.  What remains are 160-acre plots owned by up to a thousand individuals.  To this day, Indians and tribes cannot sell land without review and approval of the Bureau of Indian Affairs.

Miller pointed out that the elusive records of Indian ownership, as maintained by the United States government, inhibits Indian productivity.  Miller illustrated the need for a new policy, stating that four of the ten poorest counties in the United States are on reservations, and that Indians own far fewer businesses than most other racial and ethnic groups.  He maintained that the problem could be solved by taking business-managing power from the hands of the U.S. government and handing it to the tribes. 

Miller delineated three keys to success: The first calls for tribal sovereignty in the sense of self-managed economic activity.  The second requires the creation and support of institutions such as independent court systems to help regulate civic activity.   The final key, promoting cultural match, emphasizes Indian nations being run by those in step with Indian culture.  Miller, like his peers, agreed that we must take steps to encourage Indian sovereignty in order to broaden their access to economic productivity and prosperity.

David D. Haddock
Northwestern University

Haddock spoke on the paradox of being sovereign and bearing the burden of potential losses, and the natural means of resolving such a dilemma: establishing a reputation for enforcing contracts.  To achieve such a reputation, Haddock endorsed bringing in experts in investments opportunities to help bring in capital.  Wide-range investments would be necessary in order to prove dependability.  While the tribes would need to waive immunity and stand to lose more than outside investors, it is necessary in order to establish a trust with investors and, in turn, a solid reputation.  Nevertheless, the U.S. courts have been erratic in enforcing such waivers, which frequently contain shades of ambiguity.  Haddock pointed out that this inconstancy, in turn, can turn tribes against each other in distrust and disagreement.

To combat the problems between tribes and the U.S. court system, Haddock advocated a clarifying mandate on the treatment of tribes as non-sovereign, excepting cases where immunity is clearly outlined and retained.  Haddock also proposed a solution involving holding assets for other group members, handling commercial disputes with investors, and demanding mutual respect between tribal sovereigns.

James L. Huffman
Lewis and Clark College

Huffman linked sovereignty and property via the concept of subsidiarity.  Sovereignty is rooted in European notions of indivisibility, now applicable and especially efficient in the divided sense we practice in the U.S. federal system today.  Specifically, the federal system embodies a sovereignty which allows for smaller state entities to govern and operate underneath the greater U.S. government.  Subsidiarity, Huffman said, is the utilization of such smaller governing units within a larger scheme--tribal government within the state and federal governments in this case.

Subsidiarity allows cultural differences to be reflected in decision-making.  Therefore, Huffman reasoned that American federalism provides a working model of how a subsidiary governing force like the Indian nation can best handle its own bureaucratic affairs to the benefit of tribes which are desperately in need of efficient regulation.

Maurice McTigue
Mercatus Center

McTigue contrasted the relationship between the government and indigenous peoples in New Zealand with situations in the United States, Canada, and Australia.  In New Zealand, the ruling British crown established a treaty in 1840 called the Treaty of Waitangi, which allowed the Maori people to function under a law-making government and to retain land and equal rights among New Zealanders.  Ultimately, this arrangement caused problems, as the Maori discovered inconsistencies in how their land was handled by the crown.  The disputes eventually led to Maori wars throughout the 1860s.

McTigue pointed out that the crown attempted to resolve the troubles by creating a Native Land Court with the intent to give the Maori individual land titles while effectively disrupting their ancient communal culture.  Because communal living situations and notions of community ownership are fundamental to Maori culture and history, attempts to force them to embrace individual property ownership failed, and communal culture was reinstated.  As a new strategy, the New Zealand government established the Waitangi Tribunal in 1975, establishing a system for the investigation, consideration, and case-by-case resolution of Maori grievances.  McTigue explained that, over time, various advances, including the creation in 1988 of the Waitangi Police Unit, which was to become the Office of Treaty Settlements, have been made to consider Maori issues responsibly and efficiently.  The crown still retains ultimate discretion over Maori land, but much progress has been made to assist the Maori in land management.

McTigue concluded that the New Zealand government is trying to handle Maori claims in a way that facilitates reasonable, informed negotiation.  The Waitangi Tribunal and the Office of Treaty Settlements have created a setting that will catalyze progress. In fact, there has already been a rich "cultural renaissance" and economic improvement among the Maori due largely to efforts in New Zealand to incorporate Maori culture as part of the national psyche.  It is telling that all students now learn some Maori language in school.  Most effective, however, is the freedom of the Maori people and the resources given to them, including representation in parliament, to determine their own future.  McTigue said that the Maori desire to be included as part of New Zealand has been critical to their progress, although it may take two to three generations to erase the wounds inflicted upon the Maori over their history of economic and political struggle with the British crown.

AEI/NRI program assistant Elizabeth White prepared this summary.