Creating Entrepreneurial Reservation Economies
by Robert J. Miller
Very few, if any, Indian tribes in the United States have developed economies in which reservation residents can be employed, cash checks, and spend their money for necessities and luxuries all on the reservation. In contrast, on the 300 Indian reservations in the United States residents have to travel to the nearest off-reservation city to cash checks, buy goods, and spend their entertainment dollars. This situation benefits state economies but impoverishes reservation residents. In 1994, one tribal official estimated that $0.80 of every dollar Navajo residents received left the reservation immediately. This predicament is a disaster for the economic situation on reservations. Tribes need to recognize this problem and develop solutions. Increasing the number of privately owned small businesses on reservations is an avenue that will dramatically improve reservation economies.
Keeping dollars in the reservation economy
Reservations rapidly lose their residentsâ€™ income because of the absence of private small businesses where people can spend their money on goods and services. This leads to the loss of an enormous amount of economic activity and employment for Indian country. The development and operation of small private businesses will help tribal governments develop economies and keep the consumerism that reservation residents engage in on the reservation.
The importance of having an economy and a critical mass of small businesses on reservations is demonstrated by various economic principles. First, every reservation resident has a certain level of disposable income. Even the poorest resident has some money to spend. Obviously, if reservation families spent all their income on reservation it would create an enormous benefit to the reservation economy.
The second principle is called the â€œmultiplier effect.â€ This term defines the situation where every dollar that is spent by one person ends up as profit or salary for another person. This new person will then also spend that money and pass it on to another person who will also spend it, etc. etc.
In addition, one dollar can reverberate through an economy and become pay, profit, and spending money for a great number of people as long as the dollar stays within the local economy. Consequently, if a reservation community can keep its dollars circulating through its economy by residents purchasing their goods and services at reservation based businesses then the entire reservation economy will benefit and grow based on this respending effect.
The only way to keep dollars on reservations and in the economy is if there are numerous private businesses offering different goods and services that residents can buy. This will keep the money circulating on the reservation and rotating between businesses, employees, and consumers. The primary answer, then, to building real reservation economies appears to be for tribal governments to encourage private and corporate parties to develop and operate privately owned businesses providing a wide variety of goods and services.
Developing private, entrepreneurial businesses on reservation
Governments play an important role in developing a private, capitalist economic system. They protect the public interest, ensure fair competition, maintain law and order, enforce contracts, and define property rights. Governments set these rules by enacting laws and regulations, and by establishing courts that enforce contract and property rights. The stability provided by government encourages people to work to secure economic rights and to risk investments of their time and money. Tribal governments must play this important role in reservation economies.
Tribal governments can encourage businesses to locate on reservation. There are tax and regulatory strategies tribes can use to attract investments just as states and counties compete to entice new businesses to their areas.
Tribal governments can also greatly assist the development of private small businesses by creating an environment which assists reservation residents to start private businesses. Tribal governments can work to remedy some of the reasons for the very low rate of private business ownership among Indians. Most private businesses in the United States are started with family money or by borrowing money against home equity. Most Indians lack access to family money and rarely have accumulated home equity due to the near absence of mortgage home ownership in Indian country and a nearly non-existent escalating housing market. Seed money provided by tribal, private, or federal loan funds could help alleviate this funding problem for starting new Indian owned private businesses. Several tribes are now offering their tribal members access to business start-up loans.
Reservations also rarely have role models of successful private business owners from which others can learn. Tribal economic development departments can set up mentoring and training programs to help develop new entrepreneurs and to help them start new businesses. Various organizations already provide small business development training for individual Indians. In Oregon, for example, in 1993 four tribes created the highly successful Oregon Native American Business and Entrepreneurial Network (â€œONABENâ€) to train individual Indians to draft business plans, finance business start-ups, and operate their businesses. Indians can also access training programs from the U.S. Small Business Administration (SBA). In fact, the SBA is currently promoting its HUB Enterprise Zone program which helps minority owned businesses on reservations contract with the federal government.
As mentioned above, tribal governments also need to provide the laws, regulations, and independent court systems that will assist and protect business and property rights on reservation. Many tribes have never enacted the type of laws which can help attract businesses and banks to locate on reservation.
In conclusion, tribes must do everything they can to develop the entrepreneurial spirit in reservation residents and to ensure that more private businesses are started and operated in Indian country. These businesses will provide jobs and economic activity that will stimulate the development of even more small businesses and more economic activity. Then, when there are a sufficient number of tribal and private businesses operating on a reservation, a functioning economy will really develop from the effect of money circulating and recirculating between reservation consumers and businesses, employees, and owners.
Robert Miller is a Professor at Lewis & Clark Law School where he teaches various Indian law subjects and Civil Procedure. He is the Chief Justice of the Grand Ronde Court of Appeals and is a member of the Eastern Shawnee Tribe of Oklahoma. He is also on the board of directors of the Oregon Native American Business and Entrepreneurial Network. A longer article that expands on the ideas developed above can be found at, Robert J. Miller, Economic Development in Indian Country: Will Capitalism or Socialism Succeed?, 80 Oregon Law Review 757-859 (2002).