By Randall Kekoa Quinones Akee

Honolulu Weekly

HONOLULU (Sept. 2) - Native Hawaiians have discussed the political and legal foundations of Native Hawaiian sovereignty for decades. Our history and identity are clear – native Hawaiians are indigenous peoples and the illegality of the overthrow of the Kingdom of Hawai`i is an established fact acknowledged by Congress. What has been sorely missing is the discussion about the underlying economic system we desire.

Exactly what kind of economy do the people of Hawai‘i, both native and non-native, envision for a native Hawaiian government? What are the sources of revenue that will support the programs, services, and operations of a native Hawaiian nation? Should a native Hawaiian government be dependent on federal and state funding, generate its own revenues through government-owned businesses, or raise revenues through taxation and fees? How would citizens and members of a Hawaiian nation participate in the economic structure of the domestic-dependent nation? Would they be entrepreneurs, workers, or merely beneficiaries?

Once the political foundations have been laid, it will be extremely difficult, if not impossible, to change the economic system. Rushing into a dependent-status relationship with the United States without a clear understanding of the inherent limitations on the economic structure of that relationship is foolhardy.

There are approximately 332 Native American tribes and 229 Alaska Native villages that are already federally recognized; their varied experiences serve as models of what native Hawaiians can expect for their government and economy. While domestic-dependent status affirms the political relationship between indigenous peoples and U.S. federal government, it also severely constrains the economic possibilities.

Land Holdings under Domestic-Dependent Nation Status

There are primarily two ways in which federally recognized native American and Alaska native governments hold land in the United States: trust status and fee-simple status.

Trust Lands

The lands of federally recognized native American tribal nations in the 48 contiguous states are held in trust by the U.S. federal government. Title transfers of these lands are subject to the approval of the Secretary of the Department of the Interior. This means that trust lands held by the U.S. federal government cannot be mortgaged (much like Hawaiian Homelands), creating significant impediments to investors looking to secure their investments. Thus, most investors will refuse to invest in any business operations or activities conducted on native trust lands. Ultimately, absent government loan or loan-guarantee programs, individual native Hawaiians trying to start businesses on these trust lands would find it difficult to secure financing.

Economic development on native Hawaiian trust lands would be heavily dependent upon government funding and support. Priorities for economic development would be set according to political concerns, which may not reflect economic realities or efficiency. Even in the best-case situation with little or no political interference, government agencies are not able to move as swiftly or efficiently as commercial financing agencies to provide the necessary investment for economic development activities.

Fee Simple Lands

An alternative to holding land in trust status would be the outright ownership of native Hawaiian government land. For example, the Alaska native villages hold fee simple title to the land that they were awarded in the 1971 Alaska native Claims and Settlement Act. The Alaskan natives formed corporations and issued eligible village members equity shares. In this way, the Alaska native villages were able to circumvent some of the difficulties arising from holding land in trust status.

But, while fee simple status appears an attractive alternative to holding lands in a federal trust, there are significant problems with this option as well.

Fee simple lands may potentially be sold or if used as collateral for loans, they can be foreclosed upon. Under domestic-dependent status, transferring ownership from a native individual or government to non-native owners necessarily changes the legal jurisdiction of these lands, thereby reducing the native government’s land base.

On the continental United States, native fee simple lands were sold to non-natives at astonishing rates in the late 1800s and early 1900s, which severely diminished the lands under tribal jurisdiction.

A second drawback to fee simple land holding is that in a recent U.S. Supreme Court case, Alaska v. Native Village of Venetie Tribal Government (1998), the court concluded that fee simple lands are not considered "Indian Country" and that Alaska Village corporations cannot tax non-natives doing business on these lands. Thus, a potentially large source of tax revenue may be lost from holding fee simple lands.

A third drawback to fee simple land holding – and trust-held lands as well, is that the government would own the land. Although the land may be owned in fee simple by a native Hawaiian government, an individual citizen of the native Hawaiian government will find his private property still under the jurisdiction of the U.S. and state of Hawai‘i and subject to state and municipal taxation. This will severely diminish the ability of a native Hawaiian government to raise tax revenues from property taxes. Without private property ownership, a native Hawaiian government will lose another source of tax revenue.

The Akaka Bill (S. 344, Native Hawaiian Recognition Act of 2003) does not specify how lands will be held for the Native Hawaiian government. This should be a significant concern to both supporters and opponents of federal recognition.

Federal Bureaucracy under Domestic-Dependent Nation Status

Domestic-dependent status, as applied to native American governments in the U.S., requires federal approval on decisions relating to its trust status. Changes to federally recognized tribal constitutions and purchases of land for tribal trusts require approval from the Department of the Interior’s Bureau of Indian Affairs. Native American nations have been fighting this requirement, with some success, in recent years. The Akaka Bill calls for the creation of a federal office for Native Hawaiian relations to be established in the Department of the Interior with broad, unspecified powers over the Native Hawaiian government.

Will a new Native Hawaiian government that is federally recognized be subject to federal approvals on internal matters? Waiting for approvals from federal bureaucrats (officials who are appointed by the President and are not elected or appointed by the Native Hawaiian government or electorate) located in Washington D.C. would entail a serious loss of economic autonomy, efficiency and expediency.

In the past, federal approval was required for many important economic decisions. An example "if the Navajo Nation Council seeks to issue a lease with a coal company under terms the Bureau of Indian Affairs (BIA) considers unfair the BIA may interpret its trust responsibility as requiring it to disapprove the lease."

(Wilkins, D. American Indian Politics. Rowman & Littlefield Publishers, Inc., New York, 2002. p. 91)2

Prohibitions on Economic Development under Domestic-Dependent Nation Status

A domestic-dependent Native Hawaiian nation will not be able to pursue casino development because native Hawaiians do not qualify for the Indian Gaming Regulatory Act of 1988 which established federal guidelines for the development of high-stakes gaming operations on federally recognized native American reservations.

While there is opposition to gambling in Hawai‘i, the reality is that a large underground market for gambling exists here. In addition to these illegal activities, Hawai’i residents frequently travel to Las Vegas and Reno, Nevada to gamble. Hence, a potentially lucrative activity is denied to the Native Hawaiian government by virtue of its federally recognized status.

While casino development may not constitute long-run economic development, the short-run revenues could be used to invest in long-term economic ventures as well as investing in the education of all native Hawaiians. Many financially successful tribal nations in the U.S. have used the profits from gaming operations to enhance or to create a diversified, sound economic base for their nations. The influx of unrestricted funding (either as profits or tax revenues) could be a boon to a newly created Native Hawaiian government; however, the Akaka Bill expressly forbids this potential economic development activity.

Another area of lost economic potential stems from the exclusive economic zone (EEZ) areas surrounding Hawai`i. The EEZ has large implications for fishing and mineral extraction rights. The international convention on the Law of the Sea establishes an area of 200 miles from all shorelines to be the EEZ for independent nations. It is unclear what the ramifications of this EEZ would be for a Native Hawaiian domestic-dependent nation. If shoreline is awarded to the Native Hawaiian government, would foreign countries recognize and abide by this international convention for a non-independent nation? In short, would a Native Hawaiian government be able to sell permits and tax the fishing and mining activities within its EEZ?

Potential Organization of the Native Hawaiian Economy under Domestic-Dependent Nation Status

While other possibilities certainly exist, three seem to be the most relevant for native Hawaiians. In these three cases, federal recognition requires that the Native Hawaiian government and economy adhere to American values, laws, and culture as embodied in the U.S. Constitution.

In the first case, the Native Hawaiian government functions as a federal pass-through agency, and economic activities are restricted primarily to federally funded business development programs and services. The Native Hawaiian government serves as a conduit for disbursal of federal funds to the native Hawaiian community and non-profit organizations. In this scenario, very little business development is financed by non-governmental agencies.

A good example of a federal pass-through agency would be Alu Like, Inc. This organization relies on federal, and in some cases state –via the Office of Hawaiian Affairs, funding to provide numerous services to the native Hawaiian community such as vocational and computer training, social development programs and business development.

In the second scenario, the Native Hawaiian government takes an active role in economic development; indeed it will serve as the sole business developer of native Hawaiian lands. This is a likely scenario, as the Native Hawaiian government will hold all lands and assets acquired from the state of Hawai`i as stipulated in the Akaka Bill. The Native Hawaiian government may seek to procure funding from both the federal government and private interests. As noted above, securing private financing is difficult with trust lands, but it is possible with fee simple lands.

The third potential scenario has a much less centralized Native Hawaiian economic system. The political system is organized so that individual entrepreneurs can pursue their business development without undue government interference. The economy would be based on both individually owned and group-owned businesses that rely very little on government supports such as financing, loan guarantees, or political approvals. Individuals, native-owned corporations, and community-based organizations would drive the economic development within their own regions based on their values, resources, and economic climate. While still adhering to the laws and regulations of business development under the Native Hawaiian government, the businesses would be free from political influence in their decision-making.

The constraints of a federally recognized domestic-dependent nation make decentralized economic development very difficult, if not impossible. Individuals, community groups, and Native Hawaiian corporations would have little access to non-governmental financing or the ability to pursue independent business development under a Native Hawaiian domestic-dependent nation. The prohibition on private property ownership under native jurisdiction will make it exceedingly difficult for individuals or private groups to get their own independent financing.

The Native Hawaiian government itself may seek other sources of business financing by developing joint partnerships with corporations where the Native Hawaiian government explicitly waives its right to sovereign immunity. This would open the Native Hawaiian government to litigation in the U.S. judicial system, but it provides corporate business partners an incentive to invest on trust lands. Additionally, revenues from the Native Hawaiian government itself could be used to invest in economic development.

Regardless of the source of business financing, development will be dependent upon the political interests of the Native Hawaiian government. Development agencies and boards, separate from the governing entity, may be established under the Native Hawaiian government. These entities will never achieve complete independence from political influence, as they will not have full control over the appointment of board members, their financial assets, or natural resources; federal recognition, with its restrictive land holding requirements, precludes complete independence.

Ultimately, domestic-dependent status would not mean an independent economy nor a return to pre-contact traditional Native Hawaiian economic systems and communal land tenure. Under the scenario described above, the government would direct the productive activities, however, in pre-contact Hawai‘i, there was significant decentralization of productive activities by region. Additionally, for most of Hawai‘i’s history, land was controlled at the local, district, or island level; federal recognition will put lands under the ultimate control of the federal government.

An example of the difficulties arising from the involvement of politicians in economic development efforts can be found at the Office of Hawaiian Affairs (OHA). Political and financial support for projects such as Hana Village Marketplace (a community-based shopping center) and Ho`oulu Mea Kanu (native Plant Nurseries project) has ebbed and flowed according to political power struggles.

Decision-making by the trustees was conducted according to political alliances, not economic reality or efficiency. Projects that initially had the full support of the Office of Hawaiian Affairs were cast aside with each election as the balance of power shifted from one coalition to another.

Similarly, political rather than purely economic concerns would also heavily influence a Native Hawaiian government that directs economic development.

An OHA program that has been somewhat successful is the Native Hawaiian Revolving Loan Fund. Due to its partial federal funding, this small business loan fund has mostly been insulated from local political influence. Federal oversight, guidelines and reporting still entails a loss of economic autonomy, however.

Options for Native Hawaiians

If there are problems with the current push for federal recognition, there are three potential alternatives that native Hawaiians may pursue: 1) remain in the status quo and remedy some of the problems of the current Akaka Bill, 2) seek independence with free association, or 3) seek complete independence.

The status quo option would entail native Hawaiians continuing in our present status within the U.S. and the state of Hawai‘i. While the costs to the status quo are well known, such as the erosion of existing native Hawaiian-specific programs, what of the benefits to the status quo? There are heretofore avoided legal challenges that will arise between the Native Hawaiian nation and the state of Hawai‘i. Boundary issues, contested land parcels, natural resource use-rights, and taxation are common legal challenges faced by federally-recognized tribal nations in the United States (see www.indiancountry.com/article/1058476374 for a recent example of an armed skirmish and legal battle between Rhode Island and the Narragansett tribe).

These court cases are often fought up to the Supreme Court level and require significant financial resources for Washington-based attorneys. The current legislation (S. 344) does not provide adequate protection or guarantees against such litigation and challenges in its current form. Is there a benefit to enduring short-term losses in the status quo if that means preparing a more thorough long-run plan for native Hawaiians’ economic, political and social development?

The independence option is highly complex. There are many possible degrees of separation that may occur from complete independence to independence with a compact of free association.

Examples of these options abound in the Pacific: Fiji and Kiribati are independent of Great Britain, the Federated States of Micronesia and the Marshall Islands are independent nations in a compact of free association with the U.S., and the Cook Islands have a compact of free association with New Zealand. The independence option does not necessarily mean the dissolution of the state of Hawai‘i; there are examples of archipelagos with divided jurisdictions: the Dominican Republic and Haiti, American and Western Samoa, and Indonesia and East Timor. The potential economic benefits are difficult to forecast but could be derived from the elimination of economic constraints imposed by the U.S. federal government, the ability to attract appropriate foreign direct investment, and the ability to negotiate treaties and join regional trade associations independently.

Next steps

Much more public discussion and many more honest answers are needed before we permanently close off options for Native Hawaiians. Many questions remain unanswered about the entire spectrum of alternatives. Are we all satisfied that the current version of the Akaka Bill (S.344), or federal recognition itself, provides adequate incentives to build the economic foundations that we envision for a Native Hawaiian nation?

Federal recognition has been initiated and supported primarily by state agencies and a few non-profit organizations. How much actual support have they received while making their case for federal recognition? Of the 400,000 plus native Hawaiians in the United States, how many have been made privy to these meetings, negotiations and lobbying? Do native Hawaiians really want to be constrained to speak with just one voice (me ka leo ho`okahi wale no)? Or should we seek input from the entire native Hawaiian community and reach some consensus so that we may speak with a unified voice (me ka leo lokahi)? Looking to our past we see that the average native Hawaiian did not approve the overthrow, annexation, or statehood; it was imposed upon us. Are we repeating the same error today? In 1897, our kupuna vehemently opposed any connection to the United States government in the Petition Protesting Annexation (Palapala Ho`opi`i Ku`e Ho`ohui `Aina). Perhaps we should consider their wisdom and examine all the options before we make an irreversible decision.

September 10, 2003

Honolulu Weekly: Honolulu Weekly: www.honoluluweekly.com

Randall Kekoa Quinones Akee is a native Hawaiian, born and raised in Hawaii. He graduated from Kamehameha Schools, Dartmouth College, and Yale University with a BA and an MA in economics. He is currently a doctoral candidate at Harvard University in Political Economy and Government. He may be contacted at: akee03@yahoo.com

1 Pukui, Mary K. Olelo No‘eau. Bishop Museum Press. Honolulu, Hawaii. 1983. [sl0] Footnotes are gone – pull into body.

2 Wilkins, D. American Indian Politics. Rowman & Littlefield Publishers, Inc., New York, 2002. p. 91.

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