What did people mean when they argued that Native Americans needed to be "civilized?"

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What they meant by this is that they wanted the Native Americans to become more like white Americans.  They wanted Native Americans to be farmers who owned their own land or to be craftsmen making things or to in some other way be part of the overall US economy.  They wanted Native Americans to become Christian and to wear American clothes and speak English.  In other words, they wanted to assimilate them into mainstream American culture.

These attempts can be seen most clearly in the Dawes Severalty Act (also known as the General Allotment Act) which ended communal ownership of land and in the creation of Indian boarding schools meant to teach the economic and social ways of white America.

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