Tuesday, November 18, 2008

Free market solution vs. state solution: Somali piracy

In an article on Somali piracy, the Washington Post has this to say about the recent move that shippers have made from using the Suez Canal (which involves passing the pirate-infested Somali waters) to sending their ships southwards down to the Cape of Good Hope:

Experts say the much longer journey adds 12 to 15 days to a tanker's trip, at a cost of between $20,000-$30,000 a day.

So essentially, the shipping companies are taking a hit of $240,000–$450,000 in order to avoid Somali pirates. The question almost asks itself: they can't hire someone for the few days (surely shorter than 12 days) to protect the oil tankers while they pass by the parts of East Africa where pirates prey?

One possible answer is that shippers have traditionally depended on governments' militaries to subsidize them in the form of providing protection on the high seas, and assuming responsibility for protecting themselves in Somalia might open the Pandora's box of having to defend themselves elsewhere. Another explanation is that the subsidized protection has meant that the companies simply have never had to do it before, and they're not likely to have to do it much in the future – as the article notes, governments around the world are already getting together to protect the area at no cost to the shippers.

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