Archaic Indian Act is behind native poverty

Aboriginal Futures, Commentary, Media Appearances, Peter Holle

In yesterday’s National Post, Matthew Coon Come, the national chief of the Assembly of First Nations, suggested Ottawa is orchestrating a conspiracy to trap native people in poverty in order to assimilate them. While Mr. Coon Come is right about the existence of a poverty trap, it is the legal structure of the Indian Act itself, not a desire to assimilate native Indians, that is to blame.

The federal government, in fact, should be lauded for its attempt to show some leadership in this difficult area. Canada’s most archaic legislation, the Indian Act, may finally be revised this year: “New Law to Reform Native Voting,” read the headline after Robert Nault, Minister of Indian Affairs, announced his proposals in January. Many of them are long overdue; on many reserves voting is a joke, with the outcome tilted toward incumbents who wield enormous financial power over band members. A legal structure that ensures fair elections and protects the jobs of reserve employees who dare to dissent from entrenched chiefs will help remedy that.

Unfortunately, however, the changes offer window dressing on a dilapidated house with a rotten foundation. How fairly leaders are elected is decidedly less important than how much scope they have when they take office. Band councils have the legal authority to evict families from their homes with 24-hour notice. The title to most reserve lands, at the behest of the Crown, belongs to the entire community. With no security of possession, it becomes an irrational act for individuals to build or improve their assets. And the wholesale exemption of reserve lands from the strictures of commercial law guarantee First Nations’ exclusion from the dynamic economy surrounding them.

In a ground-breaking book published last year, Peruvian economist Hernando de Soto explained the connection between secure property rights and prosperity. Called The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else, it links higher Third World poverty levels with the lack of clear legal definitions of property. De Soto estimates that the teeming masses in Latin America, Africa and Asia are sitting on assets that total US$9.3-trillion, a capital base that could generate more enterprises than all the money coming from developed countries. Mostly composed of the land occupied by poor people, it has become what is called “dead capital.” It is “held but not owned” by its occupants. It amounts to 20 times the size of foreign commercial investment over the past decade and 93 times the amount of foreign aid to the Third World in the past 30 years. It remains captive because most of its occupants are squatters, with no legal title.

To quote The Economist, “secure title makes assets fungible. In a country with good property laws, almost anyone can use a house or a piece of land as collateral to raise a loan.” It also allows for collective effort; ownership of enterprises can be shared by hundreds, each of whom can cash out his or her share without jeopardizing the business. Without a decentralized system of ownership, with legal protection of transactions, economies remain trapped in inefficient, localized webs of interaction.

This analysis offers a compelling explanation for the entrenched poverty of Canada’s native people. A growing number of their opinion leaders, despite Mr. Coon Come’s comments, are coming to the same conclusion. The sections of the Indian Act — 29, 87, 89 and 90 — that effectively forbid commercial credit create “a real reluctance to put a business on a reserve,” one native leader recently stated. Repeal of those sections of the Act would do more to empower ordinary band members than a regime of fair voting.

B.C. native activist Meaghan Walker-Williams, assisted by economist David Friedman, has developed a proposal for expanding native commerce. She calls it the Coast Salish Free Trade Model, and it contains the ingredients for the revival of aboriginal economies. It would create free trade zones on all reserve properties, akin to the open economic structure that made Hong Kong an economic powerhouse, with no taxes and no external regulation. In exchange, businesses that invest in the zones would have to provide equity and employment for band members. Ms. Walker-Williams would also require investors to plow a percentage of their profits into a perpetual trust fund that would underwrite the myriad government services paid for by taxes.

Free trade zones would certainly mitigate the economic disaster induced by decades of bad law. But the notion would be impossible under the Indian Act. What investors would go near a reserve if it meant risking total capital loss? The section of the Act that forbids non-natives from seizing assets on reserves must be repealed, or the idea is a non-starter.

Legal assimilation is not cultural assimilation.