In this light, it is not surprising that local Somalis have sometimes portrayed pirates as Robin Hood-like heroes, rather than guilty criminals. In addition to these booming business opportunities, it has been estimated that over $300,000 of each ransom is spent on bribes to businessmen, clan leaders, village elders, and politicians. In this ransom-fuelled economy, few people had an economic incentive to oppose piracy. Evidence on the effect of ransoms on local prices, export volumes and currency exchange markets strongly support these conclusions. In what is often referred to as a “Dutch Disease”, this currency appreciation reduced profits in export markets like livestock. In addition, ransoms resulted in currency and price inflation. This money increased profits among businesses that cater to pirates, like drug traffickers, construction workers, prostitutes, and vehicle importers. Ransoms have brought over 350 million dollars into Puntland over the last five years, making it the largest single source of wealth in the Puntland economy. So why have piracy attacks been particularly rampant in Somalia? In a follow-up study with Justin Hastings at the University of Sydney, we suggest one possible answer: The size of the ransom economy has created a vicious cycle, making it increasingly unprofitable to oppose piracy. When pirates have an opportunity to work in a legitimate (and less risky) business with high wages, they are more than willing to forego piracy. Second, and most encouragingly, these results tell us that pirates are not trapped in a life of piracy. Pirates choose to take to the sea, not because they have no other option, but rather because the alternatives do not pay enough. First, they tell us-contrary to Muse’s claim-that pirates do often have other employment opportunities they can turn to. These results lead us to a couple interesting conclusions. Significantly, when prices rise again, there is also an appreciable decline in attacks. We demonstrate that when prices drop in low wage markets, there is a significant rise in the number of pirate attacks in affected states. We then looked at the effects of changes in the profitability of low-wage markets, as measured by global commodity prices. Piracy is common in over twenty coastal states, and we collected information on all attacks that occurred in these states over the last decade. This effect of declining wages on piracy is true globally. By comparing price and wage rates over time, we establish that much of the rise in Somali piracy was probably caused by this reduced purchasing power and unemployment. These newly unemployed were likely attractive to pirate organisations because of their training and access to arms. These coincided with a budgetary crisis in Puntland in April 2008, which forced the government to withhold wages from border and security forces. In 2008, Puntland was affected by a combination of drought and inflation, the latter largely driven by conterfeit currency and high world food prices. In a recent study published in the Journal of Conflict Resolution, we provide evidence that supports a different story. Many pirates have never done any fishing and studies of ransom spending suggest that the money is spent far from coastal cities. Nor is it the case that all pirates were fishermen. While illegal fishing has been a problem in Somali waters, there is little evidence of a sharp drop in fisheries production leading up to the spike in piracy. Nor is there much evidence that piracy is driven by declining fisheries. In addition, most evidence suggests that Puntland was actually doing quite well economically prior to the rise of piracy in 2008, largely fuelled by rising exports of livestock to the Middle East. Contrary to a poverty thesis, piracy began, not in Somalia’s war-torn and poorer southern regions, but in a comparatively well-off and stable north-east region of the country known as Puntland. To be fair, Captain Phillips is accurate in its portrayal: interviewed pirates do often claim that they took to piracy due to poverty, declining fisheries and the incursion of foreign fishing fleets into Somali waters. This thesis is also often perpetuated by the media and policymakers, although in reality the actual relationship between economic circumstances and piracy is more complicated. LSE’s Ryan Jablonski and Steven Oliver of the University of California, San Diego explore the reasons for piracy on the Somali economy.ĭuring one of the more poignant scenes in the Oscar nominated film Captain Phillips, Tom Hanks’ Phillips castigates Muse, the pirate leader, that “There’s got to be something other than being a fisherman or kidnapping people.” To which Muse retorts, “Maybe in America”, perpetuating the claim that Somalis are driven to the seas by high levels of poverty and instability.
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