The State of Indian Economic Development

Article Index

A complex tale to be told

by Rob Capriccioso
News From Indian Country

Judging by mainstream media accounts alone, one might be led to believe that most tribes have profitable casinos and many Native Americans are getting richer by the second as white people pour their shiny coins and tokens into Indian-owned slot machines across the nation.

But the cursory casino press coverage that tribes and American Indians often receive is missing a full and dramatic story regarding the complexities of Indian casino development, while neglecting complicated political and cultural considerations and paying little more than lip service to vast pathways tribes have forged toward economic success. Most unjustly, according to many researchers of Indian economic development, the coverage to date has created widespread false impressions about the real income levels of the average Indian.

“I think, as of late, the mainstream media has just not done a very good job,” says Manley A. Begay, Jr., Co-Director of the Harvard Project on American Indian Economic Development and a leading tribal economic researcher at the University of Arizona. “So much emphasis has been on the notion that Native people are doing very well because of gaming. There’s just a tremendous amount of emphasis on gaming and the success of gaming.”

“Maybe we’d be better off if the press ignored us altogether,” jokes Ron Cornish, a research specialist with the Center for American Indian Economic Development.

U.S. Census data tells a much more complete story. Incomes on reservations after adjusting for inflation actually declined during the decade of the 1980s when newspapers like The Detroit Free Press started to pay widespread attention to gaming growth (for a time in the later 80s through the 90s, the paper’s most substantial coverage of Indian issues were largely relegated to a casino section).

Average Indian household incomes grew over the 1990s – and huge national publications, like TIME, jumped on that information – but by the end of the decade the average on-reservation Indian citizen still had per capita income of less than $8,000, compared to more than $21,500 for the average U.S. resident. On-reservation Native American residents remained, on average, the economically poorest identifiable group in America.

The latest Census numbers, from 2000, reported that 39 percent of on-reservation American Indians were living below the poverty line—higher than any other group and four times the rate for the average American. Unemployment among gaming tribes stood at 21 percent in 2000 and at 23 percent for non-gaming tribes. The unemployment rate for the U.S. population as a whole was recorded at 6 percent.

Despite those harsh realities, however, there is good news, too. “The story today of economic development in Indian Country is one of rapidly growing economies among both gaming and non-gaming tribes,” Joseph Kalt, a professor of international political economy at Harvard University, writes in the new book The State of the Native Nations (Oxford University Press). “…Indian nations are taking hold of self-determination and making the most of it.”

Gaming In Perspective

Several researchers interviewed for this article said it’s crucial for state and federal policy makers – as well as the general public – to understand that the development of tribal gaming starting in the 1980s has by no means been a magic bullet in curbing extreme poverty among American Indians.

Begay frames the story this way: “Despite growing vigorously, Indian gaming has not grown evenly. There are substantial disparities in facilities’ sizes and success.”

The variation was readily apparent in 1995 when the General Accounting Office (GAO) conducted a detailed study of Indian gaming, finding that Indian casinos made $4.5 billion in revenue, compared with non-Indian casino industry revenue of $50 billion. Indian casino net income totaled approximately $1.9 billion. The top 13 percent of the casinos studied by the GAO accounted for 59 percent of the total revenue and more than half of the net revenue generated by the casinos in the study.

And the variation, it seems, has only grown more pronounced. As of mid-2006, according to research gathered by the National Indian Gaming Association, 224 of the 561 federally recognized tribes operated gaming enterprises with a tiny fraction of gaming operations accounting for the majority of the total revenue generated by Indian casinos. In fact, out of the 367 tribal facilities in operation in 2004, the 15 largest accounted for more than 37 percent of total Indian gaming revenues. The 55 largest tribal facilities accounted nearly 70 percent of total Indian gaming revenues.

At the same time, the First Nations Development Institute (FNDI) estimates that Indian Country faces between $17.65 and $56.5 billion in annual capital needs for basic infrastructure, community facilities, housing, and enterprise development. “Economic development in Indian Country needs capital not simply to bring tribes on par with off-reservation communities’ level of annual investment, but to address historic backlogs in areas such as educational attainment, poor health, and crime,” writes Kalt. “Accordingly, FNDI’s projections of Indian Country’s capital needs are conservative.”

Many tribes’ gaming operations are relatively small and located in remote areas with low populations. Ninety-four facilities had annual revenues of less than $3 million in 2004, and the smallest 219 operations accounted for only 8 percent of total Indian gaming revenues.

Still, while casinos have by no means been a cure all to end poverty, make no mistake: They have led to amazing economic growth and even prosperity in some instances.

“The biggest tribal economic strides, without a doubt, have been in the area of gaming,” says Cornish, who was formerly a business educator at Sinte Gleska University.

 


The Winnebago Tribe of Nebraska, for instance, opened its WinnaVegas Casino on tribal land near the town of Sloan, Iowa, in the spring of 1992. It was an immediate success, providing jobs for more than 100 Winnebagos and generating huge profits for the tribe in its first year of operation.

The Winnebago used the profits for improvements on their reservation – building a senior center and a 12-unit apartment building, funding educational reforms, a daycare center, a podiatry service credited with preventing many diabetes-related amputations, a Winnebago language and cultural program and a tribal college.

High school test scores also rose in the Native student population and unemployment rates fell below the national average.

Then, in 1994, the state of Iowa authorized the expansion of gaming in the tribe’s primary markets.

Tribal leaders quickly realized that their remote gaming operation would be severely affected by new state casinos and voted to expand the tribe’s business operations. Ultimately, the Winnebago Tribe formed Ho-Chunk, Inc. to diversify the tribe’s investments away from gaming.

“Our goal was to develop an entrepreneurial company that was able to recognize and develop various economic opportunities and was capable of making quick business decisions to capitalize on those opportunities,” according to a history section on the Winnebago Web site.

The tribe initially financed Ho-Chunk with income from gaming operations. After a few years, it became a stand-alone operation and went on to start multiple reservation-based companies. Today, Ho-Chunk employs more than 500 people in four major areas of operation, including construction, housing, government contracting, marketing/media and retail/distribution.

It’s just the brand of Indian economic development that pleases Cornish. “Diversification in economic is extremely important,” he reflects, having spent years working with tribes and individuals on developing business plans. “Trying to insulate tribes’ from economic instabilities is crucial.”

Beyond Gaming

While the Ho-Chunk story is dazzling on many fronts, there is no one sure-fire way to achieve successful tribal economic development.

“I don’t think there really is a one-size fits all type of model,” says Begay. “Given the diversity of Indian nations – culturally, socially, politically – the routes to successes are going to be different and should be different.”

The Mille Lacs Band of Ojibwe provides just one of many examples of unique business ventures in Indian Country. In 1996 tribal leaders dedicated a portion of the tribe’s gaming revenue to a small business development program. The program invests in businesses that are at least 60 percent member-owned and within 50 miles of the reservation. As of 2000, 60 percent of the 30 businesses that had received assistance were still in operation.

Likewise, the Mississippi Band of Choctaw offers another example of a tribe focused on developing and sustaining unique tribal enterprises. The tribe has managed through the years to create several thriving manufacturing businesses focused on diverse ventures, ranging from automobile development to greeting card production. The tribe has even now opened a couple of factories in Mexico under the North American Free Trade Agreement.

Today, every Mississippi Choctaw citizen who wants to and can work has a job, rising incomes and standards of living, according to tribal officials.

As the concept of self-determination has taken root across Indian Country, some tribes have created and supported vast tribal enterprises that have nothing to do with casinos, such as the Quil Ceda shopping center of the Tulalip Tribes, or the high-volume FireLake Discount Foods Center and First National Bank and Trust of the Citizen Potawatomi.

“Non-gaming enterprises are proliferating rapidly in Indian Country,” according to Kalt’s research. “Some of these are large and visible – but development is also founded on businesses owned by private tribal citizens – from Burger King franchises and Hampton Inns to paving companies, construction firms, automobile repair shops, and cattle ranches.”

Historically, the governmental sector (tribal and federal) has been the largest employer of most tribes, but today the business sector is growing increasingly large. In 1982, roughly 13,000 small businesses generated $500 million in on-reservation revenues, according to Kalt. Ten years later, the U.S. Department of Commerce identified 102,000 Native owned businesses. By 2002, the figure had more than doubled, to 206,000.

Even at one of the poorest tribes in the nation – the Pine Ridge Indian Reservation – a number of Native-owned businesses have popped up and are now doing well, even without much direct support from the Oglala Sioux tribal government. In this case, a local Indian chamber of commerce is collaborating to foster intra-chamber purchasing and pushing to develop better tribal economic polices.

Cornish believes that all tribes should be looking to make economic developments beyond gaming. “Tribal casinos usually have to share a large percentage of their revenues with states or communities,” he notes. “Plus, there’s a very active program to expand gaming beyond Indian Country.”

Culture’s Role

Upon learning the profits of the few tribes that have enjoyed considerable economic success in the gaming arena, some people, unfamiliar with tribal sovereignty, self-determination and other cultural and political issues involving American Indians, might wonder why all tribes haven’t jumped collectively onto the casino bandwagon.

Beyond the obvious problems that would arise from market competition and saturation, tribal officials interviewed throughout the country say that an immense complicating factor is the unique political and social status of American Indians as a racial group in the U.S.

Tribes not only have inherent rights under the U.S. Constitution, treaties, Supreme Court decisions, Presidential executive orders, and acts of Congress, their members also often have another set of decisions to consider based on their unique cultural beliefs and customs.


Winnebago leaders, for example, say that the role of culture has long factored into their contemporary economic decision-making.

“As early as 1989 efforts were made to identify ways to create jobs and provide money for the tribe,” according to the tribe’s Web site. “A driving force behind these efforts was Reuben Snake (Kikawa Unga), a Winnebago political and spiritual leader. Reuben encouraged the tribe to find new ways to provide jobs and to make profitable business entities, while also respecting the ways of the past and tribal tradition and culture.”

All in all, it’s a business framework that would probably make Donald Trump squirm.

“Economic development for American Indians is really very different than for other ethnic minority groups,” says Begay, who is of Navajo descent. “We hold different things sacred and we also sometimes hold similar things sacred.” (For many years prior to the 2000s, many members of the Navajo Nation resisted casino development on the basis of cultural objections.)

“The strategy that’s selected by various tribes would need to consider what the cultural implications are for going one route over another,” says Begay.

Simply put, Native Americans appear to have different goals than the average American. According to a study conducted by Harvard University, the most commonly self-reported goals of Native nations in the arena of economic development are not wealth and capitalistic riches. Instead, tribes often pursue economic development in order to have the freedom to control their own political, cultural and social destinies, and to have the ability to sustain communities where their citizens can and want to live.

But decisions aren’t always so crystal clear. Cornish notes that it can sometimes be very difficult for tribes to contemplate the role of culture in the context of their economic decision-making. “There’s nothing in Indian Country that isn’t controversial,” he says. “Especially in economic development.”

For instance, some tribes that have uranium resources under their reservations have been very reluctant to mine it in reverence to the Earth, although there is a feeling among some tribal members that the federal government might get involved, if Indians don’t act soon.

“It’s a tough situation,” reflects Cornish. “It’s easiest enough to say that a tribe needs to establish cultural parameters, but it’s much harder in practice.”

In the uranium mining situation, Cornish suggests that tribes try to get “a full education of the industry,” rather than ignoring it and hoping that the federal government won’t one day interfere.

Leadership Constraints

Once a tribe has dipped its collective toes into the economic development waters – whether via a casino, tribal business, and/or support for Native entrepreneurs – leadership becomes a key ingredient in creating successful and sustained economic development, according to several researchers.

But good leadership doesn’t come easy. Many tribal leaders have lacked educational opportunities, have never held a job, or have only held “work until the grant runs out” jobs, according to Kalt.

“Of those that have substantial work experience, much of this has typically been in government rather than business,” he says. “With more control of tribal government comes increased responsibility and accountability. While leaders are seeing the consequences of their decisions and actions and learning from these experiences, more effort and opportunity must be directed to the capacity of tribal leadership.”

“Recent economic growth in Indian Country is fragile, particularly so because it is founded on powers of self-determination that are under constant attack from certain state and federal quarters and because maintenance of such powers is not under the unilateral control of Native nations,” according to a section of The State of the Native Nations. “It is not coincidence that economic development has taken root where and when long-standing federal ‘project’ and ‘grant’ approaches to development have been replaced by tribes’ assertions of self-rule in the economic arena.”

Begay says that pressure is increasingly felt on the shoulders of Indian governments to put in place the institutional infrastructures needed to channel human and financial resources into productive activities, so that the community is working to add to the economic “pie,” rather than squabbling over how to divide the pie.

“There is a need to develop good political institutions to allow for economic development to take off,” says Begay. “Many tribes currently have governing structures that do not mesh very well with the contemporary needs and challenges of Indian nations.”

Cornish suggests that more tribal leaders should be making partnerships with outside contractors to fill certain tribal business positions, at least in the short term. “Putting less than fully qualified tribal people in managerial roles isn’t a good idea,” he says. “Tribes have to determine that if they’re going to be successful, they have to hire the best talent. Then, they can get a return on their investment by having tribal members job-shadow and learn the ropes.”

More than one researcher interviewed for this story said that tribal politics should be kept separate from day-to-day government decision-making and management in bureaucratic and business affairs. Comparative research involving multiple tribal leadership styles has found that successful economic development is most likely to occur when tribes effectively assert their sovereignty and back up such assertions with capable and culturally appropriate institutions of self-government.

“Where these tribal government-oriented attributes are absent, tribal assets such as an educated citizenry, natural resources, and the like are more often squandered, failing to deliver sustainable economic performance or lasting improvements in community welfare,” according to Kalt’s research.

In the case of Ho-Chunk, Inc., the leaders of the Winnebago Tribe of Nebraska. Winnebago chartered it with the explicit admonition that “Ho-Chunk, Inc. was established so that tribal business operations would be free from political influence and outside the bureaucratic process of the government.”

Other tribes, like the Sault Ste. Marie Tribe of Chippewa Indians, have instituted outside boards to focus specifically on tribal economic development. Such a board is intended to encourage the use of outside business expertise and an emphasis on profitability over job creation and can, in turn, isolate a tribe’s business enterprise from political interference.

“Strategic thinking is not to occur in a vacuum by the tribal council,” says Begay. “Multiple steps should be taken to make sure the tribal council is acting strategically.”

Moving Forward

Continuing to push for economic independence won’t be easy in the years to come, but most everyone agrees it must be done—and done, some say, with even less financial support from the federal government.

“The 1990s saw substantial improvement in many tribal citizens’ material welfare and fiscal health – independent of federal program spending,” according to The State of the Native Nations. “Maintaining and expanding this rate of growth is clearly critical to the long-term economic health of Native America. Rates of unemployment and poverty remain unacceptably high and suggest much productive economic potential within.”

Cornish takes the independence thought a step further, saying that some tribal leaders are currently much too dependent on federal government payments. “One day soon those payments could be gone,” he says. “Being a leader means planning for that possibility.”

Cornish says that part of the change that still has to occur is getting more tribes to focus on self-determination. “Federal funding should be like training wheels,” he says. “You’ve got to get them off. Or else you’re never going to be on your own.”

And then there’s another problem: As tribal economic success stories become more commonplace – and as tribes learn to manage the growth via new leadership mechanisms – increasing numbers of leaders are worried that future generations will leave their reservation homes and Indian communities, which could hamper the economic continuum.

“Tribes are working harder than ever before at harvesting kids who have left Indian Country to get an education,” says Cornish. “Many of these kids have scored degrees from some of the best schools in the nation.”

From his experience, many students are coming back after graduation.

Chief Philip Martin, an elder with the Mississippi Choctaw, long ago predicted that fate after once being asked by an audience of non-Indian university students how the phenomenal economic development at Mississippi Choctaw was affecting Choctaw culture.

After contemplating the question, Chief Martin replied honestly: “Well, it used to be that everyone moved away, but now they’re all coming back.”

 

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