TSG IntelBrief: Geoeconomics: The Evolution of Native American Business
December 3, 2012

Note: What is geopolitics. Colin Flint, a professor of geography, describes it as “more than a competition over territory and the means of justifying such actions: Geopolitics is a way of ‘seeing’ the world.” Today’s IntelBrief describes the contemporary effects of a longstanding difference in “seeing the world” that exists between a country and a nation within that country.

As of early December 2012, there are more than 550 Native American tribes directly contributing to the United States economy, many of which have developed into very successful enterprises. Although individually, only 10% of Native Americans and Alaska Natives manage their own business, the unified and collective business initiatives of organized tribal leaders and communities usually fare much better. While U.S. government support for minority businesses undoubtedly accounts for some of the success, far greater credit goes to the creativity and commitment of tribal leaders who frequently apply a culturally holistic and symbiotic approach to their business models.

Because Indian tribes are sovereign nations under U.S. law, individual states are prohibited from enforcing their civil statutes on reservations within their borders. These legal constraints have generated both positive and negative consequences. Native America has the highest unemployment rate in the country, exceptionally poor infrastructure, and a non-existent tax base. In addition, according to the Harvard Project on American Indian Economic Development, the unemployment rate for Native Americans is generally believed to be at least two times the national average,  and on some reservations unemployment is well above 75%.

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Fundamental Challenges for a Nation Within a Nation

When it comes to critical infrastructure, many Native American communities are also deprived of the basic necessities of life routinely enjoyed by their fellow Americans. Without the benefit of tax revenues, existing roads, utilities, and housing on many reservations are of below-average quality and often poorly maintained. And when it comes to advanced technology, the gap is even more pronounced. In some communities there is little or no access to the Internet, cellular phone technology, or even what many in the West view as a basic necessity: cable television.

According to one New Mexico State University study prepared on behalf of the Economic Development Administration of the U.S. Department of Commerce, Native American tribes have overwhelmingly identified their top investment priorities as housing, roads, waste water technology, and medical facilities, while also asserting that basic levels of technological infrastructure must be in place to lay the foundation for advancement. To address these critical community and governance challenges — and to provide even basic services to their people — tribal leaders have been forced to become increasingly creative and entrepreneurial in their approach.

The Native American businesses most familiar to consumers are the reservation-based gaming operations or casinos. Currently, there are approximately 422 gaming establishments in operation managed by 240 of the nation’s 556 federally-recognized tribes. These operations have enjoyed notable success. The U.S. National Bureau of Economic Research (NBER) reports that four years after tribes open casinos, community employment typically increases by about 12 percent. Further, the percentage of working poor adults declines by 14 percent.

Financial returns from these gaming operations have also been impressive. The revenue from Native American gaming establishments in 2011 was almost US$27.1 billion, more than double the US$12.8 billion generated in 2001. As of 2010, nearly 700,000 people worked at Native American casinos, and they earned over US$37 billion in wages. It should be noted that approximately 60% percent of the gaming revenue from all Native American casinos came from just five U.S. states: California, Oklahoma, Connecticut, Florida, and Washington.

An independent study — The National Evidence on the Socioeconomic Impacts of American Indian Gaming on Non-Indian Communities — supported some of the NBER quality of life contentions, indicating that gaming operations offered significant economic and social benefits for Native American communities. The study examined 100 Native American communities with gaming operations from across the United States. Researchers reported that analysis of thirty indicators of socioeconomic health revealed “…no harmful impacts associated with the introduction of tribal casinos. The casinos were praised for benefits including infrastructure improvements, economic growth, higher employment, better social programs, greater indigenous language retention, and all-around community vitality”. There are points, however, where findings from this study and the NBER seem to diverge. According to the latter, “Casinos do come at some cost. Four years after a casino opens, bankruptcy rates, violent crime, auto thefts and larceny are up 10 percent in counties with a casino.”

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Diversified Business Interests

Reporting that casinos are the only successful Native American business would only propagate a popular misconception. Native American tribal investments in banking, golf courses, supermarkets, manufacturing, entertainment, green technology, and hotels are also flourishing to the extent possible in today’s economy. For example the Moenkopi Legacy Inn and Suites is the first hotel built on Hopi tribal land in Arizona in 50 years, and is the recent recipient of the prestigious Fodor’s Choice Award. Likewise, The View Hotel is a successful Navajo-owned business located within the Navajo Nation and the Navajo Tribal Park at Monument Valley Tribal Park, Utah.

Native American business is active in the public sector as well, including in the fields of defense and energy contracting. As an example, Choctaw Defense is a wholly-owned corporation of the Choctaw Nation of Oklahoma. The company was initially founded in 1988 as a supplier of military shipping and storage containers as well as laser guided bomb components for Texas Instruments. Choctaw Defense currently operates three manufacturing facilities located in Antlers, Hugo and McAlester, Oklahoma. The plants are located within the historic boundaries of the Choctaw Nation of Oklahoma.

On September 21st, the U.S. Energy Department awarded a US$20 million contract to a Native American Tribally-Owned Company for administrative support services and information technology support at the Savannah River Site (SRS) Operations Office. The self-ascribed mission of SRS is to “safely and efficiently operate SRS to protect the public health and the environment while supporting the nation’s nuclear deterrent and the transformation of the Site for future use.” That Native American company, NOVA Corporation of Window Rock, Arizona, is owned by the Navajo Nation.

Recent success aside, these are important times in the struggle for Native American economic independence. Economic sovereignty is equal to political sovereignty for tribes as well as individual Native Americans. Future success depends on tribal leaders being able to create jobs and continue to pursue new opportunities for generating wealth outside gaming operations alone.

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Also available: TSG Specialized Reports: The Soufan Group’s world-class network of intelligence analysts produces specialized geopolitical and risk assessment products tailored to the unique needs of our clients in the public and private sectors. We welcome the opportunity to discuss your requirements and explore how our intelligence services can assist you in achieving your strategic objectives. For more information, please contact us at: info@soufangroup.com

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