Thursday, October 23, 2008


This article by Peter Leeson:
An-arrgh-chy: The Law and Economics of Pirate Organization
This paper investigates the internal governance institutions of violent criminal enterprise by examining the law, economics, and organization of pirates. To sectively organize their banditry, pirates required mechanisms to prevent internal predation, minimize crew conflict, and maximize piratical profit. I argue that pirates devised two institutions for this purpose. First, I analyze the system of piratical checks and balances that crews used to constrain captain predation. Second, I examine how pirates used democratic constitutions to minimize contact and create piratical law and order. Remarkably, pirates adopted both of these institutions before the United States or England. Pirate governance created sufficient order and cooperation to make pirates one of the most sophisticated and successful criminal organizations in history.

Unfortunately (emphasis mine),

Over the last decade or so there has been a resurgence of piracy off
the horn of Africa and in the Straits of Malacca ... Like seventeenth-
and eighteenth-century pirates, the modern variety choose to
plunder ships in waters in which government enforcement is weak, such
as those around Somalia and Indonesia, and commercial vessels are

Beyond this, however, modern pirates share little in common with
their predecessors. Seventeenth- and eighteenth-century pirates lived
together for long periods of time at sea. ... Because of this, their ships
formed miniature “floating societies.” Like all societies, pirates’ floating
ones also required social rules and governance institutions if pirates
were to maintain their “abominable combination.”

In contrast, modern pirates spend almost no time together on their
ships. Their “raids” take one of two forms. The first and most common
method constitutes little more than maritime muggery. Pirate “crews”
of two to six hop in small speedboats with guns; pull alongside legitimate
ships, usually in territorial waters close to the coast; and threaten their
prey at gunpoint to give up their watches, jewelry, and whatever money
the boat may be carrying. They then return to their villages on the coast,
where they live among nonpirates and resume regular employment.

These pirates do not live, sleep, and interact together on their ships
for months, weeks, or even days on end. They therefore do not constitute
a society and face few, if any, of the problems of social cooperation and
order their forefathers did.

The second and far less common method of modern piracy is somewhat
different. Crews again are small—between five and 15 men—and
spend very little time together at sea. But professional land-based criminals
hire these modern pirates to steal boats, which they then convert
into “phantom ships” and resell. They pay these modern pirates lump
sums and contract them on a case-by-case basis. Like the maritime muggers,
pirates-for-hire rely predominantly on hijacking methods to steal
ships, though for larger vessels they have been known to plant “insiders”—
sailors who pretend to be legitimate sailors seeking employment
on the ship in question—who later hijack the target from the inside.

Since modern pirates sail in very small groups and spend very little
time together at sea, ... that they do not require rules for creating order,
rationing provisions, or assigning tasks. Modern pirates do not even
require captains in the usual sense. There is, of course, someone who
steers the motorboat and acts as a leader among the six or so pirates;
but he is not a captain in the way that eighteenth-century pirate, privateer,
or merchant captains were.

Even organizational problems related to the distribution of plunder
are largely absent for modern pirates. ... modern sea robbers do not
sail for extended periods with growing piles of booty. Their trips are
evening cruises. When they end, the pirates return to their day jobs.
Modern pirates-for-hire do not even confront a distribution of booty
problem to this extent. The landed thieves who employ them pay them
wages. Once the pirates have taken a prize, they hand it over to their
employer. Sadly, then, modern pirates are far less interesting from an
economic or organizational point of view than their predecessors

Contrast with NGS Malacca Strait Pirates:
... 75 percent of heisted cargoes were inside jobs involving the ship’s crew, often the captain. “That’s why most are not reported,” he said, explaining that shipping companies often write off these losses rather than suffer bad press and risk losing their insurance.

It works like this, he said. A ship broker would call him and say there’s a customer who needs diesel fuel. “I know a crewman on a tanker,” Jhonny says. “I call his hand phone and ask him if he is happy. If he says yes, no problem. But if he says no, I tell him I make him happy, and then we make a plan.” But the crewman won’t work legitimately again, I said. He laughed. “Seamen have lots of names. Some have three or four passports. No problem.”

... I asked Beach Boy why he had become a pirate. “I can’t get work,” he said. Jhonny explained that Indonesian sailors often lacked the maritime certifications required to work on commercial ships. For years, young men like Beach Boy relied on older seamen to teach them the trade and then obtained counterfeit credentials to avoid the expensive training needed to become legally licensed seamen. But in recent years the international shipping community had clamped down on such practices, leaving many experienced Batam sailors unemployed.

No comments: