Monday, August 23, 2010

The economics of piracy in Somalia

Piracy off the shores of Somalia has come to the front news after a few spectacular cases, prompting an international response, mostly in the form of military surveillance on the waters, which has not prevented pirates from extending their hunting grounds. But some people have argued that this patrolling is just treating a symptom. Short of establishing a lawful state in Somalia, which has proven impossible so far, providing alternative livelihoods for the pirates would work better.

Sarah Percy and Anja Shortland doubt this would work. They claim a stable state and economic growth would actually help piracy. Indeed, piracy is a business and any business becomes more difficult in unstable conditions. The way to think about it is that pirate get income from piracy, and they invest locally. The better the return on that investment, the more you want to conduct piracy. Naval operations are useful here because they raise the costs of operations of pirates, but they imply also that attacks are more likely to turn violent, in particular for hostages. But I digress. Another in which local stability would be detrimental is that the whole region may be destabilized, not only Somalia.

An alternative would be to buy off the pirates and turn them into coast guards who enforce fishing rights. This deters them from piracy and would allow the fishing industry to come back to life. But this could also backfire by creating a better trained and equipped pirate force. This is a really difficult situation. Percy and Shortland think things will improve once the stakes for insurance companies and shipping companies become higher: ransoms are getting larger, and violence is becoming more commonplace. At some point they will start intervening with more conviction.

1 comment:

armchair economist said...

"economic development and greater stability aid pirates" they say, but wouldn't greater stability and the rule of law also offer pirates safer (and possibly more lucrative) legal alternatives to earning a living? How can the authors be certain about which way things would tip?