(FORTUNE Magazine) – ROUTE 16 through Neshoba County, Mississippi, is a drab stretch of highway lined by scraggly cotton fields, red clay, and pine trees. Whizzing along it, you see neither signs of wealth nor any business larger than the local feed store. Suddenly an oasis of enterprise appears -- an 80-acre industrial park, a gleaming shopping center, a new hospital, and a nursing home, topped off with the requisite Federal Express pickup station. A sign reads: WELCOME TO THE CHOCTAW INDIAN RESERVATION. Across the country a small but growing number of American Indians are discovering the joy -- and power -- that comes from making money in the private economy. In the past few years their march away from reliance on federal handouts has gained momentum that looks unstoppable. Says freshman U.S. Senator Ben Nighthorse Campbell of Colorado's Northern Cheyenne tribe, the first Indian Senator in over 50 years: ''Indians now see private enterprise as the best way out of poverty.'' True, the most vibrant Indian-owned business these days is gambling, which generates more than $3 billion in annual revenue and loads of publicity. Tribes such as the Mille Lacs Chippewas of Minnesota, the Sandias of New Mexico, and the Cabazons of California rake in tens of millions a year and have used gaming to all but eradicate poverty. Indian leaders welcome this windfall, but most aren't banking on the boom's lasting, especially if money- starved municipalities decide to move in and compete. What's encouraging -- and much less well known -- is the big rise in other Indian enterprises. Consider the three tribes of the Warm Springs confederation in central Oregon, proud owners of a power plant that brings in more than $3 million a year in sales to Pacific Power & Light. The tribes' varied business activities produce revenues of around $80 million a year and employ 1,200. They include managing the reservation's timber, running an upscale vacation resort, and operating an apparel company that has manufactured clothing for Nike. Says tribal council member Kenneth Smith, 58, a former head of the Bureau of Indian Affairs: ''We have done a good job of developing our natural resources. But we need to do still more to diversify our economic base.'' The Ak-Chin tribe, about 40 miles south of Phoenix, uses irrigated water from the Colorado River to farm 16,000 of the 22,000 acres on its reservation, ^ growing mostly high-quality pima cotton. This agribusiness, with annual revenues of roughly $10 million, provides the tribe with enough income to make it almost completely self-sufficient. The White Mountain Apaches of northern Arizona operate nine enterprises that generate over $45 million in revenue, including a ski resort, timber operations, and a plant that produces insulation and other materials for McDonnell Douglas's Apache helicopter. Private enterprise is just beginning to change the lives of many of the two million American Indians and Alaskan natives in the U.S. Nearly one-third of them are still below the poverty line, vs. 13% of the total U.S. population. Unemployment on the reservations, where about half of all Indians still live, averages about 35%. Of those who hold jobs, some 60% are employed by tribal or federal government, and their median household income -- $20,000 a year -- is $10,000 less than the national figure. Other statistics are more encouraging. Fully 66% of Indians graduate from high school, up from 55% ten years ago and climbing. Most important, in tribes where private enterprise has sprouted, unemployment and poverty are drying up. On the Ak-Chin reservation in Arizona, unemployment is about 3%, and the number of families living below the poverty line is negligible. A tribal leader, Leona Kakar, put out the word to the local welfare office to send back any Ak-Chin looking for relief. Says she: ''We have plenty of jobs.'' Also thriving is the 132-member Yavapai tribe in Prescott, Arizona, a bustling vacation town 95 miles north of Phoenix. The Yavapais are under the firm hand of President Patricia McGee, a sixtysomething dynamo. In 1984 she managed to secure a $1.2 million government grant to build a resort hotel. Then she persuaded the town to issue $8.5 million in municipal bonds for the project. Still short of capital, McGee turned to non-Indian developer William Grace of Phoenix. ''We didn't have the expertise to do commercial real estate development,'' she says, ''so we found Bill.'' Grace, who operates about two dozen shopping centers in the West, kicked in an additional $3 million and completed the 160-room Sheraton in 1988. Today the hotel is filled with conventioneers and weekenders fleeing the heat of Phoenix. The hotel's new casino, the first in the state, is jammed. McGee also leased part of the tribe's 1,400 acres to Grace, who built a shopping mall anchored by a Wal-Mart. The mall, done in high Santa Fe style, is almost full of tenants and packing in shoppers. Visionary Indian leaders like McGee find that economic development and a healthy private sector reinforce rather than undermine traditional tribal values. Economic freedom fosters pride and independence and brings in precious dollars for language programs, schools, and museums. ''We want our young people to be educated, productive members of society,'' says Phillip Martin, 67, chief of the Mississippi band of Choctaws, ''and to be proud Choctaws too.'' These days Martin, a leader with the political skills of Lyndon Johnson and the business acumen of Stanley Gault, and his 5,500-member tribe have plenty to be proud of. For generations the Choctaws lived with 75% unemployment rates and substandard everything. After ten years in the Air Force, Martin got himself elected to the tribal council. He quickly realized that the only way forward was to create nongovernment jobs. Fifteen years and 500 letters later, Martin attracted his first manufacturing business partner, and in 1979 the Choctaws began assembling wire harnesses for GM's Packard Electric Division. Today Martin presides over a portfolio of businesses with more than $60 million in sales, including plants that make wire harnesses and circuitboards for Ford, Xerox, AT&T, and Navistar, a joint venture producing auto speakers for Ford and Chrysler, a factory built for American Greeting Cards, and a printing company. All these businesses except the joint venture and the greeting card enterprise are 100% owned by the tribe, and all but the printing plant operate on tribal lands. Says Martin: ''Our only resource is our people. It took tenacity to convince businesses to come here at first. Now companies are approaching us.'' The appeal of opening a plant on the Choctaw reservation goes beyond easy lease terms, low-wage labor, or the chance to win points for being good corporate citizens -- though those things clearly help. ''Sure, sourcing to the Choctaws helps fulfill our pledge to work with minority businesses,'' says Norm Recla, a purchasing agent for Ford. ''But they also do an excellent job. We wouldn't be working with them if they didn't.'' Last year the Choctaws' plants won quality awards from both Ford and Chrysler. As with many successful tribal enterprises, each Choctaw company is run by a CEO who has full autonomy over his business. His board of directors, however, is appointed by the tribal council, headed by the chief. Both the chief and his council are elected by a popular vote of tribal members. (Federal law recognizes 314 Indian tribes, each of which sets its own membership criteria. Some -- like the Oglala Sioux -- require just a trace of Indian blood; others -- like the Mississippi Choctaws -- specify at least 50%.) The CEO and his board decide how much profit will be plowed back into the business and how much will go to the tribe. The tangled legal status of Indian tribes is one of the biggest barriers to expanding private enterprise on reservations. (The biggest is their barrenness and remoteness.) Each federally recognized tribe is considered a sovereign nation. As such, each retains certain rights over its land and peoples, though tribal laws cannot supersede federal law and usually apply to matters of tribal government, environmental regulations, and zoning codes. Indians do not pay taxes on income earned from natural resources on tribal land, which is held in trust for them by the U.S. government, nor do they pay state sales taxes or state income taxes on income earned on reservations. Reservation dwellers also don't pay property taxes. While most of these exceptions were designed to help Indians, they have also created a host of problems for would-be business partners or suppliers. Banks are often wary of lending to Indian businesses, since trust land cannot be forfeited in a foreclosure. While there are ways around that -- such as getting guarantees from the Bureau of Indian Affairs or drawing up collateralized lease agreements -- many lenders simply haven't been up to the task. Insurance companies have difficulty insuring businesses, since suing a tribe could give even a good Philadelphia lawyer fits. To resolve these uncertainties, many tribes have just begun developing detailed business codes. Occasionally, of course, this legal exceptionalism works in a tribe's favor. The real bonanza comes when Washington metes out mammoth cash settlements for ancient land claims. One of the largest is the $82 million won in 1980 by several tribes in Maine, including the Passamaquoddies and Penobscots, to settle their claim for 12.5 million acres -- almost two-thirds of the state -- and $25 billion in damages. The Passamaquoddies, a tribe of 2,800 on two small reservations near Eastport, Maine, took their $40 million share and promptly doubled it. How? With the help of an investment banker, the tribe in 1984 bought the Dragon Cement Plant in Thomaston, Maine, for $25 million, using only $2 million of its capital and loans from the Bank of Boston and others for the balance. In 1988 it sold the plant for $81 million to a Spanish consortium. The deal was so successful it is now a case study at the Harvard business school. The Passamaquoddies still own a revolutionary scrubber technology -- it recycles costly by-products -- that they have licensed to the cement plant and are trying to market elsewhere. The tribe also leases a synthetic-fiber plant to Gates Corp. and owns another factory that finishes trunk liners for General Motors cars. Its other holdings include a large blueberry farm, an apparel- making business, and a mini-mall. Lately these Indians have discovered how tough it is to manage a growing basket of businesses. Some, like a prefabricated housing company, have failed; the tribe faces a cash crunch, and unemployment is still high. Says Roger Ritter, a member of the tribal council: ''We have received some great advice, but now we need to develop expertise ourselves.'' The Passamaquoddies' banker is Thomas Tureen, 49, the puckish chairman of Tribal Assets Management, an investment bank in Portland, Maine. It has raised over $300 million for Indians, mostly through bank loans and bond sales. Tureen, a non-Indian who decided to devote his career to Indian issues after working near a Sioux reservation as a Princeton undergraduate, also helped the Mashantucket Pequots of Connecticut clear legal hurdles for the tribe's gaming operations. This tribe of 250 recently opened a $50 million casino with baccarat, blackjack, and slot machines called Foxwoods in the town of Ledyard, Connecticut, near Mystic. Under the Federal Indian Gaming Act, if any form of gambling is legal in a state, something similar must also be permitted on the lands of a recognized Indian tribe. In Connecticut charities are allowed to run Las Vegas Nights with casino-style gambling. That means the Pequots can do the same -- 24 hours a day, 365 days a year -- at their casino, where each day up to 20,000 visitors lay down their dollars. Industry analysts estimate the casino netted more than $30 million last year. The tribe has hired about 3,500 workers, making it a major employer in a region hit hard by defense layoffs. The Pequots' biggest problem: The casino is too crowded. A $200 million expansion is already under way. WHAT'S THE KEY ingredient in these success stories? Strong and stable tribal governments, says Robert White, whose book Tribal Assets maps the economic , progress of some American Indian tribes. Such stability is most often found among smaller groups, where there is less room for divisive factions. By contrast, the 20,000-strong Oglala Sioux on South Dakota's Pine Ridge reservation, one of the biggest -- and poorest -- tribes, have been troubled by internal political squabbles. One reason for the infighting: Council members are elected every two years. ''We try to get things done, but before we can, our two years are up and new people are elected,'' says councilman Frank Means. Pine Ridge, located in the poorest county in the U.S., was the scene of a bitter fight 20 years ago between supporters of AIM, the radical American Indian Movement, and the tribal government. Today those wounds have mostly healed, yet little economic progress has been made. ''We need the most basic development here so people can get jobs,'' says Means. As head of the tribe's Economic and Business Development Committee, he is trying to push through a long list of vital projects that would bring expanded utility service, business codes, and bank loans. Though the sad tale of the Oglala Sioux is still too common on America's other reservations, such stagnation is yesterday's story. With groups like the Choctaws and the Warm Springs confederation showing the way, the New World's first settlers seem increasingly determined to regain their independence and dignity by using the time-honored methods of countless immigrants who came to this country long after they did -- that is, working hard, raising capital, and getting not mad but rich.