Industries ; Federal Reserve District, 5th ; Economic development

Doug Campbell

English

Research Papers in Economics

on the
Reservation
Making it
The Eastern Band of the Cherokee Indians
shares the economic problems that afflict
tribes nationwide and the beleaguered rural
communities of western North Carolina
BY CHARLES GERENA
W
hether it’s Kitty Hawk or
Virginia Beach, every
tourist destination has it
— a strip of retailers whose purpose is
to empty visitors’ wallets. Downtown
Cherokee in western North Carolina
has one too. The major difference is
the frequent appearance of buzzwords
like “tepee” and “chief” above store-
fronts.
On an overcast morning in April,
the tourist season is just warming up.
A guy stands outside of one shop
looking bored and rather chilly
dressed in Indian garb, waiting to
greet people and have his picture
taken. For now, there are only a few
couples and families wandering
around, browsing traditional crafts
sold alongside cowboy paraphernalia
and merchandise emblazoned with
“Great Smoky Mountains.”
This is the economic heart of the
Qualla Boundary, the largest reserva-
tion in the Fifth District and home of
the Eastern Band of Cherokee
Indians. Like its mountain neighbors
seeking economic opportunities, the
Eastern Band has embraced tourism.
It is an industry where the tribe’s cul-
ture and history provide a compara-
tive advantage. A casino that opened
in 1997, one of relatively few Indian-
run gaming operations east of the
Mississippi, has jump-started the trib-
al economy.
Across the country, the 511,000
American Indians living on reserva-
tions have struggled to succeed. Their
per-capita income grew 83 percent
from 1970 to 2000, outpacing the
nationwide rate. Still, it remained
about one-third of the U.S. average.
Median incomes, poverty levels, and
unemployment on reservations fol-
lowed a similar pattern — they
improved significantly over the last
decade, yet still compare poorly to the
country as a whole.
Economists and historians blame
this lagging performance on prob-
lems with financial, human, and
physical capital; reservations either
don’t have enough of it or use it 
inefficiently. Tribes have had to 
overcome a legacy of federal micro-
management of Indian affairs, along
with the present-day problems faced
by all rural communities. Further-
more, a complicated web of land-use
and ownership policies on many
reservations makes it hard to find
investors for new ventures. The
Eastern Band is trying to meet the
unique challenges of life on the 
reservation and in western North
Carolina with pragmatism and a
determination to survive.
Reservation Life
Survival was everything when the fed-
eral government forced thousands of
Cherokee Indians from their ances-
tral lands throughout the Southeast
during the late 1830s. Many died dur-
ing the grueling westward march
known as the “Trail of Tears.” About
1,000 stayed behind, some hiding in
the mountains of North Carolina to
evade the U.S. Army. 
The story of the Eastern Band
doesn’t end there, asserts tribal mem-
ber James Bradley. “People say, ‘Oh
they were removed, how sad,’ and
they don’t get a sense of how we
fought to stay where we were and the
leadership we’ve had over the years,”
says Bradley, a program associate with
the nonprofit Cherokee Preservation
Foundation. 
To encourage downtown retailers to refurbish
their storefronts, the Eastern Band spent 
more than $1 million to renovate this 
tribal-owned shopping complex.
P
H
O
T
O
G
R
A
P
H
Y
:
 
C
H
A
R
L
E
S
 
G
E
R
E
N
A
Summer 2005 • Region Focus 35
RF Summer 2005 FINAL.ps - 7/12/2005 13:52 PMThe Eastern Band has a long history
of self-determination. After many
years of legal wrangling, tribal mem-
bers persuaded state officials to
recognize their rights as permanent
residents in 1866. This paved the way
for the federal government to
acknowledge their rights and for the
tribe to reacquire some of its land. A
general council was held two years
later, a new chief was elected in 1870,
and the tribe incorporated under
state law in 1889. 
Today, a democratically elected
council serves as the legislative branch
of the Eastern Band’s tribal govern-
ment. A principal chief and vice chief
comprise the executive branch, while 
a tribal court serves as the judiciary.
The government provides basic 
services like sewage treatment and
police protection, as well as social
services like daycare and senior 
housing, for the 8,500 tribal members
who live in the Qualla Boundary.
(About 5,000 live off the reservation.)
While the Eastern Band is a sover-
eign nation with its own laws, many
of them are harmonized with state
and federal regulations. For example,
everyone who works and lives in the
Qualla Boundary pays a tribal levy on
purchases that is equal to the state
sales tax. Also, while tribal members
don’t pay a highway-use tax on vehicle
sales, they must have a valid driver’s
license from the state.
Tribal governments often perform
many of the administrative functions
of a county. But not every tribe has a
long-standing, widely accepted sys-
tem of self-governance like the
Eastern Band. According to sociolo-
gist Stephen Cornell and other
researchers with the Harvard Project
on American Indian Economic
Development, this is essential for
economic success. 
“Indian nations that have taken
over decisionmaking power—and
have backed that power up with capa-
ble governmental organizations and
structure—have done much better
than those who haven’t,” says Cornell,
co-director of the Harvard Project.
“You have to create institutions that
the people being governed are likely
to believe in and view as theirs.”
Businesspeople dislike uncertainty,
so they are less willing to invest some-
where that doesn’t have a legitimate,
stable government which consistently
enforces the rules of the game.
“You’ve got to create an environment
[where] they feel comfortable and
that looks promising,” notes Cornell.
It doesn’t have to guarantee success,
but “it has to be a place where people
are going to get a fair shake.”
The complicated nature of land
ownership has stymied economic
development efforts on reservations.
Reservation land can be owned indi-
vidually by tribal members or
collectively by the tribe. In both
cases, there can be restrictions on
transferring or mortgaging property.
Or the U.S. Secretary of the Interior can
hold the title to reservation land in
trust. The Eastern Band placed its lands
under federal control in 1924, and other
tribes did so at other times for the same
reason: to keep non-Indian speculators
from snatching up Indian territory for 
their gain. 
The trust arrangement has worked
all too well. It complicates any effort
to obtain land or capital for new
development. Individually owned
land held in trust can be mortgaged
only with the approval of the Interior
Secretary. A non-Indian can’t pur-
chase the land unless it is subject to
foreclosure or cannot be transferred
within the tribe, plus any sale
requires federal approval. Meanwhile,
tribal land held in trust cannot be
mortgaged or sold. While it is
leasable for extended periods, the
tribe and the Bureau of Indian Affairs
have to give their OK.
Land issues were a headache for
Carr Swicegood, an Asheville busi-
nessman who opened a large
shopping center in the Qualla
Boundary four years ago. Swicegood
attracted tenants like Food Lion and
Family Dollar to Cherokee Crossing,
but banks were leery about financing
the project and the development
process took longer than usual
because of the approvals he had to get
for his 50-year ground lease.
Meanwhile, his efforts to develop a
large parcel across the road haven’t
been successful.
In general, researchers have found
that productivity is significantly
higher on reservations where a rela-
tively large portion of the land is
privately owned compared to those
where land is held in trust or owned
by the tribe.  Part of the reason is that
people may be reluctant to invest
their knowledge and money into
making their property more produc-
tive if they have a hard time reaping
the added value in the future. “You’ve
got to get the incentives right,” says
Leonard Carlson, an Emory
University economist who has stud-
ied Indian reservations.
Indeed, many business owners in
downtown Cherokee were letting
their storefronts age, until the tribe
recently renovated its strip center and
began offering low-interest loans for
external renovations. Now, new green
roofs and stucco facades greet cus-
tomers at several eateries and shops. 
Rural Life
Location also works against reserva-
tions. The federal government often
created them on the fringes of devel-
oped areas. Therefore, they share the
economic challenges faced by isolated
rural communities, challenges that limit
business development to small firms and
home-based service enterprises. 
Remote rural areas tend to have
higher transportation costs and 
limited comparative advantages for
industry. Additionally, the mountain-
ous terrain in the higher elevations of
western North Carolina leaves little
flat land for sprawling factories, sub-
divisions, or retail centers. This
makes it hard to attract human and
financial capital, which tend to
migrate to where the best opportuni-
ties are. It also results in insufficient
population density to attract and 
support large-scale service industry.
As a result, the seasonally adjusted
unemployment rate of western North
Carolina’s rural counties reached 
5.7 percent in April 2005 compared 
36 Region Focus • Summer 2005
RF Summer 2005 FINAL.ps - 7/12/2005 13:52 PMto 5.5 percent for the whole region
and 5.3 percent for the state. This gap
has persisted for the last four years. 
Meanwhile, unemployment in the
Qualla Boundary is about 12 percent.
As with many Indian reservations,
the Boundary only supports a variety
of small employers — mostly service
firms and retailers — leaving the tribe
as the single biggest employer. Most
people work directly for the govern-
ment or at tribal-owned enterprises,
including two gaming operations, a
group of service companies operated
by the Cherokee Boys Club, and a
bottled water producer.
Manufacturing activity in the Qualla
Boundary has dwindled from several
firms to just one: a company that mass-
produces toys and souvenirs. Most
employment opportunities are outside
of the reservation, such as a Stanley
Furniture plant to the west.
Shouldn’t people move away to
find better economic opportunities?
Carlson argues that such migration
can hinder efforts to preserve the
unique heritage of Indian tribes. “If
you want a culture or language to sur-
vive, you need to have a place where
there is a concentration,” he explains.
Otherwise, it becomes integrated
into the mainstream. That’s why
many tribal members have stayed on
the Qualla Boundary or returned
home to find ways to leverage native
skills and the region’s assets.
One asset that the Boundary has 
is natural resources. In the past, it 
supported agricultural activity, but
timber supplies have been depleted
and families have found better ways to
make a living than by farming. Today,
the Boundary’s natural resources sup-
port a different industry: tourism and
recreation.
In general, this sector can be a
source of economic growth for rural
areas, as dollars come from more
urbanized areas to communities
where traditional industries like agri-
culture and manufacturing have been
declining in employment. Of course,
not every Indian tribe wants its reser-
vation turned into a tourist trap —
the Havasupai Indians haven’t built
transportation infrastructure to
bring people to their scenic tributary
of the Colorado River. Nor does
every tribe have a major metropolitan
market within driving distance and
something to offer for visitors.
For the Eastern Band, tourism 
has been a good fit. Western North
Carolina is a few hours from
Charlotte and Atlanta. The Blue
Ridge Parkway and the Great Smoky
Mountains National Park, both just
north of the Qualla Boundary, draw
outdoor lovers. And one hour across
the border in Tennessee are two other
tourist magnets: Gatlinburg and
Pigeon Forge, home of Dollywood.
The result is the plethora of road-
side shops that hawk “authentic”
Indian knickknacks to people head-
ing toward the national park, which
opened in 1940. One shop started by
Chief Saunooke in 1939, the year that
the first segment of the Blue Ridge
Parkway opened, has expanded 
several times. Tribal members have
made money every summer by dress-
ing up in Indian garb to perform for
shoppers outside of stores, a practice
known as “chiefing.” 
Today, tourism and recreation is
the primary industry in the Qualla
Boundary, accounting for 2,300 of 
the Boundary’s 5,500 jobs in 2003.
About 1,700 tourism positions are at
Harrah’s Cherokee Casino, a tribal
enterprise with 80,000 square feet of
video gaming devices and two 15-story
towers of luxury accommodations.
Other attractions include the “Unto
These Hills” outdoor drama, a re-
created Indian village, and two small
amusement parks.
Betting on Gaming and Tourism
Like every industry, tourism has its
drawbacks. It pays relatively low
wages — about $7 an hour, according
to Sharon Blankenship of the
Cherokee Native American Business
Development Center. Then, there are
concerns about preserving the tribe’s
culture and geographic beauty that
many tourists pay to see. 
The biggest downside is that
tourism can be seasonal. Busloads of
people fill the casino year-round, but
the Indian village is open only from
May to October and the outdoor
drama only runs during the summer.
As a result, the unemployment rate in
the Qualla Boundary varies from a
low of 6 percent in the summer to a
high of 35 percent in the winter. 
Still, tourism brings dollars into a
community where there are few
major sources of economic activity.
The question is whether it makes a 
material difference in the lives of the
Eastern Band of Cherokee Indians.
The answer appears to be “yes,” 
largely due to gaming. Similar eco-
nomic improvement has occurred in
other reservations with casinos.
Tribal members occupy a third of
the casino’s jobs, most of which are
hourly positions that pay an average of
just under $10 an hour. In addition,
businesses on the reservation get about
half of the $15 million that the casino
Lagging Incomes
The three western North Carolina counties closest to the Qualla Boundary share the 
reservation’s lagging economic conditions. Still, county residents fare relatively better 
than the Eastern Band of Cherokee Indians.
State Median Household Population Below
Income ($) Poverty Level (%)
Eastern Cherokee Reservation 27,350  23 
Jackson County 32,552  15 
Macon County 32,139  13 
Swain County 28,608  18 
North Carolina 39,184 12
NOTE: Data are from 1999. 
SOURCE: U.S. Census Bureau
Summer 2005 • Region Focus 37
RF Summer 2005 FINAL.ps - 7/12/2005 13:52 PMspends on goods and services in North
Carolina and surrounding states.
In addition to the economic rip-
ples created by what the casino
spends, the tribal government has
been able to do more. Half of the net
revenue from the casino, as well as
from a tribal-owned bingo parlor,
goes directly into the government’s
coffers. Officials have used this
money to expand health care and
other services, which has required an
expansion of its payroll to about 900
employees. 
The other half of the tribe’s net
gaming revenue goes to each enrolled
member as a biannual payment, which
amounted to $5,200 in June 2005.
These per-capita payments accumu-
late for underage members until 
they are 18 years old and have a high
school diploma. At that point, the
windfall can be used for educational
purposes … or for a post-graduation
spending spree.
The per-capita payments exceed-
ed $50 million in each of the 
last three years, helping to boost
incomes and reduce poverty levels in
the Qualla Boundary. The economic
effect of these additional dollars 
has been more regional than local,
though. Without a critical mass of
year-round customers, many local
businesses cater to the tourist trade.
As a result, residents go outside of
the reservation for basic goods and
services. 
“You have to travel quite a dis-
tance to [shop],” says Michell Hicks,
the tribe’s principal chief. “A lot of
folks go to the outlet mall in Pigeon
Forge [or] the mall in Asheville.”
Somewhat closer to home, the Wal-
Mart Supercenter, less than 30
minutes away in Sylva, reportedly
experiences a surge in sales every
time tribe members receive their per-
capita payments.
The 3.5 million people who visit
the casino every year have spurred
the development of hotels and fast-
food places, but the local tourist
trade doesn’t see a lot of spillover
effects. “We have two groups of peo-
ple that come here: the gamer and the
tourist,” describes Joyce Dugan,
Harrah’s director of external relations
and career development at the casino
and Hicks’ predecessor. Tourists
might spend a little money at the
casino and then see other sights. In
contrast, gamers usually don’t ven-
ture into the Boundary.
So, the tribal government is work-
ing with the Cherokee Preservation
Foundation to revitalize the souvenir
shops and other businesses downtown
to make them more attractive. They
are also working to reorient attrac-
tions to leverage the tribe’s heritage
rather than merely offer trinkets
made in China or people dressed up
like extras in a Western.
Once tourism is revitalized, the
tribal government will turn to the dif-
ficult task of diversifying the local
economy. It will do what it can to over-
come the odds, including investing
$1.9 million in a regional broadband
network to attract technology-based
businesses and providing loans to
small businesses.
“The beauty of the natural envi-
ronment is probably what they should
focus on,” suggests Todd Cherry, an
Appalachian State University econo-
mist that tracks business conditions
in western North Carolina. “You can
do some things to create a compara-
tive advantage, but you have to build
on what you’re good at.” The existing
tourism sector could be expanded to
include golf courses or fine restau-
rants to appeal to different types of
visitors.
Regardless of how it is accom-
plished, diversification will be
necessary if the Eastern Band wants
to keep more of its dollars within the
Qualla Boundary. It will also help the
tribe keep its young people when
they graduate from high school. 
“It will be interesting to see if this
generation takes [their per-capita]
money and moves away, seeing other
opportunities that are bigger than
what we have,” says Dugan. She is
optimistic that they won’t. RF
38 Region Focus • Summer 2005
Anderson, Terry Lee. Sovereign Nations or Reservations? An Economic
History of American Indians. San Francisco: Pacific Research
Institute for Public Policy, 1995.
Cornell, Stephen and Joseph P. Kalt. “Sovereignty and 
Nation-Building: The Development Challenge in Indian 
Country Today.” American Indian Culture and Research Journal, 1998,
vol. 22, no. 3, pp. 187-214.
Frantz, Klaus. Indian Reservations in the United States: Territory,
Sovereignty, and Socioeconomic Change. Chicago: University of
Chicago Press, 1999.
Martin, Edward. “Reservations.” Business North Carolina, March 2004.
Stambaugh, J.J. “Cherokee Renaissance: Success of Casino 
Helping Eastern Band Reclaim Heritage.” Knoxville News/Sentinel, 
Dec. 19, 2004.
Taylor, Jonathan B. and Joseph P. Kalt. “American Indians on
Reservations: ADatabook of Socioeconomic Change Between 
the 1990 and 2000 Censuses.” The Harvard Project on American
Indian Economic Development, John F. Kennedy School of
Government, Harvard University, January 2005.
Visit www.richmondfed.org for links to relevant sites and 
supplemental information.
R EADINGS
Millions of visitors pass through the Eastern Band of
Cherokee’s reservation on their way to the Great
Smoky Mountains National Park.
RF Summer 2005 FINAL.ps - 7/12/2005 13:52 PM

Economic history : High tech down south

http://www.richmondfed.org/publications/research/region_focus/2005/summer/pdf/feature6.pdf

Economic history : High tech down south

Abstract

Similar works

Full text

Available Versions

Research Papers in Economics