COLUMN ONE : Tribes Aim at a Quiet Revolution : In a parallel to events in Eastern Europe, Indians strive to improve their economies and control their own affairs. But financing and paternalism bedevil them.

From their homes of mud brick, 250 Indians of New Mexico’s Pueblo Laguna tribe head down the road each day to what seems another world--their jobs at Laguna Industries, a tribal company that last year produced $15 million in mobile communication stations and other high-tech hardware for the U.S. military.

At the Ft. Apache Reservation in Arizona, visitors first see the Apache tribe’s untethered horses, which amble down the main drag and even clamber onto the shady porches of two village churches. But what they see next is the tribe’s ultra-modern computerized lumber mill, where Indian workers will produce 72 million board feet of timber this year.

In Montana, naked Crow tribesmen are praying in sweat lodges this month, and the young men have just slain three buffalo on Big Horn Mountain, in preparation for the all-important Sun Dance. Meanwhile, the tribe’s attorneys are at work on an equally critical job: preparing courtroom challenges to government control of the tribe’s water and financial resources.

With a keen eye toward the economic and political transformation taking place in Eastern Europe, such tribes are pursuing perestroika , Native American-style.

Saddled with staggering unemployment rates of 40% to 80%, they, too, are attempting a restructuring toward modern capitalism and political reform. And, in a bid for self-determination, they have begun to wrest control of their affairs from the historically paternalistic Bureau of Indian Affairs, whose economic policies, even the BIA admits, have failed.

Their effort is being helped along by Harvard’s Kennedy School of Government, where political economist Joseph Kalt and his students have worked for three years to define--and remove--barriers to prosperity for Indians, the poorest minority group by far in the United States.

“The parallels to what is happening in the rest of the world are just transparent,” Kalt said. “The economic challenges, the self-determination being faced now by all of Eastern Europe, is happening here, too.”

New constitutions and legal codes are being written that spell out the mysteries of tribal law to outside investors, and long-term developments are sprouting on Indian lands where income once came primarily from grazing cattle or selling souvenirs and cheap cigarettes.

Though the gusts of change come in fits and starts, they are buffeting the BIA, a bureaucracy that had seemed almost as immovable as the Kremlin once was.

Eddie Brown, assistant secretary of the Interior for Indian affairs and a Pascua-Yaqui Indian, said the BIA “has a clear mandate from everyone . . . that we have to change some things, and that the status quo is no longer acceptable.”

But just as Poland faces the almost unimaginable task of creating a private banking system from scratch, the Indian nations are confronted with huge obstacles.

Under federal law, they cannot use their lands as collateral, and must dream up other ways of persuading banks to make development loans. And because of tribal sovereign immunity, most major corporations have been unwilling to sign contracts with tribal entities that cannot be hauled to court.

Moreover, Kalt said, tribes such as the Crow are grappling with bizarre forms of tribal government, foisted upon them by federal officials in the 1930s, that make self-governing--and economic development--virtually impossible.

Legal Issues Complex

So complex are the obstacles that Sue Williams, a Harvard Law School-educated Sioux who is a leading attorney on Indian matters, holds three-day retreats with tribal leaders and uses story board drawings as a device to help figure out which of a host of legal issues to tackle first.

Williams, of Albuquerque, said the failure of Congress to draw sharp lines of authority between federal, state and tribal governments has created “a jurisdictional nightmare that horrifies developers” and forces tribes to repeatedly sue the government over virtually every area of dispute, from multiple taxation on businesses to water rights.

Kalt, in a 1989 study, wrote that “when actors other than the tribes control major decisions, the chances of any economic development at all are substantially reduced.” Economic health is improving now, he said, only on reservations with powerful tribal leaders or strong council governments who have severely reduced reliance on the BIA.

In one of the most dramatic departures from BIA control, Kalt said, the White Mountain Apaches in eastern Arizona in 1987 sued the BIA for longtime mismanagement of tribal lands. Today, the tribe no longer lets BIA officials attend important tribal meetings.

They have taken a road to independence that includes expansion of the Apache-owned Sunrise Resort, the largest ski area in the Southwest. It operates one of the most efficient lumber mills in the West. While quite poor, the tribe’s unemployment rate is only 30%, compared to a BIA estimated average of 40% reservation unemployment nationwide.

This summer, the Apaches are meeting with Merrill Lynch and other financiers over a proposal to turn an abandoned sawmill into a paper mill.

But with independence has come pain. A depressed lumber market and poor fiscal decisions by an inexperienced Apache manager, now fired, have led to a work slowdown at the lumber mill and layoffs of tribal council workers.

And educated Apaches, like Stephanie Joseph, 23, wonder if the reservation will ever catch up with the outside world. Just laid off from her $11,000-a-year tribal council job, with which she supported her mother and four siblings, Joseph said: “I’m trained in Lotus and Word Perfect but there’s no computer jobs here, so we live poor.”

Contradictions abound. The movie house is showing “Teenage Mutant Ninja Turtles,” and Apache boys wear “rat tail” hair tufts, just like kids in Westwood. Yet workers at Sunrise Resort recently asked a medicine man to exorcise a ghost from the hotel.

Ray Endfield Jr., a former banker, now manager of Sunrise, says the tribe “has one foot in the 21st Century and one in another era. But this is why we want tribal control, not outsiders running our lives. We take very seriously the spiritual needs of our people.”

Economist Kalt contends that a series of court rulings and congressional acts since 1975 has slowly transformed the federal government’s role from one of “guardian” to one of “mentor.” But new roadblocks are still being thrown in the way of Indian self-determination.

Ruling Limits Arrests

Last month, the Supreme Court ruled that tribal judges could not jail criminals who were not local tribal members. Tribes can no longer hold Anglo drunk drivers, Indian men from other tribes who beat local women to whom they are married, or other outsiders.

“The feds give lip service to Indian self-determination, and then the Supreme Court goes and does this damn fool thing,” said Cate Stetson, Williams’ law partner and an expert on Indian policy. “Our tribal clients wonder if they can trust the white man.”

Indians, remembering a long history of being duped, have vowed never to be cheated again. But, as Kalt’s research group found when it delved into the deep poverty among the Crow, some Anglos are still, in effect, buying Indians’ fur pelts with cheap glass trinkets.

The 8,000-member Crow nation in Big Horn County, Montana, owns one of the world’s largest known deposits of coal and great stands of timber. The tribe’s worth is estimated at a stunning $27 billion.

But years ago, the tribe signed a contract with a mining company to extract the rich coal reserves. Now, Kalt contends, the Crow are being paid “about half the market value” for coal in Montana.

“I told Joe Kalt we get $3 million a year from all our contracts, and one student did a little figuring and told us we are getting a rate of return of .01%--worse than any Eastern European country,” said outgoing Crow Chairman Richard Real Bird. “We were enticed, forced, pressured and starved out to give up our resources. Now we want them back.”

In the past four years, Real Bird has sued virtually every government agency involved in Indian matters and launched an all-out political war against the BIA, which maintains close control over Crow budgets and economic decisions.

But in recent months, the tables have turned against Real Bird. On April 6, he was convicted of bank fraud--for misleading banks about available tribal collateral in order to get loans to buy land that the Crow want to protect near the famous Custer Battlefield.

He and his attorneys claim that his indictment, and those of other tribal leaders, is a retaliation by federal officials who want to silence him, a charge that is denied by federal prosecutors.

Members of the tribe, deeply divided and shamed by heavy coverage of the indictments in the Anglo-dominated Montana news media, swept Real Bird out of office in May, electing a Crow employee of the BIA who promised a peaceful coexistence with the agency.

Kalt said the Crow tribe’s inability to rise above destructive internal politics is caused by its “wholly unworkable” government, created by outsiders decades ago.

“Crow have the purest form of democracy to be found in North America, with anyone of voting age also a member of government,” Kalt said. “They have a 2,800-member tribal council that is wild--no rules. Until recently, people came armed with loaded guns to council chambers.”

Last year, in a riotous meeting that landed some Crow in the hospital, tribal members rejected reforms designed by Real Bird and Kalt to create a normal government and constitution.

“There is such chaos under the Crow form of government that everything we tried crashed on the rocks,” Kalt said.

While Indian leaders regard the reform of flawed tribal governments as essential, they also believe that Congress must help tribes attract the financial backing of lenders and major U.S. corporations.

Williams contends that a federal tax credit is needed to encourage firms to invest on reservations. And she supports a bill to create an Indian-controlled federal loan agency that would “take investment decisions out of the hands of bewildered career personnel at BIA.”

But meantime, Indian business leaders question American corporate policies that would pour investments into faraway Czechoslovakia but largely shun the stricken Indian nations at home.

“I saw the enthusiasm among the Fortune 500 companies when the walls came down in Berlin, and yet here we have walls coming down through sheer force of our will--but where are the Fortune 500 companies?” asked Ron Solimon, of the Pueblo Laguna tribe west of Albuquerque.

Some Exceptions

There are exceptions, however. Purely by accident, Solimon and tribal leaders struck up a relationship with an executive of Raytheon Co. who helped the Lagunas design a development strategy that paved the way for a federal loan. A high-tech factory, Laguna Industries, was born.

“Raytheon was a mentor and teacher to us just when we needed it,” said Solimon, an attorney and president of Laguna Industries. “But we need to see hundreds more like them in Indian country.”

Another tribal firm won a government contract to restore a contaminated wasteland the size of downtown Los Angeles--Jackpile, the world’s largest open-pit uranium mine, which closed in 1982.

The success of the two companies appears to have inspired a boomlet of enterprise on the sagebrush-studded 550,000-acre reservation.

Francisco and Denise Pedro have parlayed an ancient recipe for kiln-baked bread into a 2,000-loaf-a-week business that ships the soft, frog-shaped loaves out of state. A modern grocery store has opened in an abandoned warehouse, and last month, Elaine Sarracino’s daughter started a private shuttle service to Albuquerque using her van.

At Laguna High School, not far from the whitewashed Spanish mission in which the Lagunas have worshipped continuously since the 1600s, 40% of this year’s seniors are going to college, up from 10% a few years ago.

With the blessings of the tribal council Solimon and Smith are pursuing development as a way of keeping the young from moving to cities and breaking up the tribe’s deeply spiritual, clan-oriented culture.

But the unemployment rate is still 50%, and the Lagunas still run into doubters who remember their failed efforts at farming and cattle feedlots in the early 1980s.

Each time the tribe seeks financing from a local bank with which they have done business for 30 years, it is a struggle.

“To expand Laguna Industries, we had to produce collateral equal to 120% of a loan, plus a BIA guarantee on 90% of the loan in case of default,” Smith said, shaking his head. “But we’re not going to default.”

Williams, however, points to “an extraordinary decision” in Arizona, where a bank recently sealed a development loan to the Gila River tribe with a “Western handshake.”

The bank had concluded that it was impossible to protect itself from “maddeningly ambiguous” federal laws that make it uncertain whether lenders can obtain settlements from tribes who default.

Remarkably, Williams said, instead of deep-sixing the loan, “the bank made a decision based on the history of the tribe repaying its loans and the stability of its government. They simply decided they trust the tribe.”

Such indications of change may be slight, when measured against grotesque economic conditions that have left half of all Indians living below the poverty line.

But, Kalt said: “After 100 years of failures upon failures under the thumb of outsiders, for the first time we are seeing sustainable economic development on Indian terms.”