How the Dawes Act cratered Native American wealth for generations

Wealth is critical for financial security. Individuals can tap into their wealth to invest in education, buy a home, and fund businesses. Yet in the United States, there continue to be deep, persistent racial and ethnic wealth gaps, including for Native Americans.

The average Native American household has 8 cents of wealth for every dollar of wealth for the average white American household. However, recent research highlights that wasn’t always the case. For more on this history, Marketplace correspondent Nancy Marshall-Genzer spoke with senior economics contributor Chris Farrell. The following is an edited transcript of their conversation.

Nancy Marshall-Genzer: So how were America’s Indigenous communities doing financially about 100 years ago?

Chris Farrell: Much better than is widely appreciated. At least according to the suggestive study “American Indian Wealth in the Early Twentieth Century.” So three scholars provide what they say is the first evidence of the wealth of Indigenous nations in the early 20th century. And they draw on a variety of sources to make that calculation.

Marshall-Genzer: So what did they find?

Farrell: So they calculate that Indigenous people had substantial levels of wealth after adjusting for inflation, although there was a wide diversity in wealth levels. Total per capita wealth in 1912 was above white wealth. But here’s the thing: They add that between 1912 and 1927, wealth per capita among Indigenous people in the U.S. declined by about 50%, again after taking inflation into account.

Marshall-Genzer: Those are really striking numbers, Chris. What explains such a dramatic decrease in wealth?

Farrell: A lot of forces came into play. Still, the 1887 Dawes Act is highlighted.

Marshall-Genzer: And just a little background here, Chris: What was the federal government’s rationale for the Dawes Act?

Farrell: Okay, so really quickly, the goal of the act was to assimilate Native Americans in the mainstream U.S. society by pushing them towards farming and agriculture. And that meant dividing tribal lands into individual plots. What the Dawes Act did in reality is to open much Native land to white people. The size of Native American reservation lands decreased dramatically.

Marshall-Genzer: Rather than the Act empowering Native Americans economically, it seems like the opposite happened. So give us an idea of the scale and scope of change.

Farrell: Okay, so before the Dawes Act, Native Americans controlled about 150 million acres of land. The government stripped over 90 million acres of tribal land from Native Americans and sold the land to non-Native U.S. citizens. And when tribes were paid for their land, they were systematically underpaid.

Marshall-Genzer: And yet respect for property rights has long been considered essential to U.S. economic development, right?

Farrell: I know. And there’s another paper — and it includes two of the three scholars from the wealth study — and they note how abundant land, strong property rights and the rule of law are traditionally viewed as key elements to America’s early economic success. Yet respect for strong property rights for settlers didn’t include regard for Indigenous property rights, and that’s a major factor behind the economic impoverishment of many Native American communities over the long haul.