Three Perversities of Indian Law

Abstract

During modern era of self-determination as guiding principle of Indian law, federal government is meant to be guiding tribes to self-government, understood as including well-developed constitutional and accountable forms of government, rule of law, and a separation of powers; to effectiveness in government, ability to provide appropriate services to their people competently, efficiently, and without corruption; and to economic prosperity. This article identifies three interlocking perversities in Indian law that interfere with these goals. 1. Because reservation governments lack criminal jurisdiction over non-Indians, their ability to protect safety of residents (Indian or non-Indian) is eroded by any influx of non-Indians. Since economic growth is likely to both require and encourage inflows of non-Indian employees, firms, and consumers, there is an inverse relationship between tribes' ability to facilitate economic prosperity and their ability to fulfill most basic governing functions of protection of life, limb, and property. Autarky becomes only way to retain control over essential criminal matters. 2. The boundaries and civil and regulatory jurisdiction of reservation governments are neither stable nor entrenched; and they are vulnerable to diminution in response to presence of (especially resident) non-Indians. Again, inflows of non-Indians imperil jurisdictional autonomy of reservation governments. This encourages a reverse Tiebout dynamic. Ordinarily local jurisdictions have incentives to provide good policies, uncorrupt government, stable laws, and prosperity-encouraging fiscal arrangements, because those will lead to an inflow of residents and firms, increasing jurisdiction's tax revenue. The incentives faced by a reservation government run in nearly opposite direction. If new residents or firms are non-Indian, and especially if they buy land, they diminish reservation's jurisdiction and potentially its tax base as well. 3. A tribe seeking to preserve its civil jurisdiction is well-served to concentrate economic activity in tribally-owned enterprises. Moreover, for reasons of tax preference and immunity from state taxation and regulation, tribally-owned enterprises have a large de facto subsidy compared with private, even if Indian-owned, firms on reservations. Indian polities are not immune to familiar effects of state ownership and control of major economic firms. Some of these impair political maturation of tribal governments, such as difficulty of maintaining a free and independent press when polity typically owns newspapers as well as firms that advertise in them. More of them impair economic development that is supposed to be a central goal of Indian policy; political connections and short-term success at serving as de facto jobs programs become more important than productivity or efficiency to firms' survival. Moreover, development of gambling-centered economies may have perverse effects on institutional development and broad-based economic growth. Successful tribal gambling enterprises rest overwhelmingly on a flow of funds from outsiders. Such dependent on a single source of revenue, one that does not in turn depend on any internal wealth-building or productivity growth, and one that is directly under control of political leadership, are prone to a variety of pathologies that are familiar from commodity-centered economies in developing world and that are referred to as the resource curse.