Trickle Down Piracy

Readers could make a real contribution to the people of Somalia by taking their yachts over to the Horn of Africa:

Piracy off the coast of Somalia may be a global scourge costing $12bn a year, but a new report argues ransoms deliver much-needed development to the failed state.

The average hijacking ransom brings in the equivalent of the export of 1,650 heads of cattle, while keeping hostages – 1,016 were captured in 2010 – provides jobs for local cooks, producers and traders, according to the report by Chatham House. It calculates up to 100 people are needed to secure every hijacked ship.

“Piracy appears to lead to widespread economic development,” says the report’s author Anja Shortland, who argues the flow of ransom payments has helped to boost the local exchange rate, to raise real wages and to reduce inflation.In the absence of a functioning state that has failed to eliminate al-Qaeda-linked rebels further south, the report says pirates provide “local governance and stability”.

Seed money from ransoms, which garnered a record $135m last year, has helped set up dozens of trucking companies that have reduced transport costs of staples such as rice, even as global inflation bit hard and a regional food crisis helped plunge Somalia further south of pirate strongholds into famine. . . .

While the report acknowledges some piracy money goes into drugs and flashy cars, Ms Shortland, a development economist at Brunel University, argues instead that the benefits stretch far wider than a pirate financier elite. She says any abrupt military solution that stopped piracy would deprive thousands of people of jobs and “quite noticeable trickle-down”.

Source: Financial Times

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Seth Kaplan

About Seth Kaplan

Seth Kaplan is a Professorial Lecturer in the Paul H. Nitze School of Advanced International Studies (SAIS) at Johns Hopkins University. He teaches, writes, and consults on issues related to fragile states, governance, and development. He is the author of Fixing Fragile States: A New Paradigm for Development (Praeger Security International, 2008) and Betrayed: Politics, Power, and Prosperity (Palgrave Macmillan, 2013). A Wharton MBA and Palmer scholar, Seth has worked for several large multinationals and founded four companies. He speaks fluent Mandarin Chinese and Japanese.