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When Columbus and other European explorers first landed in the Western Hemisphere, they thought they’d reached the shores of Asia. They assumed that the peoples they met must be residents of India, and they referred to them as Indians. This turned out not to be true, but the name stuck.
The Indian in the Cupboard was published in 1980, when the term “Indian” was still the commonly used name in the US and elsewhere in the English-speaking world for a member of one of the many groups that have lived in North America since well before Europeans arrived. The term “Indian” is itself neutral, if inaccurate, but it was for so long used by white settlers in a negative way that it acquired a taint, and many people today feel that its use is a sign of disrespect. In recent decades, social and political movements in the US have caused a shift in American attitudes, so that “Indian” is being replaced in the US by “Native American” or “Indigenous American,” and in Canada by “First Nations.” The most appropriate terminology is to use the specific tribal name whenever possible—in this case, Iroquois—and to use those other terms only to describe the demographic as a whole.