Reports of people living in tents and shacks at Attawapiskat evoke comparisons with the Third World, with people living in the shantytowns of South Africa and the barrios of Mexico. The comparison is apt, because we now know a lot about how people in the Third World have elevated themselves out of extreme poverty.
Stable government is essential. Failed states, such as Somalia and the Democratic Republic of the Congo, produce colossal misery. But it must be the right kind of government. Regimes that arbitrarily violate the rule of law, such as Robert Mugabe’s Zimbabwe, or concentrate all property rights in the state, such as China under Mao, produce poverty on a mass scale. Redistribution through foreign aid also does not work. Countries that have received the most foreign aid, such as Tanzania under Julius Nyerere, have performed poorly.
Democracy is desirable for many reasons but does not in itself lead to economic progress; think of India before the opening of its economy. And authoritarianism can sometimes produce economic advancement, as with China after Mao and Chile under Augusto Pinochet.
Truly progressive governments recognize individual property rights and enforce the rule of law, thus allowing people to reap the rewards of their initiatives. Individual property, voluntary yet enforceable contracts, open markets – these have been the holy trinity of economic progress in the Western world since the Industrial Revolution, and they are transforming China, India, Brazil and many other previously impoverished countries.
The formula for progress is no different for first nations, which constitute the so-called Fourth World made up of colonized peoples within North America. Their road to advancement runs not through dependence on government transfers but through property rights, contracts and markets, leading to genuine self-determination.
In the United States, the utility of “stable, fair, effective and reliable governing institutions” has been demonstrated in numerous case studies conducted by the Harvard Project on American Indian Economic Development. Researchers from the Property and Environment Research Center in Montana have shown that individually owned Indian land is far more productive than collectively owned land, and that tribes that uphold the rule of law by allowing litigants to have access to state courts rather than tribal courts experience faster economic growth.
In Canada, a recent study from the Centre for the Study of Living Standards demonstrated the overwhelming importance of education to economic progress on Indian reserves. But even after controlling for the effect of education, reserves with higher scores on a governance index constructed by the Frontier Centre for Public Policy had higher average scores on labour-market indicators. Governance matters.
My own research has to do with the relationship between property rights and first nations economies. I have found that first nations that adopt property tax regimes for leaseholds, and that have more certificates of possession for their members, score substantially higher on Statistics Canada’s Community Well-Being Index. In the absence of fee-simple ownership, leaseholds and certificates of possession are the strongest property rights available to first nations people; reserves that make more use of such rights do better in terms of income, employment, housing and education.
Parliament is considering bills to make public the salaries of chiefs and councillors and, on an opt-in basis, to extend elected terms of office of reserve governments from two to four years. These steps in the direction of greater transparency and stability should enhance the rule of law for first nations. But much remains to be done, particularly to strengthen the property rights of first nations people, to give them real ownership, so they will have the same opportunities as other Canadians to make better lives for themselves.
Parliament now has an opportunity to do just that in the wake of a report by the House of Commons finance committee that endorses the idea of an opt-in First Nations Property Ownership Act, as recommended by Manny Jules, head of the First Nations Tax Commission. First nations leaders are asking for better property rights; Parliament should listen and act accordingly.