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Enhancing Individual Property Rights is the Path to Prosperity for First Nations

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Release Date: August 12, 2002
If First Nations want prosperity and economic development for their people, private property rights must be enhanced in the substantial land base they now control, says a new paper, Individual Property Rights on Canadian Indian Reserves released today by The Fraser Institute.

"First Nations now have collective property rights to reserves totaling more than 2.7 million hectares and these totals are growing as aboriginal and treaty claims are settled. But these large amounts of land will never yield their maximum economic benefit to Canada's native people as long as they are held as collective property subject to political management," says Tom Flanagan, co-author of the paper and a Senior Fellow of The Fraser Institute.

It is clear that the material standard of living on Indian reserves is much lower than the Canadian average. Most aboriginal leaders have clearly stressed their commitment to economic development on reserves and recognize that the commercial, recreational, or residential potential of their land is the greatest economic asset of many First Nations. This new paper suggests the practical implications for economic growth and development on reserves that will result from increased property rights.

Long-established policy has tended to channel Indian property rights in a collective, government-dominated direction and many Indian reserves in Canada have no formalized individual property rights. The current structure has deprived many residents of Indian reserves of the individual property rights that other Canadians take for granted.

However, this paper illustrates that reserves do not function entirely as regimes of collective property and looks at both established and emerging systems of property rights. Band councils control much reserve land as collective property, but there is also a good deal of individual property, although not in the form of fee-simple ownership that is familiar to most Canadians.

Flanagan and co-author Christopher Alcantara assess the four different but overlapping regimes of private-property rights-customary rights, certificates of possession, land codes emerging under the recently-passed First Nations Management Act, and leases-that already exist on reserves across Canada.

The authors argue that these various nascent systems of property rights are worthy of serious study by economists, lawyers, and political scientists with a view to establishing how well they work and how they might be perfected for the benefit of First Nations people. They recommend that embryonic systems of private property, such as those under the Nisga'a Treaty, be carefully examined to see how they can be expanded and perfected for the long-term benefit of reserve residents.

Although there is no single model of property rights, the conclusion reached by economics and political science indicates that in the long run collective property is the path of poverty and private property is the path of prosperity.

"Twentieth-century history has reinforced our understanding of the role of private property rights in creating an efficient economy," says Alcantara. "Against this backdrop, it seems evident that developing workable systems of private property rights to facilitate market transactions will be a necessary condition to attaining widespread prosperity on Indian reserves."

Flanagan points out several unique challenges in providing a clear model for First Nations lands: the fee simple model that works well for most Canadians will not be appropriate for reserve lands as long as residents wish to ensure that they remain preserved for future generations of their people.

On the other hand, the desire to protect reserve land from being sold to outside owners lowers its value in the land market because it ensures that many potentially profitable transactions cannot be concluded.

"We do not present private property rights as a panacea for all the economic and social ills of native communities. Nonetheless their intelligent application will help many reserve residents obtain better housing and business opportunities while remaining connected to their aboriginal communities," the authors conclude.

About the Authors

Tom Flanagan is a professor of political science at the University of Calgary, a senior fellow of The Fraser Institute, and a fellow of the Royal Society of Canada. He has written extensively on Canadian politics, history and aboriginal issues and is the author of First Nations? Second Thoughts .

Christopher Alcantara is an MA Candidate in Political Science at the University of Calgary. He is writing his Masters thesis on Certificates of Possession and the housing program at Six Nations.