PrintFebruary 26, 2011
Piracy is Tragedy of the Commons
Piracy had at best been a romanticized curiosity to most Americans until two years. On the rare instances any of us conjured a pirate, the image was mostly a swashbuckling Johnny Depp-type bedecked in tricorns, sporting multiple pistols and knives, swooshing aboard ships to whisk away rum, gold, and spices. We were more bemused than outraged at the thought of pirates plundering in waters thousands of miles off our own coastline.
That all changed with the very real, very serious, very ugly five-day drama involving the U.S.-flagged cargo ship Maersk Alabama and its captain, Richard Phillips, in April 2009. We all know how it ended: U.S. Navy Seal sharpshooters, in an extraordinary display of marksmanship, killed three pirates, thus ending the five-day standoff and freeing Phillips from his ordeal.
Since then, piracy has mostly occupied its rightful ranking in our quotidian lives; that is, no ranking at all, until a few days ago when pirates boarded a yacht, Quest, and killed four Americans: Phyllis Macay and Bob Riggle of Seattle, and Jean and Scott Adam of Marina del Rey, Calif.
Of course, we were outraged, and rightfully so. The quartet appeared harmless enough: Their interests confined mostly to a little adventure and a little Christian proselytizing.
Unfortunately, the Quest's fate was likely sealed after the Richard Phillips incident. The unorthodox (at the time) response in using lethal force (wholly appropriate) guaranteed to escalate the viciousness of pirate tactics. One of the more testosterone-driven buccaneers at the time warned that American and French sailors would be executed should they fall under the pirates' purview, while all others would be treated more harshly. What occurred on the Quest proved prophetic.
The murder of four innocents is no doubt disturbing to sailors entering the waters off the Horn of Africa. Anxieties are only heightened when considering Somali piracy is a growth industry. According to the International Maritime Bureau, so far this year, at least 80 commercial cargo ships have been attacked in the 2.8 million square kilometer Gulf of Aden, with 19 successful hijackings. In 2008, there were 111 ships attacked and 42 successful hijackings.
Somali piracy is unlikely to vanish anytime soon. To the contrary, it will likely intensify before it abates. The business of piracy is too lucrative. Over the past five years, Somali pirates' ransom demands have increased from an average of $150,000 in 2005 to $5.4 million in 2010. Lin 2010, around $238 million was paid in ransoms.
What are the options? Ships could form convoys. In fact, some already have, particularly those sailing into Kenyan and Somali ports. Ships could be armed with heavy guns to repel attacks. But is it realistic to expect a contingent of merchant ships large enough to dissuade pirates to be proficient with heavy artillery? Pirates could be lured into attacking warships posing as merchant ships. The waters off Somalia could be avoided altogether, forcing merchant ships to sail around the South African Cape instead.
Increased naval presence is the preferred option for many sailors, but the seas off the Horn of Africa already contain warships from the European Union and a U.S.-led coalition task force, while individual countries, such as Russia, India, and China, are patrolling the same waters to protect their own interests. The U.S. military has also vetted preemptive options, attacking pirate bases on land and providing aid for Somalis willing to lend a helping hand.
Expense is the overarching drawback associated with any of the aforementioned solutions: We are talking about tens of millions -- if not hundreds of millions -- of dollars annually. Why should someone safely landlocked in Denver, Munich, or London foot the bill?
Most merchant ships are registered in small South Pacific and Latin American tax havens. In other words, these ships are free-riders: They enjoy the protection of Western military might sans the inconvenience of paying for it. These ships free-ride for a perfectly logical economic reason. Despite whatever tolls the pirates might extract, those tolls pale in comparison to the taxes and regulations Western countries would extract.
When the emotions are stripped away, piracy is nothing more than a by-product of a ubiquitous public-policy shortcoming -- one found in all corners of the world and one relatively easy to rectify - tragedy of the commons. Tragedy of the commons is the reason why you use a public toilet only as a last resort and why the shoulders of urban highways resemble landfills. Tragedy of the commons is the reason the Sea of Aden is peppered with Somali pirates. Overfishing and waste dumping have rendered large swaths of Sea of Aden barren. No one owns it, so everyone abuses it.
Non-ownership, or its equivalent, public-ownership, of the world's seas produces two inevitable conundrums: Marauding pirates and ships wanting protection from the marauding pirates. Tales of tragedy, in turn, raise international pressure to protect the free-riding ships, which produces the unwanted moral hazard of even more free-riders.
Stephen Mauzy is a financial writer, analyst, and principal of S.P. Mauzy & Associates. Send him e-mail at steve@spmauzyandassociates.com
