Briefing Paper - Piracy

Jonathan Beatty

Professor Craig

World Politics 001H

Date of Submissions: 11 December 2011

Piracy: An Organized Profession

Piracy, as defined by Merriam-Webster is “an act of robbery on the high seas; also: an act resembling such robbery (Merriam-Webster).” Piracy predominately exists in the Somali region and South East Asia. Piracy, being an easy profession to enter, has risen in these areas in recent years. Based on the presentation in class on Monday, a reason for the increase in piracy can be attributed to the 2004 tsunami. While pirates in movies and tales live a glamorous life of love and plunder, current pirates are, “highly-organized criminals” (An-arrgh-chy, Page 2). In Somalia, a pirate earns only $500 a year. The costs of piracy are continually increasing, both in monetary and motivational ways. To counteract the spread of piracy, steps such as a naval presence have been taken and solutions such as more international investment to increase nation-building has been proposed. The naval presence has not been effective and nation-building takes too much time. The only current option to successfully decrease piracy is deterrence.

Piracy has become a go-to career for those with little experience or education. Piracy has low barriers doe entry. All that is needed to enter the profession are basic seamanship skills and basic tools, such as small arms and basic GPS technology. Piracy also has low costs of compliance. Without restrictions from governments, the only code of conduct to follow is that of the pirates. Because most pirates are based out of third world countries, being arrested by the state is not much of a concern. Being captured at sea is a low probability and the weak infrastructure of the judicial system of the third world state they are based out of will let them out of jail quickly. The most appealing aspect of piracy is the high wages you receive based on performance. By raiding the correct ships; rewards can be collected, loot can be sold, and ransom can be collected for hostages. If an operation is carried out correctly, a large amount of money can be collected without being caught by international authorities (Peterson Institute). Pirates have been described as the “very essence of rational profit maximizing entrepreneurs described in neo-classical economics” (Economics of Piracy, Page 15).

Pirate incomes are extremely high for the third world countries they operate through. In 2010, the average pirate income in Somalia was between $33,000 to $79,000 a year (Economics of Piracy, Page 1). Lifetime earnings are from $168,000 to $394,000 a lifetime (Economics of Piracy, Page 1). The cost of piracy in 2010 was between $4.9 billion to $8.3 billion with costs projected to rise up to $13 billion to $15 billion by 2014 (Economics of Piracy, Page 1). Pirates have become a profession that has become profit-maximizing. These statistics indicate that the attraction of piracy will increase based on its low barriers for entry and its high profits. Based on Geopoliticity’s assessments, this is true with an increase of up to 600 incidents a year and 200-400 new pirates each year by 2015 (Economics of Piracy, Page 5).

With pirates becoming more aggressive in the Somali region, piracy needs to be curbed. Stopping piracy is more difficult than first thought because modern piracy has become an efficient machine with some pirates even being supported financially by organizations who provide rewards for successful capture of certain ships passing through the area. Another concern is that there are four main piracy gangs in Somalia alone. Each has its own specialties with 12 major sponsors funding the pirate gangs (Economics of Piracy, Page 13).

Based on calculations by Geopolicity,

“Pirates face the costs of death, injury and imprisonment… The risk adjusted cost of death, injury or imprisonment, according to opportunity forgone, ranges from a low US $1,666 to a high US $3,333, which is significantly lower than the US $14,500 arising from the next best alternative of being a pirate. Until the risk-adjusted cost of being a pirate is higher than the benefit of the next best alternative, pirates will still exist” (Economics of Piracy, P. 16).

Basically, because the likelihood of being caught is low, the low probability the third country they operate out of will detain them for long, and the low likelihood they will be killed has resulted in the benefits of being a pirate outweighing the potential costs.

There have been multiple solutions proposed to curb the spread of piracy. One solution proposed has been to increase international investment in Somalia and other areas affected by piracy in order to increase infrastructure and improve lifestyles (Peterson Institute). While this would theoretically dry up the supply of people who need to become a pirate in order to support themselves, this solution would take a long time to implement and to improve the lifestyles of those in Somalia. The appeal of the financial success of piracy would not be absent during this period either. The current solution to the problem of piracy is to send navy ships into the region. Even though this is a less expensive option, the presence of navy ships has not been proven to curb piracy because it does not change the value of piracy (Peterson Institute). The Pearson Institute for International Economics recommends the only way to effectively curb piracy is to increase the punishment for pirates and to make sure the punishment is fully carried out. Deterrence is the only way to fully decrease the appeal of piracy (Peterson Institute).

Works Cited

Geopolicity.com. "The Economics of Piracy: Pirate Ransoms and Livelihoods off the Coast of Somalia." Geopolicity.com. GeoPolicity, May 2011. Web. 9 Dec. 2011. .

Kirkegaard, Jacob F. "RealTime Economic Issues Watch | The Economics of a Career in Piracy." Peter G. Peterson Institute for International Economics. Peterson Institute for International Economics, 15 Apr. 2009. Web. 9 Dec. 2011. .

Leeson, Peter T. "An-arrgh-chy: The Law and Economics of Pirate Organization." Peterleeson.com. George Mason University. Web. 9 Dec. 2011. .

Merriam-Webster. "Piracy - Definition and More from the Free Merriam-Webster Dictionary." Dictionary and Thesaurus - Merriam-Webster Online. Merriam-Webster. Web. 9 Dec. 2011. .