Economic implications of reaffirming Indigenous land rights: Lessons from Canada

Rob Gillezeau is an assistant professor of economic analysis and policy at the University of Toronto. This article is a guest contribution to the work of the Center for Indian Country Development and does not necessarily reflect the views of anyone at the Federal Reserve Bank of Minneapolis or in the Federal Reserve System.

The U.S. Supreme Court’s 2020 decision in McGirt v. Oklahoma, which reaffirmed the existence of federally recognized reservations in eastern Oklahoma, was a watershed moment for Native nations in that region and in Indian Country as a whole. Though the case was about criminal jurisdiction, many legal experts believed it could have broader implications for other areas of law that matter for the economic prosperity of Native and non-Native communities.

While no one can say for sure what the long-run impacts of the McGirt decision will be, looking at relevant historical experiences can help. To better understand how the decision might play out economically, consider the experience of Indigenous nations in Canada (generally referred to by Canadians as First Nations) after a 1982 change to the Canadian constitution reaffirmed their rights and title to huge areas of land. As findings from an analysis described in this article suggest, the reaffirmation of Indigenous rights can be beneficial to both Indigenous and non-Indigenous communities.

McGirt prompts concerns about legal and economic uncertainty

McGirt v. Oklahoma hinged on whether the State of Oklahoma had criminal jurisdiction over a crime committed by a tribal member on lands originally reserved for the Muscogee (Creek) Nation. In a narrow 5-4 decision that some law experts called an “Indian law bombshell,” the Supreme Court decided that the Muscogee (Creek) reservation, which covers 3.25 million acres in Oklahoma, was never disestablished when the State of Oklahoma was created. The immediate result of the decision was that much of Eastern Oklahoma, including lands reserved for other tribes in Oklahoma, is once again part of Indian Country.

Much of the initial commentary on this decision highlighted the issue of uncertainty. For example, Chief Justice Roberts in his dissenting opinion wrote that the decision “creates significant uncertainty for the State’s continuing authority over any area that touches Indian affairs, ranging from zoning and taxation to family and environmental law.” There have since been important efforts to clarify the legal scope of the decision.

Uncertainty around the McGirt decision’s legal and policy consequences can spell uncertainty about its economic consequences as well. That’s because policy uncertainty can, in principle, prevent people and businesses from making investments as they wait for the uncertainty to abate. However, the actual effects of uncertainty can vary greatly from one context to another. With respect to Indigenous nations’ rights over land, for example, increased uncertainty on consultation structures—that is, the required discussions between Indigenous nations and the firms (or governments) engaged in projects in Indigenous territories—may be offset by increased local bargaining power or the desire of some firms to work collaboratively with Indigenous communities. Further, in the context of legal decisions, it may not always be clear whether the existing uncertainty was already present before a seeming shift in judicial direction occurred.

However, the type of judicial intervention seen in McGirt—one that both reasserted long-standing Indigenous nations’ rights and created policy uncertainty—is not unique. And, perhaps even more important for understanding the potential economic implications of such court decisions, related examples of reaffirming Indigenous nations’ rights occurred decades ago, allowing the longer-run impacts to the economy to be mapped out over time.

Looking toward Canada to determine what happens when Indigenous nations’ rights are reaffirmed

In Canada, starting with the Royal Proclamation of 1763, the sovereignty of Indigenous nations was recognized and any cession of Indigenous lands had to be directly negotiated between the Crown^* and an individual Indigenous nation. As a result, much of Canada was ceded to the Crown through a series of treaties with Indigenous nations. However, this process halted in the early twentieth century as the courts had weakened Indigenous claims to right and title, and the Canadian government thought it could open Indigenous lands to non-Native settlement without needing to commit to treaties. As a consequence, large parts of British Columbia, Quebec, and the far north were never ceded from Indigenous nations to the Crown.

This served as the status quo in Canada until Frank Calder and the Nisga’ Nation sued the Government of British Columbia, leading to a Supreme Court of Canada ruling in the 1970s that Indigenous right and title continued to exist under Canadian law. Later, the inclusion of Indigenous rights and title in the Constitution Act of 1982 affirmed that Indigenous right and title continued to exist. Indigenous nations’ rights were further solidified in Haida Nation v. British Columbia in 2004. This case established that the Crown needs to consult Indigenous groups prior to exploiting lands for which they may have claims.

Following the Constitution Act of 1982, Canada shifted overnight from a world in which government and the courts simply acted as if Indigenous nations’ rights and title did not exist to one in which they were written into the constitution. For the large parts of Canada where land areas had been ceded, this changed nothing. But in British Columbia and elsewhere in the country where land areas had not been ceded, shown in blue in Figure 1, this was viewed as a dramatic expansion in uncertainty over property rights. This led to the voicing of many of the same fears now being voiced in Oklahoma around the McGirt decision: in particular, that the resulting uncertainty might be a drag on economic activity for Indigenous and non-Indigenous people alike. For example, many Canadians were concerned that recognizing Indigenous nations’ rights and title might delay major resource projects or push economic activity elsewhere.

However, an empirical analysis of the nearly four decades of experience since the affirmation of Indigenous nations’ rights and title in large parts of Canada suggests that concerns around implications for economic activity were unfounded. When our team of researchers from Emory University, the University of Toronto, and the University of Victoria studied the effects of this legal and constitutional change, we found that legal recognition for Indigenous nations’ rights and title has actually led to greater economic development, benefiting both Indigenous and non-Indigenous peoples and communities in Canada.

For our analysis, we used historical records to build a dataset of Indigenous communities in Canada and the treaties they’ve signed, then merged it with 1981–2016 restricted-access data from Canada’s Census of Population. We found—contrary to many people’s expectations—that income growth has been dramatically higher in communities that did not cede land than in communities that did. Figure 2 shows this trend from 1981 to 2016. After the Constitution Act of 1982, per capita incomes diverged between the two groups. By 2016, communities that had not ceded their lands had a per capita income of $43,000, while those that had ceded their lands had a per capita income of $27,000. (Estimates are inflation-adjusted to 2016 Canadian dollars.) Further, gains are present both for Indigenous and non-Indigenous individuals living in these communities and across a broad range of economic sectors.

One explanation for these findings is that the bargaining power of First Nations governments in unceded areas was boosted disproportionately by the Constitution Act of 1982 and subsequent legal cases. Insofar as uncertainty may negatively affect economic activity, it appears to be outweighed by the impacts of stronger local bargaining power. This appears, for example, through the surge in impact benefit agreements (contracts between natural resource firms and local communities to share the gains of economic activity) as Indigenous property rights are strengthened over time in the courts.

What might lie ahead in Oklahoma?

The economic and demographic characteristics of unceded parts of Canada are clearly dissimilar to those in Eastern Oklahoma. Thus, we are not claiming to understand the long-run effects of McGirt v. Oklahoma on Eastern Oklahoma’s economy. Rather, we are providing an example of how features of the McGirt decision, namely an increase in jurisdictional authority of Native nations and an accompanying groundswell of public concern about how that increase might affect non-Native interests, did not lead to a massive decline in economic growth. Our Canadian example provides some evidence that greater land rights for Indigenous nations—even if they generate some policy uncertainty—do not translate into reduced prosperity for Indigenous or non-Indigenous communities.

Endnote

* In this article, Crown refers to the governing authority over Canada, either before or after Canada achieved political independence from the United Kingdom.