Native Americans Find Way to Make Money, Feds Outlaw It

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Like many past efforts to improve their economic situation, tribes have attempted to capitalize on their (theoretical) status as politically sovereign entities to get around federal and local regulations that stifle enterprise among  the general population.

By Ryan McMaken @ Mises Economics Blog

In California during the late nineteenth and early twentieth century, anti-Japanese sentiment ran high, in spite of the fact that they never comprised more than 3 percent of the population. To discourage Japanese immigration to California and to curb the wealth of the immigrants themselves, a large number of major employers agreed among themselves to not hire any Japanese workers. At the same time, politicians at the state legislature passed laws prohibiting Japanese immigrants from working in various occupations. In response, both immigrant and native-born Japanese worked around these laws and employment bans by focusing on industries that were ignored by much of the population due to the hard work required and the slim profit margins involved. Japanese workers and entrepreneurs began to dominate the truck farming and flower and nursery industries.

The Japanese, who developed more efficient ways of farming and getting crops to market soon began to put white farmers out of business.  White Californians responded with alien land laws in 1913 and 1920 which banned the sale of land to foreign-born Japanese and also prohibited leasing land to the same for more than three years. The Japanese merely responded by putting the land deals in the names of their native-born children, and the cycle continued, until Roosevelt solved many of the whites’ problems by simply locking the Japanese in concentration camps.

I was reminded of this episode, and the economic ingenuity of powerless political minorities when I noticed this article in the Wall Street Journal. Some Indian tribes, many of which are geographically isolated from economic and population centers, figured out how to make some money over the internet:

Thus the geography-defying digital revolution has meant a financial revolution for Native Americans: Several tribes have begun to benefit in recent years from e-commerce by owning and operating businesses offering short-term installment loans over the Internet. The Otoe-Missouria in Oklahoma and the Lac Vieux Desert Band of Lake Superior Chippewa in Michigan are two such tribes, out of the more than 560 federally recognized tribes in the U.S.

Like many past efforts to improve their economic situation, tribes have attempted to capitalize on their (theoretical) status as politically sovereign entities to get around federal and local regulations that stifle enterprise among  the general population. Casinos are an example of this, of course, but so are other industries from resource extraction to financial services.

But, as we all know, the United States government respects no “sovereignty” but its own, so the feds have begun to crack down on the latest attempt by tribes to achieve greater financial independence:

Tribal governments in America predate the founding of this country. Accordingly, the Founders viewed tribes as political entities with the inherent sovereignty to make their own laws and to be governed by them, just as states do. The Constitution and centuries of legislative and judicial precedents support this concept. Accordingly, Native American tribes have been able to successfully develop their businesses free from the bureaucracy and red tape that some state governments have created to restrict options for consumers.

Unfortunately, the Justice Department has now begun targeting tribal businesses as part of its Operation Choke Point, a concerted effort to put specific industries that it deems undesirable out of business by forcing banks to cut off their access to the financial system. Businesses offering short-term loans are among those targeted.

Legally, this is all “justified” by Operation Choke Point,  which authorizes Federal control of the financial system in the name of combating crime, terrorism, drug use, or any other “threat” to “national security.”

Harry Browne once noted that the government is good at breaking your legs, handing you crutches and then saying “see, without government, you couldn’t walk.”  This latest case with the tribes shows that if you do manage to heal your legs and walk again, the government will be sure to break your legs all over again.

This latest case with the tribes is different from the efforts against the Japanese, of course, in that the earlier case was based on racial animosity and the politics of envious whites against more successful Japanese. But the two cases are similar in that those on the receiving end of government efforts to impoverish them are often rather inventive in coming up with ways to get around the government’s edicts. Not one to declare defeat however, governments will always be back with new ways to break your legs, whether they’re in the name of protecting us from the Yellow Peril or from terrorists. It’s always just for society’s own good.

This article originally appeared at Mises Economics Blog