However, a key problem on reservations continues to be that individuals generally lack property rights to land. Land ownership on reservations is a mix of “fee simple,” “individual trust,” and “tribal trust.” Fee simple means land that is privately owned by individuals. Individual trust means land allotted to tribal members but held in trust by the BIA. Tribal trust means land managed by the tribal bureaucracy and held in trust by the BIA.
Only about five percent of land on Indian reservations is fee simple. The great majority of land is trust land, which can be difficult to develop and use productively. Trust land generally cannot be leased, mortgaged, or transferred without approval by the BIA. And the land cannot be easily used as loan collateral for an entrepreneur who wants to raise funds for investment.
Economist Terry Anderson, an expert on tribal economies, has noted that when you drive through reservations and “you see 160 acres overgrazed and a house unfit for occupancy, you can be sure the title to the land is held by the federal government bureaucracy. In contrast, when you see irrigated land in cultivations with farm implements, a barn and a well-kept house, you can be sure the land is held fee simple.”
Any business transaction dealing with Indian trust land can get bogged down in the BIA bureaucracy because it is responsible for title, probate, leasing, and other basic land functions. Also, land transactions often require costly environmental reviews, which many tribes cannot afford. Furthermore, acquiring rights-of-way on Indian trust lands is difficult, with the result that building infrastructure such as telecommunications, electricity, or gas facilities can be costly and time-consuming.
There are also “rule of law” problems on reservations. The tribes have broad and general powers of government on reservations, subject to federal limits. Such self-rule is generally a good thing, but the quality of tribal governance is often lacking. On many reservations, for example, tribal courts are subservient to tribal politicians.
One problem this creates is that outside investors are wary of putting money into businesses on reservations if they perceive tribal governments will be biased against them. This is one reason why reservations often have underdeveloped commercial lending, real estate development, and entrepreneurship. On many reservations, tribal politicians have tried to stimulate development by “picking winners” with subsidies, but such schemes often turned into boondoggles, as did the federal government’s Solyndra.
Historically, one reason why the federal government variously exploited, coddled, and micromanaged Indians was the belief that they were primitive socialists with no understanding of market institutions. But research has found that stereotype to be false. Many indigenous peoples had systems of property rights and private ownership, and many tribes were entrepreneurial and had extensive trading networks.
That brings us back to Dan Snyder. His new organization will “provide resources that offer genuine opportunities for tribal communities.” That sounds positive, but I’m concerned that Snyder’s efforts will be focused only on hand-outs, such as his recent gifts to various tribes of coats, shoes, and a backhoe. Such aid provides short-term relief, but it will not change the long-term economic prospects of reservations.
If Snyder wants to generate fundamental change, his new foundation should champion institutional reforms on reservations and reforms in the relationship between tribes and the government. Reforms to property rights and the rule of law on reservations would make Indian lands much more fertile for investment, entrepreneurship, and growth.
Chris Edwards is the director of tax policy studies at the Cato Institute, and editor of www.DownsizingGovernment.org. Before joining Cato, Edwards was a senior economist on the congressional Joint Economic Committee, a manager with PricewaterhouseCoopers, and an economist with the Tax Foundation.
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