The Political Economy of Plunder: Economic Opportunity and Modern Piracy

Abstract

Maritime piracy is a growing scourge on the international community-imposing large costs on maritime states and industries, as well as potentially undermining state capacity and funding terrorism. Using original data on over three thousand pirate attacks, we argue that these attacks are, in part, a response to poor labor market opportunities. To establish this, we take advantage of the strong effect of commodity prices on labor market opportunities in piracy-prone states. Consistent with our theory, we show that changes in the price of labor and capital-intensive commodities have consistent and strong effects on the number of pirate attacks in a country's territorial waters each month. We confirm these results by instrumenting for commodity prices using monthly precipitation levels.While conjuring images of cannons and tattered sails, piracy is also a modern scourge-and an increasingly costly as well as common one. Besides the costs of theft, sabotage and ransoms from hijackings, piracy delays shipping, drives up security costs, hinders development in coastal states and is a potential source of funding for terrorist groups, insurgents and international criminal organizations (Luft and Korin 2004;Murphy 2007; Lehr 2006). Furthermore, the number of pirate attacks (worldwide) reported by the United Nations' maritime branch-the International Maritime Organization (IMO)-has increased by more than 50% in the past five years.We argue that economic conditions play an important role in driving this variation. We argue that pirates take into account the rewards they might achieve through labor in alternative, presumably legitimate, activities when deciding whether or not to engage in piracy.In making this argument, we situate pirate groups within a larger class of predatory groups that include criminal organizations and some insurgent and terrorist groups. Like members of these groups, individual pirates balance the rewards from predatory behavior with benefits of legitimate employment and the risks of capture and punishment (Becker 1968).We therefore expect that the number of pirate attacks is not just a function of how much pirates can earn from predation, but is also a function of how much pirates can earn in other labor-intensive sectors. This paper offers multiple contributions to an emerging empirical literature on piracy (Hastings 2009;de Groot et al. 2011; Shortland and Vothnecht 2011). While some have suggested poverty plays a role in piracy, this is the first paper to explicitly test the role of labor opportunities in driving the decision to engage in piracy. In addition, this paper is among the first attempts to explain temporal variation in pirate attacks, and to use a causally motivated empirical strategy to test for a link between labor opportunities and piracy.There is also a growing literature addressing the effect of labor incentives, poverty and resource scarcity on predatory behavior more generally. Financial incentives appear play a role in both the attack and recruitment activities of terror...

Income Opportunities and Sea Piracy in Indonesia: Evidence from Satellite Data

“…This is also the case for the recent literature that focuses on the determinants of piracy. The main parts of this literature have addressed the role of state capacity in determining piracy, but a few recent papers also partly address the issue of income opportunities empirically (see Cariou and Wolff 2011, Jablonski and Oliver 2012, Daxecker and Prins 2012, and Ludwig and Flückiger 2014.…”

Economic shocks in the fisheries sector and maritime piracy

“…However, their regression analysis does not account for the potential endogeneity between pirate attacks and fish catches. The study by Jablonski and Oliver (2012) analyzes the effect of variation in commodity prices on the number of pirate attacks. Based on their results, the authors argue that lower opportunity costs in the agricultural sector, induced by reduced prices for agricultural products, increases maritime piracy activity.…”

“…However, it is conceivable that one of the factors influencing the abundance of plankton also affects economic opportunities through other channels. For example, variation in rainfall could induce variation in phytoplankton as well as changes in the agricultural sector, which in turn could induce variation in pirate activity (Jablonski and Oliver, 2012). However, variation in local phytoplankton abundance is the result of a complex interaction of various parameters, including changes in factors independent of local conditions.…”

“…19 The results in columns (3)- (4) show that a 1 percent increase in fish capture production decreases the number of piracy 17 The coefficient is significant at the 99 percent confidence level with a size of 0.09. 18 These are the regions for which coordinated, multinational counter-piracy measures are/were implemented (Jablonski and Oliver, 2012).…”

Navigating the ‘dark waters of globalisation’: Global markets, inequalities and the spatial dynamics of risk

“…While piracy and crime are not new phenomena, the sense of injustice, the generation of failed nation states, the increased opportunities for crime generated by globalisation and the lack of legitimate economic opportunities for local communities are often held as key drivers for the re-emergence of such 'criminal acts' 1 (Leeson, 2009;Murphy, 2009;Pham, 2010). A range of issues around increased conflict, environmental impacts and the emergence of powerful crime lords have led to further exploitation of local, already impoverished, communities and provided drivers into piracy and, in some cases, terrorism (Kavanagh, 2011;Daxecker and Prins, 2013;Jablonski and Oliver, 2013).…”