Community capitalism: A path to prosperity for First Nations

Posted on November 21, 2017 in Debates – Opinion
November 21, 2017.    AND

We hear lots of bad news about Indigenous people in Canada, but we should not overlook the success stories. One such piece of good news is that community capitalism is flowering among First Nations who are employing their collective assets – reserve lands and the right to be consulted on the use of their traditional territories – to enter the Canadian economy in a big way.

Community capitalism generates so-called “own-source revenues” (OSR) – money that First Nations earn for themselves rather than receive from government transfers. We estimate that the total amount of OSR is now in excess of $3-billion a year (some First Nations do not make public reports). That’s a significant amount compared with the roughly $5.5-billion transferred to the same First Nations by governments in fiscal 2015-16.

First Nations are now involved in many lines of business, including entertainment and hospitality (casinos, hotels and restaurants); natural resources (oil and gas, minerals, agriculture, fishing, and forest products); and land development (shopping centres, industrial parks and residential housing). In all of these areas of business, there are examples of First Nations that have become virtually independent from the federal government for their financing while using OSR to improve the lives of their members.

Of course, the success is uneven. In fiscal 2015-16, the top 1 per cent of First Nations generated about 11 per cent of total OSR. By way of comparison, the top 1 per cent of tax-filers in Canada reported about 10 per cent of taxable income in 2013. OSR is about as unequally distributed as income in Canada generally, so it does not immediately solve all problems for all First Nations. But for many First Nations, it is probably their best chance to attain a better standard of living, given that the federal government is heavily indebted and will never be able to eliminate poverty through grants to First Nations.

Government’s role in these success stories is largely indirect. The exemption from taxation for Registered Indians on reserves can accelerate their economic growth, as in the enterprise zones that many governments around the world use to promote development. Parliament has also legislated some useful “off ramps” from the Indian Act, such as the First Nations Land Management Act, which allows First Nations to control their own lands and “move at the speed of business, not the speed of government.” And the Supreme Court’s creation of “the duty to consult and accommodate” has given First Nations useful leverage in negotiating Impact and Benefit Agreements (IBAs), which typically provide cash, jobs and job training, contract set-asides, and sometimes even an equity stake in ownership.

Government, then, can help to create opportunities, but only First Nations can seize them. Those who have done so deserve credit for using their initiative and ingenuity to provide a better life for their members.

Sadly, if government can create opportunities, it can also destroy them. That’s what happened in the case of the Northern Gateway pipeline. After Enbridge had negotiated IBAs with dozens of First Nations along the proposed route, the federal government blocked the pipeline. These First Nations had leveraged their right to be consulted into lucrative IBAs, but the federal government nullified those agreements without consultation with those same First Nations.

Is it not ironic that business, following court decisions and government policy on consultation, negotiated beneficial agreements with First Nations, only to have government cancel everything without further consultation?

Canada has to do better than this if community capitalism is to continue taking First Nations out of poverty.

Tom Flanagan is professor emeritus of political science at the University of Calgary and a senior fellow of the Fraser Institute. Taylor Jackson is an independent public policy analyst. They are the authors of a new Fraser Institute report: Bending the Curve: Recent Developments in Government Spending on First Nations.

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