Foreign Aid and First Nations

As always, the ongoing controversy between First Nations and the Canadian government will produce no solutions, because no one seems to understand the problem.

Before we consider this matter, consider a basic principle. By their very nature, governments expropriate wealth from their subjects. Agents of the government allocate this wealth for all kinds of purposes that suits them or it. One of purposes available to wealthier governments is foreign aid.

Foreign aid has been called, “Stealing money from poor people in rich countries, and giving the money to rich people in poor countries.” Essentially, the aid is given to a corrupt foreign governments in backwards nations which are then expected to somehow help the common man in their countries. Usually the aid package involves the stipulation that the aid receiver must purchase stuff from the aid-giver.

The aid-receiver then uses this aid the same way it uses all its resources — reward political interests. This actually displaces real economic activity — i.e. activity that is determined by market participants and not politics. Naturally, the government and its friends benefit. The common man is worse off because their overlords have more wealth at the expense of others.

This also describes how First Nations Reserves work. These reserves are like third-world countries, with the role of crooked dictator and his cronies occupied by the chief, the band council, and their friends. The Indian Band is a legal entity under the Indian Act, and you could say it operates like a corporation that depends on government subsidies to exist. Hence, it is characterized by bad products and capital depreciation. Never forget this: the Indian Band receives its revenue via wealth expropriated from others. The “band” collectively receives aid from the government, but the aid must be administered by the reserve’s own governing body. These folks inevitably enrich themselves, and maybe leave a few crumbs for the decrepit Indians beneath them. The poverty on most Indian Reserves is truly horrifying, and completely expected given the system’s nature.

What of the common First Nations people who qualify as “Indians” under the Indian Act, who do not get to administer the loot? They suffer severe restrictions to their property rights, much more so than Canadians on the “outside”. For instance, they cannot use their land as security in a credit transaction. They cannot transfer their land to other members of the band without the Crown’s approval. They are gravely restricted in how they can appropriate the proceeds of selling or renting their property. This is like Communist Russia. It is incredibly more dysfunctional than the rest of Canada, which is already screwed up to a great degree.

What else do Indian Reserves have in common with Communist Russia? Extremely high rates of suicide, self-incapacitation, family breakups, promiscuity, “illegitimate” births, birth defects, sexually transmitted disease, abortion, alcoholism, and dull or brutish behavior. They have tragically low life-expectancies and their healthcare standards are far below the rest of Canada. See here and here.

People who understand how wealth is created must understand the Reserve system can never be fixed, because it is based not on private property, but on bureaucratic management and political decision-making. No one proposes doing anything about this. Furthermore, theory and experience tells us that people who understand that the groups who receive the most government “aid” are usually those who suffer the most. Therefore, it is critical to apply this to the First Nations issue as well. The more government “aid” received by Indians, the more this group must ultimately suffer.

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