TRIBAL LEAKAGE: HOW THE CURSE OF TRUST LAND
IMPEDES TRIBAL ECONOMIC SELF-SUSTAINABILITY
Gavin Clarkson*
Alisha Murphy**
ABSTRACT
Economic leakage occurs when money leaves or “leaks” away from the
local economy sooner than expected and sooner than is optimal. From an
ideal economic perspective, money should circulate in the local economy
where it was received or earned five to seven times before leaving that
community. When consumers cannot buy the goods and services they desire
in their local areas, however, they are forced to spend their money outside
their communities, and that money rarely cycles back. On some
reservations, nearly 80% of the dollars flow out of the tribal economy
without cycling even once, resulting in substantial economic leakage.
This article argues that a primary cause for the lack of on-reservation
consumer options is the cumbersome and onerous policy of the United
States government holding tribal land in trust. An artifact of a long since
discredited congressional policy called Allotment, federally-imposed
restrictions on trust land make it nearly impossible for on-reservation
entrepreneurs to secure startup financing, as they cannot borrow against the
equity they have in their homes. As a result, fewer entrepreneurial ventures
exist on reservations and thus fewer options are available for on-reservation
consumers to spend their money on reservation. The inevitable consequence
of such a lack of consumer spending options on reservations is leakage.
This article also argues that title to trust land can and should be returned
to tribes and individuals in fee under a new tribal status that confers
permanent jurisdiction to the tribe, complete with full taxation powers. Such
a system will end a primary cause of economic leaking while ensuring that
the newly transferred land will always be subject to tribal jurisdiction
regardless of the race of the landowner.

*

Executive Director, Indian Resource Development Program and Associate Professor,
New Mexico State University, Department of Finance
**
MSW Candidate and Buder Fellow, Kathryn M. Buder Center for American Indian
Studies, Washington University in St. Louis

Electronic copy available at: http://ssrn.com/abstract=2447289

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TRIBAL LEAKAGE: HOW THE CURSE OF TRUST LAND
IMPEDES TRIBAL ECONOMIC SELF-SUSTAINABILITY
Gavin Clarkson*
Alisha Murphy**
INTRODUCTION
Gallup, New Mexico, is a border town just outside the Navajo Nation
reservation with an estimated 22,000 residents;1 however, that number
nearly triples on the first of the month. Social Security checks are
distributed to the elders and veterans on the first of the month, and most
tribal members have neither access to a local bank nor sufficient consumer
spending options on the reservation. Therefore, most Navajos end up
driving for an hour or more to purchase much needed groceries, lumber,
auto-parts, and kid’s school clothes in border towns such as Gallup.
According to the University of New Mexico Bureau of Business and
Economic Analysis study, significant competition for retail dollars from the
Navajo Nation is spread among several surrounding non-Indian
communities, such as Gallup, Grants, Farmington, Show Low, and
Winslow.2
The 2014 Diné Policy Institute Food Sovereignty Report3 found that
60% of respondents needed food items that were not available locally. 4 The
Navajo Nation Department of Economic Development reports that 71% of
Navajo dollars are spent off the reservation, 5 and nearly 80% of tribal
consumers purchased their groceries off reservation. 6 This economic
leakage happens despite the long drives off-reservation to the grocery store,
*

Executive Director, Indian Resource Development Program and Associate Professor,
New Mexico State University, Department of Finance
**
MSW Candidate and Buder Fellow, Kathryn M. Buder Center for American Indian
Studies, Washington University in St. Louis
1
2010 U.S. Census Bureau http://quickfacts.census.gov/qfd/states/35/3528460.html
2
Mitchell, J. (2006, April 1). UNM Bureau of Business and Economic Analysis. .
Retrieved April 27, 2014, from http://bber.unm.edu/pubs/MAINSTREET_Gallup.pdf
3
available at http://www.dinecollege.edu/institutes/DPI/Docs/dpi-food-sovereigntyreport.pdf (hereinafter Food Sovereignty Report).
4
Id at 17
5
Trib, C. (2003, January 1). 2002 -- 2003 Comprehensive Economic Development
Strategy
of the Navajo Nation. Retrieved April 27, 2014, from
http://www.navajobusiness.com/pdf/CEDS/CEDS%202002-03.pdf
6
Navajo Nation Division of Economic Development Completes Consumer Shopping
Preference Survey. (2012, February 1). Retrieved April 28, 2014, from
http://navajobusiness.com/pdf/Ads/NavEconomicDataBulletinFinal_030212.pdf

Electronic copy available at: http://ssrn.com/abstract=2447289

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some drives as long as 240 miles.7 These startling statistics not only
demonstrate the magnitude of the economic leakage that pervades the
Navajo Nation but also explains why the Wal-Mart in Gallup is one of the
largest in the world. Such leakage is not unique to the Navajo Nation.

The former Chairman of the Crow Nation in Montana suggested that if
“anyone doubts that money flows into Billings [from the Crow Nation,] go
to Wal-Mart today after members receive their per-capita check from the
tribe. ‘We don't call it Wal-Mart, we call it Crow-Mart.’”8 According to the
Billings Gazette, that quarter per-capita payment from the tribe’s coal
mining royalties was $310.9 Of the Crow Nation’s nearly 12,000 tribal
members, approximately 8,000 live on the reservation and were highly
likely to spend their per-capita checks in Billings 10.
The Crow Nation and the six other federally recognized tribes in
Montana also conducted a study that found that tribal and BIA salaries
pump more than $200 million directly into the state economy, and “since
every dollar turns at least five times in a local economy, the total annual
contribution may reach $1 billion.”11 When private-sector wages as well as
7

Food Sovereignty Report, supra note 3 at 17
Shay, Becky, Crow leader outlines plan for fuel plant, Billings Gazette, December
06, 2007
9
Id.
10
Id.
11
Selden, Ron, Economic development attitudes must change, Indian Country Today,
8

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[7-Jun-14

goods and services purchased by tribal and BIA entities are considered, the
contribution to the State of Montana “could reach $3 billion to $5 billion a
year.”12 In his book, Reservation Capitalism, Professor Robert Miller
identifies several studies on leakage from various reservations in addition to
the Montana tribal study, such as research on the Zuni Pueblo economy that
found that 84% of all individual income was spent off reservation.13 Former
Commissioner of Indian Affairs Robert L. Bennett perhaps best
summarized the problem of leakage, “When a million dollars is invested in
most communities, it generates approximately ten million dollars of cash
flow. But in Indian communities, one million dollars generates just one
million dollars of cash flow.” 14
The authors have seen firsthand how this economic leakage operates in
Crownpoint, New Mexico, on the eastern edge of the Navajo Nation.
Crownpoint has over 2,000 residents who live and work in the area but
leave the reservation to spend their paycheck. Other than one overpriced
grocery store,15 a non-Indian-owned Mexican restaurant next door, and two
gas station convenience stores, Crownpoint has no other stores, shops, or
restaurants.
Tim and Kathy Murphy have lived in Crownpoint most of their lives,
and the hour-long drive to Gallup has been a normal bi-weekly trip for as
long as they can remember.16 They shop off-reservation in order to get
affordable produce and meats because the local grocery store is too
expensive. Although demand exists for multiple grocery stores, and
competition would certainly reduce grocery store prices,17 the Murphys
routinely make the decision not to shop at the non-Indian-owned grocery
store in Crownpoint except in emergencies, and their experience mirrors
that of most families in Crownpoint. Thus, their earnings, and the earnings
of the entire community, routinely leave the reservation and never cycle
back – a classic case of economic leakage.
But why is economic leakage so pervasive on reservation communities
and yet the towns bordering those communities consistently see a net
monetary inflow from tribal members? This article argues that a primary
cause for the lack of on-reservation consumer options is the cumbersome
and onerous policy of the United States government holding tribal land in
June 13, 2001.
12
Id.
13
Robert J. Miller, Reservation “Capitalism”: Economic Development in Indian
Country. (Native America: Yesterday and Today) Praeger (2012), p. 136.
14
Robert L. Bennett, “The War on Poverty” in Indian Self-Rule: First Hand Accounts
of Indian-White Relations from Roosevelt To Reagan 224 (Kenneth R. Philp ed., 1986)
15
Food Sovereignty Report, supra note 3 at 16
16
Telephone interview with Tim Murphy, May 5, 2014.
17
See Part III infra

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5

trust. An artifact of a long since discredited congressional policy called
Allotment, federally-imposed restrictions on trust land make it nearly
impossible for on-reservation entrepreneurs to secure startup financing, as
they cannot borrow against the equity they have in their homes. As a result,
there are fewer entrepreneurial ventures on reservations and thus fewer
options for on-reservation consumers to spend their money on reservation.
The inevitable consequence of such a lack of consumer spending options
on-reservation is leakage.
Part I of this article explores the interplay between economic leakage
and trust land, and Part II explores the historical origins of trust land as part
of the overarching history of federal Indian policy. Part III returns to the
interplay of economic leakage and trust land, focusing on both micro- and
macroeconomic perspectives. Having explored both the legal and economic
underpinnings of trust land and its concomitant consequences, Part IV of
the article makes the argument that title to trust land can and should be
returned to tribes and individuals in fee under a new tribal status that
confers permanent jurisdiction, complete with full taxation powers, to the
tribe. The core premise of this article is that ending the current trust land
system will eliminate a primary cause of economic leaking while ensuring
that the newly transferred land will always be subject to tribal jurisdiction
regardless of the race of the landowner. We conclude with some final
thoughts as well as suggestions for further research.
I. ECONOMIC LEAKAGE AND THE CURSE OF TRUST LAND
Miller lists three reasons why economic leakage in tribal communities
like Pine Ridge, Rosebud Sioux (and Crownpoint) lead to disastrous
economic situations for Indian reservations. First, the lack of community
development
[l]eads to more poverty and overall lower Indian family incomes.
Second, having so few employers and jobs available in Indian
Country leads to high unemployment rates. And, third, the absences
of thriving economies, characterized by a sufficient number of
privately and publically owned businesses in Indian Country, adds to
the impoverishment of Indians and their families. 18

Although the trust land issue is not specifically emphasized by Miller,
this article focuses on trust land as a primary impediment for entrepreneurs
who want to start up small businesses or pursue entrepreneurial endeavors
on the Navajo reservation. Because Navajo land is held in trust, the United
States government has legal ownership of the land, and tribes and individual
Indians are merely beneficial owners. Selling and leasing Navajo land, even
18

Miller, supra note 13 at 113.

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for community development, must be approved by the United States. In his
article, “Ending the Curse of Trust,” noted tribal entrepreneur Lance
Morgan says,
Trust status hurts individual American Indians. It prevents us from
using our land as collateral, which has effectively killed Nativeowned agriculture. This system left us with almost no choice but to
lease out our land, primarily to non-Indians. That's why we are land
rich, but still dirt poor. 19

Professor Miller echoes this sentiment when he points out that
[T]ribes and Indian owners cannot sell, lease, develop, or mortgage
[trust land] for loans without the express approval of the federal
government. Needless to say, having the United States looking over
the shoulders of tribal governments and requiring federal approvals of
most economic decisions, and the time it takes to gain these
bureaucratic approvals, adds enormous costs and inefficiencies to
tribal and Indian economic endeavors. The inefficient and nonbusiness-oriented federal bureaucracy creates serious obstacles for
tribal governments and Indians in using trust assets for economic
purposes, and for non-Indian companies who want to work in Indian
Country. 20

The policy of restricting tribal land as trust land means that potential
entrepreneurs do not have access to a prime source of capital for business
startup. Without entrepreneurship a tribal economy cannot be selfsustaining, yet tribal members still must meet their basic consumption
needs. In an interview with the Farmington Daily Times in 2011, Navajo
Nation president, Ben Shelly, pointed out the need to reverse economic
leakage. President Shelly said “every weekend we come to town, into
Farmington, especially the first of the month … same with Gallup, same
with Page, same with Flagstaff”21 and spend money earned on the
reservation. Professor Miller similarly points out,
The money Indians spend does not circulate on their reservations
between various public and private business opportunities and jobs.
Clearly, if there are no businesses on reservations where residents can
buy necessary and luxury goods, they will make those purchases off
reservation. The lack, then, of small businesses on reservations leads

19

Morgan, Lance, Ending the Curse of Trust, Indian Country Today, March 25, 2005.
Available at http://indiancountrytodaymedianetwork.com/2005/03/23/ending-curse-trust94626
20
Miller, p. 40
21
Landry, Alysa, Navajos break ground on third casino, Farmington Daily Times,
February 26, 2011.

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to many negative economic impacts. 22

The legal origins of trust land come, in part, from Cherokee Nation v.
Georgia,23 the first Supreme Court opinion involving an American Indian
tribe,24 where Chief Justice Marshall wrote that “the relation of the Indians
to the United States is marked by peculiar and cardinal distinctions which
exist no where else.”25 One of those “peculiar and cardinal distinctions” was
the notion that Indian tribes were
[d]omestic dependent nations … in a state of pupilage. Their relation
to the United States resembles that of a ward to his guardian. … They
look to our government for protection; rely upon its kindness and its
power; appeal to it for relief to their wants; and address the president
as their great father. They and their country are considered by foreign
nations, as well as by ourselves, as being … completely under the
sovereignty and dominion of the United States26

Part of that guardian ward relationship was the notion that the federal
government would be the protector of Indian lands, both from avaricious
settlers and land speculators as well from the Indian himself. It was this
sense of paternalism from the “Great White Father” that led to the
disastrous policy of tribal trust land. In order to fully understand where that
policy came from, it is necessary to go father back into history.
II. A BRIEF HISTORY OF TRIBAL LAW AND POLICY27
The paternalistic notions of tribal inferiority that led to the various
restrictions of tribal economic development such as tribal trust land are not
new and traces predate the origins of the United States itself. The year
before Congress passed the Allotment Act, the Supreme Court would opine
that “the relation of the Indian tribes living within the borders of the United
States, both before and since the Revolution, to the people of the United
States has always been an anomalous one and of a complex character.” 28
The Court’s temporal lens needed to extend much earlier, however, as
the legal principles that existed when Europeans first made contact with the
Indians had their origins in legal theories developed to justify the
22

Miller, p. 114.
Cherokee Nation v. Georgia, 30 U.S. (5 Pet.) 1 (1831).
24
An earlier Supreme Court case, Johnson v. McIntosh, 21 U.S. (8 Wheat.) 543
(1823), dealt with the issue of who could acquire title to land from Indian tribes, but no
tribe was a party to the case.
25
Cherokee Nation, 30 U.S. (5 Pet.) at 16.
26
Id. at 17
27
An expanded discussion of Indian Country Economics can be found in Gavin
Clarkson, Tribal Bonds: Statutory Shackles and Regulatory Restraints on Tribal Economic
Development, 85 N.C. L. Rev. 1009 (2007) at 1019–30.
28
United States v. Kagama, 118 U.S. 375, 381 (1886).
23

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Crusades.29 As the competing European nations began to expand their
empires, the papacy began to grant exclusive rights to lands as they were
“discovered,” including rights of sovereignty over the indigenous
populations.30 Even after England broke away from the authority of Rome,
English law still supported this “Doctrine of Discovery,” 31 although the
validity of the doctrine was a subject of debate among early colonial
settlers.32 Irrespective of conflicting religious interpretations of Indian
rights, “practical realities shaped legal relations between the Indians and
29

See, e.g., Pope Innocent IV, Commentaria Doctissima in Quinque Libros
Decretalium, reprinted in THE EXPANSION OF EUROPE: THE FIRST P HASE 191, 191–92
(James Muldoon ed. & trans., 1977) (“[I]s it licit to invade a land that infidels possess or
which belong to them? . . . [I]t is licit for the pope to [demand allegiance, and] if the
infidels do not obey, they ought to be compelled by the secular arm and war may be
declared against them by the pope and not by anyone else.”). See also ROBERT A.
WILLIAMS, JR., THE AMERICAN INDIAN IN WESTERN LEGAL THOUGHT: THE DISCOURSES OF
CONQUEST 14 (1990) (discussing the crusading era origins of the legal doctrines which
governed European land claims in the Americas).
30
See, e.g., Bull “Inter caetera Divinae” of Pope Alexander VI dividing the New
Continents and granting America to Spain, (May 4, 1493), in CHURCH AND STATE
THROUGH THE CENTURIES 153, 156–57 (Sidney Z. Ehler & John B. Morrall trans. and eds.,
1967) (“Wherefore, all things considered maturely and, as it becomes Catholic kings and
princes . . . you have decided to subdue the said mainlands and islands, and their natives
and inhabitants, . . . with the proviso, however, that these mainlands and islands found or to
be found, discovered or to be discovered . . . be not actually possessed by some other
Christian king or prince.”). See also Bull “Romanus Pontifex” of Pope Nicholas V granting
the Territories discovered in Africa to Portugal, (January 8, 1455), in CHURCH AND STATE
THROUGH THE CENTURIES, supra at 144, 145; WILLIAMS, supra note 70, at 14. See also
generally Felix S. Cohen, The Spanish Origin of Indian Rights in the Law of the United
States, 31 GEO. L. J. 1 (1942).
31
See, e.g., Calvin’s Case, 77 Eng. Rep. 377, 397–98 (K.B. 1608). “All infidels are in
law perpetui inimici, perpetual enemies (for the law presumes not that they will be
converted, that being remota potentia, a remote possibility) for between them, as with the
devils, whose subjects they be, and the Christian, there is perpetual hostility, and can be no
peace; . . . And upon this ground there is a diversity between a conquest of a kingdom of a
Christian King, and the conquest of a kingdom of an infidel; for if a King come to a
Christian kingdom by conquest, . . . he may at his pleasure alter and change the laws of that
kingdom: but until he doth make an alteration of those laws the ancient laws of that
kingdom remain. But if a Christian King should conquer a kingdom of an infidel, and bring
them under his subjection, there ipso facto the laws of the infidel are abrogated, for that
they be not only against Christianity, but against the law of God and of nature, contained in
the decalogue; and in that case, until certain laws be established amongst them, the King by
himself, and such Judges as he shall appoint, shall judge them and their causes according to
natural equity.” This opinion was authored by Lord Chief Justice Edward Coke who,
coincidentally, wrote the charter for the Virginia Company in 1606. See WILLIAMS, supra
note 70, at 44.
32
Compare the arguments of John Winthrop (as “for the Natives in New England they
inclose noe land neither have any settled habitation nor any tame cattle to improve the land
by, & soe have noe other but a naturall right to those countries.”) with those of Roger
Williams (“I have knowne them make bargaine and sale amongst themselves for a small
piece, or quantity of Ground [and this they do] notwithstanding a sinfull opinion amongst
many that Christians have right to Heathens Lands.”) recounted in Cheister E. Eisinger,
The Puritan’s Justification for Taking the Land, 84 ESSEX INST. HIST. COLLECTIONS 135,
135–41 (1948).

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colonists.”33 The necessity of getting along with powerful and militarily
capable Indian tribes 34 dictated that the settlers seek Indian consent to settle
if they wished to live in peace and safety, buying lands that the Indians were
willing to sell rather than displacing them by other methods.
At the outbreak of the French and Indian War in 1754, treaty making
assumed a new dimension, as each of the competing European powers
sought to form alliances with the various tribes. The military importance of
treaty alliances would continue throughout the Revolutionary War period as
well. After the war, however, a powerful group of tribes who had sided with
the British during the war directly confronted the founding fathers. Those
tribes still maintained claims to the territory between the Appalachian
Mountains and the Mississippi River. President George Washington detailed
his proposed policy for dealing with the Indians in a letter to James Duane,
the head of the Committee of Indian Affairs of the Continental Congress:
Policy and [economy] point very strongly to the expediency of being
upon good terms with the Indians, and the propriety of purchasing
their Lands in preference to attempting to drive them by force of arms
out of their Country; which as we have already experienced is like
driving the Wild Beasts of the Forest which will return as soon as the
pursuit is at an end and fall perhaps on those that are left there; when
the gradual extension of our Settlements will as certainly cause the
Savage as the Wolf to retire; both being beasts of prey tho’ they differ
in shape. In a word there is nothing to be obtained by an Indian War
but the Soil they live on and this can be had by purchase at less
expence [sic], and without that bloodshed, and those distresses which
helpless Women and Children are made partakers of in all kinds of
disputes with them. 35

Although many consider Washington’s letter the founding document of
American Indian policy,36 its notion of Indians as “Savages” sits alongside
the pragmatic necessity of entering into treaties with the Indians. As the
newly formed United States began its inexorable march westward, the
Indian lands usually were not taken by force but were instead ceded by
treaty in return for, among other things, the establishment of a trust
relationship,37 often in specific consideration for the Indians’ relinquishment
of land.38
33

COHEN’S HANDBOOK OF FEDERAL INDIAN LAW § 1.02 (2005)(1941).
Id. Despite devastating outbreaks of disease, the Indians would continue to
outnumber the European settlers for several decades.
35
Letter from George Washington to James Duane (Sept. 7, 1783), in DOCUMENTS OF
UNITED STATES INDIAN P OLICY 1, 2 (Francis Paul Prucha ed., 3rd ed. 2000).
36
See, e.g., WILLIAMS, supra note 12, at 44.
37
The scope of the trust relationship is multi-faceted. “Many treaties explicitly
provided for protection by the United States.” COHEN, supra note 74, at §1.03[1]. See, e.g.,
Treaty with the Creeks, Aug. 7, 1790, art. II, 7 Stat. 35. Treaty Between the U.S.A. and the
34

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Various political factions disagreed over whether tribalism could
survive contact with white civilization and whether the appropriate course
of action was to make the Indians assimilate into that society or to remove
them beyond the reaches of that society. 39 Ultimately, notions of tribal
inferiority prevailed, and Congress passed the 1830 Removal Act, 40 Sending
dozens of tribes to the Indian Territory, often by force. 41
While the formal existence of the United States began at a point when
the prevailing policy recognized tribal sovereignty through the treatymaking process, such an orientation was not permanent. Once the removal
process was essentially complete, responsibility for Indian affairs, along
with the authority to negotiate on a government-to-government basis with
the tribes, moved from the War Department to the Interior Department, 42
although such treaties still had to be ratified by Congress. In the 1870s,
however, Congress ceased making treaties with the Indians 43 and instead
developed a policy of allotting tribal lands to individual Indians, 44
characterizing the allotment program as a “mighty pulverizing engine” 45
Kaskaskia Tribe of Indians, Aug. 13, 1803, art. II, 7 Stat. 78.. Other treaties provided the
means for subsistence. See, e.g., Fort Laramie Treaty, Sept. 17, 1851, art. VII, 11 Stat. 749
(providing for subsistence rations for the Sioux.); Treaty with the Western Cherokees, May
6, 1828, art. VIII, 7 Stat. 311. (“[E]ach Head of a Cherokee family . . . who may desire to
remove West, shall be given, on enrolling himself for emigration, a good Rifle, a Blanket,
and Kettle, and five pounds of Tobacco: (and to each member of his family one
Blanket,) . . . a just compensation for the property he may abandon.”).
38
See, e.g., Treaty with the Creeks, supra note 78, at 35; Treaty with the Kaskaskia,
supra note 76, at 78; Treaty with the Western Cherokees, supra note 76, Fort Laramie
Treaty, supra note 76.
39
See Letter from President Jefferson to William Henry Harrison (Feb. 27, 1803),
reprinted in Prucha, supra note 76 at 22. (“[O]ur settlements will gradually circumscribe
and approach the Indians, and they will in time either incorporate with us as citizens of the
United States, or remove beyond the Mississippi.”).
40
Removal Act, ch. 148, 4 Stat. 411 (1830) (current version at 25 U.S.C. § 174
(2000)).
41
The Choctaws were one of the first tribes to be removed along what one of their
chiefs described as a “trail of tears and death” See e.g. Gavin Clarkson, Reclaiming
Jurisprudential Sovereignty, 50 KAN. L. REV. 473, 475 n.14 (2002).
42
See VINE DELORIA , JR. & CLIFFORD M. LYTLE, AMERICAN INDIANS, AMERICAN
JUSTICE 113 (1983).
43
Treaty making with the Indians was ended by Congress in 1871: “[H]ereafter no
Indian nation or tribe within the territory of the United States shall be acknowledged or
recognized as an independent nation, tribe, or power with whom the United States may
contract by treaty.” Abolition of Treaty Making, 16 Stat. 544, 566 (1871), reprinted in
Prucha, supra note 76, at 135.
44
General Allotment Act of 1887, ch.119, §1, 24 Stat. 388. The statute is also known
as the Dawes Act after Senator Henry L. Dawes of Massachusetts. While the Dawes Act
represented the final, full-scale realization of the allotment policy, many treaties made with
western tribes from 1865 to 1868 provided for allotment in severalty of tribal lands. See
ROBERT WINSTON MARDOCK, THE REFORMERS AND THE AMERICAN INDIAN 213 (1971).
45
In an address to Congress in 1901, President Theodore Roosevelt expressed his
sense of the assimilation policy: “the time has arrived when we should definitely make up
our minds to recognize the Indian as an individual and not as a member of a tribe. The

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11

that would destroy tribalism and force Indians to assimilate into dominant
society as individuals.46
This theory of assimilation justified the legislation as beneficial to
Indians. Some proponents of assimilation policies argued that if Indians
adopted the habits of civilized life, tribes would need less land and the
surplus land would be available for white settlers. 47
Although anti-Indian prejudices undoubtedly contributed to the passage
of the General Allotment Act of 1887, 48 historians agree that the Act was
primarily “pushed through Congress, not by western interests greedy for
Indian lands, but by eastern [liberals] who deeply believed that communal
landholding was an obstacle to the civilization they wanted the Indians to
acquire . . . .”49 These liberals believed that “[p]ride of ownership . . . would
generate individual initiative . . . and bring material and cultural
advancement” for the Indians.50 Prominent liberal James Bradley Thayer of
Harvard Law School enthusiastically praised the Dawes Act—designed to
sever the individual from the tribal collective—as a “great, far-reaching, and
beneficent” achievement.51 These so-called “friends of the Indian,”
demanded that Indians be absorbed into the mainstream of American life
and the “savagery” of tribal autonomy be destroyed. 52
As the “mighty pulverizing engine” began its work, tribal members
under the Act surrendered their undivided interest in the tribally owned
lands for a personally assigned divided interest, usually held in trust for a
limited number of years, but “allotted” to them individually. 53 The
Allotment Act was the first statute to specifically mention the notion of trust
land, and from this point forward, trust lands, whether owned by the tribe or
an individual Indian, were subject to onerous and cumbersome federal
General Allotment Act is a mighty pulverizing engine to break up the tribal mass [acting]
directly upon the family and the individual.” Theodore Roosevelt, President of the U.S.,
Message to Congress (Dec. 3, 1901), in A COMPILATION OF THE MESSAGES AND PAPERS OF
THE P RESIDENTS 1789–1902, at 315, 348 (George Raywood Devitt ed., Supp. 1903).
46
See Gavin Clarkson, Not Because They are Brown, but Because of Ea: Why the
Good Guys Lost in Rice v. Cayetano, and Why They Didn’t Have to Lose, 7 MICH J. RACE
& L. 317, 325 (2002).
47
COHEN, supra note 74, at § 1.04.
48
24 Stat. 388 (1887). The statute is also known as the Dawes Act after Senator Henry
L. Dawes of Massachusetts. While the Dawes Act represented the final, full-scale
realization of the allotment policy, many treaties made with western tribes from 1865 to
1868 provided for allotment in severalty of tribal lands. See Robert Winston Mardock, The
Reformers and the American Indians 212 (1971).
49
Prucha, Great Father, at 669
50
Mardock, supra note 48, at 22.
51
James Bradley Thayer, The Dawes Bill and the Indians, The Atlantic Monthly, Mar.
1888, at 315.
52
COHEN, supra note 74, at § 1.04.
53
COHEN, supra note 74, at § 1.04.

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oversight. At best, that oversight would turn out to be benevolently
incompetent, but often it would prove insidiously exploitative of Indian
interest for the benefit of non-Indians.54
The oscillating pattern of alternating congressional support and then
hostility for tribal sovereignty would continue for the next century. By the
1930s it was clear that the Allotment Act was a colossal failure,55 and
Congress passed the Indian Reorganization Act of 1934 (“IRA”). 56
Although Congressional policy had completely reversed itself with the
passage of the IRA—tribal sovereignty was now to be encouraged rather
than destroyed—federal Indian policy would oscillate through one more
cycle in the next half century57 before President Nixon issued a landmark
statement calling for a new federal policy of “self-determination” for Indian
nations.58 By “self-determination,” President Nixon sought “to strengthen
the Indian’s sense of autonomy without threatening his sense of
community.”59 Self-determination60 led to an increase in economic
development activity, but access to capital remained an impediment. 61
President Reagan also made an American Indian policy statement on
January 24, 1983, stating his support for “self determination.” 62 In
54

Cite to Navajo case involving Peabody Coal
See, e.g., BROOKINGS INSTITUTION, INSTITUTE FOR GOVT. RESEARCH, THE
P ROBLEM OF INDIAN ADMINISTRATION (1928) (documenting the failure of federal Indian
policy during the allotment period).
56
25 U.S.C. §§ 461-79 (2000).
57
The period between 1945 and 1970 is referred to as the Termination Era, and was
characterized by the passage of number of statutes that “terminated” individual tribes—
“these acts distributed the tribes’ assets by analogy to corporate dissolution and afforded
the states an opportunity to modify, merge or abolish the tribe’s government functions.”
BARSH & HENDERSON, supra note 90, at 132. Examples of this legislative activity include
Act of August 13, 1954, ch. 732, 68 Stat. 718, and Act of August 3, 1956, ch. 909, 70 Stat.
963 (repealed 1978).
58
RICHARD NIXON, P ROPOSED RECOMMENDATIONS RELATING TO THE AMERICAN
INDIANS—MESSAGE FROM THE P RESIDENT, H.R. Doc. No. 91-363, at 116 CONG. REC.
23258 (July 8, 1970). See also The Indian Financing Act of 1974, Pub. L. No. 93-262, 88
Stat. 77 (1974) (codified as 25 U.S.C. §§ 1451–1453). Perhaps the greatest of Nixon’s
contributions to Indian tribal sovereignty was Public Law 638, which expressly authorized
the Secretaries of Interior and Health and Human Services to contract with and make grants
to Indian tribes and other Indian organizations for the delivery of federal services. The
Indian Self-Determination and Education Assistance Act of 1975, Pub. L. No. 93-638, §3,
88 Stat. 2203 (codified as amended in scattered sections of 25 U.S.C.)
59
Samuel R. Cook, What is Indian Self-Determination?, RED INK, May 1, 1994,
available at http://faculty.smu.edu/twalker/samrcook.htm.
60
The key legislation of this era includes: The Indian Self-Determination and
Education Assistance Act of 1975 §3; The Indian Civil Rights Act of 1968 (current version
at 25 U.S.C. §§ 1301–1341 (2000)); The Indian Financing Act of 1974 (current version at
25 U.S.C. § 1451) (2000); and The Indian Child Welfare Act of 1978 (current version at 25
U.S.C. §§ 1901–1963) (2000). See generally COHEN, supra note 74, at § 1.07.
61
COHEN, supra note 74, at § 21.03[1].
62
P RESIDENTIAL COMMISSION ON INDIAN RESERVATION ECONOMIES, REPORT AND
RECOMMENDATIONS TO THE P RESIDENT OF THE UNITED STATES 7 (1984).
55

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attempting to define “self-determination,” he stated:
Instead of fostering and encouraging self-government, federal policies
have, by and large, inhibited the political and economic development
of the tribes. Excessive regulation and self-perpetuating bureaucracy
have stifled local decision making, thwarted Indian control of Indian
resources and promoted dependency rather than self-sufficiency. 63

In 1983 President Reagan established the Presidential Commission on
Indian Reservation Economies. In 1984 the Commission published its
Report and Recommendations, again calling for a major shift in federal
Indian policy.64 The report identified “trust land” as the single greatest
federal impediment to tribal economic development.
Trust status constraints operate as an obstacle to Indian reservation
economic development in a number of ways since these constraints
constitute a complex framework of regulatory control over Indian assets.
The constraints are authorized in treaties, statutes, regulations,
procedures, and manuals governing specific resources such as land,
minerals, timber, water, hunting and fishing, and trust funds. The trust
status of Indian resources is not just an obstacle to economic
development from the perspective of collateral for financing.
Bureaucratic regulation and control of Indian asset management is also a
problem.
Trust status means that Indian tribes lack the same property revenue base
that local governments have. It also means that capital which they
already have cannot be flexibly used for tribal investment. Trust status
freezes tribal assets in a pre-capitalist state.65

III. MICRO- AND MACROECONOMIC PERSPECTIVES
Lance Morgan suggests that the trust land policy “serves as the single
largest impediment to Indian country's economic growth and tribal
sovereignty,”66 but how does the interplay between trust land and economic
leakage manifest itself in economic terms. A primary source of market
failure in the sense of economic development within Indian Country is the
severe restrictions imposed on any market for tribal trust land. The
restrictions on tribes regarding land ownership and activity is not conducive
for business; therefore few if any entrepreneurs attempt to start a business.
As Lance Morgan points out,
Back in the late 1800s, in order to stop scam land sales and egregious
tax seizures by state governments, the federal government took title to
63

Id.
Id.
65
Id., Part Two, p. 31
66
Morgan, Lance, Ending the curse of trust, Indian Country Today, March 23, 2005

64

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all tribal and individual American Indian land. The side effect of
creating trust land practically guaranteed our poverty as tribes and as
a people. Trust land can't be sold, taxed, mortgaged or used as
collateral. Trust status severely restricts the tribe's and an individual's
ability to use our largest asset, our land and its resources. 67

According to the 2012 summary of the Board of Governors of the
Federal Reserve System, “the inability or difficulty in using trust or
restricted land as collateral to access financing for business development
eliminates a major source of equity and security for loans.”68 Individual
Indian entrepreneurs are excluded holistically from opportunity for
advancement. The Federal Reserve summary also identifies an important
disincentive to small businesses in Indian Country, pointing out that “the
title status reports process, typically administered by the U.S. Department of
Interior, is often burdensome and time-consuming, which interferes with the
efficient use of land for business development.”69 Navajo entrepreneurs are
already at a disadvantage, coming from a low socioeconomic status. They
don’t have the time to wait for the Department of Interior to make a move.
Although the problem of economic leakage is a macroeconomic
concept, the problem also manifests itself in microeconomic terms as well.
Since Crownpoint has only one grocery store, despite being next to a state
highway which connects directly to Interstate 40, prices at this grocery store
are significantly higher than comparable stores in Gallup and Farmington
and are also higher than grocery stores owned by the same company at one
other location on the Navajo Nation. The Navajo Times recently reported
that
According to the U.S. Department of Agriculture, most of the Navajo
reservation is considered a food desert. Being designated as a food
desert means people have little access or no access to large
supermarkets on their land to maintain a healthy diet. 70

Because of the trust-land issues, it is harder for a competitor to open up
in Crownpoint, and therefore that grocer has a local monopoly and can price
accordingly. In microeconomic terms, demand remains the same, but supply
is restricted, thus driving up prices. Certain consumers are unable to afford
local prices and will spend the money to drive to Gallup to purchase
groceries. Given the difficulty of starting up a small Navajo owned,
affordable, grocery store in Crownpoint, how are other business startups to
67

Id.
Board of Governors of the Federal Reserve System 2012 summary
69
Id, p. __
70
Bitsoi, A., L., (2013). Food experts: summit aimed at preventing extinction of tribe.
The Navajo Times, June 13, 2013. Retrieved April 4, 2014 at
http://navajotimes.com/news/2013/0613/061313foo.php#.U2G3SPldXh5
68

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succeed? Without the opportunity to develop the community, youth
residents who attend Navajo Technical University have few local job
opportunities after graduation except to leave Crownpoint or leave the
reservation all together.
IV. ENDING THE CURSE OF TRUST LAND
Lance Morgan summarizes the impact of the failed policy of tribal trust
land when he points out that these “trust-land issues make escaping from
poverty very difficult, if not impossible and leave large portions of [Indian
Country] stuck in a cycle of dependency.”71 Land held in trust is a
debilitating factor that prevents tribes from having any opportunity to
become self-sufficient and self-sustaining, as it restricts a significant source
of capital for on-reservation activity. Access to capital provides the
necessary means to build and maintain adequate infrastructure to improve
the lives of tribal citizen, but tribes do not have access to capital if they do
not have the right to mortgage or sell their land-like non-reservation
entities. According to the Minneapolis Federal Reserve Bank newsletter, the
Community Dividend, “a commonly cited barrier to the development of
private market in Indian communities is the lack of access to affordable
credit and capital.” This lack of access to capital is clearly affecting all
tribes.
Rather than merely lament the problem, however, Morgan suggests that
the optimal solution is simply to give tribes back their land. He proposes
that
Title to trust land should be returned to tribes and individuals in fee
under a new tribal status. This new tribal status must confer
permanent jurisdiction, complete with full taxation powers, to the
tribe, ensuring that the land will always be subject to tribal
jurisdiction regardless of the race of the landowner. In one move, we
can liberate Indian country economically and politically. … It is clear
that there would be many details to work out, but the basic concept is
sound. 72

Legislation is currently pending before Congress that would allow tribes
to take control of their trust assets and implement land ownership systems
along the lines of Morgan’s suggestion. Senator Crapo (R-Idaho) has
introduced S.165, the Indian Trust Asset Reform Act, in the 113 th Congress.
Title II of this Act would allow certain tribes to participate in a pilot
program that would give them control of their trust land and allow them to
implement management strategies as they deem appropriate, subject to
certain fiduciary restrictions.
71
72

Morgan, Lance, Ending the curse of trust, Indian Country Today, March 23, 2005.
Id.

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CONCLUSION
Until the core issue of trust land is addressed, however, alternative
strategies for increasing tribal entrepreneurship need to be pursued. One of
the co-authors has suggested revisions to the securities laws to increase the
availability of private investment capital in Indian Country.73 Already in
place, however, Community Development Financial Institutions (CDFIs)
act as incubators for entrepreneurial start-ups by providing micro-loans that
enable and encourage small businesses financially. A Native-owned CDFI
can act as a catalyst for economic growth participation by finding and
enabling accessible capital that will then generate the necessary financial
aid or private and communal business development, even when home equity
loans are unavailable due to restrictions on trust land. Further research is
underway on how Native-owned CDFIs can stand in the gap until more
comprehensive economic reforms are in place.
***

73

See Gavin Clarkson, Accredited Indians: Increasing the Flow of Private Equity into Indian
Country as a Domestic Emerging Market, 80 Colo. L. Rev. 285 (2009)