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Creating Entrepreneurial Reservation Economies

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 residents' 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 "multiplier effect." 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.

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
re-spending 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 that 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
nonexistent 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 (ONABEN) 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 reservations. Many tribes have never
enacted the type of laws that can help attract businesses and banks to
locate on reservations.

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 re-circulating between reservation
consumers and businesses, employees and owners.

Robert Miller is an associate 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.