List of Cited References

Incorporating some of the most impoverished portions of the United States, Indian Reservations are clear candidates for economic development.  However, a combination of political, legislative and sociohistorical factors produce an economic development atmosphere vastly different from that of the rest of the nation.  Over the past decade, most academic opinions concerning how to improve economic conditions on reservations have focused on the burgeoning Indian gaming industry, but many other opinions concerning reservation development have also been published.  This report summarizes recent topics in Economic Development on American Indian Reservations by examining gaming, tourism and natural resources as economic development strategies and then discussing economic views on the roles of tribal governments and federal land tenure laws.  Concluding this report is a brief analysis of two proposed development models showing that reservations’ unique qualities necessitate different economic development approaches than followed elsewhere. 

Established by the Supreme Court in the early 19th century as “Dependent Domestic Nations,” Indian Reservations are technically sovereign nations contained wholly within the United States.  Long before the term “economic development” was known, various branches of the U.S. government have tried to improve living conditions for its indigenous peoples.  Some of these tactics have been dubious (forced assimilation, for example) while some have been somewhat more plausible (such as focusing on agricultural promotion), but rarely have these strategies resulted in improved economic potentialities. 

Given such a long and battered history of economic development, it is little surprise that current research in the field stretches over a broad spectrum of economic, legal, political, and sociological thought.  Most economists studying Indian Reservations incorporate these discrete notions in their writings, resulting in a rich assortment of published opinions.  

The current era of the legal/economic status of reservations was established in the 1970s, with a series of federal acts aimed at promoting the sovereignty and self-sufficiency of Indian Tribes.  Although still administered by the U.S. Department of Interior’s Bureau of Indian Affairs (BIA), reservations suddenly gained much greater autonomy through newfound abilities to levy taxes, own assets, establish judiciaries, etc. (Cornell and Kalt 1992a).  This “self-determination” policy is acknowledged to have been based upon an economic development theory that greater sovereignty would stimulate development and thus reduce tribes’ dependence on federal funds (Julnes 1994).  Reluctant to cede too much control, the federal government still regulates much activity on reservations, making the desired extent of self-determination unclear.    The first major test of self-determinism in relation to economic development came from Florida, where the Seminole Tribe established a high-stakes bingo operation – then illegal in the state.  Thus, the modern era of economic development on reservations was ushered in with bingo, and with it emerged a new generation of economic literature focusing on new reservation development possibilities. 
 

TRIBAL GAMING   
Indian Nations won major legal battles with the landmark 1982 Seminole Tribe v. Butterworth Supreme Court case, followed by the similar 1987 case of California v. Cabazon Band of Mission Indians.  These decisions codified, for the first time, the ethereal notion of Indian sovereignty, by permitting tribes to house high-stakes gaming facilities on their premises (Mezey 1996).  However, Congress quickly restricted this newfound sovereignty by passing the Indian Gaming Regulatory Act (IGRA) of 1988, ostensibly intending to discourage organized crime by making Indian gaming a regulated industry (Jansen 1995). 

Within a few years, Indian gaming exploded into a $5 billion per year industry and spawned the greatest current debate on reservation development (Goozner 1997).  Economists generally agree that tribal gaming is a niche-filling enterprise that reservations, because of their sovereignty and generally remote locations, are in unique positions to fill (Brosnan 1996; Henderson and Russell 1996).  However, most analysts believe that gaming is less a panacea, and more a transitional step to a well-balanced economy.  Jansen (1995, 4) states that gaming provides “a starting point for economic development primarily through an injection of capital” into the reservation economy.  This capital is of critical importance since many reservations lack sufficient infrastructures to attract additional development.  That this objective can be met while strengthening political autonomy increases its appeal to tribal leaders (Cornell and Gil-Swedberg 1995).  Under IGRA guidelines, at least 50 percent of proceeds from gaming must be invested in tribal improvements, and Indian leaders often praise gaming proceeds for creating needed capital enhancements (Anders 1996; Minnesota 1992).  Thus, gaming tends to be more popular with tribal government and financial leaders than it is with economists or non-Indians, who tend to be highly influenced by gambling’s many social ills (Johansen 1993; Anders 1996; Henderson and Russell 1997).  

The true economic benefits of tribal gaming remain unclear.  The lack of disclosure laws for Indian Nations means that they are generally reluctant to divulge financial statistics, and most analyses of the industry tend to be made with incomplete data (Cordeiro 1992; Goozner 1997).  Indian leaders, and reports drafted at their bequest, emphasize the positive gains from this infusion of capital.  One report made for a tribal gaming organization in Minnesota claims massive employment and social welfare gains associated with that state’s large Indian gaming industry (Minnesota 1992).  However, the picture painted in the above report may not be truly indicative of the long-term outlook.  For example, it grouped construction-related jobs into the gaming industry total, implying that those jobs would remain even after new construction of casinos ceases. 

Many uncertainties question the long-term sustainability of gaming as an economic development strategy.  Even the industry’s most enthusiastic supporters assert that the combined forces of social opposition and industry competition will eventually halt the windfall of profits.  Opposition is frequently raised inside reservations, when tribe members object to gambling’s “incompatibility” with traditional values (Johansen 1993; Henderson and Russell 1997).  Former Navajo president Albert Hale was one of the few tribal leaders to reject the gaming option, claiming unsustainability as a major reason (Hale 1997). 

Additionally, there is the question of whether gaming is desirable under any circumstances.  Robert Goodman, director of the U.S. Gambling Research Institute, cites the universal increase of bankruptcies and cases of fraud that accompany casinos, and claims that gaming produces a zero-sum game, since resources are “sucked out” of the host community (Harmon 1997).  However, Goodman and others agree that gaming on reservations makes sense in the short-term because reservations often have “almost no preexisting local businesses to be negatively affected (Goodman 1995, 25).” 

Often the most vocal opponents of reservation gaming are state governments.  Tsosie (1997) analyses this relationship and the widespread enmity between states and tribes.  Many states view tax-exempt reservations as drawing resources away, while adding nothing in return.  In fact, Tsosie paints the federal government as some tribes’ only political ally because of the government’s desire to reduce its own expenses by creating more economically self-sufficient reservations  (Tsosie 1997; Royster 1994). 

Indian reservations are typically in remote locations, but the degree of isolation can predict the likelihood of gaming producing positive economic results.  Cordeiro (1992) studies this likelihood by regression analysis and concludes that proximity to population centers is the most significant determinant of a reservation casino’s success.  Cornell and Kalt reach similar conclusions concerning reservation location and manufacturing suitability.  Finding appropriate industries for reservations is complicated by their remote and often poorly accessible locations, although as the following sections illustrate, many other viable options exist for economic development on reservations. 
 

TOURISM   
While casinos attract customers who spend only short amounts of time on site, several reservations have been able to capitalize on tourism, either with or without casinos, to boost their economies (Cornell and Gil-Swedberg 1995; Guyette 1996; Harmon 1997).  There is an obvious caveat here, in that not all locations are well suited for tourism; being located in a scenic area is essential.  Tribes endowed with tourism possibilities have sometimes found that tourism can be a sustaining industry.  The largest non-gaming reservation enterprise in the United States is a ski resort operated by Arizona’s White Mountain Apache Tribe (Vinje 1996).  

Less controversial than gambling, tourism is cited by some as being consistent with, and even encouraging traditional Indian values by fostering “cultural tourism,” which includes arts and crafts, or other forms of tourism highlighting traditional culture  (D. Smith 1994).  One writer highly recommends this approach, stating that cultural tourism encourages the creation of “cottage industries to produce arts, traditional foods, other items of tourist interest, and culturally appropriate demonstrations (Guyette 1996, 135).”  Unfortunately, many of the employment opportunities listed above provide very little income; a balanced economic development strategy needs to offer more than just microenterprise cottage industries. 
 

NATURAL RESOURCES   
As with most rural economies, natural resources are critical to rural reservations, and perhaps the most contentious natural resource issue concerns water rights.  Governed by an intricate and confusing web of regulations, certain Indian Reservations control valuable groundwater and surface water rights (R. Smith 1992).  Many such cases are currently under litigation, but water may become one of the most valuable assets of Western Indian tribes. 

Federal bureaucracy creates many inconsistencies concerning water rights.  Among these issues are reservations’ privileges to off-site surface or groundwater.  Historically, the federal government has not supplied reservations in the West with similar water resources as neighboring non-Indian lands.  Being essential for the agriculture on which many reservations depend, the lack of water greatly impedes economic development.  One economic study determined that on the Fallon Reservation in Nevada, nearly 52,000 person-years of employment have been lost since 1910 due to inequitable government (Harris et al. 1992).  Similar scenarios exist on reservations throughout Indian Country and can begin to explain the widespread economic failure of agriculture on these lands. 

Another method of attracting capital to a reservation is through natural resource industries such as mining or forestry.  These industries may provide a steady cash stream, and when properly managed can be consistent with long-term economic goals (D. Smith 1994; Gordon et al. 1997).  To quell fears that activities such as logging take advantage of the earth, both Indian and non-Indian analysts stress that resource-based economic development is compatible with traditional cultural values, which emphasize respectful veneration of a tribe’s land (Kruger and Etchart 1994; Pinkham 1996; McCorquodale et al. 1997).  Kruger and Etchart (1994) cite the example of the Yakima Nation of Washington, whose 475,000 acres of commercially forestable land yield the tribe over 80 percent of its revenue and 25 percent of its employment.  With a history of logging dating to the 1950s, when the tribe drafted sustained yield agreements under the auspices of the Interior Department, the Yakima exemplify how resource-based industries can benefit a tribe. 

However, some tribes are at odds with the timber industry and the U.S. Forest Service, whom they see as mindlessly chasing after culturally important tribal lands.  Two Muckleshoot tribal leaders lash out at these two groups in a newspaper editorial (Daniels and Jerry 1997), saying that “tribal enterprises and cultural property must not be sacrificed for the monetary gain of a corporate entity.  They must be fully analyzed and valued in all environmental and planning reviews.” 

Regardless, forest or mineral resources harbor massive possibilities.  Royster (1994) notes that aggregate tribal subsurface resources are enormous (for example, Indian Tribes control 1/3 of all U.S. uranium reserves) and that the mineral estate represents many reservations’ best hope of economic development. 
 

TRIBAL GOVERNMENTS   
The above economic development possibilities are heavily dependent on a reservation’s location.  Given that relatively few tribes are blessed with very desirable locations, what other factors could spawn desperately needed economic stimuli?  As stated earlier, by virtue of their de jure sovereignty, Indian reservations are in a unique situation, but that attribute hinders some otherwise clear issues. 

Many observers point to tribal governments as being significant factors in attracting development to their respective tribes.  Since reservations are effectively autonomous nations, their governance is of great import.  Cornell and Gil-Swedberg (1995) studied tribes that are ethnically and geographically similar and concluded that governmental efficacy is a major determinant of tribal success.  In their study, the authors compared the Mescalero, Ft. Apache, and San Carlos reservations in the Southwest and found development at San Carlos to be impeded due to an unstable, scandal-ridden, relatively weak tribal authority.  Conversely, the Mescalero and Ft. Apache reservations both have high degrees of bureaucratic consistency, which greatly helped in securing economic development possibilities.  Both of the latter tribes are among the most well developed and diversified in the United States, and the authors attribute much of that success to their respective governments.  

Other academic reviews of tribal governments have reached similar conclusions (Blanchard 1997, Cornell and Kalt 1995), with Blanchard proposing that tribes follow a model for proper nation building along the lines of developing nations.  Julnes (1994) determined in a nationwide survey of tribal leaderships that a major obstacle in generating economic development is that many governments become plagued by nepotism, high turnover and incompetence, and are unable or unwilling to create internal economic momentum.  While tribes can change many aspects of their reservation governments, other difficulties have resulted from decades of federal mismanagement and are unlikely to soon change. 
 

LAND TENURE        
One such federal obstacle to overcome is the problem of land tenure.  Most land on Indian Reservations is not explicitly owned by any one entity – rather it is placed in federal trusteeship, meaning that tribes or tribal members administer the land but the Department of Interior officially holds the title.  This is a legal quagmire for many reasons, and presents a serious hindrance to economic development because it prohibits tribes from borrowing funds while using land as collateral.  Anderson and Lueck (1992) presented this dilemma, describing how the lack of total control over land hinders both the ability to get capital and also the potential to fully develop land.  Their study found that lands controlled under this federal trusteeship produced lower agricultural yields and fostered slower rates of economic growth than did similar Indian occupied lands that were owned under a traditional fee simple arrangement.  

The most important impact, in economic development terms, of the land tenure situation is the problem of securing capital from commercial institutions.  While some non-profits or organizations such as the Small Business Administration will make small loans to tribes without land collateral, commercial lending is imperative for a successful economy.  One banking industry observer noted that banks’ reluctance to loan is not based just on the collateral issue (Bronstein 1995).  Another major concern deals with tribal sovereignty and that sovereign nations are not subject to the Federal Uniform Commercial Code.  This means that lenders have no federal recourse in the event of foreclosure.  Given these conditions, it is not surprising that tribes have great difficulties in obtaining necessary infusions of capital (Anderson and Lueck 1992).  

There is no consensus on how to solve this problem, since the options of relinquishing sovereignty by subjecting reservations to federal financial laws would diminish the popular (among Indians) notion of self-determination (Hale 1997; Lindo 1997).  Still, many researchers agree that the lack of available capital is the most pressing obstacle to successful development. 
 

SELECTED ECONOMIC DEVELOPMENT MODELS  
Taking the above issues into consideration, some economists have drafted models suggesting best practices for future development on reservations.  Upon composing these models, the authors did not overlook significant sociohistorical problems that continue to plague Indian Reservations.  Many of these factors result from the well-known legacy of discrimination encountered by Indians for hundreds of years, and are still of critical importance concerning economic development possibilities.  

Among these models is one written by Dean H. Smith, a Mohawk and professor of economics.  Smith incorporated the complexities of reservations’ “culture of poverty,” or the aggregate erosion of necessary personal skills needed for economic success.  Noting the coadunative problems of unemployment, unskilled workers and these issues’ effects on young tribal members, Smith says these concerns “will become more problematic as this cohort enters their working years unless economic development occurs (D. Smith 1994, 89).” 

The model proposed by Smith essentially begins with retail development enabling tribe members to buy goods on site, thus avoiding the common current situation of most tribal income funneling into off-reservation “border towns.”  Once a small retail base is established, the reservation can begin engaging in export development, having native-generated capital to fund making the production of goods for off-reservation sale.  According to Smith, this new production (identified as most likely being arts and crafts, textiles, or other products requiring low sunk costs) can create export industries, spawning a cycle of economic growth (D. Smith 1994). 

This model is sensible for a number of reasons.  It accommodates the complexities of having a largely unskilled workforce, acknowledging that the retail sector can provide Indian workers with basic but necessary experience in workplace deportment.  While it sounds relatively simple, Smith notes that this model would take decades to fully realize.  In addition, Smith does not overlook the fact that tribes with special circumstances, such as the viability of extractive enterprises or tourism economies, could enjoy the benefits of additional steps in the model. 

Taking into consideration the differing geographic and cultural assets of various reservations, Stephen Cornell and Joseph P. Kalt, co-directors of the Harvard Project on American Indian Economic Development, devise another suggested model for development.  In addition to the aforementioned necessities of geography, workforce skills, and capital availability, Cornell and Kalt identify another “ingredient” for economic development success – that of “cultural receptivity.”  This is meant to capture the extent to which certain tribes welcome cooperation with outsiders, viewed as necessary for economic success (Cornell and Kalt 1992b). 

Studying the Sioux Nations of the Dakotas, Cornell and Kalt describe how the traditional view of tribal authority rooted in tiyospayes (kinship units) has created a rather introverted economy.  The authors continue by noting that successful investment by nontribal members can only succeed in “a tribe whose self-confidence and cultural standards can support extended cooperation with outsiders, and in which hierarchical ‘bosses and workers’ systems are not seen as personally demeaning by tribal workers (ibid., 41).”  Breaking down the culture of poverty that spawns defensive sociopolitical ideologies is seen by Cornell and Kalt as a long-term benefit of well executed sovereignty, and the model calls for the federal government to provide more practical assistance in helping tribes effectively exercise their sovereignty. 
 

CONCLUSION       
Economic development on Indian Reservations differs substantially from off-reservation economic studies.  Issues of sovereignty, culture, location and history combine to form a very unique set of circumstances.  Because the issue of economic development on reservations is far from resolved, no consensus of opinion has been reached by economists studying the topic.  Not surprisingly, the heated debate over Indian gaming has dominated recent headlines, with Wisconsin and California both in fervent negotiations with their respective tribal gaming authorities.  Many other issues, such as water rights, land tenure issues, as well as new sovereignty concerns are currently in litigation at various judicial levels. 

With so many relevant economic development issues at the mercy of courts, economists have been forced into a reactionary position concerning reservation development, amending their models and recommendations to the constantly changing legal parameters.  The legal, political and sociological uncertainties have made one thing clear – that successful and sustainable economic development is still a long way off for most reservations, and that much more needs to be accomplished in all of the above areas to effectuate a major change. 
  
 

List of Cited References