170 BUREAU OF AMERICAN ETHNOLOGY [BuU. 188 



all traders are united against the ever-increasing threat of off-reserva- 

 tion competition. In practice it is chiefly territorial monopoly rather 

 than collusion which tends to minimize competition, for attempts to 

 draw trade away from neighboring stores are not infrequent. Shonto 

 Trading Post has had considerable success in drawing trade from 

 stores farther west by offering more liberal credit terms, higher prices 

 for lambs and wool, and by a double-price system whereby outsiders 

 buy flour and coffee at lower prices than do Shonto residents. These 

 practices are condemned by other traders, but are common enough in 

 all parts of the reservation. 



If reservation trading posts offer comparatively little competition 

 to one another, the same is not true of off-reservation retail merchants. 

 Lower freight rates, high turnover, and straight cash operation 

 allow the latter to offer prices consistently at least 15 percent lower 

 than those found on the reservation (cf. Kluckholm and Leighton, 

 1946, p. 39), and create a very real competition for the increasing 

 Navaho cash dollar. To meet this competitive threat many traders 

 have sought to minimize expendable cash by the technique of credit 

 saturation. At Shonto, credit terms and limits have been made con- 

 sistently more liberal in recent years with the idea of getting most 

 of the community's income spent before it is earned. If the trader is 

 no longer the only merchant in contact with his particular consumer 

 market, he is still the only one close enough to it to be able to grant un- 

 secured credit. Thus traders have, in a sense, found a new way to 

 exploit territorial monopoly so as to minimize traffic with rival 

 merchants. 



CAPITAL AND FINANCE 

 CAPITALIZATION 



Although small retail business is traditionally undercapitalized 

 (Kaplan, 1948, p. 13G; Comish, 1946, p. 326), probably no enterprise 

 in modern America operates with less capital investment and smaller 

 reserves than the Navaho trading post. Buildings, land, and fixed 

 assets belong legally to the Navaho tribe, so that the trader has in 

 actuality no equity save in the value of his leasehold. As a result 

 trading posts have extremely low investment value, and seldom can 

 be sold for more than three or four times their annual net earnings. 



Low investment value has an inevitable effect upon operating re- 

 serves. In order to protect themselves personally most trading post 

 owners annually draw out nearly all net earnings in the form of salary 

 and distributed profit, leaving a bare minimum of funds tied up in 

 store accounts. Shonto's operating reserves often amount to no 

 more than a few hundred dollars. The result, year in and year out, is 

 an overwhelming dependence on mercantile credit. 



