How successful First Nations have achieved prosperity

The following is excerpted from Thomas Flanagan’s The Wealth of First Nations, which is shortlisted for the 2019/2020 Donner Prize, an annual award for the best book on Canadian public policy.

Adam Smith’s monumental work The Wealth of Nations ( 1776) laid down the economic and political principles that have made possible the prosperity of modern industrial societies. On the economic side, property rights and free exchange. On the political side, protection of society and enforcement of laws by a limited state.

Decades of empirical research have shown that these principles explain patterns of wealth and poverty in international society. Whatever their religion and culture, nations that protect markets and property rights under the rule of law and limited government tend to prosper; nations that try to rig markets, plunder property rights, and govern arbitrarily tend to stagnate.

Ten years ago I began a program of empirical research to see if these principles also apply to Canada’s First Nations. Fortunately a measuring stick was at hand: the Community Well- Being Index (CWB), first published in 1986 and updated every five years with new census data on income, employment, housing quality, and formal education. The CWB has been criticized for including only economic variables, and maybe it could be improved. But no Indigenous leader argues against more income, jobs, housing, and education.

There are over 600 First Nations in Canada, and their CWB scores vary widely around the mean of 58 ( 2016), with individual scores ranging from 30 to 90. This variation allows the researcher to search for factors correlated with higher scores. Without claiming to determine causation, this kind of research can paint a profile of what the more successful First Nations are doing.

One finding is geographical: First Nations located near cities and sizable towns tend to have higher CWB scores than those in more remote locations. However, even remote First Nations can achieve high CWB scores if they participate in resource plays, such as forestry, mining, and the production of oil and gas. The underlying factor is economic opportunity.

Location is not entirely outside human control. It can be functionally improved by better transportation and communication as well as by public policy that promotes rather than hinders resource development.

Moving beyond locational factors, First Nations that prosper tend to be engaged in Canada’s economic marketplace. They generate own- source revenue by creating businesses that sell goods and services, especially in the real estate development and hospitality industries. They show that the path to prosperity lies in “making” things for sale, not in “taking” more subsidies from government.

In general, they see their reserves and traditional lands as sources of economic opportunity. They enter the First Nations Land Management Agreement so they can manage their own lands, “moving at the speed of business, not the speed of government,” as the chiefs often say. They foster and respect property rights, including certificates of possession for individual members, the lands collectively owned by the Nation, and the new quasi- property right to be consulted before economic development takes place. And, like other communities in Canada, they levy property taxes on leaseholds to generate revenue for necessary infrastructure.

On the governmental side, they run a tight ship, staying out of deficit and debt. Many are models of financial probity, putting Canada’s senior governments to shame. They adequately reward chiefs for their executive functions but do not overpay councillors, thus dampening the hyper- politicization that can be the curse of First Nation politics. They reward successful chiefs with long terms of office so they can get things done. Above all, they strive for independence in managing their own affairs, utilizing the numerous “off ramps” from the Indian Act that have been legislated under both Liberal and Conservative governments.

All these results are summarized in my book The Wealth of First Nations, together with statistical and other observational evidence. It must be emphasized that these findings are not my personal advice; they are the best practices followed by successful First Nations and their leaders. They are the people who are constructing better lives for themselves, making their own decisions about their own resources.

There is lots of research and writing on the difficulties faced by First Nations. We need more research and writing on how they have overcome those difficulties. Understanding their success will help other First Nations figure out how to move ahead in their own circumstances, and help Canadian policy- makers to remove roadblocks to progress that still exist in the Indian Act and other legislation.

path to prosperity lies in ‘making’ things for sale, not in ‘ taking’ more subsidies.