Imagine a country that has a corrupt authoritarian government. In that country no one knows about checks and balances or an independent court system. Private property is not recognized in that country either. Neither can one buy or sell land. And businesses are reluctant to bring investments into this country. Those who have jobs usually work for the public sector. Those who don’t have jobs subsist on entitlements that provide basic food. At the same time, this country sports a free health care system and free access to education. Can you guess what country it is? It could be the former Soviet Union, Cuba, or any other socialist country of the past.
Yet, I want to assure you that such a country exists right here in the United States. And its name is Indian Country. Indian Country is a generic metaphor that writers and scholars use to refer to the archipelago of 310 Native American reservations, which occupy 2 percent of the U.S. soil. Scattered all over the United States, these sheltered land enclaves are held in trust by the federal government. So legally, many of these land enclaves are a federal property. So there you cannot freely buy and sell land or use it as collateral. On top of this, since the Indian tribes are wards of the federal government, one cannot sue them for breach of contract. Indian reservations are communally used by Indian groups and subsidized by the BIA (the Bureau of Indian Affairs, Department of the Interior) with a current annual budget of about $3 billion dollars. Besides being a major financial resource that sustains the reservation system, BIA’s goal is also to safeguard indigenous communities, or, in other words, to make sure that they would never fail when dealing with the “outside” society. People in the government and many Native American leaders naÏvely believe that it is good for the well-being of the Indians to be segregated and sheltered from the rest of American society.
This peculiar trust status of Indian Country, where private property rights are insecure, scares away businesses and investors.[1] They consider these forbidden grounds high risk areas. So, in Indian Country, we have an extreme case of what Robert Higgs famously labeled “regime uncertainty” that retards economic development.[2] In fact, this “regime uncertainty” borders on socialism. James Watt, Secretary of the Interior in the first Reagan administration, was the first to publicly state this. In 1983, he said (and then dearly paid for this), “If you want an example of the failure of socialism, don't go to Russia, come to America and go to the Indian reservations.”[3] ...
Before we proceed, I will give you some statistics. Native Americans receive more federal subsides than anybody else in the United States. This includes subsidized housing, health, education, and direct food aid. Yet, despite the uninterrupted flow of federal funds, they are the poorest group in the country. The poverty level on many reservations ranges between 38 and 63 percent (up to 82 percent on some reservations),[4] and half of all the jobs are usually in the public sector.[5] This is before the crisis of 2008! You don’t have to have a Ph.D. in economics to figure out that one of the major sources of this situation is a systemic failure of the federal Indian policies.
These policies were set in motion during the New Deal by John Collier, a Columbia-educated social worker, community organizer, and utopian dreamer who was in charge of the Native American administration during FDR’s entire administration. English Fabian socialism, the anarchism of Peter Kropotkin, communal village reforms conducted by the Mexican socialist government, and the romantic vision of Indian cultures were the chief sources of his intellectual inspiration. Collier dreamed about building up what he called Red Atlantis, an idyllic Native American commonwealth that would bring together modernization and tribal collectivism. He expected that this experiment in collective living would not only benefit the Native Americans but would also become a social laboratory for the rest of the world. The backbone of his experiment was setting up so-called tribal governments on reservations, which received the status of public corporations. Collier envisioned them as Indian autonomies that would distribute funds, sponsor public works, and set up cooperatives. In reality, financed by the BIA, these local governments began to act as local extensions of its bureaucracy.
For example, in the rest of the United States, municipalities and counties do not own restaurants, resorts, motels, casinos, and factories. In Indian Country, by contrast, it became standard practice since the New Deal. By their status, these tribal governments are more interested in distributing jobs and funds than in making a profit. As a result, many enterprises set up on reservations have been subsidized by the government for decades. Under normal circumstances, these ventures would have gone bankrupt. This system that was set up in the 1930s represents a financial “black hole” that sucks in and wastes tremendous resources in the name of Native American sovereignty.
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