Paying the Pirate's Price: Do the Economics of Piracy Demand the Privatization of the Sea?

Article excerpt

AT THE BEGINNING of April, after a vessel was captured off the Somali coast, the military liberated the crew by storming the boat and killing two of the pirates. While the crew was saved, the ship's captain was killed in the attack, leaving behind a wife and a 3-year old son.

That's not the story you heard? That's because you're not French. While the story of the Maersk Alabama and the Navy SEAL operation that freed its captain were gripping American attention, the French were focused on the drama unfolding upon the Tanit, a 40-foot sailboat on an around-the-world voyage. When it became clear that negotiations for the crew's release had come to an impasse, French commandos moved in.

The French government had warned the skipper not to proceed into the Gulf of Aden, where piracy has increased dramatically during the last four years. But the captain chose to ignore the advice. He apparently was chasing a dream to drop out of commercial society and would not be dissuaded.

Most piracy, by contrast, stems from very material dreams, on the part of both the pirates and the plundered. All affected parties are looking to make a living and constantly calculating the most efficient means to do so.

While tourists occasionally have fallen victim to piracy, most hostages are crew members on commercial ships. This is no surprise. According to a 2008 RAND study, the main factor behind the re-emergence of old-style piracy has been a massive increase in commercial maritime traffic. Combined with the large number of ports around the world, this growth has provided pirates with a wide range of tempting, high-payoff targets. And as more sea-borne commercial traffic passes through narrow and congested maritime chokepoints, the ships must reduce their speed to ensure safe passage, heightening their exposure to interception and attack.

No one has bested the 18th-century pirate Bartholomew Roberts' pithy summation of why piracy exists: "In an honest Service, there is thin Commons, low Wages, and hard Labour; in this, Plenty and Satiety, Pleasure and Ease, Liberty and Power; and who would not balance Creditor on this Side, when all the Hazard that is run for it, at worst, is only a sower Look or two at choaking. No, a merry Life and a short one shall be my Motto"

The time and place may have changed, but Roberts' reasoning still holds true. Like Roberts in the 18th century, Somali pirates have little to lose in the 21st. Their country is wracked by chaos and poverty. It is also adjacent to one of the most heavily traveled shipping lanes in the world; 20,000 ships a year pass through the Gulf of Aden. Ransoms for crews can be as high as $3 million. The International Maritime Bureau counted III pirate attacks off Somalia in 2008, a threefold increase over the previous year.

For Somalia, piracy is an economic boon, benefiting both the pirates and the economies of the areas in which they live. Somali pirates made an estimated $30 million to $150 million in ransom in 2008 alone. Through purchases of homes, cars, clothes, food, and other amenities, this money ends up boosting the regional economy as well. Just as certain Caribbean ports of call catered to the needs of 17th- and 18th-century pirates, so do certain spots in Somalia cater to the needs of contemporary pirates. The port of Eyl, the Tortuga of Somalia, is booming. It's even rumored to have restaurants dedicated to feeding hostages.

While it's pretty clear why some Somalis would become pirates, it might not be as obvious why shipping companies respond the way they do to the pirate threat. Despite increased piracy, the shippers seem to carry on heedless of the danger and without exploring alternative possibilities.

For instance, commercial ships don't have to go through the Gulf of Aden and around the Horn of Africa. They could avoid the area entirely by going round the Cape of Good Hope. But this route adds 20 days to the trip and brings on many new expenses, which are particularly problematic if competitors keep taking the old short cut. …