Pirate Bourse: Somali pirates turn to capitalism to invest their hijacked millions

"We've made piracy a community activity"

I don't know whether to laugh or cry at this report from Sam Gustin at Daily Finance; Nils Gilman probably already knows the story but I can't wait to send it to him.

You remember Nils; right, from my posts last year? If not, read his talk on deviant globalization. This latest twist in the adventures of Somalia's pirates could be lifted from one of his lectures on how criminal gangs are bypassing the state to set up their own economies. From Gustin's report:

[...].Somali pirates have begun to put all of that ransomed lucre -- tens of millions of dollars in recent years -- to work for them, setting up a stock exchange "that has drawn financiers from the Somali diaspora and other nations," according to a startling Reuters dispatch from Somalia published Tuesday.

The bandits' bourse is a small building in the once-small fishing village of Haradheere, about 250 miles northeast of Mogadishu. "Now it is a bustling town where luxury 4x4 cars owned by the pirates and those who bankroll them create honking traffic jams along its pot-holed, dusty streets," the wire service reports. Somalia is considered one of the most dangerous countries in the world for Western journalists.

"Four months ago, during the monsoon rains, we decided to set up this stock exchange. We started with 15 'maritime companies' and now we are hosting 72. Ten of them have so far been successful at hijacking," Reuters quotes a "wealthy former pirate named Mohammed" as saying.

"The shares are open to all and everybody can take part, whether personally at sea or on land by providing cash, weapons or useful materials ... we've made piracy a community activity."

Also quoted is "piracy investor" Sahra Ibrahim, a 22-year-old divorcee, who was lined up with others waiting "for her cut of a ransom pay-out after one of the gangs freed a Spanish tuna fishing vessel."

"I am waiting for my share after I contributed a rocket-propelled grenade for the operation," she said, adding that she got the weapon from her ex-husband in alimony. "I am really happy and lucky. I have made $75,000 in only 38 days since I joined the 'company'."

[...]

Piracy used to be dominated by two clans, according to Jeffrey Gettleman of The New York Times: "the Saleban, based in Xarardheere [Haradheere], and the Majeerten, who brought hijacked ships back to a small beach town called Eyl. Now, according to witnesses in Somalia, many other clans are involved, even Bantus, a minority group best known as farmers."

Gustin reports that meanwhile, on the high seas, pirate business is booming:

Somali pirates have seized a U.S.-bound tanker carrying $20 million worth of crude oil and taken it to a pirate harbor along the barren desert coast of central Somalia in one of the most audacious pirate strikes ever, U.S. naval officials said.

"She's a big ol' girl, almost a quarter million tons. They're not speedy, they sit low in the water ... so a determined pirate like this one can be successful," Rear Adm. Peter Hudson said in Kenya on Tuesday, according to the AP. Hudson said it was the second-largest ship ever hijacked by pirates. The tanker's 30-member crew was also kidnapped.

Is there any way to stop the pirates? Not appreciably, according to the AP report that Gustin's article links to. It's virtually impossible to adequately patrol 2.5 million square miles of ocean -- particularly during these times, when nations have little revenue to spare for such activity.

Several months ago John Batchelor's show had a segment on the building of a mega-super oil tanker, a virtual floating island, which was designed to cut down on shipping costs because it could carry so much oil in one trip. Try to imagine the oil spill from one of those monsters, eh? Anyhow, the ship has a deck that's so high off the water, pirates can't scale it from their boats.

But what's to prevent the pirates from boarding a mega-tanker from the air -- either by landing a helicopter on the deck or parachuting onto it? They're raking in so much from their bourse they can afford a few helicopters and planes.

The story of the Somali pirates folds into the larger story of deviant or 'black' globalization that Nils and two of his colleagues, and a small host of thinkers drawn from a variety of fields, have been studying for years.

That story in turn folds into the failure of highly centralized national governments in poorer countries to provide even baseline services for large numbers of their citizens.

And that story intersects with the 'failure' of first-world schemes to significantly develop the world's poorest nations -- although, as I pointed out in a series of essays in 2005 about international development banks, it's not really a failure. That's because the primary goals of those banks were not actually to develop the poorest nations, no matter what the glossy annual reports said. The goals were to serve geostrategic ends -- to support governments that allied themselves with a first-world country -- and to provide gainful employment for large numbers of contractors and sub-contractors.

The pirate story is a perfect illustration of unintended consequences that arise from the misuse and abuse of the development principle. Has the first world learned its lesson yet? Nah, nothing has changed; not if Afghanistan is any indication: The Aga Khan still slogs on, after all these decades, now helping small but genuinely useful vilage development projects in Afghanistan. And the first world still deploys discredited modernization theory, now in Afghanistan, to advance military ends and provide employment, at gouge prices, for hosts of contractors.

And yet with all this I find the story of the capitalistic pirates to be oddly inspiring. It reminds me of a report from so many decades ago I can't even remember where the story took place. It was about a terrible accident, a chemical spill or radiation leak, which could not be cleaned up. It had rendered a large tract of land unfit for all living things. So the land, completely barren, was fenced off with warning signs posted not to enter, then left alone by humans.

Some years later, maybe 10 or 20 years later, observers returned to inspect the cataclysm. They were stunned by what their eyes took in. They had come across Paradise Lost: a land teeming with wildlife and vegetation. Animal, bird, and insect species that had abandoned the land long before because of human encroachment had returned. Plants and trees that were immune to the poison in the earth had taken root and flourished. This caused the reporter to muse on the incredible fecundity of nature.

So it is with unlucky Somalia -- possessing nothing, not even geostrategic importance, so hopelessly poor and underdeveloped it couldn't even qualify as a fourth-world nation. And yet human creativity, if not smothered by state control, always finds a way. That it found a way in Somalia through thieving -- it wouldn't be the first time in history a ruling class got its start in a life of crime.

History, however, has never before seen such a high level of globalized crime. So I will end on a less hopeful note by quoting Nils Gilman on deviant globalization:

A new class of global actors is playing an increasingly important role in globalization: smugglers, warlords, guerrillas, terrorists, gangs, and bandits of all stripes. Since the end of the Cold War, the global illicit economy has consistently grown at twice the rate of the licit global economy. Increasingly, illicit actors will represent not just an economic but a political force.

As globalization hollows out traditional nation-states, what will fill the power vacuum in slums and hinterlands will be informal non-state governance structures. These zones will be globally connected, effectively run by local gangs, religious leaders, or quasi-tribal organizations – organizations that will govern without aspiring to statehood.

This RBO entry, which republishes one of my posts on Nils Gilman's work, adds a number of links that are a good introduction to Nils's research on deviant globalization and modernization theory. These are two subjects you need to learn something about if you want to understand the early part of the 21st century and how we got here.