The wealth of Indian nations.

It is said that a rising tide raises all boats, but that has not been true for American Indians. Despite recent growth partly owing to gambling casinos built on reservations, per capita income for Native Americans living on reservations in 1999 was $7,846 compared to a U.S. average of $27,880. This puts reservation Indians on a par with the people in countries such as Palau or Oman.

Why does this bastion of poverty persist in a sea of wealth? One hypothesis is that Indian cultures are inimical to capitalism, but this is not supported by the facts. Supposedly Chief Seattle said in the 1850s: "How can you buy or sell the sky, the warmth of the land.... Every part of the Earth is sacred to my people." Never mind that these were not the words of the chief but were fabricated for a television program; this view does not fit the historical facts. From tepees to horses to land and water, pre-Columbian Indians established property rights described by one anthropologist as "naked possession." Even after being confined to reservations, "the tradition of individual ownership was so well established that Indians resisted government efforts to establish common property," says economist Leonard Carlson.

Another explanation for reservation poverty is that Native Americans lack high-quality natural resources. Many reservations, however, encompass hundreds of thousands of acres, including valuable natural resources. In the 1980s, for example, the Crow tribe had $27 billion worth of coal, more than $3 million per tribal member. Unfortunately, the asset earned a paltry 0.01 percent return--leaving 55 percent of tribal members on public assistance.

Physical capital and human capital are surely important to economic prosperity but are lacking on reservations because the institutions that govern Indian economies do not encourage investment. ...